FDI Key Test Of Sustainability Of Saudi Arabia’s Economic Transformation — Strategist

By Zarul Effendi Razali

KUALA LUMPUR, Sept 30 (Bernama) -- Foreign direct investment (FDI) will be a crucial indicator of whether Saudi Arabia’s economic diversification can translate into sustainable transformation, according to global strategist Stephen Innes.

Innes, Global Strategist at Quintex Intel, said FDI offered a clearer indication of international investors’ confidence in the kingdom than headline economic growth figures alone.

“That (FDIs) tells you appetite of foreign investors, whether they want to move into bonds, whether they want to move into infrastructure spending or whether they just want to simply move into equity markets,” he said in an interview with Bernama World programme on Wednesday.

Innes said FDI into Saudi Arabia had declined somewhat this year, which he considered understandable given the regional conflict and the uncertainty surrounding the investment environment.

He said the eventual return of stronger foreign investment would be important in determining whether the sectors developed through Saudi Arabia’s economic transformation could become sustainable over the longer term.

A further development he highlighted was the growing role of private-sector investment, saying it indicated that the transformation was no longer being driven solely by government spending.

“The interesting aspect here, getting back to private sector investment, we’re actually seeing a lot of private sector investment come in. So it’s just not the usual old Saudi Arabia opening up the government taps to support the economy,” he added.

Innes said the role of sovereign capital would also be important, particularly in supporting domestic investment and creating conditions that could encourage foreign investors to return.

“What matters well beyond Saudi Arabia right now is we know it’s going to continue to be one of the largest producers.

“What we’re going to have to see, the important driver here are the pools of sovereign capital, whether they start investing, start supporting the Saudi Arabia rebuild, and whether this generates significant impetus to drive foreign investors back into the economy,” he said.

He said developments in Saudi Arabia would therefore have implications beyond the kingdom, particularly because of its continued importance as a major global oil producer and its growing investment role.

The focus on FDI is consistent with Vision 2030’s stated objective of attracting foreign investment as part of efforts to develop the private sector and diversify the Saudi economy.

-- BERNAMA