The latest global forecasts from Standard Chartered indicate that growth in the Gulf Cooperation Council (GCC) is likely to slow in 2023 due to declining contributions from hydrocarbons; however, momentum is expected to continue in non-hydrocarbon sectors. In the Middle East and North Africa, the industrial sector was the most active in 2022, accounting for 23% of all deals. The number of transactions rose to a record 1,200 deals, compared to 1,141 in 2021, while the value of mergers and acquisitions totaled $85.2 billion compared to a record $109.10 billion the previous year.
Growth Outlook in Saudi Arabia
Conditions in Saudi Arabia look very promising in 2023, with total investment from the Kingdom expected to reach $10.9 billion upon confirmation of first-half figures, which represents more than one-third of the anticipated total for the Middle East and North Africa at $31.9 billion, according to Refinitiv data.
Outbound Investments and Mergers & Acquisitions in the Region
Activity in the mergers and acquisitions space continues to build from a diverse and growing base of investors in the Middle East and North Africa, as regional firms, sovereign entities, and non-governmental institutions actively seek opportunities. At the beginning of the second quarter of 2023, the Saudi oil company acquired a 10% stake in China’s Rongsheng Petrochemical for $3.58 billion.
Investments and Economic Reforms in Saudi Arabia
Analyses indicate that Saudi Arabia is not only an attractive place for investments but also a destination to attract capital outflow. Diversification reforms and large investments in building new sectors such as technology, renewable energy, e-commerce, and updating ports, logistics, healthcare, education, and infrastructure have led to overall economic growth in the country.
Saudi Investments Abroad
Last year, the subsidiary of the Saudi Public Investment Fund acquired a 35.3% stake in Olam Agri Holdings Limited in Nigeria for $1.24 billion. The subsidiary also holds an 8.3% stake in Nintendo, making it the largest foreign investor in the Japanese gaming company.
Future Outlook
The Saudi government is working to achieve strong fiscal discipline and support for businesses and consumers, creating an environment conducive for local, regional, and international companies to seek acquisitions. The positive outlook is expected to continue moving forward.
The economy of Saudi Arabia grew by 1.1% in the second quarter of 2023, thanks to non-oil activities. The Kingdom has offered 140 projects for investment in the private sector, along with asset sales and partnerships in 17 sectors, including healthcare and aviation. There are another 300 projects under evaluation. Economic reform programs and investment channels – including Vision 2030 and the Public Investment Fund – serve as strong signals to global investors.
Across the region, sovereign wealth funds must achieve key targets set in major diversification projects. The Saudi government continues to open investments and efficiencies through the privatization of key state-owned enterprises and, in some cases, entire sectors.
From this information, we can conclude that when it comes to mergers and acquisitions activity and economic diversification, Saudi Arabia and its neighbors are still at the beginning of the road.
• Mazen Al-Banyan is the CEO of Standard Chartered in Saudi Arabia. Note: The views expressed in this section are those of the author and do not necessarily reflect the views of Arab News.
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