Saudi Arabia is pursuing foreign investment with a new sense of urgency as the prolonged oil price slump forces the world’s largest oil exporter to find alternative sources of revenue.
The Saudi Arabian General Investment Authority will submit to the cabinet this quarter recommended rules for opening the country’s retail sector to 100% foreign ownership, said Abdullatif al-Othman, the authority’s governor. The kingdom is courting international companies to do business in Saudi Arabia and has created a smartphone application to market investment opportunities, highlighting non-oil sectors like transport, healthcare, tourism and building materials.
“We really wanted people to recognize that the kingdom’s economy, even in a low prevailing oil price environment, can be extremely productive in terms of leveraging the sectors that are growing,” al-Othman said in an interview in Riyadh. He declined to comment on local newspaper reports that Apple Inc is among the companies that received preliminary approval to invest.
Brent crude at less than $30 a barrel is slowing growth in the Arab world’s biggest economy, giving new seriousness to talk of diversifying away from oil, the government’s main revenue source, and pushing officials to consider reforms and regulation changes.
Foreign direct investment last year fell to the lowest level since 2004, dropping to $7.6bn from a peak of $39.4bn in 2008, Saudi newspaper Al Eqtisadiah reported this week. Al-Othman said that on average, Saudi Arabia has been attracting $10bn a year in foreign direct investment and that the government is aiming for a “10-year rolling average” that will double or triple that.
“Decline is a cyclical thing in the global economy,” he said. Saudi Arabia’s foreign investment has typically been tied to oil, petrochemicals and infrastructure, so to counter the slump in those areas, the government is focusing on attracting investment in non-oil sectors, he said.
The investment authority has also been meeting with companies already operating in Saudi Arabia to ask how they can improve the ease of doing business, al-Othman said.
“We would love anyone to say look, if you change this law or regulation, I am coming here with these investments,” he said. “Any regulation.”
In September, Saudi Arabia announced that it would open its retail and wholesale sectors to full foreign ownership, eliminating the requirement for a local partner that remains in sectors like financial services.
The investment authority, along with the commerce and labour ministries, is studying the move to determine what conditions and criteria to put in place for companies.
“Definitely by the first quarter of this year, we will present a recommendation to the council of ministers, because that’s the next step,” al-Othman said.
The authority has received more than 10 “serious” proposals from international companies, he said. “Some offered some plans for establishing a regional hub, others offered some plans to do manufacturing,” he said.