Saudi government bodies to use new methodology to calculate foreign investment

Three Saudi government bodies will announce results of foreign investments in the kingdom by the end of September based on a new method of calculation practiced by the G20 countries and other international bodies, report in a business news website has revealed.

According to Saudi Arabia’s business news website Al-Maal, the spokesman for the Saudi General Authority for Statistics, Tayseer al-Mefrij, told the newspaper that the new methodology will be adopted by the General Authority for Statistics along with the General Authority for Investment, and the Saudi Arabian Monetary Authority (SAMA).

Al-Mefrij said that the new methodology will reflect – when applied – the real volume of foreign investments in Saudi Arabia, which witnessed an increase after the implementation of various economic reforms.

He also said that the three authorities have completed their preparations to begin with a field survey mid-July, ensuring that the annual survey will provide a full statistics report including field surveys as well as administrative data records from relevant authorities. These results will be adopted as the actual evaluation foreign investments flow into the kingdom.

Informed sources also revealed that the current numbers depended on data estimated by SAMA, and represent the cash flow from abroad to foreign investments, which are included in estimates for the balance of payments for the year, amounting to over SAR 5 billion.

Benefit of reforms

Statements by the General Investment Authority indicate that a series of reforms and restructuring witnessed by the Saudi economy has contributed to a 130 percent rise in the number of licenses issued for foreign investments inside the kingdom, during the first quarter of 2018. As a result, 157 licenses were issued this year compared to 68 issued during the same period last year.

The statements showed that during 2017 a total of 377 new investment licenses have been issued worth SAR 5.7 billion. The duration to issue new licenses did not exceed 24 hours while the renewal was done during an hour.

Al-Maal predicts that the current methodology used to estimate the balance of payments has affected the calculations of foreign investments flow into Saudi Arabia during 2017, which have been announced by SAMA without considering all the related changes in evaluating the size of foreign investments.

Since 2017, Saudi Arabia has witnessed several reforms to support investments and attract global investors and, in the beginning of 2018, full foreign ownership for investments in engineering, education and recruitment companies was allowed. The country also issued a high-level approval system ensuring that initial approvals are not required for companies to operate.

A committee has been constituted to facilitate several reforms that would lure foreign investors, including easing of issuing licenses and reducing the time required to do so, facilitating cross-border trading systems, as well as easing bankruptcy and mortgage systems and minority investors protection.

Investing in Saudi market

These economic reforms help investors enter the Saudi market with a system available for their support. This is in addition to the kingdom’s new Vision programs and investment opportunities, privatization programs, and the establishment of the Saudi Commercial Arbitration Center.

The effect of these reforms are expected to reflect in Saudi Arabia’s investment climate in the coming months, where companies need up to six months to study reforms and make decision to enter the market. Accordingly, the data for the second and third quarters of 2018 are expected to see further improvement.

The analysis proposed by Al-Maal newspaper rejects recent media reports suggesting a drop in foreign investments during 2017, as it relied only on reports presented by SAMA, which represents cash flow from abroad to foreign investments. As stated earlier, this figure was estimated at SAR 5 billion.

The recent reports on foreign investments in Saudi Arabia have not includes fully-owned investments or those with GCC partnerships or its branches. It also did not include real estate investments owned by individuals from GCC countries, which are estimated at SAR 1 billion, nor investments in economic cities.

It is also clear that a number of companies did not submit their financial statements while others started investing at the end of 2017. Al-Maal said it has seen reports that indicate that the number of properties in which Gulf businessmen are investing reached 2,081 and they are valued at SAR 914.8 million.

According to the General Authority for Investment, the number of establishments during the year 2017 amounted to 377 enterprises with a total capital of SAR 5.7 billion, while the number of facilities at the Economic City Commission with foreign and Gulf investments reached 9 with a total capital of SAR 332 million.


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