Vision 2030 Thrives In The Midst Of Change
After last year’s oil price collapse, Saudi Arabia is leaving no stone unturned in its efforts to diversify its economy away from its heavy reliance on oil revenues.
The reforms implemented in the “Saudi Vision 2030” framework under the leadership of Crown Prince Mohammed bin Salman have reflected positively on the kingdom’s economy and, in a large way, are helping it overcome the impact of the pandemic crisis. This includes boosting digital transformation activities and modernizing through large infrastructure projects worth trillions of dollars in total.
After witnessing a contraction of 4.1% in 2020, the IMF expects Saudi’s real GDP to grow by 2.4% this year rising to 4.8% in 2022. This would maintain the kingdom’s spot as the Arab world’s largest economy.
Mega-Developments
With around $430 billion in assets under management, the country’s sovereign wealth fund, the Public Investment Fund (PIF), is financing many of Saudi Arabia’s megaprojects, which are being developed to boost tourism, expand infrastructure, and attract foreign direct investment (FDI).
Plans for the $500 billion futuristic city of NEOM were announced by the Saudi Crown Prince in 2017. The project encompasses a high-tech development of 26,500 square kilometers (10,230 square miles)
on the Red Sea with several zones, including industrial and logistics areas. The project is earmarked for completion in 2025. It is expected to create 380,000 jobs and contribute $48 billion to the kingdom’s gross domestic product (GDP) by 2030. The world’s largest green hydrogen project will be based in NEOM in the northwest corner of Saudi Arabia. This project consists of a $5 billion green hydrogen-based ammonia production facility powered by renewable energy and is being developed as a result of a partnership between Air Products, ACWA Power, and NEOM.
The kingdom is also investing several billion dollars in tourism, including in the Red Sea Project, Amaala, Qiddiya, and Diriyah Gate. The $2 billion Red Sea Project is expected to be completed in 2030 and will comprise 50 hotels offering around 8,000 rooms and around 1,300 residential properties across 22 islands and six inland sites. Meanwhile, Amaala is an ultra-luxury destination project along Saudi Arabia’s northwestern coast and is one of Crown Prince Mohammed bin Salman’s major development projects. It is expected to generate 22,000 jobs across various sectors, including hospitality and tourism. Qiddiya is a $533 million entertainment, sport, and art city. The Diriyah Gate restoration is a $20 billion lifestyle destination based at the Saudi royal family’s ancestral home.
A Recovering Oil Industry Last year was tough for the oil industry amid the COVID-19 pandemic, which resulted in a sharp fall in both demand and prices. Oil collapsed into negative pricing in April 2020 for the first time in history in the wake of stringent lockdown measures introduced by countries across the world. It has been recovering this year, with oil prices trading around $60-70.
In May 2021, Saudi Arabia’s oil exports were worth $16 billion, indicating a growth of 147% compared to the exports recorded from the same period a year earlier. Saudi Aramco was the only major oil and gas producer to post a profit in 2020, reporting a profit of $49 billion. Earlier in the year, Aramco CEO Amin H. Nasser stated that he had an optimistic outlook for 2021, expecting a significant recovery in demand during the second half of 2021.
Despite an overall effort to invest in non-oil-related activities, Saudi Arabia still intends to continue to invest in the oil and gas sector. This is in defiance of the recommendations from the International Energy Agency (IEA) to reduce the use of fossil fuels in an effort to fight climate change.
One of the kingdom’s biggest investments in energy is coming in the form of the King Salman Energy Park (SPARK), which is being developed by Aramco. The energy hub aims to provide different services and products, including exploration, production, refining, petrochemicals, conventional power, water production and treatment, and drilling. It is expected to contribute $5.8 billion to Saudi Arabia’s annual GDP and 100,000 direct and indirect jobs, with phase one already attracting $1.6 billion in investments.
Culture And Modernisation Saudi’s Vision 2030 involves not only an economic transformation but a cultural one as well, with the kingdom implementing a string of reforms to modernize the nation. In the past few years, Saudi has worked on shaking off the country’s ultra-conservative image by easing restrictions on various forms of entertainment and promoting more tolerance. This includes lifting the driving ban for women, making major changes to its kafala system, and hosting international artists at its MDL Beast festival.