Covid-19 has not spared Saudi Arabia. The kingdom has been caught at the juncture of the demand/supply shocks the whole world has experienced, and the collapse of the oil market. Yet the reforms set in motion in 2016 under the Vision 2030 strategy have built resilience in the system and given the country a better chance to withstand external shocks, investment minister Khalid A Al-Falih tells fDi. 

Q: How has the Saudi Arabian government adjusted its investment proposition in the wake of the pandemic? 

A: We were already in the midst of an adjustment. With Vision 2030, we anticipated some of the mega trends taking place, and we have already been driving the country in a co-ordinated way towards building new sectors that are more focused on qualitative competitive advantages than on the transitional resources sectors, like hydrocarbons and minerals. We are building sectors around technology, tourism — around the global environmental sustainability and energy transition that is taking place — by empowering our most important resource: our ever renewable youth, both men and women, within the Saudi economy that are already in the driver's seat of Vision 2030. 

Q: What kind of incentives have you introduced to support the economy? 

A: The biggest incentive is ensuring its resilience and capacity to absorb shocks. I would like to say this is the biggest shock we are going to see, but we don’t know that yet. Ten years ago, everyone was thinking that the great financial crisis was the crisis that would end all crises with the resilience it forced to build in the financial sector, and now we are living through something bigger and more difficult.

It’s important for any country, and their public and private sectors, to build resilience to withstand unexpected shocks. Saudi Arabia has proven to be one of the most resilient economies. We experienced the confluence of an economic, demand, health and even psychological crisis. And of course this was compounded by the oil market crisis, given the importance of oil in our economy. 

Yet our financial sector is stronger than ever, our credit rating maintained — our economy is shrinking a bit and unemployment has risen in the past few months, but we are on our way to recovery. We have opened up and proven to the private sector that we look after them and the people first. It’s important that the government ensures this sense of security and safety. Another thing is making sure that the regulation is predictable and that honest conversation is ongoing with the private sector. 

Q: The government is also introducing free zones?

A: We have a series of special economic zones (SEZs) in a design stage. They will be focused on specific sectors, addressing domestic demand and particular exports markets in logistics, advanced manufacturing, biotech, chemicals and maritime industries. We are also designing specific SEZs for finance and tourism.  

Q: You were formerly chief executive of Saudi Aramco and the energy minister. How do you assess the current oil market? 

A: My outlook is that oil will continue to be the backbone of the energy mix for decades to come. There is urgency in the environmental arena to switch to non-fossil fuels, but I do not think that is realistic. If we were to do that, we would be slowing the global economy significantly and adding another risk factor to the ones we are already experiencing.

What we need is a managed transition. The kingdom is an active player — we are already active in energy efficiency, switching to gas and also introducing hydrogen, renewables, green ammonia and blue ammonia. The kingdom is a leader in those fields. 

This interview was recorded at the FT Global Summit on October 21.

This article first appeared in the December/January print edition of fDi Intelligence.