Saudi Arabia opens up its economy by introducing new investment guidelines to attract foreign direct investments (FDIs)

Saudi Arabia unveiled seven investment principles that include equality for foreign and Saudi investors as the Arab world’s biggest economy looks to attract global conglomerates to boost foreign direct investment.

Established through a royal decree, the seven-point agenda will support the development of a competitive investment environment in the kingdom, which is going through a massive economic overhaul, the Saudi Arabian General Investment Authority (SAGIA) confirmed.

The rapid pace of economic transformation in the coming years in our opinion is opening exciting investment opportunities – both in Saudi, a 6-20 economy opening up to international businesses and in the broader Middle East. These principles will play in our opinion an important role in underpinning the reforms that are making it easier for investors to access these markets. Saudi Arabia, one of the world’s biggest oil exporters, is undergoing a series of social and economic reforms to cut its dependence on the sale of hydrocarbons. The kingdom is focusing on increasing the contribution of its non-oil economy to gross domestic product by cultivating a local manufacturing industry and attract FDI. The non-oil sector accounts for about 40% of GDP at present. The collapse of oil prices in mid-2014 from a peak of 115 US-Dollar per barrel to lows of below 30 US-Dollar per barrel in 2016 accelerated the momentum to overhaul the economy.

Under its Vision 2030 programme, Saudi Arabia has set the target of increasing foreign investment to 5.7% if the country’s GDP from 3.8%. Last year, FDI recorded a 127% year-on-year growth, according to SAGIA, which did not provide further details. The World Bank recently has ranked Saudi Arabia as the fourth-largest reformer within the G-20 in its latest “Doing Business” report.

The seven principles that will act as guidelines for current and future investment regulations include: ensuring equality between Saudi and foreign investors; protection of investments in compliance with the laws in Saudi Arabia; enabling the sustainability of investment and maintaining transparency when addressing investors’ complaints.

The agenda also addresses: access to equal investment incentives and implementing transparent, non-discriminative criteria for eligibility; implementing social and environmental standards; facilitating access procedures for foreign workers and their families; and ensuring the transfer of knowledge, technology and enhancement of local human capital. SAGIA, the kingdom’s state-backed inward investment agency, is also working with the World Bank to improve the country’s global ranking in terms of ease of doing business and has identified 400 reforms that could help attract more investments.

According to our information about 40% of those measures have been completed so far. Saudi Arabia is ranked 92nd among 190 countries, already ahead of states such as India, the Philippines, Argentina and Lebanon, according to the 2018 World Bank rankings.

“To improve is to change; to be perfect is to change often” Churchill once said.

In our opinion, Saudi Arabia still has a long way ahead to achieve its Vision 2030 programme over the next decade – but the necessary focus for reforms seems now to get in place.