Saudi Arabia flag Saudi Arabia: Investing in Saudi Arabia

Foreign direct investment (FDI) in Saudi Arabia

FDI in Figures

According to UNCTAD's World Investment Report 2024, FDI inflows to Saudi Arabia stood at USD 12.3 billion in 2022, down from USD 28 billion one year earlier (-56%); whereas the total stock of FDI reached USD 215.5 billion. At the end of 2023, manufacturing industries held the largest share of Saudi Arabia's foreign direct investment stock at SAR 259 billion (29%). Wholesale and retail trade, along with motor vehicle and motorcycle repairs, followed with SAR 135 billion (15%). Financial and insurance activities ranked third with SAR 112 billion (12%). In terms of countries, the UAE held the largest foreign direct investment stock in Saudi Arabia at SAR 152 billion, followed by Luxembourg with SAR 102 billion and France with SAR 65 billion (data General Authority for Statistics). In the first three quarters of 2024, FDI inflows to the kingdom reached SAR 54.3 billion.

The country has pushed to increase FDI in recent years as part of the “Vision 2030” plan to end reliance on fossil fuels, and it is aiming for USD 100 billion in annual FDI by 2030. Moreover, Saudi Arabia adopted seven “Guiding Principles for Investment Policymaking”, including non-discrimination, investment protection, investment sustainability, enhanced transparency, protection of public policy concerns, ease of entry for employees, and the transfer of knowledge and technology; and the Saudi Arabian General Investment Authority was upgraded, becoming the Ministry of Investment. Recently, Saudi Arabia also launched a SEZ program that focuses on non-traditional industries, which include cloud computing, tourism, renewable energy, and logistics. Among new investment incentives, Saudi Arabia introduced a Special Integrated Logistics Zone, which offers a 50-year tax exemption for investors, including those with full foreign ownership rights. Moreover, investors benefit from VAT advantages for servicing and assembly operations within the zone. Furthermore, the country established the Saudi Investment Promotion Authority, which will collaborate with the Ministry of Investment to gather opinions and prepare proposals for laws, procedures and manuals. Political and social tensions, reduced access to credit and the policy of “Saudization”, which favours the domestic labour force, have all been obstacles to FDI. Nonetheless, the government has invested heavily in national infrastructure to attract investment, and FDI is seen as one of the most effective ways to diversify the economy and provide employment for younger generations. The government opened the retail and wholesale sectors to 100% foreign ownership and has launched a large privatization programme. On 11 August 2024, Saudi Arabia introduced an Updated Investment Law, replacing the 2000 Foreign Investment Law, effective 180 days after publication. The new law ensures equal treatment for local and foreign investors under similar conditions and offers protection against expropriation, except by judicial ruling, legal procedures, and fair compensation. Foreign investors no longer need a license but must register with the Ministry before investing, following the regulations. For activities listed as excluded, approval from the Ministry is required. The law also allows the competent authority to grant investment incentives based on eligibility criteria. Finally, Saudi Arabia ranks 47th among the 132 economies on the Global Innovation Index 2024 and 69th out of 184 countries on the latest Index of Economic Freedom.

 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 5,39919,2867,886
FDI Stock (million USD) 241,775261,061268,947
Number of Greenfield Investments* 90150239
Value of Greenfield Investments (million USD) 9,4318,95813,473

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Saudi Arabia Middle East & North Africa United States Germany
Index of Transaction Transparency* 9.0 6.4 7.0 5.0
Index of Manager’s Responsibility** 9.0 4.8 9.0 5.0
Index of Shareholders’ Power*** 7.0 4.7 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

Return to top

What to consider if you invest in Saudi Arabia

Strong Points

Once Saudi Arabia became a member of the WTO in 2005, the foreign investment climate in the Kingdom substantially improved. From an investor's point of view, the country's strong points are:

  • Economic stability
  • Largest world oil reserves, important position in OPEC
  • A large local market with a high spending power (and a population of over 35 million)
  • A strategy of economic diversification (with the program Saudi Vision 2030)
  • Sound infrastructure
  • Consolidated finances
  • Well-regulated banking system
Weak Points

While the country has undertaken reforms to encourage foreign investment, the legal framework in resolving commercial disputes is considered by some to be inadequate. There is a lack of transparency in applying intellectual property legislation, and the Government imposes quotas of Saudi employees in companies. Cases of delayed payment of some government contracts have been reported. The traditionally conservative cultural environment, including the enforced segregation of the sexes in most businesses and social settings, may discourage certain investors who are not accustomed to such practises.

Other weak points are:

  • High dependence on hydrocarbons sector
  • High unemployment rate among natives, and under-employment of women
  • Economy is dependant on public spending
  • Weak political governance
  • Weak economic transparency
  • Deteriorated regional geopolitical environment.
Government Measures to Motivate or Restrict FDI
According to the law on foreign direct investment, being licensed to operate in Saudi Arabia as a foreign investor is necessary to obtain any permit to start operations. In 2018, the Saudi Council of Ministers approved full foreign investments in the transport, recruitment, audio visual and real estate sectors. Foreign direct investments (FDI) can be made in Saudi Arabia in all business activities that are not restricted to those which must be exclusively undertaken by Gulf Cooperation Council nationals or companies owned by them, the negative list (oil and mining sector, some services, etc.). Foreign investors are no longer required to have local partners in a number of sectors and may own property for company activities. They are allowed to repatriate their company money and can sponsor foreign employees, subject to certain criteria in accordance with the Nitaqat (Saudisation) programme. In 2016, Saudi Arabia authorised the acquisition of 100% of assets by foreign investors in retail and wholesale trade. A privatisation program has also been launched. The government also tries to attract FDI in the sectors of renewable energy and entertainment.

In order to facilitate investments in the Kingdom, the Ministry of Investment has set up an Investment Services Centre (ISC). The ISC must decide to grant or refuse a license within 30 days of receiving an application from an investor. The Saudi Centre for commercial arbitration has also been created, which assures foreign investors an inexpensive fee in case of commercial arbitration.  

The Saudi government launched Saudi Vision 2030, an ambitious development program that foresees important opportunities for foreign investors in the sectors of education, housing, health and energy, among others.

Invest Saudi was created by the Ministry of investment (MISA) to be the national investment promotion brand of the Kingdom and offer several services to investors. Saudi Arabia's incentives and support schemes are specifically designed to encourage investment with the potential to diversify and improve the Kingdom's competitiveness. The incentives include financial, fiscal and employment support. The MERAS facilitates services with government agencies.

Nevertheless, other recent governmental initiatives aimed at favouring employment of Saudi citizens may discourage foreign investors: cost of working permits for foreigners, quota of foreign worker employees, stricter policy of localisation and introduction of a VAT since 2018.
Bilateral investment conventions signed by Saudi Arabia
Saudi Bilateral Investment Agreements

Return to top

Any Comment About This Content? Report It to Us.

 

© eexpand, All Rights Reserved.
Latest Update: February 2025