Motives for and the types of foreign direct investment in saudi arabia

Foreign direct investments usually occur when a business person sets up business operations in a different nation or is able to acquire assets from foreign organizations, as well as the establishment of ownership or managing interest in a foreign nation (Tamer et al,. FDI is different from portfolio investment whereby the investor acquires equity of an organization that is foreign based. Foreign Direct Investments are made to happen in countries with what is called open economies. Such economies provide skilled labor and growth prospects above the average which is difficult to find in countries with highly regulated economies. FDI aids in the establishment of either substantial influence or effective control over the strategic decision making of the foreign market. One of the salient moves to encourage FDI in the country is spearheaded by the Saudi Arabian General Investment Authority commonly known as SAGIA.

The authority has made efforts to establish an investment Service Center dubbed ISC. The ISC is mandated to accept or nullify a license from investors within a span of a month. In the case of arbitration arising from commercial activities, the Kingdom has developed the Saudi Center for commercial arbitration (Siddiqui & Iqbal, 2018). A notable motive to have FDI is government support. This is a salient enabling motive because investors need to see whether he has any chances of growing the business in the near future in the chosen nation. According to AA1000, another aspect that could favor FDI in Saudi Arabia is the availability of a skilled workforce. For big investors like McDonald to thrive in a developing nation like Saudi Arabia, they need to recognize the importance of a skilled labor force (Alquaiz et al.

A skilled labor force is suitable because they are teachable, can effectively communicate and possess the technical skills needed. By proper utilization of skilled labor, foreign direct investment is likely to create value. Fig: Sourced from the UNCTAD latest data on FDI in Saudi Arabia Role of FDI in Saudi Arabia’s growth of GDP and non-oil GDP The Inflows from Foreign direct investment have for the past few years impacted the Economy of Saudi Arabia both directly and indirectly. This has resulted in the stimulation of the countries growth and provision of economic stability (Al Rajhi et al 2012). Government statistics indicate that between the year 2006 to 2018, FDI in Saudi Arabia had resulted in an average growth of up to 0. 5 % of the national GDP.

In the year 2008, FDI had contributed to the highest GDP of 10. According to (Tamer et al. , 2016) foreign direct investment is one ways through which a country can raise the national GDP. Saudi Arabia has a huge opportunity to promote growth and raise non-oil related GDP through FDI. The nation has the advantages of skilled labor market, good political will and a growing economy which are suitable for foreign direct report. We are in the era of globalized world economy and one of the key driving forces behind it the FDI which is enhancing interdependence of county economies.  Empirical Economics, 54(2), 309-342. AA1000 Stakeholder Engagement Standard. Retrieved from https://www. accountability. org/wp-content/uploads/2016/10/AA1000SES_2015. , & AlSelaimi, R. Determinants of entry modes choice for MNEs: Exploring major challenges and implications for Saudi Arabia.