ECONOMIC TRENDS

SAUDI LOOKS TO ATTRACT SAR 5TRN PRIVATE SECTOR INVESTMENT

The Saudi government is pulling out all the stops to accelerate private sector investment in the country.

On 31 March, His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince, deputy prime minister and chairman of the Council of Economic and Development Affairs, launched the ambitious Shareek (Partner) Program that aims to attract as much as SAR 5 trillion in private sector investment by 2030.

The programme will emerge as a major stimulus package for the kingdom and likely lead to a slew of projects that would spur economic activity and job creation. It aims to facilitate financial, monetary, operational and regulatory support to attract investment.

The government-wide effort will bring together ministers of investment, tourism, finance, communications, information technology, human resources and social development, the governor of the Public Investment Fund, the secretary of the Council of Economic and Development Affairs and the deputy minister of Economy and Planning to help create opportunities for the private sector to invest in the country.

"The programme was established to accelerate the growth of business opportunities within the kingdom and support the achievement of Vision 2030," according to the Saudi Press Agency. "The programme is not a direct response to the negative economic impacts of the COVID-19 pandemic, but rather it achieves a number of goals, most notably to support the sustainable growth of the kingdom's economy. The launch of the programme is another step for the kingdom paving the way towards a resilient and diversified national economy."

This is part of SAR 12 trillion worth of investments planned by 2030, Crown Prince Mohammed bin Salman said in televised remarks.

“The kingdom will witness a leap in investments in the coming years, by SAR 3 trillion, pumped by the Public Investment Fund until 2030, as announced at the beginning of this year, in addition to SAR 4 trillion that will be injected under the umbrella of the National Investment Strategy, and its details will be announced soon,” the Crown Prince said in a TV briefing.

“Thus, the total investment that will be pumped into the national economy is SAR 12 trillion until 2030, and this does not include government spending estimated at SAR 10 trillion over the next 10 years, and private consumption spending expected to reach SAR 5 trillion until 2030, so the total of what will be SAR 27 trillion (USD 7 trillion) will be spent in the Kingdom of Saudi Arabia over the next 10 years,” the Crown Prince added.

The programme aims to encourage large companies to raise their investment by more than 50% of their current plans. The Shareek programme will negotiate loans and grants available with the companies, and will likely reduce the cost of investment in projects.

“A number of factors will be taken into consideration, such as job creation, infrastructure development and the company's investment history,” according to SPA.

While the programme is available to large Saudi companies, the slew of new projects will also benefit small to medium sized companies and international companies that could collaborate with large domestic companies.

“Regarding the provision of various incentives or options if the large companies are private companies or listed on the stock exchange, the advantages and opportunities available to the large companies depend on the criterion based on the necessity of those companies showing the ability to invest amounts in excess of SAR 20 billion during the year 2030 and invest SAR 400 million in every major project to become eligible for the program’s support,” according to the government. 

BOOSTING SAUDI’S INVESTMENT APPEAL

Even before the programme began, international investors are making a beeline for Saudi Arabia. Companies such as PepsiCo, Schlumberger, Deloitte, PricewaterhouseCoopers, Tim Hortons, Bechtel, Bosch and Boston Scientific have signed agreements to establish their regional offices in the country.

It is part of capital Riyadh’s efforts to become more competitive and emerge as one of the 10 largest city-economies in the world.

“The Kingdom of Saudi Arabia will work to provide many incentives and advantages that raise its competitiveness regionally and globally, to attract these headquarters and give them sufficient time to move and operate without affecting their business,” according to the SPA. “The incentives offered will be limited to regional headquarters only, excluding their operations outside the regional headquarters.”

Indeed, the kingdom reported awarding a record number of foreign investor licenses in the fourth quarter of 2020.

The Ministry of Investment of Saudi Arabia (MISA) said it provided 466 registered licenses, the highest on record since data began in 2005, and 60% higher compared to the fourth quarter last year.

Industrial and manufacturing were the most popular sectors among foreign investors in the fourth quarter, followed by logistics, retail, e-commerce and ICT.

The pandemic-hit year did not see a slowdown in investor interest, with 1,278 new foreign companies securing licenses, a 13% increase compared to 2019 and a 73% increase compared to 2018.