Kingdom Is Top FDI Recipient in Arab World

[Riyadhi]

Kingdom Is Top FDI Recipient in Arab World

P.K. Abdul Ghafour & Mahmood Rafique, Arab News

JEDDAH/MANAMA, 18 October 2007 — Saudi Arabia was the largest recipient of foreign direct investment (FDI) in the Arab world in 2006, attracting $18 billion, an increase of 51 percent over 2005, according to a report of the United Nations Conference on Trade and Development (UNCTAD).

The report, published on Tuesday, attributed the increase to the region’s strong economic growth and improved business climate and to high oil prices which have attracted increasing amounts of FDI to oil, gas and related industries as well as to telecom, tourism and financial services.

The unprecedented increase in FDIs came after Saudi Arabia took a series of measures to attract foreign investment. The Supreme Economic Council (SEC) revised the negative list last March, allowing foreign investment in vital sectors like insurance services, wholesale and retail trade, air and train transport, and communication services.

Abdul Rahman Al-Tuwaijeri, secretary-general of the council, which is chaired by Custodian of the Two Holy Mosques King Abdullah, said the SEC opened new economic sectors for foreign investment in line with the king’s economic reforms aimed at strengthening the economy, attracting more foreign investment and enhancing private sector participation.

The negative list of investment was also revised to comply with Saudi Arabia’s commitments under the regulations and conditions of the World Trade Organization. The Kingdom became the 149th member of the WTO in December 2005.

“Also commercial agencies, except franchise rights are now open for foreign investment,” Tuwaijeri said.

According to the UNCTAD report, FDI inflows to the 14 economies of West Asia surged by 44 percent in 2006 to an unprecedented $60 billion. Turkey topped the list with $20 billion, a 100 percent increase over 2005, Saudi Arabia second with $18 billion and the UAE third with $8 billion, with a 23 percent decline in inflows or $8 billion. Jordan with $3.1 billion FDIs and Bahrain with $2.9 billion, were on fourth and fifth positions, respectively.

Efforts by Gulf countries to diversify their production activities beyond oil-related activities succeeded in attracting greater FDI flows to the manufacturing sector. FDI outflows from West Asia totaled $14 billion, an increase of 5 percent over the 2005 level.

The value of cross-border mergers and acquisitions (M&As) by investors from West Asia increased by 78 percent, amounting to $32 billion, as a result of high oil prices and the current account surpluses of oil-producing countries.

About two-thirds of those M&As were targeted at developed countries, in particular the United Kingdom (35 percent by value), Canada (11 percent) and the United States (9 percent).

Accounting for 8 percent of the value of such M&As, Pakistan was also an important target nation. In developing regions, investments in telecommunications (mainly in sub-Saharan African countries), real estate and leisure industries were notable in 2006, the report said.

Services remained the dominant sector for FDI in West Asia, a major proportion of which went to financial services as a result of the privatization and liberalization policies of a number of countries in the region.

Kuwait accounted for more than half of the region’s total outward FDI, mainly in the telecommunications industry.

In light of the region’s high GDP growth and ongoing economic reforms, supported by the prevailing high oil prices, the upward trend in FDI to West Asia is likely to continue, the report said.

The UN agency’s investment assessment of West Asia came two weeks after a World Bank report described Saudi Arabia as the seventh fastest reformer globally and the second fastest in the region. “This year Saudi Arabia made bold business reforms making it one of the world’s leading reformers. Saudi Arabia is now the top ranked economy in the Middle East,” said Jamal Haider, co-author of the bank’s Doing Business Report 2008.

Amr Al-Dabbagh, governor of Saudi Arabian General Investment Authority, said the jump in the new ranking from was a major step toward achieving the “10 by10” goal sought by SAGIA to place the Kingdom in the top 10 countries in terms of investment. “Saudi Arabia has become the number one recipient of foreign direct investment in the Middle East. Inflows have increased from $2 billion to $18 billion in the last two years,”Al-Dabagh said.

The SAGIA chief said the figures would grow more rapidly with the development of the Kingdom’s six new economic cities, and special economic zones that are attracting top global companies with major investment opportunities. King Abdullah launched four mega-economic cities in Rabigh, Hail, Madinah and Jizan, which are expected to draw SR300 billion in investment and create more than a million jobs.

“With Saudi Aramco’s recent expansion of refineries and the building of the Kingdom’s economic cities, foreign investment in the country has become more attractive to investors abroad, mainly due to the liberalization of investment rules in which SAGIA has played a vital role,” said Abdul Rahman Mousa, an investment specialist at SAGIA.

[huit]

$18B... wow!

[Riyadhi]

I remember telling someone in the UAE forum that Saudi received the higest FDI in the region but no one bought that

[smussuw]

because telecoms licenses, Gas and investments from the UAE are not real indicators of FDI

oh okay, maybe am giving excuses but I cannot buy that still

[*UofT*]

This is not hard to believe at all, Saudi has been the recepient of the highest FDI in the Arab historically and why would it come as a surprise if this holds true in 2007?

I think people are forgetting the fact that Saudi at the end of the day is the largest market in the Middle East...

Just the city of Riyadh itself is equivalent in population to all of UAE and Qatar.

Really this isn't rocket science.

[Riyadhi]

what about petrochemical investments? do they count?

[*UofT*]

Apart from petrochemicals, there have been Gas and Oil deals that the kingdom has undertaken with the likes of China? It could very well be the actual capital set up of refineries and refurbishment of existing oil fields in the wake of high crude prices is translating into FDI.

[smussuw]

It is just that I don't see significant results in Saudi Arabia in reality.

[Riyadhi]

لأن الشق أكبر من الرقعة

[cyborg81]

Originally Posted by Riyadhi

I remember telling someone in the UAE forum that Saudi received the higest FDI in the region but no one bought that

well yes the uae was the highest reciever of FDI but that was in the year 2006.as u can see this year saudi was on top as FDI in uae plunged 23%.

[AtaSaudi]

Originally Posted by smussuw

It is just that I don't see significant results in Saudi Arabia in reality.

Which kind of "significant result" do you whant to see in KSA?!