Riyadh’s efforts to open up its economy have paid off, with a $6bn increase in foreign investment into the kingdom in 2007, far outstripping investment into other countries in the region.

Foreign companies invested $24.3bn in Saudi Arabia in 2007, up from $18.3bn in 2006, through acquisitions and investments in new projects, according to the UN Conference on Trade & Development (Unctad).

Unctad’s World Investment Report, published on 24 September, is thought to be the most comprehensive survey of foreign direct investment (FDI) in the region and the wider world.

“There is a general trend of easing FDI restrictions in Saudi Arabia,” says Astrit Sulstarova, economic affairs officer at Unctad. “There were some energy projects and projects in infrastructure that have played an important role.”

The Saudi government has taken steps to make it easier for foreigners to invest in the kingdom. It has reduced the number of sectors that are off limits to foreign investors, allowing FDI in services, mining, urban rail transport and air transport for the first time. Most of the FDI in infrastructure came in the water and telecoms sectors.

Saudi Arabia was by far the largest destination for investment into the Gulf and North Africa in 2007, with faster growth than the UAE or Egypt, the second and third-largest recipients of FDI.

Foreign investment into the UAE reached $13.3bn, up from $12.8bn in 2006. Egypt attracted $11.6bn in new investment, up from $10bn in 2006.

The three largest FDI recipients attracted far more money than any others in the region.

Lebanon was the fourth largest destination for FDI in 2007, with $2.8bn in net inflows, even though the country lacked a functional government. “Lebanon still received a large amount of inflows because it has always been an open country,” says Sulstarova. “There is a long tradition of foreign investment in the country.”

Beirut’s FDI was up $100m from its 2006 total of $2.7bn, a small increase compared with most other countries in the region.

Morocco was the fifth most popular destination for FDI, with $2.6bn, up from $2.5bn in 2006. Rabat needs foreign investment more than most North African countries because its revenues from oil and gas are negligible.

In 2007, Morocco asked Unctad to review its rules for foreign investors. The UN agency’s recommendations led to a series of measures to make FDI in the kingdom easier.

“They reorganised their investment promotion institution,” says Anne Miroux, head of investment analysis at Unctad. “Morocco really needs to attract manu-facturing. Its programme of reforms stands out.”

Compared with Saudi Arabia and the UAE, the four other GCC nations attracted much smaller volumes of FDI.

Foreign companies invested $2.4bn in Oman, $1.8bn in Bahrain, $1.1bn in Qatar and just $123m in Kuwait in 2007.

Kuwait has failed to attract any large deals for years, according to the Unctad report. In 2005 and 2006, it attracted $234m and $122m in FDI respectively.

Kuwait is ranked 134 out of 140 countries in terms of the amount of international investment it attracts. But by contrast, it is the region’s largest deal-maker, with net outflows of $14.2bn in 2007, compared with $8.2bn in 2006.

Kuwait’s sovereign wealth fund, the Kuwait Investment Authority, accounts for much of the cross-border investment by Kuwaiti organisations.

However, Saudi Arabia is fast catching up with Kuwait, with $13.1bn in net outflows in 2007, compared with just $1.3bn in 2006.

In 2007, some of Saudi Arabia’s largest companies, including Saudi Telecom and Saudi Basic Industries Corporation (Sabic), made major overseas investments, taking advantage of the strong balance sheets they had built up from domestic operations.

The UAE was third in terms of its international investments, with $6.6bn in net outflows, down from $10.9bn in 2006. The UAE is the only GCC member whose overseas investments fell in 2007.

Most of the investments were made by its sovereign wealth funds, such as Abu Dhabi Investment Authority and Dubai World, and a handful of multinational companies, including telecoms company Etisalat and real estate developer Emaar Properties.

The Qatar Investment Authority helped make Qatar the region’s fourth largest international investor in 2007, with $5.3bn in net outflows from an almost standing start in 2006, when it invested just $127m.

Bahrain had $1.7bn in net outflows, up from $980m in 2006. Oman invested a total of $570m abroad in 2007.

Most investments by Gulf countries went into the banking, telecoms, real estate and man-ufacturing sectors in other Middle East or North African countries.