Saudi Arabia race until attract investment haunted by skepticism

  • Saudi Arabia minister says FDI up 33% in first six months of 2021
  • Investment remains below past goals
  • Riyadh raises stake with more ambitious investment goals
  • Lack of big FDI announcements can affect credibility

DUBAI, Nov. 16 (Reuters) – Saudi Arabia could be credible problem if it keeps shifting goal messages for the amount of foreign investment die it wants to change its view of An future beyond oil in An reality, financial Sources and analysts report that.

Five years since Crown Prince Mohammed bin Salman launched Vision 2030 to end dependency on the kingdom on fossil fuels, foreign direct investment (FDI) remains good short of goals.

When Riyadh revealed the plan in In 2016, it set out to increase annual foreign direct investment to nearly $19 billion in $8 Billion 2020 in 2015, but last year it was just $5.5 billion. How much longer-term goal used to be for foreign direct investment hit 5.7% of gross domestic product (GDP) by 2030, although Riyadh did not give An dollar target.

Now the kingdom has raised the stakes again, saying it wants $100 billion in annual FDI by 2030, a new goal die many analysts find it too ambitious.

“(It) raises eyebrows over: how it seems rather unattainable, especially that over the past four quarters of FDI in total $18.6 billion and the total FDI inflow since the start of 2011 is only equal to $92.2 billion,” said economist James Swanston of Capital Economics.

be consistent with its GDP target, the $100 billion goal means the economy would met 150% need to grow to in 2030 to reach $1.75 trillion – a level that would have made Saudi Arabia the world is the ninth largest economy last year, behind Italy and beyond of Canada, South Korea and Russia.

To be sure, the years since the launch of Vision 2030 have not been helpful for foreign direct investment a purge of the Saudi business elite in 2017 and the murder of Jamal Khashoggi in 2018 scared off private investment. Then the pandemic hit.

But analysts say the kingdom and its… grand reform plan, may soon start lose credibility in the eyes of investors.

“Low year-on-year incoming FDI levels will eventually no longer be viewed optimistically as space for Saudi Arabia to improve and instead ask the question: what’s going on? on here?” said Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington.

‘SETTING UP THE SYSTEM’

Saudi authorities say a lot of the plan is still in the initial stages, die mainly consist of of regulation and planning, and money shall in increasingly start pouring into the kingdom over the next a few years.

The Saudi minister of Investments Khalid al-Falih said the FDI numbers were: already improve.

“We repair the system, we are preparing the deals, we are taking companies in service,” he told Reuters. “A lot of our transactions are being prepared.”

In the first half of 2021 – excluding the leasing of Saudi Aramcos (2222.SE) oil pipelines – FDI rose met 33% compared to the same period in 2020 and wax already above goals for this year as a whole, he said.

At the annual “Davos.” from Saudi Arabia in the Desert” Future Investment Initiative last month, various memoranda of understanding were signed, but hopes of a big investment announcement had tripped.

Electric car manufacturer Lucid (LCID.O), for for example, that for the most part in owned by the Saudi Sovereign Public Investment Fund (PIF) and whose headquarters are located in Silicon Valley has not announced a long-awaited plan to build a factory in the kingdom.

Saudi Arabia launched a national infrastructure fund and calls it a strategic partnership with the worldthe biggest asset manager, black rock (BLK.N), but the US company advises Riyadh in instead of investing capital.

“Saudi wealth remains attractive to foreigners asset administrators. The titans of Wall Street praised the locals economy on podium, signed lucrative deals and walked away without doing anything of their own capital. Speaks volumes,” said a senior banker in the wave.

A BlackRock spokesperson said it was on a consulting engagement with the fund, which would be fully funded by the National Development Fund, a government body, and would then strive for attract capital from other investors.

“It is certain possible that BlackRock could be one of these providers of external capital,” said the spokesman.

‘KNOWN DIFFICULT’

In a sign of his desire to attract more investors, Saudi Arabia has given this an ultimatum year that foreign companies should set up their regional headquarters in the land towards the end of 2023, of risk losses out on government contracts.

Saudi Arabia has a much larger consumer base than regional neighbors and international businesses operating in the Gulf may not want to miss out on lucrative opportunities die arise from being plans for economic transformation.

Saudi authorities announced on the investment forum that they licensed 44 international companies to set up regional headquarters in the capital Riyadh.

But ultimatums, combined with Abruptly changes in trade deals and tax regimes, are seen as another sign of the unpredictable policies of the kingdom. Many Gulf executives think companies will find solutions to stay in Dubai, that one more developed market and one less conservative society.

Forum participants speak on condition of anonymity said there were lingering concerns over regulations and taxes, as well as high operating costs and a defect of skilled local workers.

Saudi Ministry of Investment did not respond to requests for comment over the criticism.

“The Saudis business environment is still notoriously difficult to navigate as a foreign investor,” Swanston said.

“In terms of trying to gain some credibility for the investment goals of Vision 2030 would be quite crucial for Saudi to get some real commitments from companies and foreign investors,” he said.

‘COUNTRY WITHIN A COUNTRY’

Progress on NEOM, Vision 2030’s $500 Billion signature project, also remains difficult to assess, to add to the concern over the financial transparency.

The planned megacity in the desert, announced in 2017 and supported by PIF, studies the economic and legislative framework, NEOM That’s what CEO Nadhmi al-Nasr told Reuters.

requested how many contracts were awarded, of how a lot was spent, he declined until give detailed answers.

“Honestly, we’re not paying much attention at the moment of the progress on how much we have granted, want this is just the start of a long trip. If your ambition is to become almost a country in create a country, then you have it over big … we’re not ready yet start to talk over how we spent a lot,” he said.

However, give details of project expenditure, realized investments and foreign commitments can help Riyadh profit more credibility, especially considering the size of its goals, analysts said.

To push net FDI up to $100 billion a year is a part of a bigger plan met the eye on more over $3 trillion in investment in the domestic economy by 2030 and economists fear that even local targets will be met hard to meet.

“In this stadium moving economic goal posting within the 2030 margin is still feasible. However, there will come a day when the final score card must be counted and progress can no longer be measured by ambition of project announcements’ said Mogielnicki.

Editing by David Clarke

Our standards: The Thomson Reuters Trust Principles.

Read More: World News

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