Saudi Arabia is on the move. The country is the cradle of Islam. It is the beacon of the Arab world. The leader of the global oil industry. All of this has typically provided the ruling elite with good reasons to uphold the status quo. And yet change is happening. This is already a monumental breakthrough. 

“Even within Saudi Arabia no one expected this much change in such a short time,” admits Walid Almurshed, the head of the World Bank’s IFC in Saudi Arabia and a Saudi national himself. 

Crown Prince Mohammed bin Salman, or MBS, fixed the direction of travel with his flagship Vision 2030, released in 2016. Seven years on, cranes and excavators are at work to turn that vision into reality. One figure speaks volumes: more than one in four people (27%) active on the job market at the end of 2022 was working in construction, according to figures from the statistics office. 

Saudi society as a whole is experiencing even deeper changes. Inevitably, the focus of many social reforms has fallen on the role of women. Wahabbist precepts have been somewhat relaxed, creating greater room for women in public life. Their participation in the labour force has touched 36%, up from 23% in 2015, according to government and World Bank data (see page 72). 

Other fields lack similar progress. When it comes to political rights and civil liberties, the country’s laws remain as rigid as ever.  

A refrain heard in expat circles in Riyadh is: “Saudi Arabia is like Dubai 30 years ago.” This is not to be taken at face value — the two geographies are not comparable — but many believe Saudi Arabia can replicate Dubai’s trajectory in becoming a flourishing, respectable centre of trade, finance and culture at the heart of the Middle East. 

The ambition is certainly there. In fact, the country’s leadership is willing to close the gap with the UAE for regional supremacy very rapidly. By 2030, MBS wants Saudi Arabia to be one of the top 15 world economies, a recognised global brand — billions are being poured into Saudi-led sports events to serve this purpose — and even a hub for sustainable technologies. While oil may still be bankrolling all that, MBS’s vision ultimately aims to get the country to net zero by 2060. 

Demographics 

Look no further than demographics to understand Saudi Arabia’s current reform impetus. Saudi nationals make up 59% of the total population of 32.1 million, according to the country’s 2022 census. As many as 63% of them are under 30 years of age. MBS now wants the population to reach 50 million by 2030.

It has a big, young population that needs to be engaged, or else it risks becoming a political time bomb

Pat Thaker

“It has a big, young population that needs to be engaged, or else it risks becoming a political time bomb,” says Pat Thaker, regional director of the Middle East and Africa region at the Economist Intelligence Unit. 

Currently, the participation of Saudi nationals in the labour market is limited at about 25% of the workforce, according to official statistics. 

The government has boosted Nitaqat, or Saudisation, to encourage more Saudis to engage with the job market. The policy, which has been in place for decades, assigns minimum quotas of Saudi nationals to be employed in key, high-value-added sectors. It goes as far as determining the minimum salary to be paid to its citizens, as well as reserving whole sub-sectors, such as car sales, for locals. 

However, the Saudi economy needs investment and economic activity to facilitate Nitaqat and absorb the mounting wave of young Saudis entering the job market. And while the contribution of the oil and gas industry is enormous in terms of value-add, it is more limited in terms of jobs creation given its capital-intensive profile. 

Investment power 

Inevitably, the diversification of the economy into private, non-oil sectors is one of Vision 2030’s key strategic objectives to generate quality employment for Saudi nationals. 

“Saudi Arabia is using its investment power to create a more diverse and sustainable economy,” reads one of the three pillars of Vision 2030. 

The Public Investment Fund (PIF) is a key actor in the deployment of the ‘investment power’ that originates in the country’s oil prowess. The PIF has the mandate to pump no less than SAR150bn ($40bn, or about 5% of gross domestic product) per year into the local economy until 2025, according to Vision 2030. 

The fund has already made inroads. Its overall assets under management have risen to about $700bn, according to its own figures, and the mid-term goal is to grow its assets to $2tn by 2030. No state-owned investor other than Singapore’s GIC and Abu Dhabi’s ADIA deployed more capital than PIF in the five-year period to 2022, according to figures from research firm GlobalSWF. 

The PIF’s so-called mega-projects encapsulate the essence of Vision 2030: highly transformative and ambitious endeavours, enormous in scale. The $500bn city of Neom is pushing the boundaries between reality and futuristic fantasy. Red Sea Global is developing ultra-luxury tourist destinations on the Red Sea Coast (see page 74). Diriyah is blending history with high-end housing and hospitality (see page 75). Qiddiya is shaping up to be a city totally devoted to entertainment, while Roshn is a wider initiative to increase the rate of home ownership among the population. 

Vision 2030’s diversification drive does not stop there. In early 2023, the ministry of investment launched a special economic zone (SEZ) programme to attract investment and stimulate activity in strategic manufacturing and logistics activities. So far, four new SEZs have been sanctioned, each one with a specific sector remit (see page 70). 

A present of contradictions

Hanging between past and future, the present of Saudi Arabia is one of many contradictions.

Its role as the seat of the two holiest places of Islam, with millions of pilgrims visiting Mecca and Medina every year, demands caution when it comes to social reforms. And yet the young Saudi society is picking up customs that signal a radical shift from the past. 

Any serious commitment to energy transition is an existential threat to the oil industry. And yet sustainability is one of the mantras of the mega projects underway, with the likes of Red Sea Global developing the biggest off-grid solar power project in the world. 

The ruling elite remains committed to exerting absolute power and stonewalling any form of dissent. And yet seems willing to occasionally hold out an olive branch to gain a seat at the highest levels of international politics.

Measured against the world’s economic elite MBS wants to belong to, Saudi Arabia has much ground left to cover. 

But when compared with the country of only 10 years ago, the difference is already like night and day — provided this is a one way journey with no turning back.

This article first appeared in the August/September 2023 print edition of fDi Intelligence