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Foreign investment in Saudi Arabia lowest in a decade

March 23, 2018 at 1:39 pm

Crown Prince of Saudi Arabia Mohammed bin Salman Al Saud (2nd R) in Washington, United States on 23 March 2018 [Bandar Algaloud/Saudi Kingdom Council/Anadolu Agency]

The flow of foreign investment in to Saudi Arabia has dropped sharply due to concerns over political and economic reforms introduced by Crown Prince Muhammad Bin Salman. A report in the Financial Times revealed that the Kingdom had received the smallest number of investment projects in a decade as foreigners feel increasingly wary about the future of the country.

According to an investment monitor owned by the FT there were only 58 foreign projects in 2017 compared to a high of 140 in 2011. Worryingly for Bin Salman, who is in desperate need of foreign capital to see through his Vision 2030 project, the report found that investment from Western Europe and the US fell by $144 million and $457 million, respectively.

Both regions, the report pointed out, are primary sources of foreign capital for the Kingdom. Between 2010 and 2016, the yearly average for foreign direct investment is said to be a hefty $2.9 billion from Western Europe and $2.1 billion from the US.

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Equally concerning for Riyadh is the finding that the fall in investment from the US and European nations was not reflected in the rest of the Middle East. Other Gulf countries like Qatar and the UAE have not been hit by similar drop in confidence and are said to be healthy, even seeing an increase in 2017.

Analysts cited by the FT explained the fall in western investment on the disruption and uncertainty following radical changes to Saudi domestic and foreign policy under the 32-year-old Crown Prince. “MbS’s policies represent a profound disruption to the status quo in Saudi Arabia,” said Jane Kinninmont, deputy head of Chatham House’s Middle East and North Africa programme, “which may well be necessary as the business and economic status quo was unsustainable, but there is now significant uncertainty.”

“The risk-reward ratio isn’t attractive to many foreign companies just now,” Kinninmont continued while predicting that 2018 will see the trend of weary investors reluctant to take their chance in Saudi Arabia.