Why Saudi Arabia Remains Bullish on FDI and Attracting Large-Scale Foreign Investments

As one of the largest multi-billion-dollar economies in the Middle East and having established itself as a Top 20 global economy, Saudi Arabia has been making significant strides in attracting large-scale foreign investment in recent years.?

According to Statista, the country attracted $5.5 billion in foreign direct investment (FDI) in 2021, a significant increase from the $1.5 billion recorded in 2018. It is now well on its way to achieving its aim of garnering $1.7 trillion by 2030.

The Public Investment Fund (PIF) is one of the key institutions driving Saudi Arabia's investment agenda. The fund has the mandate to invest in strategic sectors, including technology, energy, and infrastructure. PIF has been instrumental in attracting foreign investment, especially in the tech sector. The fund is aiming to create a whopping 1.8 million jobs and contribute to $320 billion in non-oil GDP by 2025. The program has launched more than 30 companies across 10+ sectors.

Similarly, the Saudi Privatization Program, which seeks to attract FDI and improve the efficiencies of the public sector, seeks to draw in $16.5 billion in investment from public-private partnerships by 2025.

Regulatory reforms

One of the key reasons its FDI attractiveness has bloomed over the past decade is that the Saudi Arabian government has been working tirelessly to create an environment that is conducive to foreign investment. It has implemented various reforms that make the country more business-friendly and the government is expected to continue to introduce new measures aimed at attracting foreign investors in the near future.

One of the most significant regulatory reforms in recent years has been the establishment of the Ministry of Investments. This ministry serves as a one-stop-shop for investors, offering a range of services to facilitate FDI, such as business registration, licensing, and other regulatory approvals. The Ministry of Investments also provides investors with access to information on investment opportunities, industry trends, and regulatory changes.

Another important regulatory change in Saudi Arabia has been the introduction of the Foreign Investment Law (FIL). The FIL has replaced the previous investment regime with a more transparent and open regulatory framework. It allows foreign investors to hold up to 100% ownership in most sectors of the economy and offers a range of incentives, including tax exemptions and customs duty waivers.?

Ease of doing business

In addition to these changes, Saudi Arabia has also implemented several measures aimed at improving the overall business environment. For example, the government has reduced the time and cost of obtaining business licenses, streamlined the process for obtaining construction permits, and improved access to credit for small and medium-sized enterprises.

The Saudi government has also launched several initiatives aimed at attracting FDI in specific sectors. For example, the Vision 2030 plan, which is a long-term development strategy aimed at diversifying the economy, has identified several priority sectors for investment, including energy, transportation, healthcare, and tourism. The government has introduced several measures to support investment in these sectors, such as tax incentives, subsidies, and other financial incentives.

The Saudi government has also implemented various measures to streamline the process of setting up and operating a business in the country. For example, it has introduced electronic services for company registration, which has reduced the time and cost of setting up a business. It has also simplified the visa application process for foreign investors and their families, making it easier for them to live and work in the country.

By attracting investment in sectors such as energy, transportation, healthcare, and tourism, the government can develop new sources of economic growth and create a more diversified economy. This can help to insulate the country from external shocks and improve its overall economic stability.

Another important reason is that these initiatives can help to promote the transfer of technology and knowledge-sharing. Foreign investors often bring with them new technologies, management practices, and skills that can help to improve the productivity and competitiveness of local firms. By attracting investment in sectors such as healthcare and energy, the government can encourage the development of new industries and help to create a more dynamic and innovative economy.

Protecting investors

The Kingdom has also enacted various laws to protect foreign investors. For instance, it introduced the Anti-Bribery Law, which criminalizes bribery and other forms of corruption, which is essential for creating a transparent and predictable business environment. It ensures that foreign investors can operate in a fair and ethical manner and that they are not subject to undue influence or corruption. This has helped to increase investor confidence and attract more foreign investment to the country.

It has also created a mechanism for resolving commercial disputes quickly and fairly, which has boosted investor confidence. This mechanism includes specialized commercial courts, which are staffed by expert judges with experience in commercial law.?

This has helped to ensure that disputes between foreign investors and local businesses are resolved quickly and efficiently, which is crucial for maintaining investor confidence. It also reduces the risk of legal disputes, which could otherwise deter foreign investors from investing in the country.

Conclusion

Overall, Saudi Arabia remains bullish on FDI and attracting large-scale foreign investment. The government's commitment to creating a business-friendly environment and diversifying the economy, coupled with the PIF's investment in strategic sectors, has positioned the country as an attractive investment destination.?

As a result, FDI inflows to Saudi Arabia as a percentage of GDP have increased steadily in recent years. The future looks bright for the country, and with the continued implementation of Vision 2030 strategies and the PIF's achievements, Saudi Arabia's future as the top investment destination in the Middle East looks bright.