Investment in Saudi Arabia from abroad fell 80 percent in 2017, according to a report by the UN Conference on Trade and Development. But scratch beneath the figures and a different picture emerges. This report sounds ominous for Saudi Arabia and the economic plans set forth under Vision 2030, but closer examination reveals a more complicated situation. The 80 percent drop in investment from foreign firms in Saudi Arabia is a jarring number. However, it is less shocking when taken in the context of a global trend. The same UN report stated at the very beginning that “Global flows of foreign direct investment fell by 23 percent in 2017.” Foreign investment in “developed and transition economies” fell significantly, and there was almost zero growth in foreign investment into developing economies. In other words, the drop in inward investment for Saudi Arabia is part of a global trend. The report does not reach a conclusion about why this trend has occurred, but it is likely due in part to healthy activity in the world’s largest economies and new regulation and tax laws in countries such as the US that encourage domestic investment. A second reason for the major drop in foreign investment in Saudi Arabia came from the sales of foreign-owned assets to domestic interests. The UN report specifically mentioned this, giving the example of Royal Dutch Shell’s $820 million sale of its stake in the SADAF petrochemical plant to the Saudi state-owned company SABIC. The SADAF sale only accounts for about 15 percent of the drop in foreign direct investment in Saudi Arabia, but this sale should be seen as a sign of Saudi economic health instead of struggle. The purchase by SABIC shows that domestic industries are able to buy out foreign partners and invest domestically themselves. Some foreign investors will need time for the dust to settle to see how well the changes underway in Saudi Arabia succeed. Ellen R. Wald Another possible reason for the drop in foreign direct investment in Saudi Arabia was the perception of political risk. Saudi Arabia went through major political changes in 2017. The country began preparing for social liberalizations such as the introduction of movie theaters and women driving — both seen as positive changes, but changes nonetheless. Global businesses can be conservative institutions, afraid to take chances in unknown situations. For that matter, the changes in Saudi Arabia are still continuing. To that extent, many foreign investors consider Saudi Arabia a risky environment. For more than 50 years Saudi Arabia had a reputation for extreme stability and conservatism, but now the perception of the country is not as clear to many businesses. To be clear, any liberalizations— whether social, regulatory, or political— are seen as positive. However, some foreign investors will need time for the dust to settle to see how well the changes in Saudi Arabia succeed. A new generation will eventually take charge in Saudi Arabia and it appears to outside investors that new norms are being adopted. Investors want to be sure that these changes go smoothly. Finally, there is a very simple fourth reason that foreign direct investment in Saudi Arabia fell in 2017: Vision 2030 required it. Internationally, many have mistaken Vision 2030 and recent efforts by the Saudi government as a drive to bring investment into the Kingdom. This is not the main goal. Rather, Vision 2030 and the PIF Program actually crowd out some foreign investment with Saudi-led domestic investment. The Future Investment Initiative (FII) conference held by the PIF in the fall of 2017 (and planned again for the fall of 2018) was meant as “discussions and debates to explore future developments in the world economy.” Despite misconceptions that the FII was seeking to bring investors to Saudi Arabia, its goals included building relationships and helping business leaders understand opportunities related to Vision 2030. It was not a sales pitch to dump capital into Saudi Arabia. Despite recent deficits, the Saudi government is still cash-rich and the oil industry ensures it will continue to be. Saudi Arabia and Vision 2030 seek foreign partnerships for employment opportunities, economic diversification and knowledge creation; they do not necessarily seek foreign investment. The PIF program calls for the PIF to invest in Saudi Arabia, to unlock new technologies and improve employment and the economy. When it does this, it also prevents foreign investment, which is fine economically. Take a well-known example: The AMC movie theater expansion into Saudi Arabia. When AMC Entertainment Holdings finalized plans to open 100 cinemas in the Kingdom, it did so in partnership with the PIF. AMC could have solidified the deal with a loan from an international bank, or it could have worked with a private equity investor in New York or London. AMC could have financed the expansion with its own cash. Instead, AMC partnered with the PIF, and an opportunity for foreign direct investment into Saudi Arabia disappeared. Saudi Arabia, and the PIF in particular, is crowding out some foreign investment. Though this makes the data in the UN report look bad, it does not indicate problems for the Saudi economy. Ellen R. Wald, Ph.D. is a historian and author of “Saudi, Inc.” She is a Non-Resident Scholar at the Arabia Foundation, a Washington think tank, and the president of Transversal Consulting. Twitter: @EnergzdEconomy