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Saudi Arabia attracts $32bn in FDI inflows

30 September 2025

 

Saudi Arabia attracted SR119bn ($31.7bn) in foreign direct investment (FDI) inflows in 2024, marking a 24% increase from the previous year. This updated data from Saudi Arabia’s General Authority for Statistics (Gastat) reveals a revised figure that is 37% higher than the initial estimate, according to Bloomberg, and signals renewed investor interest, even as inflows remain short of the government’s $100bn annual target for 2030.

Until April 2025, leading analysts and data indicated a 19% YoY decline. The updated figure marked a sharp turnaround from earlier readings, when inflows were thought to have fallen to their lowest level since 2021. Analysts note the new data captures a wider range of market activity, including mid- and small-cap firms, offering a fuller picture of investment flows, signalling a turning point in sentiment. “This shows that inflows are no longer tentative but part of a sustained trend, marking one of the kingdom’s strongest years on record,” said Hamzeh Jalal B Al-Gaaod, Mena analyst at TS Lombard. 

Sector focus

The manufacturing sector led FDI inflows with SR35bn ($9.3bn), accounting for 29% of the total. This was followed by wholesale and retail trade (including vehicle repair) and construction, each accounting for 15% of the share at SR18bn. Financial and insurance services also represented a significant share, totalling approximately SR14bn (12%). This distribution aligns with Riyadh’s efforts to expand industrial capacity, strengthen supply chains and deepen financial services as part of its Vision 2030 diversification programme.

The push is reinforced by new agreements: On 29 September 2025, Saudi Arabia’s Minister of Industry and Mineral Resources Bandar Alkhorayef held a series of bilateral meetings in Shanghai with senior executives of leading Chinese industrial companies to explore opportunities for localising high-value industries and expanding investment in the Kingdom, illustrating how FDI is being channelled into building local supply chains and technology capacity.  

Source markets

The UAE remained Saudi Arabia's top source of FDI for the fourth consecutive year. Inflows from the US and Germany more than tripled compared to 2023, while Hong Kong’s contribution surged to $2bn, marking a tenfold increase year-on-year. In contrast, investments from France and Spain declined. 

Outflows ease

Saudi outbound investment fell sharply in 2024, dropping 74% year-on-year, according to Gastat. The steep decline marks a structural shift: while Saudi Arabia has long been a major source of global capital, it is now positioning itself as a destination for international inflows. This aligns with Saudi Arabia’s broader economic transformation in the second half of 2024, shifting from exporting capital to attracting and retaining it. 

“The breadth of capital sources highlights the global reach of Saudi’s reforms, and the sharp fall in outflows shows investors are choosing to invest locally rather than leverage Saudi capital abroad,” Al-Gaaod said. “Outflows are no longer dominating the picture; the Kingdom is now drawing capital in rather than sending it out.”

Political dynamics have also influenced sentiment. Al-Gaaod noted that Trump’s endorsement of the Gulf states helped re-ignite investment flows from abroad, reinforcing the perception that Saudi Arabia is a safer long-term destination.

Reform dividend

Recent regulatory changes have also strengthened Saudi Arabia’s investment environment. A unified investor framework now covers both domestic and foreign firms, featuring simplified registration procedures and expanded investment incentives. Restrictions have been eased in sectors such as renewable energy, technology and logistics, opening the market to a wider range of international players. 

Key measures include easing foreign ownership caps in selected sectors, the introduction of securitisation rules to deepen capital markets, and the White Land Law aimed at unlocking idle real estate supply. These steps go beyond headline reforms, signaling Riyadh’s attempt to create a more competitive and transparent business environment. 

Another initiative under trial is a fund-of-funds model giving international investors exposure to mid- and small-cap companies on the Saudi exchange, broadening access beyond the large-cap names that have traditionally dominated foreign portfolios.  

These changes are intended to lower entry barriers and support the government’s long-term diversification goals. Al-Gaaod noted that the streamlined framework and new incentives are not merely symbolic; foreign investors are now visibly more comfortable in committing capital.

Analysts caution, however, that while the reforms mark progress, further steps will be needed to provide long-term certainty and fully align the investment climate with international expectations. 

Diversification push

Beyond regulatory change, investment is flowing into priority sectors aligned with Saudi Arabia’s diversification goals. In the automotive industry, Public Investment Fund (PIF)-backed Saudi electric vehicle (EV) firm Ceer is developing the kingdom’s first electric vehicle brand and aims to begin production in 2025. Additionally, PIF and South Korea’s Hyundai Motor Group announced a $500m joint venture in 2023 to build a Saudi EV plant, expected to be completed in 2026 with an annual capacity of 50,000 units.

In the energy sector, Aramco and BlackRock (via Global Infrastructure Partners) announced an $11bn investment in the Jafurah midstream gas network, which will supply the power needed for manufacturing and large-scale data centres. The mining sector is also expanding, with plans for lithium processing, battery production and metals development to secure clean energy supply chains.

This trend is regional as well. Abu Dhabi’s Masdar is shifting its focus from green hydrogen and ammonia to data centres, reflecting a shift in ESG and renewable energy investment strategies. Al-Gaaod stated that this reflects a new role for hydrocarbons: “Energy is still a driver, but now it powers industry and infrastructure rather than serving only exports, a change reflected in projects from Jafurah to Masdar.”

Looking ahead

Saudi Arabia is gaining traction in attracting international capital, with inflows approaching previously achieved record levels. While the $31.7bn recorded in 2024 is still below the government’s $100bn annual target for 2030, analysts stress that consistent inflows at lower levels would still be meaningful. 

“Even if inflows stabilise around $20-30bn annually, that will still mark a solid achievement for the non-oil economy,” said Al Gaaod. 

Preliminary data shows $6.4bn in inflows during Q1 2025, indicating continued activity. The upcoming wave of foreign capital is expected to focus on technology and digital infrastructure, with over $80bn in artificial intelligence and data centre projects already announced.

Beyond digital, the pipeline also spans EV and battery production and large-scale desalination projects, reinforcing diversification in both industry and utilities. At the same time, growth in debt capital markets and recent fiscal discipline, including scaling back parts of Neom Line project and cancelling certain contracts, underline that ex-oil expansion rests on multiple pillars, not FDI alone. 

MEED’s October 2025 special report on Saudi Arabia includes:

> GOVERNMENT: Riyadh confronts rising regional chaos
> ECONOMY: Riyadh looks to adjust investment approach
> BANKING: New funding sources solve Saudi liquidity challenge
> OIL & GAS: Aramco turns attention to strategic projects
> GAS: Saudi Arabia and Kuwait accelerate Dorra gas field development
> POWER: Saudi Arabia accelerates power transformation
> WATER: Transmission projects drive Saudi water sector growth
> CONSTRUCTION: Saudi construction pivots from gigaprojects to events
> TRANSPORT: Infrastructure takes centre stage in Saudi strategy

To see previous issues of MEED Business Review, please click here
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Sarah Rizvi

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