The recent publication of the “World Investment Report” by the United Nations Conference on Trade and Development (UNCTAD) sheds light on the state of foreign direct investment (FDI) across the globe in 2023. The findings spotlight the Kingdom of Saudi Arabia, which has held a prominent position in attracting and exporting foreign investments in the Middle East for the past three yearsHowever, the year 2023 marked a significant decline in both FDI inflows and outflows for the nationIn concrete numbers, the total inflow of FDI was reported at $12.319 billion, which represents a drastic decrease of 56.1% compared to the previous yearSimilarly, the outflow totaled $16.071 billion, reflecting a decrease of 40.4%. Furthermore, the FDI stock within Saudi Arabia measures at approximately $215.524 billion, which is a decline of 19.9%, while the outflow stock has increased by 8.9%, reaching about $203.768 billion.

Yet, a more nuanced picture emerges when one examines domestic statistics regarding Saudi Arabia's investment landscape

Advertisements

The Ministry of Investment of Saudi Arabia has released its latest report, “Economic and Investment Monitoring,” which reveals a promising increase in FDI inflowsSpecifically, for the year 2023, Saudi Arabia’s FDI inflow was reported at 72 billion Saudi Riyals (SAR), marking a 12.1% year-on-year increaseThis rise can be attributed to a nuanced understanding of the previous year's figures wherein a large transaction worth $15.5 billion—related to the acquisition of 49% of Saudi Aramco's gas pipeline subsidiary by an international consortium—skewed the 2022 numbersThe report clarifies that this transaction was excluded from the FDI inflow calculation for that year.

Additional data points from this report suggest that the FDI stock in Saudi Arabia stood at 808 billion SAR in 2023, representing a healthy growth rate of 6.1% from the previous yearThis reflects ongoing efforts and strategies devised by the Saudi government to attract foreign investments

Advertisements

A critical component of these efforts is the well-defined national investment strategy, which sets a bold goal of increasing total FDI inflows to 388 billion SAR by 2030, aiming for a contribution of 5.7% to the nation’s GDP.

To facilitate this ambitious trajectory, various governmental departments have introduced a range of investment promotion initiatives in 2023. One prominent initiative launched by the Ministry of Tourism is an investment promotion plan for the hotel sectorThis project aims to streamline the investment process while enriching the range of tourism products available in the countryThe target is to attract 42 billion SAR in investments for the hotel sector by 2030, ultimately generating 120,000 jobs in the process.

In a collaborative effort, the Ministry of Industry and Mineral Resources joined forces with the Ministry of Investment to introduce a new incentive package valued at 685 million SAR

Advertisements

This initiative aims to increase investment in mineral exploration, minimizing the perceived risks associated with the early stages of explorationThe incentive package outlines financial incentives specifically for companies and investors who wish to engage in mining activities in Saudi Arabia, enhancing local talent and expertise accessibility for foreign investors.

Moreover, an Environmental Fund is poised to launch several green initiatives this year with an initial allocation of 6.3 billion SAR to support eco-friendly projectsBy 2023, the fund has already generated 295 million SAR in returns with a 6.6% rate of return.

On the aspect of outward investments, a report by Global Sovereign Wealth Fund (SWF) addresses Saudi Arabia's Public Investment Fund (PIF), which has notably bucked the trend observed with most sovereign wealth funds globally in 2023. While many funds curtailed their spending, the PIF escalated its transaction activity from $20.7 billion in 2022 to a remarkable $31.6 billion in 2023, thus surpassing Singapore's Government Investment Corporation and becoming the most active sovereign wealth fund worldwide

• The Inability of Jinshan Cloud to Stand Alone
• The Rise of A-Shares and the AI Investment Boom
• SK On: A Strategic Shift with Strong Prospects
• The UK’s Economic Dilemma: Inflation
• The Golden Era of Gold

This aggressive investment strategy included notable stakes in corporations such as Scopely, Nintendo, Vale, Heathrow Airport, and Rocco Forte Hotels, showcasing Saudi Arabia's hope to realize its Vision 2030 through these investments.

In an encouraging financial disclosure, the PIF published its consolidated financial statement and independent audit report wherein it recorded total revenues exceeding 331.36 billion SAR in 2023—more than doubling year-on-yearSuch growth is remarkable compared to the previous year's loss of 41.55 billion SAR, driven primarily by substantial improvements in investments within the banking and telecommunications sectors, alongside increased dividend incomeAdditionally, by the end of 2023, the PIF's total assets reached 3.663 trillion SAR, growing by 25.6% from the previous year.

The strategy designed by the PIF emphasizes focusing investments domestically from 2021 to 2025 to secure the advancement of national industries and expedite development projects

This includes a particular focus on enhancing the nation's aerospace industry, establishing strategic partnerships with foreign original equipment manufacturers to facilitate the transfer of critical capabilities and technologiesThe PIF is also exploring opportunities to localize the automotive industry in conjunction with international battery manufacturers.

Key projects under development, including NEOM, the Red Sea, and Qiddiya, reflect the PIF's long-term commitment to fostering sustainable economic growth within Saudi ArabiaThe immediate objective of this plan is to reduce the share of the PIF's international assets from 30% in 2020 to 24% by 2025.

Concurrent with these domestic-centric strategies, the PIF recognizes the significance of international investmentsDiversifying across various geographies, sectors, and currencies remains a priority for the fund to ensure an optimal balance of risk and return