The complexion of Saudi Arabia has changed dramatically in the past few years. Not only is this oil-rich economy now facing a gaping budget deficit, it is also looking to diversify its economy to one that is market driven rather than government driven, and introduce reforms under a programme called Vision 2030.
Vision 2030, introduced in mid-2016 by Deputy Crown Prince Mohammed Bin Salman, contains 755 initiatives.
“It targets every sector and calls for transparency and accountability,” said Saudi Arabia's minister of commerce and investment, Dr Majed Bin Abdullah Al Qasabi, during a visit to the Center for Strategic and International Studies and IMF spring meetings in Washington, DC. “Only if one-quarter of the initiatives are accomplished, it puts pressure on the government to perform.”
Ups and downs
Saudi Arabia’s economy has been on a rollercoaster ride since the crash in crude oil prices that began in 2014. Gone are the days when the country was flush with oil revenues and could bestow on its citizens heavy subsidies for food and fuel in an environment that had neither income taxes nor corporate taxes. Today, 81% of Saudi Arabia’s population is under the age of 45. Large numbers of its young people are unemployed.
Vision 2030 is a broad initiative. But Mr Al Qasabi explains that each government entity has its own set of initiatives or projects. His own ministry has 36 initiatives and is revamping 30 laws and bylaws to make Saudi Arabia more competitive. These include franchise, corporate, bankruptcy and currency laws. The government has also created a commission to look into and enable economic drivers such as $1.3bn to support SMEs. A stimulus package of approximately $44bn has also been created to stimulate private sector investment.
“We have a unique opportunity to attract global partners,” adds Mr Al Qasabi. This includes the privatisation of utilities such as sewerage, water, roads and electricity – and also renewable energy. The government has announced a target of building 9500 megawatts of renewable power capacity by 2023. “Solar is part of our new focus,” adds Mr Al Qasabi.
Other areas of focus include mining and logistics. “Saudi Arabia is so rich in minerals,” says Mr Al Qasabi. “We have bauxite, phosphate, zinc, iron, and copper and have explored only 3% [of the country]. And there’s ample opportunities connected to the Red Sea, where 13.5% of global trade passes by.”
Saudi Arabia has leveraged its proximity to this critical global trade route by creating economic zones, re-export zones, warehousing and distribution zones or seaports. “We could be a launching pad for East-West trade and [also trade] with Africa,” says Mr Al Qasabi.
Tourism is another potential point area to bring in FDI. Plans have been announced to double the number of tourists coming into Saudi Arabia, including those making pilgrimages to Mecca, by building a new railroad between Mecca and Medina, as well as a new airport. The country’s Public Investment Fund has unveiled plans for a new entertainment city on the scale of Las Vegas near Riyadh.
Mr Al Qasabi admits the biggest challenge is changing the mindset of the Saudi people and coordinating efforts between government entities. “We are building this ship as we sail,” he says. “Our quality of life will be better, but there will be disruptions."