Foreign investment in Saudi Arabia more than doubled in 2018: UNCTAD

Foreign direct investment (FDI) in Saudi Arabia more than doubled to $3 billion in 2018, moving up from a 14-year low recorded in 2017, according to the latest UNCTAD Global Investment Trends Monitor, released this week.

However, this is still less than one-tenth of the peak in 2008, UNCTAD report added.

Overall in West Asia, FDI flows were flat at $26 billion last year, UNCTAD noted. Globally, FDI fell by nearly a fifth in 2018 to an estimated $1.2 trillion from $1.47 trillion in 2017. The drop, the third in as many years, brings FDI flows back to the low point reached after the global financial crisis, with the decline concentrated in developed countries where inflows fell by as much as 40 percent to an estimated $451 billion, UNCTAD report said.

“The underlying FDI trend has shown anemic growth since the global financial crisis and has been on a downward trajectory since 2013,” James Zhan, Director of UNCTAD's Investment Division said.

“The factors behind this negative trend, such as lower profitability of foreign investment and shifts in global value chains, are not changing in the near future. The macro-economic backdrop is also deteriorating," he said.

According to UNCTAD, the decline was concentrated in developed countries where FDI inflows fell by 40 percent to an estimated $451 billion, mainly due to large repatriations of accumulated foreign earnings by US multinational enterprises.

“The 2018 FDI decline stems from corporate income tax reform in the United States. From 2017, United States multinational enterprises have embarked on a large repatriation of accumulated foreign earnings, a move which has hit Europe hard,” UNCTAD report added.

In 2018, Europe’s foreign investment inflows amounted to $100 billion – an unprecedented 73 percent decline – and a value last seen in the 1990s, UNCTAD report noted. The United States also saw its inflows dip to $226 billion, a decline of 18 percent.

Looking ahead, UNCTAD report maintained, a rebound in global FDI in 2019 is likely ‘but the underlying trend remains weak’.