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Brit Saudi Direct Investment Motivations Research Paper

Oil money, though not the sole source of Saudi Arabia's significant wealth and stability, has played a major part in the country's ability to ride out this economic storm largely unscathed, with hardly a misstep in their march of progress (Siddiqi 2008). A repetition of a similar analysis at the end of 2009 shows that the country has in fact taken a hit form the global economic downturn, which could hardly be avoided, but the picture is far from dire for Saudi Arabia (Siddiqi 2009). Infrastructure investment is still taking place, and a more in-depth analysis of Saudi Arabia's long-term spending and industries shows that the country's non-oil sectors have had a combined growth of more than five percent over the previous five years, with manufacturing, transportation, and telecommunications each increasing nearly ten percent over the same period (Siddiqi 2009). All of this points to a great deal of potential profitability and success through direct investment in the country, and such investment has continued despite the tightened capital available throughout the world (Siddiqi 2009). Despite this phenomenal and continued growth, however, the real motivational factors are often overshadowed by perceived barriers to investment.

Methodology

Two research tools were developed for use in this study, in accordance with the issues identified n relevant literature and according to validated and verified practice within the field. The primary research too, and the only instrument from which any data was ultimately gathered, was a questionnaire meant to ascertain certain details of the business -- the British firm -- to which the questionnaire had been sent, and the specific individual responding to the questionnaire. The central research questions were also addressed, and the respondents were asked to rank a set of ten motivational factors and ten barriers to direct investment in Saudi Arabia in order of their perceived importance. Questionnaires were distributed via email to individuals at over one hundred British firms representing a wide array of different industries and organizational models; the response rate of thirty-eight percent was lower than had been hoped for but still provided a large enough data population to allow for a preliminary statistical analysis with a substantial degree of confidence.

An interview was also developed in the hopes that the CEOs of several of the firms contacted might be able to devote some time to this research. The interview was to be conducted largely along the same lines as the questionnaires, but was kept more open ended and allowed for greater discussion and clarification of the perceived motivations and barriers to direct investment in Saudi Arabia. At the scheduled date for the conclusion of the data-gathering process, over a month after initial contact had been made, only a handful of apologetic refusals to interview requests had been received.

Statistical analysis of the qualitative data collected, consisting of regression and chi-square analysis to determine the degree of prevalence of certain barriers and motivational factors, was also conducted. Comparisons of ranking responses to business types and degrees of firm investment in Saudi Arabia were also conducted, and individual details of the specific respondents -- namely the number of years the individual had been with the...

Such cross-analyses were utilized to ensure the objectivity and validity of the data and its interpretation, yielding more meaningful and far less suspect results. This was made especially necessary due to the relatively small sample size.
Results

One of the most commonly perceived factors motivating direct investment by British firms in Saudi Arabia was the facilities provided to foreign investors. This can be interpreted as perhaps demonstrative of the improved infrastructure that the country has invested in, which makes direct investment in Saudi Arabia far more feasible and individually satisfying -- as well as organizationally profitable -- than in previous decades (Bushnak 2001). Petroleum stocks and labor costs tended to receive high ranking as motivational factors, as well, whereas labor skill -- especially for those firms with continuing investments in the country -- received a fairly consistent low ranking in this regard.

The perceived barriers to direct investment in Saudi Arabia were even more consistent, with weak and/or incomplete infrastructure and the weak rehabilitation of manpower capabilities consistently cited as the primary barriers to the set-up and maintenance of direct operations within the country. The perception of these two primary barriers showed no correlation to industry type, position or level of seniority of the respondent, nor any other demographic statistic measured by the questionnaire, but rather persisted as a universal perception across all of these lines. This is somewhat different form the findings of certain motivational factors, which varied depending on the British firm's connection to the oil industry generally and in Saudi Arabia specifically. Technological failings -- primarily a lack of it -- were also cited as major barriers to direct investment in Saudi Arabia; this can be seen as highly related to and possibly repetitive of the perceived problems with infrastructure provision and maintenance that was identified.

Conclusion

The perceived barriers and motivations to direct investment by British firms in Saudi Arabia do not necessarily reflect an accurate understanding of the real-world situation for direct investors in the country. The persistence of infrastructure concerns despite the rapid and continued expansion of infrastructure through both private and government spending is limiting many firms in their international potentials. Further research detailing reasons behind these perceptions and more effective methods for education is recommended.

References

Bushnak, A. (2001). "Investment Needs and Privatization of Water Services in Saudi Arabia." International Journal of Water Resources Development (17(2), pp. 257-60.

Siddiqi, M. (2005). "The rise and rise of an equity culture." Middle East (361), pp. 44-9.

Siddiqi, M. (2008). "Saudi Arabia: Bucking the global trend?" Middle East (392), pp. 44-8.

Siddiqi, M. (2009). "Responding to international crisis.." Middle East (401), pp. 46-50.

Smith, P. (2008). "Opening the door to foreign investment in the Arab world. Middle East (389), pp. 28-31.

Sources used in this document:
References

Bushnak, A. (2001). "Investment Needs and Privatization of Water Services in Saudi Arabia." International Journal of Water Resources Development (17(2), pp. 257-60.

Siddiqi, M. (2005). "The rise and rise of an equity culture." Middle East (361), pp. 44-9.

Siddiqi, M. (2008). "Saudi Arabia: Bucking the global trend?" Middle East (392), pp. 44-8.

Siddiqi, M. (2009). "Responding to international crisis.." Middle East (401), pp. 46-50.
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