The drive to attract foreign direct investment (FDI) into the Kingdom is about a great deal more than money. Of course, given the continuing flow of government surpluses, the high profitability of Saudi businesses and the substantial domestic funds looking for a profitable investment return, money is, by and large, the least of the issues that is on anyone’s mind when they go out to seek foreign capital.

There are however two critical extra inputs that come with direct foreign investment, by which is meant the allocation of capital on a long-term basis to a project that will be undertaken, very probably with a Saudi partner. Other investments, generally through the capital markets, are of shorter duration. Indeed they may be held for no more than days, even hours. These amount to speculation, which of itself is not necessarily bad. Speculators can add volume and liquidity to a market in good times. However, as Turkey is currently finding out to its cost, when times are difficult foreign indirect investment can vanish with the speed of morning dew. Its disappearance drives down stock market indexes and generally adds to the sudden lack of confidence in a country’s capital markets.

The first important element when an international investor commits to a Saudi project is technology. It is the transfer of technology, most typically in manufacturing processes, that is often the key to a deal. The business of manufacturing is a constant ferment of innovation, as companies seek better ways to do things more cheaply, faster or in ways that have never been attempted before. It is not just about robotics, though this matters increasingly in sectors such as the automotive industry. One of the most important and little considered areas of innovation is the machine tool industry. These are the companies that make the machines that make the things that manufacturers want. Once typically Swiss or German, there are now major Asian manufacturers whose machine tools are breaking new ground in manufacturing processes.

Now when a foreign manufacturer sets up in the Kingdom, it is very likely to be bringing a degree of new technology, which will underpin the success of the venture. The direct investment here in Saudi Arabia is probably being made because the foreign company sees that, because the Kingdom is the regional economic powerhouse, it can reach new markets, not least in the Kingdom itself and elsewhere in the GCC.

However it would be naïve to imagine that an international business would readily give to a venture here, the very latest technology with which it is equipping its main plants elsewhere in the world. It will very naturally want to keep some competitive advantage for its home base. This said, a Saudi investor entering into a deal to work here with a foreign company, ought to understand these commercial realities. Ideally, there ought to be clauses in the contract which say that as technology advances, the venture in the Kingdom will be upgraded, to stay just one step behind the cutting edge.

Now of course, advanced technology is already bought by Saudi companies who need no foreign partners to give them a technical advantage. Given the strength of corporate balance sheets, businessmen in the Kingdom can afford to equip their firms with the best. As the meeting in Tokyo this week of the Saudi-Japanese Business Council made clear, most technology is for sale.

But it is often the case that more is needed than the machines and the processes. With ever more complex appliances, there is an increasing training requirement for operators and also managers. There is in addition a growing engineering component. However advanced, most technology has yet to be able to look after itself. At best a device can warn when it has a problem developing or needs components replaced.

This need for more fits in with the rising trend of ISO compliance within the Kingdom. The International Organization for Standardization 9000 quality management codes are the best know and most widely applied to organizational processes. But there other ISO codes to which the Kingdom’s firms are already adhering, including environmental and energy management, risk, food safety and of increasing concern worldwide at this time, information security management.

The point about technology transfer, particularly through a foreign investor, is that it also brings with it the requirement for management rigor. International businesses committing capital to a Saudi venture are not investing out of the kindness of their heart. They expect to see a proper return for their money from a well-run, technologically-advanced operation. It is this insistence on discipline which is enriching the Kingdom’s business community and boosting the creation of a thriving non-oil economy.