Inward investment promoters step up their efforts

Far from taking a back seat since the appalling events of September 11, the promoters of inward investment into the Gulf region have vowed to redouble their efforts.

At this week's first annual Gulf Inward Investment Forum in Dubai, His Highness Prince Abdulla bin Faisal bin Turki Al Saud, chairman of the Saudi Arabian General Investment Authority told delegates that the Kingdom was about to open up more opportunities for foreign direct investment.

'Sagia will forward recommendations to the Supreme Economic Council,' he said. 'Some parts of telecommunications could open up for foreign investments. But in the case of insurance, it may take some time as the laws of the land have to be reworked before changes can be made'.

But Prince Abdulla indicated that the oil and gas industry is to be opened up for foreign investment towards the end of the year. He also pledged to expand Sagia's role in offering a one-stop shop to foreign investors, and eventually become a no-stop shop for foreign direct investment into the Kingdom.

Saudi Arabia has long been closed to foreign investment, and nationalised most foreign companies over 20 years ago. Since then the Kingdom has pursued an independent, state-controlled expansion of its economy without the benefit of the higher operating efficiency and technical expertise of foreign investors.

At the conference His Highness noted that considerable progress had been made, but that in order to move the economy forward foreign direct investment was now essential. He said that without FDI the Saudi economy would continue to expand at a sub-optimal level with the consequent shortfall in opportunities for its citizens.

Over the past 17 months Sagia has approved more than $10bn in new inward investment projects and aims to issue new licences within 30 days. Officials said the authority has around 100 staff and is expanding rapidly to meet growing demand. They reported no fall off in interest in inward investment since September 11.

Meanwhile, the president and ceo of the Shell companies in Saudi Arabia, Floris Ansingh presented the $25bn Saudi Gas Initiative to the forum in Dubai. This huge project falls outside the purview of Sagia and was the result of a recent tour of western capitals by His Highness Crown Prince Abdullah.

Mr Ainsingh explained how the SGI is set to offer massive opportunities for industries associated with gas to flourish in Saudi Arabia. And he recalled the impact of the development of a large gas field in The Netherlands on agricultural production, as an example.

Clearly foreign direct investment is now taking off big time in Saudi Arabia. But Prince Abdulla thinks that even more effort needs to be made in attracting investors to the Gulf region.

'I do not think there is enough effort being made on promoting these markets to investors,' he said. 'What we see happening are Gulf officials spending more time attending inter-governmental conferences and praising each other rather than in actual efforts to co-ordinate in attracting investments'.

'Regional governments have been lousy at managing investment programmes. Now it is much better for the Gulf States to allow competition to come in, even if it leads to the death of regional institutions. Governments should be left with regulations and ensuring consumer protection and get out of the way of businesses'.

From the Dubai government, Mohammed Alabbar, director-general of the Dubai economic department told the forum that it was unfortunate that this region was the last in the world to discover foreign direct investment. And he too added that it was 'time for governments to step aside and allow private investors to make money'.

Despite the impact of recent international events, the flame of economic reform still burns brightly in the Middle East and we can expect to hear a lot more from the economic reform lobby in the near future. This may be a difficult time for pro-western thinking in some circles, but there really is no viable alternative economic programme if the Middle East wants to expand its economy further.