Foreign investment is growing in Saudi Arabia despite the pandemic
The Ministry of Investment of Saudi Arabia (MISA) issued 466 foreign investor licenses in the fourth quarter of 2020, the highest number of licenses recorded in a quarter since 2005.
This represented a 52 percent rise compared to the previous quarter and a 60 percent increase over the same period in 2019. Additionally, last December witnessed the highest number of licenses awarded in Saudi Arabia in a single month, with 189 licenses.
The value of the foreign direct investment (FDI) inflows into Saudi Arabia reached almost $1.9 billion in Q4, a growth of 80 percent compared to the same period in 2019 and an increase of nearly 20 percent for the entire year of 2020 ($5 billion).
It is reported that industrial and manufacturing, logistics, retail, e-commerce and information and communications technology are among the leading industries that attracted FDI in Q4 2020. Non-oil sectors showed momentum recently. Investments in the non-oil manufacturing facilities totaled $6.13 billion in 2020, with Q4 reporting a 95 percent year-on-year increase.
It is worth noting that despite the exceptionally difficult circumstances during last year, due the negative impact of the coronavirus disease (COVID-19) pandemic, the Kingdom has managed to attract foreign investment of huge magnitude.
One of the main factors that led to an increase in foreign investment licenses was the swift action by the Saudi government in handling the pandemic, through which it maintained the resilience of the Saudi economy and proved its flexibility in facing such crises.
The relaxing of some lockdown measures in June last year also helped the national economy to catch its breath, which is reflected in the rebound witnessed in FDI. The relaxed measures have helped FDI to grow to 1,278 licenses in 2020, a 13 percent and 73 percent increase over 2019 and 2018 respectfully.
I believe that another key factor was the announcement of the huge spending by Crown Prince Mohammed bin Salman of $7 trillion on the Saudi economy by 2030, which exceeds what was spent in the Kingdom within the past 300 years.
Also, I believe that the Invest Saudi brand has helped to promote foreign investments in the Kingdom, since the brand is designed to enable the clear, unified and effective communication of the Kingdom’s investment opportunities to global and domestic investors and private sector businesses.
Investment Minister Khalid Al-Falih said: “These figures indicate that the Saudi economy is maintaining resilience despite current challenging market conditions. It presents strong evidence that we can continue forward with determination and optimism.”
I believe the request by the Saudi government for international firms who are awarded government contracts to shift their Middle East hubs to the Kingdom will help attract even more foreign investment to the country.
This will also help to create jobs for Saudi nationals, which, in turn, will reduce the unemployment rate in Saudi Arabia from as high as 15.4 percent in Q2 2020 to as low as 7 percent in 2030.
It is worth noting that a number of foreign companies have responded favorably to the government’s decision by announcing the shift of their regional offices to the Kingdom, such as PepsiCo, Schlumberger, Deloitte, and PwC.
• Talat Zaki Hafiz is an economist, financial analyst and a board member of the Saudi Financial Association. Twitter: @TalatHafiz