Saudi Arabia: Transformation surges forward
Rapid enactment of Saudi Vision 2030 enables the country’s highest economic growth for over a decade
Saudi Arabia is one of the fastest-growing economies worldwide, with the World Bank reporting in October that its gross domestic product (GDP) is likely to have expanded by 8.3 percent in 2022.
According to the Ministry of Finance, this remarkable performance is being “driven by real GDP growth in oil activities and sustained levels of growth in the real GDP of non-oil activities.” Increasing and diversifying nonoil revenues is a central objective of the groundbreaking Saudi Vision 2030 plan that was launched by Crown Prince and Prime Minister Mohammed bin Salman bin Abdulaziz Al Saud in 2016, explains Ajlan bin Abdulaziz Al Ajlan, chairman of the Federation of Saudi Chambers (FSC), the umbrella body for the kingdom’s business community: “Since 2016, the process to advance Saudi Arabia’s economic and commercial systems has not stopped and the economy has witnessed a substantial transformation within that time.”
Hundreds of reforms have so far been enacted in order to, among other things, make it easier to do business and increase private sector involvement in a modern, digital and inclusive economy. “The private sector plays an essential role in Vision 2030 and its contribution to the economy has been improving significantly. The main changes we have seen might be summarized as increases in competitiveness, as businesses have been utilizing infrastructure the government has been building to upgrade their capabilities; entrepreneurship, with innovation and risk taking highly encouraged; and participation in the public sector, as the private sector has moved from being reactive to being a proactive partner,” says Al Ajlan.
Additionally, the tremendous progress the country has made in implementing Vision 2030 has led to foreign direct investment inflows quadrupling since 2016 to reach in excess of $19 billion in 2021, according to the Ministry of Investment. “The FSC is optimistic about Saudi Arabia remaining attractive for domestic and international investments. Sectors that should be considered by future investors are ones that are aligned with Vision 2030 programs, which are currently experiencing major growth. Examples are healthcare, mining and metals, aerospace and defense, tourism, chemicals, real estate, industry and manufacturing, transport and logistics, information and communication technologies, energy and financial services,” Al Ajlan states.
Notably, multinationals in diverse sectors—including names like Unilever, Baker Hughes and Siemens—are choosing to establish regional headquarters in Riyadh and more international companies may soon join them in the thriving Saudi capital. “During 2022, we have received dozens of foreign delegations,” reveals Nasser Abuhaimed, secretary general of Riyadh Chamber. One of 26 chambers of commerce located around the kingdom, Riyadh Chamber’s activities illustrate how the business community is working with the government to develop the economy. For instance, says Abuhaimed: “This year, the chamber has held important events that involved extensive discussions. These included the Riyadh Economic Forum, held under the auspices of King Salman bin Abdulaziz, in which a number of ministers participated. Riyadh Chamber’s committees have also addressed challenges facing certain sectors and activities, and proposed suitable solutions in coordination with the government.”
Evidence for Saudi Arabia’s economic and societal transition exists on many levels, from awe-inspiring new giga projects to the fact that 33 percent of its workforce is now female. Another example is its rapid establishment of an internationally important capital market. “When you decide to diversify economic activities, you need to focus on areas where you have a competitive advantage. Very high up that list when Vision 2030 was devised was the financial sector, which had been profoundly underutilized. In the last few years, constraints have been removed from the capital market that have turned it into a vibrant economic sector. In equities, for instance, this involved opening up to international investors. Today, we are one of the largest capital markets in the world by market cap, while between 2019 and 2021, we had over $45 billion of net investor flows coming into the country, which saw foreign investment in our stock market grow from under 5 percent to roughly 15 percent of free float,” states Mohammed bin Abdullah Elkuwaiz, chairman of the country’s Capital Market Authority.
Saudi Arabia has also made impressive progress in its debt, derivatives and asset management markets, he adds: “Last year, we reached close to $200 billion in assets under management and over 500,000 market participants. The country’s capital market is firing on all cylinders for the benefit of Saudi Arabia and the broader region.” The financial sector’s increasing strength, alongside the rise in interest in Saudi Arabia from global companies and growth in its domestic economy are key contributors to the high degree of confidence in Vision 2030 among the business community, says Tony Cripps, CEO of SABB, one of the kingdom’s largest financial institutions: “It is astonishing how much is happening in Saudi Arabia at the moment, which is opening up huge opportunities for investors.”
“It is astonishing how much is happening in Saudi Arabia at the moment, which is opening up huge opportunities for investors.”
Tony Cripps, CEO, SABB