Crown Prince Mohammed bin Salman’s (MBS) vision to transform Saudi Arabia into a global investment hub appears to be faltering as foreign investors increasingly withdraw from the kingdom. Since MBS became Crown Prince, Saudi Arabia has experienced growing political instability, which, alongside crackdowns on prominent business figures, has created a climate of fear and uncertainty. These concerns have prompted foreign investors to pull billions out of the country, casting doubt on MBS’s ambitious plans to diversify the economy and attract international investment.
Investor Exodus and Rising Withdrawal Rates
In the second quarter of this year, foreign investors withdrew approximately 8 billion riyals from Saudi Arabia, marking a 14.1% increase compared to the same period in 2023. This exodus reflects a growing lack of confidence in the kingdom’s stability and the safety of investments under MBS’s rule. Sources suggest that investors are concerned about financial losses due to unpredictable policy decisions and the kingdom’s strained political relationships, which add to the perceived risks of doing business in Saudi Arabia.
Economists emphasize that foreign investors seek stability and reassurance from government leaders. However, MBS’s policies have contributed to an environment that is anything but stable. His administration’s frequent detentions of business leaders and control over major corporations have left investors questioning the long-term viability of the Saudi market. The absence of reliable judicial processes also raises concerns about whether investments are truly safe in the kingdom.
Crackdowns and Seizures Raise Red Flags
The crackdown on prominent Saudi businessmen, including the high-profile detention of Prince Alwaleed bin Talal in 2017, has fueled concerns among foreign investors. MBS’s sweeping anti-corruption campaign led to the detention of dozens of business figures and officials, with assets worth over $100 billion reportedly seized. While the Saudi government framed these actions as anti-corruption measures, investors viewed them as alarming signs of arbitrary power and potential threats to their own investments.
Many investors now worry about their ability to operate freely within Saudi Arabia and fear that their assets could be seized under similarly vague accusations. This has led to a perception that Saudi Arabia’s leadership is prioritizing political agendas over creating a welcoming business environment, thereby deterring new investments and prompting existing investors to exit.
High Ambitions, Dubious Foundations
MBS has launched numerous ambitious projects under his Vision 2030 plan, such as the futuristic city of Neom and the massive linear city known as The Line. These initiatives require trillions of dollars, yet they lack a clear economic foundation. Economists argue that such projects may be overly ambitious and financially unsustainable, as they would require funding far beyond what Saudi Arabia’s current oil revenues can support.
Attempts to attract foreign investment in these projects have not met expectations. For example, Saudi Arabia recently sought $170 billion from Israeli investors for its mining sector, but results were disappointing. Given that major mining nations like Australia and Canada have stronger ties with global investors, Saudi Arabia faces steep competition, and its strained relationship with Canada further complicates these efforts.
Vision 2030’s Shortfall and Declining Investor Confidence
When MBS launched Vision 2030 in 2016, the goal was to attract $19 billion in foreign direct investment by 2020. However, this target has fallen significantly short, with actual foreign investment in 2020 reaching only $5.4 billion. While Vision 2030 seeks to reduce Saudi Arabia’s dependence on oil by diversifying its economy, the kingdom’s inability to achieve its investment goals suggests that the current approach may not be working.
The recent classification of Saudi Arabia as an emerging market by MSCI was expected to boost investor interest, but this reclassification has not translated into the inflows anticipated. Fund managers now face a dilemma: they must weigh the potential benefits of investing in Saudi Arabia’s privatization efforts and low-cost energy against the risks associated with political instability and unpredictable regulatory practices.
A Bleak Outlook for Saudi Investment Climate
Economists warn that the steady decline in foreign investment is a worrying sign for Saudi Arabia. MBS’s ambitious economic projects depend heavily on foreign capital, yet the kingdom’s strained political environment and lack of judicial transparency are deterring investors. As Saudi Arabia accelerates privatization in sectors such as healthcare, aviation, and flour milling, the risks to foreign investors remain high, given the government’s track record of prioritizing political interests over economic stability.
For Saudi Arabia to truly position itself as a global investment destination, the government will need to address investor concerns and establish a more stable, transparent, and predictable business environment. Until then, the exodus of foreign investors is likely to continue, casting a shadow over the kingdom’s ambitious economic goals and threatening the viability of MBS’s Vision 2030.
