RIPPLE EFFECT: Diversification and more FDI opportunities

By: Jeddah: Khalil Hanware

Economic openness has been for long recognized as a key driver of economic growth and development.
The more countries are able to draw on global knowledge and the more effectively they can tap global export markets, the greater their growth potential.

The concerted efforts made by the Kingdom in recent years to boost greater FDI and drive export development are of critical importance for delivering the long-term prosperity of the Saudi people.

Though FDI in Saudi Arabia dropped 23.67 percent to $9.30 billion in 2013 from $12.18 billion in the previous year, according to UN Conference on Trade & Development, FDI is of particular importance.
This is not because of capital, as Saudi Arabia has an exceptional wealth of capital, but because of the wealth of knowledge and technology it is ideally couple with.

FDI received by the Kingdom last year was the lowest since 2008, when the figure was $39.46 billion.
But Saudi Arabian General Investment Authority (SAGIA) shows optimism in attracting FDI in future through a series of programs launched during the past two years to make the Kingdom more investment-friendly.

As Saudi Arabia seeks to diversify its economy and create sustainable long-term growth opportunities for its people, foreign capital can have an important role to play.

This is particularly essential as the Kingdom seeks its transition to a knowledge-based economy. This ultimately has to rely on education, innovation, and steady gains in productivity. Better integration in the global economy is a key enabler of these processes.

Saudi Arabia needs to continually enhance the attributes of FDI in order to increase productivity and competitiveness. For Saudi Arabia, what is likely to be more critical in the future is the distinctive combination of locational advantages and, especially, created assets that the country or region can offer to potential investors.

Despite fall in FDI in 2013, it is not surprising to see more FDI flows targeting the Kingdom in future because of its massive economic expansion.

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.

Saudi Arabia still is attractive as an investment destination because of its favorable growth dynamics and it is hence likely to show more resilience than many other countries in the region.

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