What is Direct Investment?
Direct investment (foreign direct investment when cross-border) is a long-term investment made by an investor or company to acquire a controlling interest (typically 10% or more) in a business in another jurisdiction, with the intent of influencing operations.
How It Works
- Greenfield: establish a new operation in the target country.
- Brownfield: acquire an existing local business.
- Joint venture: partner with a local entity.
- Distinguishes from portfolio investment (passive holdings without control).
Saudi Context
Foreign direct investment into Saudi Arabia is licensed by the Ministry of Investment (MISA). Vision 2030 set an ambitious FDI target of 5.7% of GDP by 2030. Major Saudi-bound FDI flows into renewables, logistics, and tourism megaprojects (NEOM, Red Sea, Diriyah), all benefiting from streamlined MISA licensing and special economic zone incentives.
Example
A European industrial group sets up a Saudi LLC with SAR 50,000,000 paid-up capital under a MISA license, builds a SAR 200,000,000 manufacturing plant in Jubail Industrial City, and qualifies for a 5-year corporate tax incentive.