Our series of notes on investment, published earlier in the year, highlighted the immense levels of spending required globally to maintain critical infrastructure and develop emerging industries, such as renewable energy. While individual governments, together with the domestic private sector, may cover a significant share of this spending, a portion will undoubtedly be financed by way of Foreign Direct Investment (FDI).
Greenfield FDI, in particular, is likely to play a critical role in diversification plans in the GCC, as it introduces new activity in the host country. Using the fDiMarkets database, which tracks greenfield investment announcements, we can take a deeper look at how countries within the GCC have fared in terms of their ability to attract this type of investment.
The UAE has gained in popularity as a destination for FDI in recent years. The UAE ranked number two globally for the number of announced greenfield projects in 2023 (following the USA in the top spot). Greenfield FDI into the UAE has historically been dominated by inflows to the coal, oil and gas; real estate; and hotels and tourism sectors. There has however been a shift in more recent years, with the top three sectors for greenfield FDI in the years 2021 – July 2024 swapping to renewable energy, software and IT, and business services.
The Kingdom of Saudi Arabia has set an explicit target for FDI in its Vision 2030 plans, hoping to attract USD 100bn annually by 2030.Scaling up to achieve the required levels of inflows remains a challenge but there have been a series of reforms which should facilitate growth in FDI.
As might be expected from a hydrocarbon rich country, the sectors that have historically received the greatest share of greenfield FDI are chemicals and coal, oil and gas. Similar to the trend seen in the UAE in recent years there are, however, signs of diversification in KSA. Between 2021 and July 2024, the top sectors for greenfield FDI inflows to Saudi (by value) were metals, communications and automotive OEMs.