Saudi Arabia’s foreign direct investment has reached its highest level in more than a decade last year, seeing a sharp upswing thanks mainly to an oil pipeline deal in the second quarter.
FDI inflows totalled $19.3bn, the most since 2010, according to data published by the Saudi central bank last week. A new national investment strategy last year set an FDI target of more than $100bn annually by 2030.
Crown Prince Mohamed bin Salman’s ambitions for diversifying the kingdom’s oil-dependent economy rest in part on its ability to secure more foreign investment. But the push has faced obstacles, with investors complaining of a raft of issues with Saudi regulations.
The bulk of last year’s FDI total was from state oil company Saudi Aramco selling a $12.4bn stake in an oil pipelines entity to investors led by EIG Global Energy Partners LLC.
Even without that transaction, however, inflows would have been at their highest level since 2016. The Investment Ministry issued more than 3,300 new foreign investment licenses in the second half of 2021, a greater than threefold increase from the same period in 2020.
Globally, FDI flows rose 77% to an estimated $1.65tn in 2021, according to the United Nations Conference on Trade and Development.
Meeting the government’s FDI goals by 2030, which include a target of increasing its contribution to gross domestic product to 5.7%, would require more than doubling the size of the economy over the next eight years.
Saudi Arabia is meanwhile also planning to offer incentives, revamp regulations and create special economic zones to attract more investment and convince international companies to build a bigger presence the kingdom.
An official at Invest Saudi, the government’s investment promotion agency, said “large numbers” of multinationals established regional headquarters in the country last year, drawn by the size of its market and other opportunities.
“We also expect that the underlying growth in FDI will be accelerated” in 2022, said the official, who declined to be identified in line with government rules. As work on new infrastructure projects progresses, “we expect to see more companies moving to Saudi Arabia in 2022, including SMEs attracted by our burgeoning start-up ecosystem.”