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Saudi Arabia tops Arab world with $ 12.2 bn FDI inflow

Saudi Arabia topped the list as foreign direct investment (FDI) into Arab states rose by 9.8 percent last year.

Source : Khalil Hanware / 20 June 2013

Saudi Arabia topped the list as foreign direct investment (FDI) into Arab states rose by 9.8 percent last year.

Despite unrest in some of them, FDI in Arab states exceeded $ 47 billion in 2012 compared with $ 42.9 billion the previous year, the Kuwait-based Arab Investment and Export Credit Guarantee Corp. (AIECGC) said in its annual report released yesterday.

Saudi Arabia topped the list of inflows with $ 12.2 billion, representing 25.8 percent of the total, the report said.

However, it said, the FDI was 28.5 percent lower than the figure of $ 66.2 billion in 2010.

Commenting on the FDI report, Fahad Alturki, head of research at Jadwa Investment, said: "While Saudi Arabia has always been the largest recipient of FDI in the region owing to its economic size and demographic advantages, this position has been strengthened further in the last few years given the political and economic instability in many of the Middle Eastern countries."

Against this background, he said, it is not surprising to see more FDI flows targeting the Saudi Arabia. "These flows focus on investment in energy and industrial projects, as well as investments in financial services, real estate, and contracting thereby contributing to economic diversification, increasing economic output capacity and creating job opportunities for the Saudi young population," Alturki said.

John Sfakianakis, chief investment strategist at Masic in Saudi Arabia, said: "FDI has become an important source of external finance and it highlights Saudi Arabia's solid economic growth, opportunities and business friendly environment. While FDI represents investment in production facilities, its significance for Saudi Arabia is much greater.

He said not only can FDI add to investible resources and capital formation, but it is also a means of transferring production technology, skills, innovative capacity, and organizational and managerial practices between locations, as well as of accessing international marketing networks.

He said Saudi Arabia needs to continually enhance the attributes of FDI in order to increase productivity and competitiveness. FDI policy frameworks are becoming similar in most countries resulting in greater competition."For Saudi Arabia, what is likely to be more critical in the future is the distinctive combination of locational advantages and, especially, assets that the country or region can offer potential investors," Sfakianakis added.

Jarmo T. Kotilaine, a regional economist, told Arab News: "FDI is clearly recognized across the region as an important driver of economic development. Even if the region is rich in capital, FDI at its best comes with knowledge and technologies that are less readily available in the GCC. They remain critical for the continued success of the diversification initiatives."

However, he said the outlook for FDI remains uncertain at a time when the global economy still continues to face a multitude of risks and investor confidence remains volatile. "The GCC is attractive as an investment destination because of its favorable growth dynamics and hence it is likely to show more resilience than many other parts of the world. Overall, on current projections I would expect this year to be more or less comparable to last year in terms of FDI flows into the region," Kotilaine said.

The AIECGC report covered 20 out of the 22 Arab League states, excluding war-torn Syria and the tiny Comoros.

FDI rose in 15 of them, including four countries — Tunisia, Egypt, Libya and Yemen - that witnessed violent unrest during the past three years, according to AFP.

Saudi Arabia topped the list while inflows to the UAE rose 25 percent to $ 9.6 billion, or 20.8 percent of the total. Lebanon came third with $ 7.8 billion followed by Algeria with $ 6.2 billion, the report said.

According to the AFP report, in Egypt, the value of FDI rose from a negative $ 483 million in 2011 to $ 2.8 billion last year. In Tunisia it increased by 68 percent to $ 1.95 billion.

FDI in Libya rose from a flat 2011 to $ 720 million last year, and in Yemen it increased from $ 713 million in the red to $ 4 million in the black.

The GCC drew in the most investment, accounting for $ 26.4 billion or 56 percent of total FDI in the Arab world, the report said.

Inflows into Kuwait more than doubled to about $ 1.9 billion.


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