Can reforms plug the FDI gap?

Saudi’s aggressive reforms and efforts to reel in FDI have drawn attention from Bloomberg, which is out with a piece spotlighting the flurry of reforms introduced over the past year, which included rent freezes, opening property ownership to foreigners, capital market liberalization, and a new privatization strategy. These moves are all aimed at attracting FDI — “the main lacking piece” in the Kingdom’s story,” as EFG Hermes’ Head of Macroeconomic Analysis Mohamed Abu Basha puts it.

Why now? Fresh foreign capital would support corporate expansion, infrastructure funding, and ease pressure on public finances. Saudi Arabia has faced fiscal deficits since 2022 and its current account has been in deficit for over a year now, prompting higher borrowing and a scaling back of gigaprojects.

Still trailing regional rivals: Despite the reforms, Saudi Arabia continues to lag the UAE — particularly Dubai — in attracting global capital, weighed down by housing and schooling constraints, traffic congestion, and disruptions from ongoing construction. However, investors remain optimistic — “over the long haul money will come here,” said TCW Group’s Richard Miller. “It’s maybe not going to go from here to there as fast they want it to, but there’s no way it doesn’t eventually get there.”