Saudi Arabia experienced a substantial increase in foreign direct investment (FDI) during the third quarter of 2023, with a notable surge of 29.13 percent compared to the previous quarter. Data from the Saudi Central Bank (SAMA) revealed that FDI inflows amounted to SR7.99 billion ($2.13 billion), up from SR6.2 billion in the preceding quarter. In contrast, the Kingdom’s total investment in foreign countries declined by 8 percent during the same period, totalling SR17.21 billion.
The rise in FDI aligns with Saudi Arabia’s ongoing economic reforms aimed at attracting greater external funding. Initiatives include the introduction of the National Investment Strategy, the launch of the regional headquarters program, and newly introduced tax incentives, including zero levies, for foreign companies. These reforms are crucial components of Vision 2030, a strategy designed to diversify and grow the Kingdom’s economy.
Vision 2030 outlines the goal of increasing FDI’s contribution to the gross domestic product to 5.7 percent and positioning Saudi Arabia among the top 10 economies in the Global Competitiveness Index by 2030. In February 2021, the Saudi government expressed its intention to limit contracts with foreign companies without regional headquarters in the Kingdom. Guidelines were later issued to encourage companies to establish such bases in Saudi Arabia.
Investment Minister Khalid Al-Falih reported in November that the Kingdom had exceeded its target, with over 200 international firms from various sectors, including energy, technology, healthcare, and hospitality, setting up bases in Riyadh. Notable companies that relocated include Northern Trust, Bechtel, Pepsico from the US, and IHG Hotels and Resorts, PwC, and Deloitte from the UK.
Starting January 1, the Investment Ministry, in collaboration with the Ministry of Finance and the General Authority for Foreign Trade, will maintain a list of companies without headquarters in the Kingdom. Accessible on the unified electronic portal for government procurement, this list will subject such companies to consideration for government projects only under exceptional circumstances.
The ministry also announced a zero income tax policy in December 2023 for foreign entities relocating their regional headquarters. This policy, effective from the license issuance date, provides a 30-year corporate profit tax exemption, offering increased stability and planning opportunities for these firms. The tax incentive, coupled with other benefits like relaxed Saudisation requirements and work permits for executives’ spouses, further encourages multinational companies to choose Saudi Arabia as their regional headquarters, as highlighted by the minister.