Foreign investment licences in Saudi reach record high

Supplied

• Deals expected to create 5,800 new jobs in the kingdom
• Flash estimates show 9.6 percent real GDP growth in Q1
• 6,015 new licences awarded to foreign investment projects in Q1

The number of foreign investment licences have soared to record highs in Saudi Arabia as more than 100 deals worth over $4 billion were struck during the first quarter of 2022.

Saudi Arabia’s Ministry of Investment (MISA) revealed that the deals announced are expected to create more than 5,800 new jobs in the domestic economy, as the kingdom’s transformation journey continues to present investment opportunities in new and exciting sectors.

One of the most significant deals announced in Q1 was the $3.4 billion investment by Lucid Motors to establish an electric vehicle factory in Saudi Arabia. 

• Gulf rivals jostle for position as EV test bed

CEO Peter Rawlinson has no doubts about picking the kingdom for the project. “Saudi Arabia is undergoing a massive transformation, with an emphasis on sustainability, high technology, and clean projects,” he said in comments published by the MISA report.

“Saudi Arabia is also strategically located, accessible from three continents with just a short flight.

Therefore, from the country we will be able to service Europe and Mena.

“Taken together, these factors are a perfect fit for Lucid’s core objective of providing our electric vehicles and sustainable mobility to as many markets as possible. 

“It is incredible to be a part of this huge catalyst for change.

“Saudi Arabia is a country that is renowned for its oil reserves, but it has a concrete vision to transition to sustainable mobility and renewable energy sources; in many ways, this vision is a beacon for the entire world,” he added.

MISA said that foreign investor interest in Saudi Arabia reached a historical high in Q1, yielding a record-breaking number of new licences. 

Marking the seventh consecutive quarterly rise, the first quarter witnessed 9,383 new foreign investment licences.

This rise was supported by the government’s efforts to improve the investment environment, strengthening investor sentiment as global economies rebound from the Covid-19 pandemic. 

There was also an increase in the number of companies choosing to establish their regional headquarters in Riyadh, MISA added.

The Q1 investment announcement comes after recent data showed that FDI inflows to Saudi Arabia in 2021 reached $19.3 billion, the highest in 10 years.

According to the report, the kingdom’s economy entered 2022 on an accelerated growth path, with flash estimates showing 9.6 percent real GDP growth in constant prices in Q1, the highest rate since 2011. 

With the economic recovery gathering momentum, the wholesale and retail trade topped the chart for the highest number of new licences with a 548 percent increase compared to the previous quarter, and a 7,612 percent surge compared to Q1 2021, partially driven by the National Program for Combating Commercial Concealment regulation that allowed businesses to correct their status in the kingdom. 

A total of 6,015 new licences were awarded to new foreign investment projects in the sector in Q1, more than three times the 2021 total of 1,760. 

This rise in wholesale and retail was followed by construction and manufacturing sectors, with 1,112 and 670 new licences, respectively.

Khalid Al-Falih, Saudi Arabia’s Minister of Investment, said: “The high level of investor interest and strong momentum in the economy reflects how successful Saudi Arabia’s long term economic vision has been in unlocking opportunities for investors. 

“As we look ahead, the National Investment Strategy will help us to accelerate this process – enabling Saudi and international investors to play a major role in one of the world’s most unique and exciting opportunities.”

Domestic manufacturing sustained growth due to localisation efforts, highlighted by continued industrial investments in Q1.

The first quarter saw 299 new factories starting production, with 176 new licences being awarded and a total investment of more than $1.1 billion.

Ownership in the Saudi Exchange (Tadawul) by qualified foreign investors also increased by 29.3 percent in Q1 compared to the previous quarter.

Foreign portfolio investment flows have significantly increased since 2019 when a regulatory change eased registration requirements and increased the range of institutional investors. 

At the same time, the popularity of IPOs in the kingdom has surged, positioning the bourse as a regional leader with 15 out 20 in the region in Q1. 

The figures, published in MISA’s Investment Highlights report, follow the International Monetary Fund’s recent projection that the Saudi economy will experience the second-fastest growth in the G20 this year. 

Likewise, Fitch Ratings has revised Saudi Arabia’s Long-Term Foreign-Currency Issuer Default Rating outlook upwards from stable to positive on the back of a consolidating budget surplus, restrained spending, and steady market conditions.

But Saudi Arabia is already preparing the groundwork for improving the investment environment with the drafting of a new Investment Law.

Announced in January by Al Falih, the new law will allow local and global investors to be treated equally and is expected to introduce a broad range of innovations that will catalyze investment across the economy.

The consultation period ended last month and analysts from Albright Stonebridge Group said that the law as currently drafted “would represent a major shift in Saudi investment policy clearly aimed at making the kingdom more attractive to foreign direct investment.”  

“Most notably, the draft law alludes to the introduction of investment incentives that would be issued by sector regulators and approved by a ministerial committee, although it offers no information on the nature of these incentives or the qualification criteria,” they added.

Top 10 Saudi investment deals in Q1

• Lucid Group will open the first international plant in Saudi Arabia with an investment worth up to $3.3 billion
• Hyundai Motor Group will collaborate with Saudi Aramco, as well as King Abdullah University of Science and Technology in jointly developing an environmentally friendly fuel and engine for vehicles
• The Saudi Central Bank (SAMA) has granted a licence to the local digital lender D360 which will start its operations with an initial capital of $440 million
• Saudi Arabia’s Ministry of Investment inked 12 memoranda of understandings (MoUs) at this year’s inaugural World Defense Show to help strengthen the local aerospace and defense ecosystem. 
• Halliburton has opened a first-of-its kind facility in Saudi Arabia to support the oil and gas value chain. The Halliburton Chemical Reaction Plant will also enable support for Saudi Arabia’s agriculture, mining and personal care industries.
• Saudi Arabia’s Tourism Development Fund (TDF) has announced that Playa Hotels & Resorts will bring its all-inclusive offerings to the kingdom
• Ireland-based Kerten Hospitality has teamed up with Rooh Al Reef Hotels Company to develop community and sustainability-driven resorts throughout the kingdom
• Saudi Arabia’s Ministry of Investment has announced the signing of a deal with GSK to improve the kingdom’s healthcare and life sciences sector and localise manufacturing, transfer knowledge and technology
• Egypt-based quick commerce start-up Rabbit has announced that it expects to invest $60 million in Saudi Arabia over the next two years, as the company recently received its licence to operate in the kingdom