Saudi Arabia will use multi-billion dollar infrastructure projects to attract foreign investment in sectors such as transport, healthcare and industrial equipment, a senior economic official said on Monday.
The kingdom is spending tens of billions of dollars annually on roads, ports, airports, hospitals and schools for a young and growing population — a potential bonanza for foreign firms. One project, the Riyadh metro, is expected to cost $22.5 billion.
Prince Saud K. Al Faisal, executive director for investment policy at the Saudi Arabian General Investment Authority, said that under a new programme, the government would propose investments linked to such state spending plans.
For example, bidders to supply government projects might be encouraged to establish Saudi manufacturing facilities. The government may standardise equipment specifications across projects and guarantee to buy minimum amounts of factory output to make such investments more attractive.
Prince Saud said the programme represented a shift in focus for Saudi Arabia, towards using foreign investment to obtain technology and high-quality jobs and away from emphasising the monetary size of investments.
“We’re moving from quantity to quality, to targeted investments,” he said in an interview.
Investors that establish export bases in Saudi Arabia will be given priority, he said. “We don’t want them to cater to the Saudi market alone — we want them to be exporting to add value.”
South Korean media reported last month that local steelmaker POSCO had signed a preliminary deal to sell part of its construction unit to Saudi Arabia’s Public Investment Fund (PIF) for about $1.4 billion. POSCO would use some of the proceeds to form a joint construction venture with PIF.
Prince Saud said the proposed deal was in line with the government’s new approach to investment.
“The government is thinking differently now,” he said. “You see different government entities working together towards strategic investments that benefit the kingdom’s economy.”
The world’s largest crude exporting country has been trying for years to diversify its economy beyond oil and find more private sector jobs for its citizens. The pressure to diversify has increased with the plunge in oil prices since last June, which has pushed state finances into deficit.
Foreign direct investment in Saudi Arabia fell to $9.3 billion in 2013, the most recent year for which data is available, from $12.2 billion in 2012, figures from the Arab Investment and Export Credit Guarantee Corp show.