New incentives attract investors to Saudi Arabia

 

The effort to enhance the Kingdom’s competitiveness as a destination for foreign direct investment (FDI) is taking place across a wide front. However, three initiatives in particular have caught the attention of the global investment community during 2019.

Increased Visibility

In October 2019 Saudi Arabia staged its third large-scale global investment conference. Established in 2017, the Future Investment Initiative is an annual gathering of global leaders, investors and innovators. The 2018 event resulted in more than 25 deals with a combined value of around $56bn, according to Khalid Al Falih, then-minister of energy, industry and mineral resources, and current minister of investment. The 2019 conference was carried out with the support of a large number of international partners, including Credit Suisse, HSBC, MasterCard, Samsung, EY, PwC and Deloitte, and led to 24 investment deals worth $20bn. Focus areas of the 2019 edition included transformation in the energy sector; innovative solutions to global challenges; and connectivity and inclusivity. Among the more prominent attendees that year were President Jair Bolsonaro of Brazil and Prime Minister Narendra Modi of India, as well as nearly 300 decision makers, investors and experts from more than 30 countries. The scale and global prominence of the event has helped to highlight the Kingdom’s place in the international investment landscape.

Saudi Arabia’s profile as a worldwide leader will be bolstered further when it hosts the 2020 edition of the G20 Leaders’ Summit in November. The first meeting of the G20’s Trade and Investment Working Group was held in Riyadh in March 2020.

Funding Boost

In its drive to boost FDI the Kingdom is opening some of its most important funding programmes to both foreign investors and a broader range of economic activities. The Saudi Industrial Development Fund (SIDF) was established by the government in 1974 in order to provide medium- and long-term loans to the private industrial sector. For decades it has focused on providing assistance to small manufacturers, and in 2018 alone it channelled more than SR9bn ($2.4bn) into 108 industrial projects. In 2019 the fund embarked on a new phase of development assistance, having been granted an expanded mandate to support the objectives of Saudi Vision 2030. As a result, SIDF is targeting four primary sectors with its financing solutions: industry, mining, energy and logistics. Under the new terms, companies in targeted sectors will be offered additional financing options, including multi-purpose loans and acquisition financing. Crucially, from a foreign investor’s perspective, the fund has also been granted the ability to finance businesses outside the Kingdom, provided that have Saudi investors.

Attracting Investment

The country’s process of Saudiisation has resulted in a net outflow of foreign workers in recent years (see Economy chapter), but when it comes to investors, the authorities have taken a different approach. In June 2019 the Kingdom launched a permanent residency programme designed to increase foreign investment inflows. Aimed at high-net-worth individuals, a permanent residency permit is currently available to qualifying applicants at a cost of SR800,000 ($213,000). Minimum requirements include proof of financial solvency, as well as a clean criminal record and bill of health. In addition to the full permanent residency option, a less expensive alternative exists in the form of a one-year renewable residency permit, available for SR100,000 ($26,600).

The new framework makes the Kingdom more attractive to foreign investors as place to live and work, providing the government with a considerable boost in revenue: when the plan was first shown to Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud in 2016, revenue projections for the Kingdom foresaw a gain of approximately $10bn by 2020.

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The Report: Saudi Arabia 2020

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