LONDON, 10 October 2005 — The Saudi Arabian General Investment Authority (SAGIA) plans to make the Kingdom “one of the top ten foreign investment locations in the world by 2010.” So declared Amjad Shacker, director of corporate communications at SAGIA yesterday to CNBC Arabia.
Ever since Amr Al-Dabbagh took over as governor of SAGIA in March 2004, a new sense of urgency seems to be sweeping the corridors of power at the authority.
To help achieve its aim of becoming a top ten global FDI location within the next five years, SAGIA is cooperating with the World Bank in conducting an evaluation of the investment environment in the Kingdom. The aim, according to SAGIA, “is to provide the appropriate scientific mechanism to measure and compare the progress made in the investment environment” and to set the priorities for achieving “competitive environment regionally and internationally”.
Not surprisingly, Al-Dabbagh has been touring the major investment capitals especially in the West — the US, UK and EU — in recent months trumpeting the reform process in the Kingdom and the competitive advantages of in investing in the energy, transport, and knowledge-based industries in Saudi Arabia. “We are the energy capital of the world, with one-quarter of all known oil reserves, and have the most cost-effective feedstock in the region,” he stressed recently at a conference in London. “Our second competitive advantage is our geographical location. We need to invest heavily in transport infrastructure and deregulate the whole sector. As for our focus on knowledge-based industries, factors include the size of the market, the fluidity and profile of our population, and the commitment of both the private sector and the government to invest in the country.”
Despite a market flush with liquidity due to the high oil revenues due to high oil prices, the Kingdom is seeking funds for projects worth more than SR2.34 trillion ($624 billion) in vital sectors including petrochemicals, gas, railways, desalination and electricity. SAGIA recently reported a 4,596 percent increase in investments in licensed projects in the second quarter of this year compared to the same period last year. The total amount invested during the first half of 2005 reached SR65 billion, the organization said in a report. The aim is to attract $1 trillion in FDI flows over the next 20 years.
SAGIA stresses that it is the current reform process in the Kingdom that has yielded the above dividends. A report published earlier this year by the International Finance Corporation, the private sector and capital markets investment arm of the World Bank Group, titled “Doing Business in 2006” rated the Kingdom as the best investment location in the Arab World and 38th out of 155 locations worldwide.
But ratings, reforms and alliances have their upsides and downsides. Saudi Arabia’s accession to the World Trade Organization (WTO) will indeed remove tariffs on Saudi petrochemicals and goods; but it will also force the removal of subsidies and government hand-outs especially to the energy and petrochemical sectors and force the opening of the market to all comers — both local and foreign. Is the Kingdom’s industrial, private sector, human capital and educational infrastructure up to withstanding the anticipated foreign competition when the barriers come down? How does one reconcile the competing demands of a high adult male unemployment rate with those of an achieving and educated female cadre of employees seeking equal employment rights and their chance to contribute to the economic development of their country?
Foreign investors are indeed looking toward the day when the negative list will no longer exist.