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RIYADH: Saudi Arabia’s gross fixed capital formation surged to SR317.5 billion ($84.7 billion) in the first quarter of 2024, marking a significant 7.9 percent increase compared to the same period last year, recent data has revealed.

The Ministry of Investment’s report underscores that this expansion was driven by growth in both the government and non-government sectors. GFCF, which represents the net increase in physical assets within an economy, plays a crucial role in gross domestic product as it reflects the accumulation of capital supporting future production capabilities and economic growth.

Of the total GFCF, the government sector contributed 7 percent, experiencing a robust growth rate of 18 percent. Meanwhile, the non-government sector, constituting 93 percent, also saw a substantial rise of 7.2 percent.

Saudi Arabia’s proactive efforts to attract foreign direct investment and bolster bilateral relations have significantly bolstered the Kingdom’s economic trajectory. FDI serves as a pivotal catalyst for GFCF development, facilitating funding for investment projects and resource and knowledge transfer across borders, thereby fostering economic expansion and maturation.

Key initiatives such as the National Investment Strategy, the Regional Headquarters Program, and zero-income tax incentives for foreign entities play a vital role in advancing Vision 2030, aimed at diversifying and expanding the economy.

During this quarter, the Ministry of Investment issued 3,157 investment licenses, marking an impressive 93 percent surge compared to the same period last year, excluding licenses issued under the anti-concealment law.

In its economic and investment monitor released in late May, the ministry revealed that the construction and manufacturing sector dominated with 47 percent of total permits, followed by vocational and educational activities, information and communication technology, accommodation and food services, and wholesale and retail trade.

Remarkably, the real estate sector witnessed the most significant year-on-year growth, with a staggering 253.3 percent increase in investment licenses.

Furthermore, 127 international firms secured permits to relocate their regional headquarters to Saudi Arabia in the first quarter of 2024, reflecting a remarkable 477 percent year-on-year upsurge. Leading corporations such as Google, Microsoft, Amazon, Northern Trust, Bechtel, Pepsico, IHG Hotels & Resorts, and Deloitte have established operations in the Kingdom under this program.

The report also highlights that Saudi Arabia processed 445 applications for investor visit visas during the first quarter of this year, enabling overseas businesspersons to explore opportunities in the country.

According to a report by Goldman Sachs in October last year, the Kingdom’s National Investment Strategy aims to enhance FDI, targeting growth to 3.4 percent of GDP by 2025 and 5.7 percent by 2030. Additionally, it anticipates that GFCF will rise from its current contribution of about 25 percent of GDP to 26.4 percent by 2025 and 30 percent by 2030.

A cornerstone of the NIS is the Shareek program, launched in 2021, which seeks to boost domestic investment by private sector companies to $1.3 trillion by 2030. Involving 28 private firms, this program aims to increase non-oil exports from 16 percent to 50 percent, with the announcement of the first wave of supported projects for large companies under Shareek made on March 1.

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