المدونات

Foreign direct investment (FDI) plays a pivotal role in stimulating a country’s economic growth. It helps create employment opportunities, increase wages, replace declining market sectors, and stimulate infrastructure development and technology transfer.

Over the years, many economies such as China, India, South Korea, Singapore, and Taiwan have experienced high levels of progress due to strong FDI flows, among other key factors. Most states have geared towards promoting FDI due to its positive impact on their overall socio-economic framework. They encourage foreign investments by implementing significant policy changes and clear strategies to create a favourable business climate.

Saudi Arabia’s Position in the Arab Region

In the Arab region, the kingdom of Saudi Arabia has been the largest FDI recipient. According to a recent report, the volume of FDI that flowed into the kingdom has already reached an estimated $199 billion. The 2013 World Investment Report, published by the United Nations Conference on Trade and Development (UNCTAD), also showed that Saudi Arabia was the biggest FDI recipient in Western Asia after Turkey.

Ease of Doing Business and Economic Diversification

Saudi Arabia ranks 22nd out of 185 countries for overall ease of doing business, says SAGIA. This improvement follows the government’s efforts to ease foreign investment rules and reduce reliance on the oil sector.

The reforms have made Saudi Arabia one of the world’s most attractive destinations for FDI inflows. As per SAGIA’s 2011 report, published by the National Competitiveness Center (established by SAGIA to spearhead a new attitude to competition and achievement in Saudi Arabia) among the top industries that received the highest investments were the contracting sector ($28.8 billion), chemicals and petrochemicals ($21.6 billion), and real estate ($15.3 billion). The same report showed that the kingdom’s FDI stocks reached $170.4 billion in the whole of 2010.

Contracting Market Growth and Investment Impact

Competition in the contracting market remains strong, with numerous foreign firms continuously looking for opportunities to land mega-projects across Saudi Arabia. According to the latest report by NCB Capital, a Riyadh-based investment company, the government granted the biggest amount of contract awards by value in 2013, reaching $78.2 billion, Construction Week reported. The majority of awards went to transport, power, real estate, industrial projects, and petrochemicals.

FDI inflows stimulate activities and make the contracting industry highly competitive. Large investments will introduce new technologies and improve efficiency across the real estate sector. These investments are vital as demand for affordable housing among low- and middle-income families continues to rise. Like other GCC nations, Saudi Arabia faces rapid urbanization and population growth, increasing housing pressure. FDI can help close the gap between limited affordable housing supply and growing demand from key income groups.

Best Choice: Contributing to Regional Real Estate Solutions

Best Choice was established by a group of seasoned Saudi investors to oversee infrastructure and residential projects in the kingdom. At the same time, it is developing and selling mixed-use projects in Turkey and other key European and Asian markets. The company has been underscoring the role of the private sector in addressing the issue of lack of affordable residential units facing the GCC region today.

Vision for the Future

The Saudi government continues to improve its business environment to attract more foreign investments. Large FDI inflows are expected to boost socio-economic development across multiple sectors. The housing sector, facing high demand for social units, will also benefit from increased investment.
Mohamad Rabih Itani is the CEO of Best Choice, a real estate investment firm based in Riyadh.