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FDI trends align with Vision 2030

3 October 2024

 

This package also includes: Riyadh redoubles efforts to boost inward investment

Foreign direct investment (FDI) trends are typically volatile and impacted by economic and political factors.

According to a report on FDI by GlobalData, there was a decline in both project numbers and capital investment in 2023 after a strong year in 2022. 

While the overall numbers were down, the report highlighted global trends that include a strong investor focus on the Middle East and elsewhere in Asia, outside of China, with Saudi Arabia and the UAE identified specifically as markets that offer strong potential. 

According to a GlobalData poll, the Middle East ranked as the fourth most attractive region for FDI in 2024 by investor sentiment.

Middle East deals 

In terms of deals, the Middle East experienced annual growth in both project activity and inbound capital investment from FDI in 2023. Companies announced 1,848 projects worth an estimated $88.3bn. Geopolitics, strategic partnerships, digitalisation, emissions reductions and artificial intelligence are the key themes causing investors to expand in the region. 

The UAE was the largest destination country in the region with $23bn of deals across 1,277 projects, which also made it the third-largest FDI market in the world in 2023 based on project activity. 

Saudi Arabia was the second-largest destination country in the region based on project activity. According to GlobalData, the kingdom attracted inward investment of $17.3bn from 305 FDI projects, which represents a growth of 23% in inward FDI investment in 2022-23. 

Core sectors

A detailed analysis of the Saudi FDI data shows that some sectors have been more successful than others. The numbers show that the core sectors of Vision 2030 have been best placed when it comes to attracting FDI.

The most successful sector in terms of value is metals and minerals. There have been $9.5bn of metals and minerals projects announced in the kingdom, which is significantly more than the second-largest sector, renewables and alternative power, which has attracted $5.4bn of deals. 

Metals and minerals are an increasingly important sector for Saudi Arabia. The kingdom says its natural resources are worth $2.5tn – an increase of more than 90% compared with 2016 estimates.

To help monetise these reserves, Riyadh enacted a new mining investment law in 2021, and since then the Ministry of Industry & Mineral Resources (MIMR) has awarded more than 2,000 mining permits to local and foreign firms under its accelerated exploration initiative.

Renewables and alternative power is also an important sector for FDI, with foreign players investing in power generation projects that are delivered on a public-private partnership basis. 

Not all projects are announced with a value. Based on the number of FDI projects rather than the aggregate of their announced value, the best-performing sector is tourism, with 271 projects, followed closely by business and professional services, with 270 projects. 

Tourism is another key pillar of Vision 2030. It has been identified as a focal point for Saudi Arabia’s economic transformation because it opens up the kingdom to foreign visitors, while at the same time creating jobs and investment opportunities.

When analysed based on business function, manufacturing is the leading sector based on deal value, while construction is the largest sector when measured by the number of projects. Both of these sectors are playing a key role in delivering the objectives of Vision 2030. 

Manufacturing investments are helping develop jobs and investment opportunities in Saudi Arabia, while also keeping Saudi spending within the kingdom and securing supply chains. This is highlighted clearly by the kingdom’s various moves into the automotive manufacturing space, which aims to establish Saudi Arabia as a key supplier of vehicles for both the local and international markets. 

Construction underpins many of the other sectors being developed in Saudi Arabia as much of the new economic activity that is planned needs new facilities. Whether it be hotels for tourism, factories for manufacturing or office buildings for professional services, there is a wide range of construction projects planned and underway in the kingdom. 

FDI landmarks

Notable breakthroughs in FDI in Saudi Arabia this year highlight these trends shown by the data. The first major deal involves manufacturing and was reported in January when Turkish steelmaker Tosyali Holding revealed plans to invest up to $5bn in a new steel plant in the kingdom.

Another manufacturing deal came when The Saudi Arabian Industrial Investments Company (Dussur) divested its 55% ownership in General Electric Saudi Advanced Turbines (Gesat) to GE Vernova, giving the US-headquartered firm full ownership of the manufacturer.

For construction, the National Housing Company (NHC) has signed several major deals with foreign investors. In April, NHC and Urbas Middle East Real Estate Company, a subsidiary of Spain’s Urbas Group, signed an agreement to develop over 589 residential units in NHC’s Al-Fursan suburb of Riyadh.

In March, NHC signed another deal with Egyptian real estate developer Talaat Moustafa Group (TMG) to develop over 27,000 residential units at NHC’s Banan City project, which is also in the Al-Fursan suburb of Riyadh. 

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Colin Foreman

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