RIYADH: Saudi Arabia recorded second quarter foreign direct investment flows are down 85 percent year on year, an investment ministry report showed on Tuesday.
The FDI inflows were at SR7.9 billion ($2.1 billion) in the second quarter, compared with about SR51.9 billion in the same period last year.
The ministry attributed the plunge in FDI inflows to closing the deal of The Saudi Arabian Oil Company, also known as Saudi Aramco, in the second quarter of 2021 which amounted to SR47 billion.
When Aramco’s initial public offering deal is excluded, the Kingdom’s foreign direct investment grew 46.5 percent year on year.
Indeed, the second quarter of 2022 saw FDI levels rise 6.6 percent compared to the previous three months.
This is in contrast to global trends, which saw inflows drop 35.1 percent in the second quarter of 2022 compared to the previous quarter.
Year-on-year, global FDI funding fell 19.5 percent.
FDI inflows of countries belonging to the Organization for Economic Co-operation and Development experienced a decrease in growth rates.
While the euro area’s FDI inflows growth rate plunged 9 percent, those of the US, China, and India, fell 59.9 percent, 4.4 percent, and 5.5 percent respectively.
On the other hand, the investment inflows growth rate in Japan surged 100.1 percent in the same period.
Nominal gross fixed capital formation, or GFCFC, surged 36.2 percent year on year to reach SR248 million in the second quarter.
The ministry attributed the jump to the growth in fixed capital formation in the government sector by 75.6 percent – representing 14 percent of the GFCF – and in the private sector by 31.4 percent – accounting for 86 percent of the GFCF.
This came amid efforts to boost the role of the private sector in the Kingdom’s economic development process.
As a percentage of nominal gross domestic product, the GFCF dropped 23.6 percent in the second quarter of 2022, compared to 24.7 percent in the corresponding period a year earlier.
When it comes to FDI stocks, these grew in the Kingdom by 0.8 percent in the second quarter to hit SR 994 billion.
The increase in FDI stocks is mainly ascribed to the recent policies implemented by Saudi Arabia in an attempt to lure and support international investments via diverse facilities and incentives. In return, this raised the confidence levels of foreign investors in the country’s investment environment.
Moreover, closed deals jumped over 178 percent in the third quarter of 2022 to reach 53 deals, up from 19 deals in the same quarter of 2021.
A total number of 203 closed deals have been recorded up until the third quarter of 2022 reflecting an increase of 133.3 percent, compared to a total of 87 deals in the corresponding period a year ago.
Looking at the distribution of the deals by sector reveals that the entrepreneurship and innovation sector was in the lead with 47 out of the 53 closed deals. Other sectors included biotech, healthcare, advanced manufacturing, and education and training, all with a similar number of deals.
As for the distribution of deals by country, the UAE was in the lead with a total of ten closed deals during the third quarter. Cayman Islands followed with four deals, and the US’s British Virgin Islands followed with 3 deals each.
All the previous falls under enabling investment and enhancing the attractiveness of its environment in Saudi Arabia.
“Our nation holds strong investment capabilities, which we will harness to stimulate our economy and diversify our revenues,” the report said, citing the Kingdom’s Crown Prince Mohammed bin Salman.