Investment Insights

Saudi Arabia Ended 2021 With A Phenomenal Q4

Imad Adileh
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The last quarter of 2021 was a record-breaking one for Saudi Arabia as the country saw a 400% increase in foreign investment licence issuance compared to the same quarter of the previous year. Most of this investment was in the technology sector, with start-ups and SMEs seeing substantial growth.

2021 in total was an impressive year for Saudi's investment landscape. The first three quarters experienced a 65% increase in net foreign investment inflows. This exciting rate of growth can be attributed to multiple factors, including the government's longstanding efforts to attract foreign investors with the easement of legal and regulatory impediments. This has included lifting restrictions on foreign business owners, who are now entitled to 100% ownership of their Saudi-based enterprises, with a few sector-specific exceptions.

In total, the Saudi government's National Investment Strategy has kickstarted 40 initiatives aimed at reforming the investment environment. These legislative changes, initiated as part of Vision 2030, have successfully attracted significant global interest.

Saudi's Emerging Industries

In 2018, the oil industry accounted for 42% of Saudi Arabia's GDP. In 2021, this figure dropped to 24.7%. This substantial reduction represents Saudi Arabia's ongoing commitment to economic diversification, which has seen the emergence of several promising private sector industries.

The COVID-19 pandemic had a profound effect on Saudi Arabia's eCommerce sector, accelerating a wave of rapid sector growth across the region. In 2021 alone, the sector grew by 17%, placing Saudi Arabia as the 27th largest eCommerce market in the world.

This sector transformation caused a ripple effect across related industries, such as logistics and fintech. Neobanking is anticipated to show a revenue growth of 55.6% by 2023, leading the way for more fintech startups to enter the market. In 2022, digital payments will represent a total transaction value of $43,360 million, and by 2026, users of this technology are expected to increase to 36.64 million.

Telecommunications and IT have also been identified as some of the largest growth sectors in Saudi Arabia, representing a combined market value of SAR134 bilion in 2021. These industries now contribute 5.5% to the nation's GDP and are forecast to grow at a rate of 9.01% until 2030.

Regulatory Changes Affecting Investment in KSA

Dr Al-Shahrani, the deputy minister for economic affairs and investment studies, said that the government aims to make Saudi Arabia one of the top 15 economies of the world by 2030.

"These reforms come with the aim of attracting foreign investments of over $100 billion into the Kingdom by 2030," he explained at the Invest in Saudi forum held at Dubai Expo.

As part of this goal, the National Investment Strategy continues to focus on facilitating the ease at which investors can enter the Kingdom's market.

The Saudi government has made a number of recent changes to the regulatory landscape, with the most notable being the enactment of the Private Sector Participation Law in 2021. Aimed at supporting private sector participation, this law introduces a number of important reforms, which regulate government partnerships with private sector operations. This framework addresses land acquisition rights, private company protection, dispute resolution and government step-in rights.

These changes have been instrumental in making Saudi Arabia a more attractive investment destination. The kingdom jumped 30 places ahead in the global "ease of doing business index" in 2020. And continued reforms are expected to see Saudi Arabia become an increasingly popular investment destination in the coming years as well.

To go beyond in Saudi Arabia and for your Audit, Tax, Marketing and Advisory requirements contact our International Leader, Imad Adileh.