Saudi Arabia is moving full steam ahead with its focus on inward investment and, with it, higher requirements for foreigners coming to the kingdom to take capital elsewhere.

The kingdom’s $925 billion sovereign wealth fund, the Public Investment Fund, saw its assets rise 29% to 2.87 trillion Saudi riyals ($765.2 billion) in 2023, its annual report released earlier this week revealed, with local investment a major driver.

The fund’s investments in domestic infrastructure and real estate development grew 15% year-on-year to SAR 233 billion, while its foreign investments rose 14% to SAR 586 billion. At the same time, the Saudi government introduced laws and reforms to facilitate and even regulate investment in the country as it develops its Vision 2030 plan to diversify its oil-dependent economy.

“The PIF report marks a shift from foreign-driven investments to a focus on domestic opportunities. The days of viewing Saudi Arabia as a mere financial reservoir are coming to an end,” Tarik Solomon, president emeritus of the American Chamber of Commerce in Saudi Arabia, told CNBC.

“Today, PIF’s success depends on partnerships based on mutual trust and a long-term vision, where stakeholders are expected to contribute meaningful capital and not just seek profits.”

One example is the kingdom’s headquarters law, which came into effect on January 1, 2024, and requires foreign companies operating in the Gulf to establish their Middle East headquarters in Riyadh if they want contracts with the Saudi government.

Saudi Arabia’s recently updated Investment Law also seeks to attract more foreign investment and has set an ambitious target of $100 billion in annual foreign direct investment by 2030.

That figure has now averaged around $12 billion per year since Vision 2030 was announced in 2017, according to data from the kingdom’s Ministry of Investment — still a long way from that goal.

Some observers in the region are skeptical that the $100 billion figure is realistic.

“The new investment law is absolutely critical to facilitate more foreign direct investment (FDI), but it remains to be seen whether it will lead to the huge increase and amount of capital required,” a Gulf-based financier told CNBC, speaking anonymously due to professional restrictions.

Solomon echoed this sentiment, noting that increased spending on major projects will require higher breakeven oil prices for the Saudi budget.

“It remains to be seen whether the PIF’s domestic investments will yield the expected results, especially in a region fraught with instability and oil-dependent budgets facing prolonged periods of low oil prices,” he said.

Still, the new law “will improve local business conditions to attract foreign investment,” James Swanston, a Middle East and North Africa economist at Capital Economics, wrote in a recent report.

Investors have long complained that confusing and often ad hoc rules discourage greater participation in the Saudi economy. The new law will align the rights and obligations of foreign investors with those of citizens, introduce a simplified registration process replacing licensing requirements and ease the court process, among other things, according to the Saudi government.

“We have long held that so-called ‘wasta’ (loosely translated as ‘who you know’) has been a major impediment to foreign companies establishing themselves in Saudi Arabia,” Swanston wrote.

Encouraging greater foreign participation “should also ease the burden that has recently been placed on the Public Investment Fund to compensate for lower foreign investment in the Kingdom,” he added.

The shift toward greater scrutiny and domestic priorities is not exactly new; rather, it has gained greater speed each year.

While many foreign companies have long viewed the Gulf as a source of “dumb money,” some local investment managers said — referring to the stereotype of oil-rich sheikhs throwing money at whoever wants it — investment from the region has become far more sophisticated, employing deeper due diligence and being more selective than in years past.

“It used to be a lot easier to come and say, ‘I’m a fund manager from San Francisco, please give me a couple million,’” Marc Nassim, partner and managing director at Dubai-based investment bank Awad Capital, told CNBC in 2023.

“I think only a small minority of them will be able to take money out of the region; they are much more selective than before.”

If the kingdom’s priority was not clear to foreign investors before, it is now, said the Gulf-based financier who asked not to be identified.

“The PIF has been focused on attracting investment to Saudi Arabia for the past few years,” he said. “It took some time for bankers to fully appreciate the scope and scale of the change. It is, rightly, about transforming the economy.”