Kingdom aims to boost FDI inflows to 5.7% of its nominal GDP by 2030 Saudi Arabia has rolled out a series of ambitious reforms and projects designed to foster FDI and enhance the overall business environment RIYADH: Saudi Arabia’s foreign direct investment inflows reached SR96 billion ($25.6 billion) in 2023, marking a 50 percent annual increase from the previous year, according to recent data. A report from the Ministry of Investment said that these figures are calculated using a new methodology aligned with the International Monetary Fund’s sixth edition of the Balance of Payments Manual, which offers updated guidelines for compiling cross-border transaction data. The figures exclude the SR55 billion Aramco deal from 2022, in which a consortium led by BlackRock Real Assets and Hassana Investment Co. acquired a 49 percent stake in a newly-formed gas pipeline subsidiary. The reported inflows surpassed the National Investment Strategy target by 16 percent. Saudi Arabia aims to boost FDI inflows to 5.7 percent of its nominal gross domestic product by 2030, up from the current 2.4 percent, with a target of attracting $100 billion annually. The report also highlighted that FDI stock — the total value of foreign investments in the Kingdom — reached SR897 billion, a 13.4 percent annual increase. Net inflows surged by 91.1 percent to SR86 billion. Manufacturing industries led FDI inflows in 2023, amounting to SR34.44 billion, or 36 percent of the total. The financial and insurance sectors followed with SR14.86 billion, construction attracted SR13.38 billion, and wholesale and retail trade saw SR12.57 billion in inflows. By the end of last year, manufacturing industries also contributed the largest share of the total FDI stock, reaching approximately SR258.74 billion, or 29 percent of the total. Wholesale and retail trade activities contributed SR134.8 billion, or 15 percent, while financial and insurance sectors accounted for SR112.13 billion, or 12 percent. Saudi Arabia is actively working to cultivate an attractive investment environment as part of its Vision 2030 initiative, which aims to diversify the economy away from oil revenues. The Kingdom has rolled out a series of ambitious reforms and projects designed to foster FDI and enhance the overall business environment. These initiatives include streamlining regulatory processes, offering incentives to investors, and hosting high-profile events that showcase the Kingdom’s potential as a global investment hub. The country’s focus on localization and innovation has positioned manufacturing as a critical pillar for attracting global investments, aligning with its goals of self-sufficiency and sustainable development. The Saudi government’s proactive approach to improving the ease of doing business has also played a key role in attracting FDI. Localization efforts have evolved from mere compliance to becoming vital engines for both short-term success and long-term growth. Companies like Emerson have exemplified this journey by establishing local manufacturing facilities and expanding their operations to include a wide range of products tailored to the specific needs of the Saudi market. The focus on building a skilled local workforce has strengthened the manufacturing sector’s attractiveness to foreign investors. Initiatives that promote collaboration with local educational institutions ensure a continuous talent pipeline, with Saudi nationals leading the way in these operations. This commitment to workforce development, especially through enhancing opportunities for women in manufacturing roles, aligns with Vision 2030’s broader goals and fosters a more inclusive economy. Initiatives like “In-Kingdom Total Value Add,” or IKTVA, support the localization of supply chains, reducing reliance on imports while enhancing domestic manufacturing capabilities. By sourcing critical components locally, manufacturers can lower transportation costs and environmental footprints, making the sector even more appealing to foreign investors. Riyadh leads FDI inflows Riyadh attracted SR33 billion in FDI inflows, positioning it as the leading region in Saudi Arabia. This can be attributed to its status as the Kingdom’s capital and economic hub, where government initiatives and major infrastructure projects have bolstered investor confidence. The Eastern Province followed with SR29 billion in inflows, benefiting from its natural resources and strategic location, which support trade and industrial activities. The region includes key cities such as Dammam, Al-Hasa, Al-Jubail, and Al-Khobar. Al-Khobar recently achieved the 99th position in the International Institute for Management Development’s Smart City Index for 2024, becoming the fifth Saudi city to earn smart city status alongside Riyadh, Jeddah, Makkah, and Madinah. This recognition highlights the Kingdom’s commitment to Saudi Vision 2030, focusing on technology-driven urban development. The IMD index evaluates cities on their ability to utilize advanced technologies to create sustainable, intelligent communities. The Madinah region attracted SR23 billion in FDI, driven by its religious significance and recent reforms to enhance global investment opportunities. As Muslim high-net-worth individuals worldwide increasingly seek property investments in the holy cities of Makkah and Madinah, the region is becoming a magnet for significant financial commitments. Investments in infrastructure, such as Turkish airport operation and services firm TAV Airports’ $275 million project to expand Prince Mohammad Bin Abdulaziz International Airport, further highlight the region’s growing appeal. This upgrade is essential to accommodate the rising passenger traffic, which soared nearly 50 percent last year to reach 9.4 million. By enhancing the airport’s capacity to handle 18 million passengers annually, the development strengthens the region’s connectivity and bolsters its appeal as a destination for religious tourism. In tandem with these infrastructure advancements, the hospitality sector in Madinah is also poised for transformation. Taiba Investments, a hospitality and real estate company, has announced a strategic partnership with Hilton to bring the Waldorf Astoria Hotels & Resorts brand to the city. The renovation of the existing Taiba Front Hotel into Waldorf Astoria Al Madinah is set to elevate the tourism experience, featuring over 300 luxurious rooms and suites, multiple dining options, and state-of-the-art facilities, including multi-functional halls and a fitness center. Scheduled to open in 2028, the hotel will enhance the pilgrimage experience, situated just a stone’s throw from the Prophet’s Mosque. Top countries driving FDI inflows In 2023, Saudi Arabia’s FDI inflows came from a diverse international landscape, with the top 20 countries accounting for 85 percent of the total. The UAE led the way, contributing 19 percent, followed by France with 11 percent. The UK and the Netherlands each contributed around 7 percent, while Egypt accounted for 6 percent. Among G20 nations, France was a significant player, contributing 12 percent, followed by the UK with 7 percent. The US and India also made noteworthy contributions, with 6 percent and 4 percent, respectively.