Investing Saudi Arabia in 2024
The topic of investing in Saudi Arabia has become a focal point of discussions within the business world. Saudi Arabia’s economy has demonstrated its resilience over the course of 2023 and into 2024. Growth has been sustained in the midst of global economic pressures, geopolitical instability, and the wake of the Covid-19 pandemic.
Saudi Arabia’s ongoing economic transformation, supported by commendable reforms under the Vision 2030 agenda and higher oil prices, has helped create high growth, record low unemployment, contained inflation, and strong external and fiscal buffers, while reducing reliance on oil.
The banking system remains on a strong footing. The aggregate capital adequacy ratio is strong, profitability—driven by net interest margins—is high and above pre-pandemic levels, and the NPL ratio is low and declining. While growth in mortgages has recently moderated, demand for project-related and consumer loans remains strong, helping offset the impact on profitability from rising funding costs linked to higher interest rates and a greater share of time and saving deposits in banks’ liabilities.
While higher oil prices and increased oil-driven exports account for much of the Kingdom’s growth, the nonoil economy has also demonstrated strength, buoyed by pro-business reforms that seek to diversify the economy and attract foreign private investment under the strategic roadmap of Vision 2030. Saudi Arabia is in the middle of an economic upswing, supported by higher non-oil activity, according to analysis by the Economist Intelligence Unit.
Saudi Arabia: Selected Economic Indicators, 2021–24
Population: 32.2 million (2022)
Quota: SDR 9,992.6 million (2.10% of total)
Main products and exports: Oil and oil products (79.5%)
Key export markets: Asia, the U.S., and Europe
9th
largest stock exchange by market capitalisation – Saudi Exchange
17
out of 64 – World Competitiveness Ranking (Overall) (IMD)
10.2 0%
growth in FDI inflows in Q1 2023 compared to Q1 2022
In this guide, we look at investing in Saudi Arabia, the Vision 2030 objectives, and recent business-friendly reforms that support the private sector. We also discuss key legal issues that foreign investors need to know about when considering investing in the Kingdom.
Key Facts About Vision 2030
Vision 2030 is an ambitious socio-economic reform program, with the purpose of creating an open Kingdom where business opportunities are diverse and abundant, education, employment, and career development opportunities are aligned, and economic growth is sustainable.
The three key themes of Vision 2030 are to foster an ambitious nation, a thriving economy, and a vibrant society. These broad themes are cascaded into 96 “Strategic Objectives” and 13 “Vision Realisation Programmes” (“VRPs”).
Investing in Saudi Arabia Giga Projects
Vision Realisation Projects
Saudi Arabia’s large-scale “giga-projects” have been described by the Government as “the crown jewel of Vision 2030”. Designed to open new areas of economic activity, create jobs, and drive economic development, the projects span sectors, from energy to tourism.
Many giga-projects are large-scale infrastructure and construction projects, led by the PIF in partnership with the private sector.
The giga-projects are already stimulating the economy. The vast investment needed is driving both domestic and foreign investment. The human capability needed to bring the giga-projects to fruition is creating jobs and attracting international expertise, and it will serve to develop the skills and capabilities of Saudi nationals.
Looking ahead, the projects have the potential to re-cast the economic profile of Saudi Arabia and drive non-oil sector contribution to GDP for the long term.
The investment climate
Privatization and the growing private sector
National Investment Strategy
> increased tax revenues following the tripling of the VAT rate to 15 per cent in 2020; and
Trade & Investment Events in 2024
Foreign Direct Investment
In driving private sector growth, foreign investment emerges as a fundamental force within Saudi Arabia’s economic framework. The Privatisation Programme, coupled with the liberalization of the Saudi Exchange and the establishment of Special Economic Zones, extends a compelling invitation to international investors. Inbound investment into Saudi Arabia has been affected by the slowdown of economic growth as a result of geopolitical tensions.
Despite a global downturn in FDI flows, Saudi Arabia defies the trend. The trend, investing in Saudi Arabia is witnessing a noteworthy surge during Q1 2023, signaling a promising trajectory of economic resilience and attractiveness to foreign capital.
While global FDI flows declined in Q1 2023 by 34.7 percent compared to Q1 2022 according to the OECD, FDI inflows into Saudi Arabia increased in the same period. Data published by the Ministry of Investment (“MISA”) in October 2023 shows that Saudi Arabia saw a growth rate in foreign direct investment (“FDI”) inflows of SAR 8.1bn in Q1 2023.
Saudi Arabia was the most targeted nation for M&A in the MENA region, with deal values of US$7bn, according to statistics published by MENA Investment Banking Review.
Investing in Saudi Arabia Special Economic Zones
When it comes to investing in Saudi Arabia, Special Economic Zones are one of the first questions that investors ask. The creation of SEZs, with bespoke regulations, is expected to boost investment further. Sector-based SEZs are a key tool to incentivize foreign investors to enter the local market. Moreover, SEZs have few or no restrictions on foreign investment and provide more favorable
regulatory and operating environments, including tax holidays.
The Kingdom’s first special economic zone, the Integrated Logistics Bonded Zone (ILBZ), focusses on providing integrated logistics. The ILBZ located adjacent to the King Khalid International Airport in Riyadh. Furthermore, four new SEZs, Ras Al-Khair Special Economic Zone, King Abdullah Economic City Special Economic Zone, Jazan Special Economic Zone and Cloud Computing Special Economic Zone were announced in April 2023.
Geographical Importance: Asia Investing Saudi Arabia
Saudi Arabia is a strategic location at the crossroads of three continents – Asia, Africa and Europe. This is why, the Kingdom is well placed to foster relationships across the globe.
It is clear that Saudi Arabia’s economic relationships are evolving closer to Asia. Whilst not displacing traditionally strong relationships with Western countries, deepening ties with the East are being driven by mutually beneficial trade and investment opportunities.
Inflows of investment and expertise from Asia are to a large extent attributable to economic diversification initiatives in Saudi Arabia and the Giga projects.
Outflows from goods trade to Asia are primarily in the oil and gas sector. For example, in 2021, the KSA was the largest supplier of oil to China. Moreover, renewable energy becoming increasingly significant as it contributes to Asia’s green agenda and plans for energy security in the future. Sovereign wealth funds are also looking East for investment opportunities.
Many opportunities for outbound investment are being led primarily by the PIF as well as companies such as Aramco and Dar Al Arkan. PIF has a focus on the infrastructure, energy, and renewables sectors. India, China and Malaysia are key destinations for investment in the Asia region.
China Investing Saudi Arabia
China is already one of Saudi Arabia’s largest trading partners. As at August 2023, China is the main destination for exports of Saudi Arabia, according to statistics released by the General Authority for Statistics.
In the first half of 2022, Saudi Arabia was the single largest recipient of investment from China at US$5.5bn. China was the top investor in Saudi Arabia by deal volume in Q2 2023, according to MISA.
More recently, Saudi Arabia signed 12 cooperation agreements worth in excess of US$1.3bn with Chinese companies and banks at an investment forum held in Beijing.
Saudi Arabia’s need for investment and expertise, in particular, in the technology, construction and infrastructure, logistics and renewables sectors, complements China’s Belt and Road Initiative (“BRI”) development strategy. China’s BRI aims to build connectivity and co-operation across the world. Since the launch of the BRI initiative, China’s foreign direct investment in Saudi Arabia has grown rapidly. In conclusion, closer coordination of the BRI and Vision 2030 is anticipated. This came in line with announcements following meetings between Crown Prince bin Salman and Chinese President Jinping in 2019.
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