Arab News, Monday, Jan 02, 2023 | Jamadi Al Thani 9, 1444
Spreading wings to beat the global financial turbulence
Saudi Arabia has become an attractive and growing market riding on the back of
its remarkable oil-led economic growth and its exemplary focus on the targets of
its Vision 2030, positioning itself as one of the world’s leading investment
“Our nation holds strong investment capabilities,
which we will harness to stimulate our economy and diversify our revenues,” said
Crown Prince Mohammed bin Salman in the third quarter report of the Economic and
The Kingdom largely intends to achieve this
through the National Investment Strategy to make Saudi Arabia a sustainable and
world-class investment destination.
The NIS aims to triple its investment volume,
measured by gross fixed capital formation, to reach SR2 trillion ($530 billion)
or 30 percent of its gross domestic product. It also plans to increase the
overall domestic investment component of GFCF to SR1.65 trillion, meaning an
average annual growth rate of around 9 percent.
The crown prince said at the launch of the Vision
2030 blueprint in 2016: “We intend to provide better opportunities for
partnerships with the private sector through our position as the heart of the
Arab and Islamic worlds, our leading investment capabilities, and our strategic
As the private sector’s role in the Kingdom’s
economic development strengthened, the nominal GFCF increased 36.2 percent year
on year to reach SR248 billion in the second quarter of this year, according to
the Ministry of Investment.
The private sector accounted for 86 percent of the
GFCF in the country, and it increased by 31.4 percent in the second quarter of
2022 compared to the same period a year before. On the other hand, the
government sector’s share rose by 75.6 percent.
As a percentage of nominal GDP, however, the GFCF
slightly dropped to 23.6 percent in the second quarter compared to 24.7 percent
in the same quarter of 2021.
The Kingdom has also taken remarkable steps toward
attracting foreign investment into the country, like introducing governance,
labor market reforms, and new initiatives for foreign investors.
Its NIS targets include increasing FDI around 20
times to 5.7 percent of GDP by 2030.
Compared to the first quarter of 2022, the FDI
inflows into the Kingdom in the second quarter increased by 6.6 percent,
revealed the Ministry of Investment of Saudi Arabia.
FDI saw a year-on-year increase of 46.5 percent in
the second quarter when excluding Saudi Arabian Oil Co.’s $12.4 billion deal
with EIG and Mubadala to sell 49 percent in its subsidiary, Aramco Oil Pipelines
Data released by MISA also revealed a substantial
178.9 percent surge year on year in the number of closed deals, reaching 53 in
the third quarter of 2022.
Between January to September, the Kingdom closed
203 deals, showing a 133.3 percent surge compared to the same period in 2021.
When assessing the sector distribution, it was
clear that the entrepreneurship and innovation sector was the most appealing to
investors, with 47 deals closed in the third quarter.
The biotech, education, and training sectors saw
two new deals closed in the third quarter of 2022, while healthcare and advanced
manufacturing bagged a transaction each.
The UAE inked 10 deals, followed by the Cayman
Islands and the Virgin Islands, signing four and three contracts, respectively,
in the third quarter of 2022.
The country with the largest number of closed
deals was the UAE, reaching 10 agreements. The Cayman Islands, the British
Virgin Islands, and the US followed with four and three contracts, respectively,
in the third quarter of 2022.
More bang for the buck
Furthermore, the MISA report noted that up until
the third quarter of this year, the number of investment licenses increased by
15,000 licenses, meaning a staggering 527.4 percent rise year on year.
New investment licenses grew 8.8 percent in the
third quarter to 928 compared to 853 in the same quarter a year before. This
does not include licenses issued as part of anti-concealment law enforcement.
Specifically, the real estate industry grew five
times year on year in the third quarter to 30 new licenses, showing the most
significant increase among all registered activities.
The leading activity with new licenses was
construction, with 234 licenses issued in the third quarter.
A close second was wholesale and retail trade,
with new license issuance equal to 233, while manufacturing came in third with
186 new ones between July and September.
The Kingdom continues to attract local and
international investor participation, with the deals recorded in the $1 million
to $5 million bracket reaching a record high first half of the year, according
to the Saudi Arabia Venture Investment Report of the first half of this year.
“The highs recorded by KSA in H1 2022 have been
reflective of the keen interest shown by global and regional investors in the VC
(venture capital) ecosystem,” added the venture investment report.
The Kingdom’s VC ecosystem aggregated over $550
million in funding in the first two quarters, surpassing the total proceeds of
“Saudi Arabia has set itself a goal for growing
international and private domestic investment in the Kingdom, a goal that is
unprecedented in purpose and scale,” reported the NIS catalog.
“The Kingdom has done so knowing that this is
nothing short of critical — increasing investment is a lynchpin to achieving the
wider and more diverse economic and social goals of Vision 2030,” it added.