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SAUDI ARABIA - Oct 17 - Kingdom Is Top FDI Recipient In Arab World.

Saudi Arabia is the largest recipient of foreign direct investment (FDI) in the Arab world in 2006, attracting $18 bn, an increase of 51% over 2005, according to a report of the UN Conference on Trade and Development (UNCTAD). The report, attributed the increase to the region's strong economic growth and improved business climate and to high oil prices which have attracted increasing amounts of FDI to oil, gas and related industries as well as to telecom, tourism and financial services. The unprecedented increase in FDIs came after Saudi Arabia took a series of measures to attract foreign investment. The Supreme Economic Council (SEC) revised the negative list last March, allowing foreign investment in vital sectors like insurance services, wholesale and retail trade, air and train transport, and communication services. Abdul Rahman Al-Tuwaijeri, secretary-general of the council, which is chaired by Custodian of the Two Holy Mosques King Abdullah, said the SEC opened new economic sectors for foreign investment in line with the king's economic reforms aimed at strengthening the economy, attracting more foreign investment and enhancing private sector participation. The negative list of investment was also revised to comply with Saudi Arabia's commitments under the regulations and conditions of the World Trade Organization. The Kingdom became the 149th member of the WTO in December 2005. "Also commercial agencies, except franchise rights are now open for foreign investment", Tuwaijeri said. According to the UNCTAD report, FDI inflows to the 14 economies of West Asia surged by 44% in 2006 to an unprecedented $60 bn. Turkey topped the list with $20 bn, a 100% increase over 2005, Saudi Arabia second with $18 bn and the UAE third with $8 bn, with a 23% decline in inflows or $8 bn. Jordan with $3.1 bn FDIs and Bahrain with $2.9 bn, were on fourth and fifth positions, respectively. Efforts by Gulf countries to diversify their production activities beyond oil-related activities succeeded in attracting greater FDI flows to the manufacturing sector. FDI outflows from West Asia totaled $14 bn, an increase of 5% over the 2005 level. The value of cross-border mergers and acquisitions (M&As) by investors from West Asia increased by 78%, amounting to $32 bn, as a result of high oil prices and the current account surpluses of oil-producing countries. About two-thirds of those M&As were targeted at developed countries, in particular the United Kingdom (35% by value), Canada (11%) and the US (9%). Accounting for 8% of the value of such M&As, Pakistan was also an important target nation. In developing regions, investments in telecommunications (mainly in sub-Saharan African countries), real estate and leisure industries were notable in 2006, the report said. Services remained the dominant sector for FDI in West Asia, a major proportion of which went to financial services as a result of the privatization and liberalization policies of a number of countries in the region. Kuwait accounted for more than half of the region's total outward FDI, mainly in the telecommunications industry. In light of the region's high GDP growth and ongoing economic reforms, supported by the prevailing high oil prices, the upward trend in FDI to West Asia is likely to continue, the report said. The UN agency's investment assessment of West Asia came two weeks after a World Bank report described Saudi Arabia as the seventh fastest reformer globally and the second fastest in the region. "This year Saudi Arabia made bold business reforms making it one of the world's leading reformers. Saudi Arabia is now the top ranked economy in the Middle East", said Jamal Haider, co-author of the bank's Doing Business Report 2008. AAl-Dabbagh, governor of Saudi Arabian General Investment Authority, said the jump in the new ranking from was a major step toward achieving the "10 by10" goal sought by SAGIA to place the Kingdom in the top 10 countries in terms of investment. "Saudi Arabia has become the number one recipient of foreign direct investment in the Middle East. Inflows have increased from $2 bn to $18 bn in the last two years",Al-Dabagh said. The SAGIA chief said the figures would grow more rapidly with the development of the Kingdom's six new economic cities, and special economic zones that are attracting top global companies with major investment opportunities. King Abdullah launched four mega-economic cities in Rabigh, Hail, Madinah and Jizan, which are expected to draw SR300 bn in investment and create more than a million jobs. "With Saudi Aramco's recent expansion of refineries and the building of the Kingdom's economic cities, foreign investment in the country has become more attractive to investors abroad, mainly due to the liberalization of investment rules in which SAGIA has played a vital role", said Abdul Rahman Mousa, an investment specialist at SAGIA.
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Publication:APS Diplomat Recorder
Date:Oct 20, 2007
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