CRACKING THE CODE

audi Arabia, the largest economy in the Gulf region, has traditionally seen its growth fueled by its petro-industry. However, in recent years, officials in Riyadh have undertaken major efforts to diversify the country’s economy, shifting its composition to technology through investing sovereign wealth gained from oil into its IT sector. Oil prices still remain important for this effort and for economic policy planning, of course, and fluctuations directly affect global ratings. As Saudi Arabia becomes a more active participant in global investment markets, such fluctuations will likely have wider consequences for the global economy.

Key to this effort is the Kingdom’s national oil company, Saudi Aramco, which is now expected to debut its IPO in 2020. Aramco has absorbed Saudi state manufacturing company SABIC, making the IPO more significant for the Saudi economy. In 2019, the Kingdom saw its largest over-budget expenditure ever, spending that demonstrates its leadership’s willingness to take on debt with investments in non-oil related industries that do not, or will not, turn a profit. Saudi’s wealth and importance to the global economy have made it easy to issue bonds to raise funds cheaply on international markets.

Alongside Aramco, Saudi Arabia is welcoming more private firms as investors and partners. To oversee this process, Riyadh has explored different models and established regulatory authorities. Part of the effort involves the privatization

Sof state-owned companies, a process that has already begun in the Saudi aviation sector. Under the National Center for Privatization & PPP, other sectors and state-owned assets are being prepared for more private ownership and operation.

The National Industrial Development and Logistics Program (NIDLP) is another key program meant to attract more foreign investment into the country. It focuses on four sectors: energy, industry, logistics, and mining, all linked through the development of Industry 4.0 and high-tech manufacturing.

The Kingdom is also aiming to encourage entrepreneurship and enlarge the GDP contribution of SMEs—a reliable job engine in emerging markets. The SME General Authority has supported this effort with funding, mentorship, and licensing.

Saudi megaprojects and futuristic “smart cities,” including NEOM, the Red Sea Project, and Qiddiya, an entertainment city, further open doors to international participation. Saudi Arabia awarded global engineering consultant AECOM the contract for the NEOM project, with a range of other technology driven firms becoming subcontractors in various supply chains.

Saudi planers also aim to increase the number of Umrah and Hajj pilgrims as part of an overall growth strategy. Annual pilgrimages by millions to Mecca and Medina are a reliable source of foreign capital. Infrastructure investments to make these journeys easier could see benefits across the economy. ✖

Ajlan Al Ajlan

CHAIRMAN OF THE BOARD, RIYADH CHAMBER OF COMMERCE AND INDUSTRY

Suliman Almazroua

CEO, NATIONAL INDUSTRIAL DEVELOPMENT AND LOGISTICS PROGRAM (NIDLP)