Saudi Arabia: Investing
In this page: FDI in Figures | What to consider if you invest in Saudi Arabia | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information
Global foreign direct investment (FDI) flows in 2021 were USD 1.58 trillion, up 64 per cent from the exceptionally low level in 2020. The recovery showed significant rebound momentum, with booming merger and acquisition (M&A) markets and rapid growth in international project finance because of loose financing conditions and major infrastructure stimulus packages. However, the global environment for international business and cross-border investment changed dramatically in 2022. The war in Ukraine – on top of the lingering effects of the pandemic – is causing a triple food, fuel and finance crisis in many countries around the world. Investor uncertainty could put significant downward pressure on global FDI in 2022. The 2021 growth momentum is unlikely to be sustained. Indeed, world flows in the second quarter of 2022, the latest data available, were down 31% from the first quarter and 7% less than the quarterly average of 2021 (UNCTAD Global Investment Trends Monitor, October 2022). The negative trend reflects a shift in investor sentiment due to the food, fuel and finance crises around the world, the Ukraine war, rising inflation and interest rates, and fears of a coming recession. Expectations for the full year are for a marked slowdown.
FDI flows to Saudi Arabia had gradually declined due to political factors and lower oil prices; however, economic diversification and new projects outside the oil and gas sector helped reverse the trend. According to UNCTAD's World Investment Report 2022, FDI inflows in Saudi Arabia remained resilient despite the pandemic, increasing by 20% to USD 5.39 billion in 2020, up from USD 4.56 billion one year earlier and to 19.28 billion in 2021. Policy interventions aimed at diversifying investment seem to be effective: key investments in financial services, retail, e-commerce, and ICT have been reported. The stock of FDI in the country increased in 2020 and reached USD 241 billion. The United Arab Emirates, the United States, France, Singapore, Japan, Kuwait and Malaysia are the main investors in Saudi Arabia. The investments are mainly oriented towards the chemical industry, real estate, fossil fuels, automobiles, tourism, plastics and machinery. Meanwhile, outflows from Saudi Arabia decelerated sharply in 2020 (-64% to USD 4.9 billion) before regaining momentum at USD 23.86 billion in 2021.
The Kingdom has pushed to increase FDI in recent years as part of the Vision 2030 plan to end reliance on fossil fuels, and it is aiming for USD 100 billion in annual FDI by 2030. Moreover, Saudi Arabia adopted seven “Guiding Principles for Investment Policymaking”, including non- discrimination, investment protection, investment sustainability, enhanced transparency, protection of public policy concerns, ease of entry for employees, and the transfer of knowledge and technology; and the Saudi Arabian General Investment Authority was upgraded, becoming the Ministry of Investment. Recently, Saudi Arabia also launched a SEZ program that focuses on non-traditional industries, which include cloud computing, tourism, renewable energy, and logistics. Political and social tensions, reduced access to credit and the policy of “Saudization”, which favours the domestic labour force, have all been obstacles to FDI. Nonetheless, the government has invested heavily in national infrastructure to attract investment, and FDI is seen as one of the most effective ways to diversify the economy and provide employment for younger generations. The government opened the retail and wholesale sectors to 100% foreign ownership and has launched a large privatization programme. The authorities welcome FDI due to its ability to transfer technology, employ and train the national workforce, foster economic development and enhance local raw materials. The country's controlled inflation and relatively stable exchange rate, openness to foreign capital in upstream gas, as well as extensive privatisation programmes are among the advantages attracting investors to the country. The dynamic performance of the banking sector is driving the growth of the non-oil sector. Lastly, access to the world's largest oil reserves, very low energy costs and a high standard of living are decisive factors for foreign investors. Nevertheless, foreign investment is currently prohibited in 10 sectors, including oil exploration, drilling, and production; fisheries; security and detective services; and real estate investment in the holy cities of Mecca and Medina.
| Foreign Direct Investment | 2019 | 2020 | 2021 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 4,563 | 5,399 | 19,286 |
| FDI Stock (million USD) | 236,376 | 241,775 | 261,061 |
| Number of Greenfield Investments* | 134 | 88 | 147 |
| Value of Greenfield Investments (million USD) | 12,526 | 10,162 | 9,502 |
Source: UNCTAD, Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
| Main Investing Countries | 2017 (latest official data available), in % |
|---|---|
| United Arab Emirates | 21.9 |
| USA | 20.3 |
| France | 9.1 |
| Singapore | 6.9 |
| Japan | 5.6 |
| Kuwait | 4.6 |
| Malaysia | 4.6 |
| Main Invested Sectors | 2017 (latest official data available), in % |
|---|---|
| Chemical industry | 30.8 |
| Real estate | 27.7 |
| Coal, oil and gas extraction | 7.9 |
| Automotive industry | 7.1 |
| Hotels and tourism | 6.9 |
| Plastics | 5.0 |
| Industrial machinery | 2.4 |
Source: The Arab Investment & Export Credit Guarantee Corporation - Latest available data.
Once Saudi Arabia became a member of the WTO in 2005, the foreign investment climate in the Kingdom substantially improved. From an investor's point of view, the country's strong points are:
While the country has undertaken reforms to encourage foreign investment, the legal framework in resolving commercial disputes is considered by some to be inadequate. There is a lack of transparency in applying intellectual property legislation, and the Government imposes quotas of Saudi employees in companies. Cases of delayed payment of some government contracts have been reported. The traditionally conservative cultural environment, including the enforced segregation of the sexes in most businesses and social settings, may discourage certain investors who are not accustomed to such practises.
Other weak points are:
| Country Comparison For the Protection of Investors | Saudi Arabia | Middle East & North Africa | United States | Germany |
|---|---|---|---|---|
| Index of Transaction Transparency* | 9.0 | 6.4 | 7.0 | 5.0 |
| Index of Manager’s Responsibility** | 9.0 | 4.8 | 9.0 | 5.0 |
| Index of Shareholders’ Power*** | 7.0 | 4.7 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
There are ready-to-move-in offices available on rent in various business parks across Kingdom's main cities.
However in case the foreign company is of national interest, the Saudi Government may provide temporary space for a limited period till the company establishes itself in the country.
Foreign investment that fulfils the requirements of the Foreign Capital Investment Code enjoys all privileges of national capital and is entitled to the same treatment, protection, and incentives accorded to national capital, which includes exemption from customs duties on machinery and equipment.
In addition, foreign investors who hire Saudis may benefit from a rewards system, whereby the Government would pay 50% of the employees’ salaries, subject to conditions as specified by the Human Resources Development Fund.
The Saudi Arabian General Investment Authority (SAGIA) and Invest Saudi may be contacted for further information about investment laws and opportunities in Saudi Arabia.
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Latest Update: June 2023
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