Saudi Arabia’s race to attract investment dogged by scepticism By

By Davide Barbuscia, Saeed Azhar and Yousef Saba

DUBAI (Reuters) – Saudi Arabia could have a credibility problem if it keeps shifting the goal posts for the amount of foreign investment it wants to turn its vision of a future beyond oil into a reality, financial sources and analysts said.

Five years since Crown Prince Mohammed bin Salman launched Vision 2030 to end the kingdom’s dependence on fossil fuels, foreign direct investment (FDI) remains well short of targets.

    When Riyadh unveiled the plan in 2016, it aimed to boost annual FDI to nearly $19 billion by 2020 from $8 billion in 2015, but last year it was just $5.5 billion. The longer-term goal was for FDI to hit 5.7% of gross domestic product (GDP) by 2030, though Riyadh did not give a dollar target.

Now the kingdom has raised the stakes again, saying it wants $100 billion in annual FDI by 2030, a new goal that many analysts consider overambitious.

“(It) does raise eyebrows as to how it looks quite unattainable, particularly that over the past four quarters FDI has totalled $18.6 billion and the total FDI inflow since the start of 2011 is only equal to $92.2 billion,” said Capital Economics economist James Swanston.

To be consistent with its GDP target, the $100 billion goal means the economy would have to expand by 150% to reach $1.75 trillion by 2030 – a level that would have made Saudi Arabia the world’s ninth biggest economy last year, behind Italy and ahead of Canada, South Korea and Russia.

To be sure, the years following Vision 2030’s launch have not been helpful for FDI. A purge of the Saudi business elite in 2017 and the murder of Jamal Khashoggi in 2018 deterred private investment. Then the pandemic struck.

But analysts say the kingdom, and its grand reform plan, may soon start to lose credibility in the eyes of investors.

“Low year-on-year inward FDI levels will eventually stop being perceived optimistically as room for Saudi Arabia to improve and instead beg the question: what’s going on here?” said Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington.

    ‘FIXING THE SYSTEM’

    Saudi authorities say much of the plan is still in its initial phases, which consist mostly of regulations and planning, and money will increasingly start pouring into the kingdom over the next few years.

Saudi Investment Minister Khalid al-Falih said the FDI numbers were already improving.

    “We are fixing the system, we are preparing the deals, we are engaging companies,” he told Reuters. “A lot of our transactions are being prepared.”

    In the first half of 2021 – excluding the leasing of Saudi Aramco (SE:)’s oil pipelines – FDI rose 33% from the same period in 2020…