Foreign Investment in Saudi Arabia Rises by 44% in Q1 2025

In Q1 2025, Saudi Arabia reported a 44% year-on-year surge in foreign direct investment (FDI), reaching SAR 22.2 billion. This sharp rise marks a critical turning point in the Kingdom’s economic transformation under Vision 2030. But what’s behind the numbers, and what should foreign investors know before entering this high-potential market?

‍

In this post, we break down the latest FDI trends, explore the driving forces behind Saudi’s investment boom, and offer practical insights for international businesses considering expansion. Backed by Peninsula’s 15 years of on-the-ground experience in the Kingdom, here’s what the latest data reveals, and why it matters.

FDI in Saudi Arabia: Momentum Builds in Q1 2025

Saudi Arabia attracted SAR 22.2 billion (USD 5.9 billion) in net foreign direct investment in Q1 2025, up from SAR 15.5 billion the previous year. This represents a 44% year-on-year increase, driven by substantial inward flows and a sharp decline in outward capital investments.

• Inward FDI climbed 24% year-on-year to SAR 24 billion.
• Outward FDI dropped 54%, signalling a renewed domestic focus.
• While quarter-on-quarter FDI dipped 7%, the broader trend shows increasing foreign investor confidence.

This performance places Saudi Arabia firmly in the global spotlight, ranking 13th on Kearney’s 2025 FDI Confidence Index.

What’s Driving the Spike in Saudi Foreign Investment?

Several interlocking forces have converged to make Saudi Arabia a more attractive destination for foreign capital in 2025:

1. Vision 2030 Strategy Execution

At the core lies Vision 2030, Saudi Arabia’s ambitious blueprint to diversify away from oil dependency. FDI plays a central role in funding megaprojects and scaling new sectors such as:

• Tourism (e.g. Red Sea Project, Diriyah Gate)
• Entertainment (e.g. Riyadh Season, Qiddiya)
• Technology and AI (e.g. investments into Humain, NEOM Tech)

2. Policy Reforms That Favour Investors

Saudi regulators have introduced sweeping changes to attract and retain foreign businesses:

• Regional HQ Mandate: Multinationals seeking government contracts must now establish regional HQs within the Kingdom.
• Legal Reforms: Updates to investment and company laws have simplified structuring and ownership rules.
• Sectoral Incentives: Long-term tax exemptions, land grants, and funding access in priority industries.

3. Shift in Investor Sentiment

Previously known as a source of outbound capital, Saudi Arabia is now recasting itself as a global investment destination. This signals a broader structural rebalancing of the Kingdom’s economic identity.

Challenges Still Facing Foreign Investors

While the momentum is promising, investors must approach with clarity and caution. Several headwinds remain:

• Regulatory Complexity: Despite reforms, the setup process still involves multiple ministries and can span 20+ steps.
• Cost of Entry: Company setup in Saudi Arabia is significantly more expensive than in the UAE, making ROI calculations crucial.
• Unmet FDI Targets: Vision 2030 aims for USD 100 billion annually in FDI, current levels are far from this benchmark.
• Short-Term Volatility: A 7% quarter-on-quarter dip shows that while the trend is upward, fluctuations remain.

How to Invest in Saudi Arabia Successfully

Based on Peninsula’s experience helping over 1,500 companies establish operations in the Kingdom, here are key strategies for navigating the investment journey:

1. Start with Sector Fit: Align your expansion with high-priority sectors such as tourism, technology, entertainment, and logistics.
2. Leverage Local Partnerships: Strategic alliances can unlock faster approvals and market access.
3. Plan for a Multi-Agency Process: Engage early with MoCI, SAGIA (now MISA), GAZT, and ZATCA to avoid bottlenecks.
4. Ensure Legal Clarity: Choose the right entity structure, LLC, Branch, or Foreign Investment Licence—based on your operational goals.

Final Thought from Alistair

Saudi Arabia’s 44% FDI rise is a signal that the Kingdom is opening up in ways we haven’t seen before. But real success still depends on the execution. At Peninsula, we help clients move from opportunity to action, with precision.

‍

About Alistair:

‍Alistair Paine brings 15 years of dedicated experience in Saudi market entry, guiding Fortune 500 companies and innovative scale-ups through successful establishment in the Kingdom. His expertise in Saudi company formation, licensing and market entry strategy, positions him as a leading authority and consultant in international business expansion to Saudi Arabia.

‍

Schedule a free consultation with Alistair and the Peninsula team to understand which market entry strategy is best suited to your business setup in Saudi Arabia.

Email: Alistair@peninsulacs.com

‍

‍

‍

‍

‍

‍

‍