Saudi investment rises despite controversies, says GlobalData

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Following the news that foreign direct investment (FDI) inflows to Saudi Arabia grew 10.2% year-on-year (y-o-y) to reach $3.5bn in the first nine months of 2019 compared with January-September 2018, when the amount equalled $3.18bn;

Colin Foreman, Deputy Editor at GlobalData, a leading data and analytics company, offers his view:

“Saudi Arabia’s economic reforms and new construction projects continue to attract growing volumes of FDI into the Kingdom. However, while the latest FDI figures show that progress is being made towards its Vision 2030 economic goals, there are signs that the growth rate could be plateauing.

“In the January-September 2018 period, inflows to the Kingdom grew by more than 170% compared with the corresponding period in 2017, when inflows were valued at just $1.16bn.

“The simple explanation could be that after starting an initial jump from a low base, the rate of growth for FDI is now less spectacular. Another more challenging explanation may be that international controversies involving Riyadh have tempered Saudi Arabia’s ability to attract FDI.

“The 2019 FDI numbers came shortly after the murder of Jamal Khashoggi by Saudi government officials in Istanbul in October 2018. The incident had an impact on business, with the likes of the UK’s Richard Branson suspending his business activities in the Kingdom.

“In 2020, Saudi Arabia is looking to move forward. The raft of projects that it launched in 2017 are now moving into construction and require investment.

“The government’s privatisation drive will also continue following the initial public offering of Saudi Aramco at the end of last year.

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“While economic strides are being taken, controversy will nevertheless persist. In mid-January, there were claims that Saudi Crown Prince Mohammed bin Salman bin Abdulaziz al-Saud had hacked a mobile phone owned by Amazon owner Jeff Bezos.

“Although Saudi government quickly dismissed the allegations as ‘absurd’, it could, as with the Khashoggi murder, have a dampening effect on FDI.

“That said, the data for 2019 shows that the weight and scale of Riyadh’s economic reforms and new projects across the Kingdom are still an attractive proposition for investors, and as long as that continues the outlook for Saudi Arabia remains positive.”


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