An Analytical Study of the Factors Affecting Investment Efficiency in The Industrial Sector in the Kingdom of Saudi Arabia

Abstract

The research objective is to investigate the extent of efficiency in industrial investment in the Kingdom of Saudi Arabia and the factors affecting it. The research used the deductive approach methodology in the economic analysis in both from the quantitative and descriptive perspectives. Following Klein’s model, and Two Stage Least Squares (2SLS) technique was used for estimation. Among the major findings of the research is the existence of a positive relation between domestic industrial product and government expenditure, the interest rate, credit size and taxes.  In addition, investment was also found to be positively related to aggregate wages in the industrial sector, GDP and technology level.  Further, a positive and statistically significant relation was also found between industrial investment and profits in the industrial sector. The study recommends more incentives, more utilization of industrial investment maps, better exploitation of comparative and competitive advantages to localize industries, developing human capital, articulating partnership forms with the public and private sectors in the field of industry.