FDI Trends In KSA

Imad Adileh
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As part of Saudi Arabia's move towards economic diversification, the country has been actively seeking to attract foreign direct investment (FDI). Unexpected global events such as the outbreak of Covid-19 have caused significant changes in FDI patterns globally, and KSA is no exception. In this article, we explore the FDI trends in KSA over the past 12 months and look at how the pandemic has impacted investment flows as well as the projected trends moving forward.

FDI Into Saudi Arabia: Then & Now

In recent years the government has made significant reforms to make the country more attractive for foreign investment. This includes measures such as establishing the Saudi Arabian General Investment Authority (SAGIA) in 2000 to streamline the investment process, and launching a new visa regime in 2019, which makes it easier for foreign investors and workers to obtain visas. As a result of these efforts, FDI into KSA has increased steadily in recent years, reaching an all-time high of $13.8 billion in June 2021.

Like every major economy, Saudi Arabia felt the effects of the global pandemic. While MENA FDI figures slumped to $66 billion in 2020, Saudi Arabia led the way in terms of FDI inflows in the region with a 20% rise in the same year. This is a testament to the government's efforts to make the country more attractive to foreign investors and the continued interest from international companies in opportunities in KSA.

FDI Trends By Sector

The pandemic has had a major impact on FDI patterns globally, with many companies reconsidering their investment plans and priorities. In KSA, foreign investment has typically been focused on the oil and gas sector, but over the past year, there has been a rise in investment in sectors such as real estate, tourism, education, and renewables. This is in line with the government's Vision 2030 plan, which aims to reduce the country's reliance on oil and gas and diversify the economy. Leading investors include France, the United States, Singapore, the UAE, Malaysia, Japan, and Kuwait.

In 2021, the renewable energy mega project Dumat Al Jandal was hooked up to the Saudi national grid, making it the largest wind farm in the MENA region. The $500 million project was constructed as part of an investment partnership with French and Emirati renewable energy developers. This is just one example of the growing interest in opportunities in the renewables sector in KSA.

Similarly, there has been an uptick in investment in the education sector. In 2019, Dubai-based GEMS Education announced plans to build at least 50 new schools across the Kingdom, providing education to more than 100,000 Saudi students.

Looking Ahead – FDI Projections

In the first quarter of 2021, Saudi Arabia issued its highest ever number of investment visas in a single quarter since records began in 2005. This represented a quarterly rise of 2.6% and demonstrates a powerful rebound in investment activity following the pandemic.

The issuing of these visas signals a strong pipeline of FDI projects in the coming months, and we expect to see continued interest in KSA opportunities from international investors. In the first quarter of 2022, FDI figures in Saudi Arabia reached $1.97 billion, representing a year-on-year increase of 9.5%. This is a positive sign for the country's economy and its attractiveness as an investment destination.

And while the petrochemical energy sector continues to be a key driver of FDI, we expect to see more growth across diverse sectors in the coming years as the country continues working towards its Vision 2030 plan.