Saudi Arabia is top investment market for 90% of international businesses in UAE

More than three quarters of businesses view the kingdom as a central plank of their regional growth strategy, says HSBC

Salwa Palace in the At-Turaif district of Diriyah. Saudi Arabia is developing a string of giga-projects to boost its non-oil economy. Bloomberg

Nine out of 10 international businesses operating in the UAE aim to invest in Saudi Arabia in the next five years, as they bet on continued economic momentum in the kingdom to boost growth, according to a new report.

More than three quarters of the businesses view the kingdom as a central plank of their regional and international growth strategies and are eager to strengthen their trade and investment ties with the Arab world’s largest economy over the next six months, HSBC said in its New Networks of Capital: Saudi Arabia report on Wednesday.

The HSBC study, which surveyed top decision-makers from 4,000 businesses with international operations generating $50 million to $500 million in annual revenue, explored trade and investment relationships between Saudi Arabia and eight major global markets: the UK, Hong Kong, mainland China, the US, India, Germany, the UAE and Egypt.

Princess Reema: Today's US-Saudi relationship built on technology and innovation

Read More

The UAE-based respondents saw the kingdom as a hub of investment with economic stability (59 per cent), growth (58 per cent), and a good position as a gateway to other markets in the Gulf region (42 per cent).

“As Saudi Arabia’s leading trading partner in the GCC and its third largest globally, the UAE continues to play a pivotal role in strengthening trade and investment flows,” Mohamed Al Marzooqi, chief executive UAE, HSBC Bank Middle East, said.

“That strength underlines how intra-Menat (Middle East, North Africa and Turkey) investment is reinforcing the region’s confidence in its own future.”

The International Monetary Fund (IMF) in October upgraded its 2025 economic growth forecast for the kingdom due to a faster-than-expected unwinding of oil production cuts in the world's biggest oil exporter.

In its latest World Economic Outlook report, the IMF raised the Saudi GDP growth estimates to 4 per cent, up from the 3 per cent it projected in April. The lender expects Saudi economic output to maintain the pace of expansion at 4 per cent next year as well.

Saudi Arabia is pushing to reform its economy and cut its reliance on the sale of hydrocarbons to generate revenue. Developing non-oil sectors of the economy and further boosting foreign direct investment are central planks of the kingdom's Vision 2030 agenda. The reforms span sectors including property, investment and the management of companies.

“At HSBC, we see first-hand how our clients are deepening this partnership, investing in technology, energy transition and major development projects that are shaping the next generation of growth for both nations,” Mr Al Marzooqi said.

In terms of the best routes for expansion into the kingdom, nearly half of surveyed businesses in the UAE named private equity and venture capital funds (48 per cent), followed closely by mutual funds (46 per cent) and partnerships and joint ventures (45 per cent), HSBC said.

The technology and innovation sectors of Saudi Arabia were the top investment destinations, with 47 per cent of current and 46 per cent of future investment going into both sectors.

In terms of attractive channels of participation in the Saudi economy, 52 per cent of respondents picked project finance while 46 per cent of businesses chose risk management solutions.

About 96 per cent of UAE-based international businesses said Saudi Arabia’s sustainability agenda encourages investment, while 94 per cent viewed the kingdom as a “reliable hub for trade and investment even during times of global uncertainty”, HSBC said.