Foreign direct investment (FDI) plays a pivotal role in stimulating a country’s economic growth. It helps create employment opportunities, increase wages, replace declining market sectors, and stimulate infrastructure development and technology transfer.

Over the years, many economies such as China, India, South Korea, Singapore, and Taiwan have experienced high levels of progress due to strong FDI flows, among other key factors. Most states have geared towards promoting FDI due to its positive impact on their overall socio-economic framework. They encourage foreign investments by implementing significant policy changes and clear strategies to create a favourable business climate.

In the Arab region, the kingdom of Saudi Arabia has been the largest FDI recipient. According to a recent report, the volume of FDI that flowed into the kingdom has already reached an estimated $199 billion. The 2013 World Investment Report, published by the United Nations Conference on Trade and Development (UNCTAD), also showed that Saudi Arabia was the biggest FDI recipient in Western Asia after Turkey.

To date, Saudi Arabia’s General Investment Authority (SAGIA) said the kingdom, the world’s fastest reforming business climate, placed 22nd of the 185 countries ranked based on the overall ease of doing business. This advance has been the result of the Saudi government’s move to relax its restrictive foreign investment policies and diversify its economy away from the oil sector.

The reforms have made Saudi Arabia one of the world’s most attractive destinations for FDI inflows. As per SAGIA’s 2011 report, published by the National Competitiveness Center (established by SAGIA to spearhead a new attitude to competition and achievement in Saudi Arabia) among the top industries that received the highest investments were the contracting sector ($28.8 billion), chemicals and petrochemicals ($21.6 billion), and real estate ($15.3 billion). The same report showed that the kingdom’s FDI stocks reached $170.4 billion in the whole of 2010.

Competition in the contracting market remains strong, with numerous foreign firms continuously looking for opportunities to land mega-projects across Saudi Arabia. According to the latest
  report by NCB Capital, a Riyadh-based investment company, the government granted the biggest amount of contract awards by value in 2013, reaching $78.2 billion, Construction Week reported. The majority of awards went to transport, power, real estate, industrial projects, and petrochemicals.

FDI inflows stimulate activities and make the contracting industry highly competitive. Large investments would come in, leading to the creation of new technologies and ideas aimed at developing and enhancing the efficiency of the entire sector. These investments are crucial especially at a time when the demand for affordable housing from low- and middle-income families is rapidly increasing. Like the rest of the Gulf Co-operation Council (GCC) region, rapid urbanisation and a population boom in the kingdom are driving this housing demand. We believe that FDI would significantly contribute to the efforts to narrow the gap between an insufficient supply of affordable housing stocks and high demand from the target income groups.

Best Choice was established by a group of seasoned Saudi investors to oversee infrastructure and residential projects in the kingdom. At the same time, it is developing and selling mixed-use projects in Turkey and other key European and Asian markets. The company has been underscoring the role of the private sector in addressing the issue of lack of affordable residential units facing the GCC region today.

Amid the Saudi government’s continued efforts to create a good business environment, the kingdom is expected to draw in more foreign investments. Huge FDI inflows would foster socio-economic development and help improve various industries, including the housing sector which is facing a huge demand for social housing units.

Mohamad Rabih Itani is the chief executive officer of Best Choice, a Saudi Arabian real estate investment and development firm based in Riyadh