Overview

Saudi Arabia is undergoing a profound economic transformation through comprehensive reforms to reduce its reliance on oil and diversify its economy. With its abundant natural resources and strategic location, it has emerged as one of the world’s twenty-largest economies, playing a crucial role in the global oil market.

Since the inception of Vision 2030, Saudi Arabia has effectively implemented numerous initiatives and structural reforms, driving economic transformation. These efforts encompassed bolstering local content, developing national industries, launching promising sectors, and empowering the private sector and SMEs. Moreover, these changes fortified the Kingdom’s economy and resilience in combating the COVID-19 pandemic in 2020.

This blog explores the initiatives undertaken as part of Vision 2030, highlighting the impact of these reforms and the Kingdom’s progress in achieving its economic objectives.

Economic Reforms in Saudi Arabia

The economic reforms make Saudi Arabia an attractive destination for investment in previously untapped sectors, promoting economic diversification and growth.

Saudi Arabia’s economic expansion includes heavy investments in the industrial and manufacturing sectors. Additionally, the Kingdom has launched significant tourism, hospitality, industry, and mining projects, fostering non-oil economic growth, job creation, and increased local consumption. Vision 2030 has driven extensive economic and financial structural reforms, fostering an improved business environment and empowering the private sector. These initiatives are designed to enhance the role of the private sector and increase productivity rates, fostering a conducive environment for economic development.

• Saudi Arabia launched the National Investment Strategy to stimulate domestic and foreign investments and attract leading international companies to establish their headquarters in the Kingdom.
• Vision 2030 expanded funding sources, strengthened the Saudi financial market by launching Nomu Market and a derivative market, and joined global emerging market indices.
• The Kingdom introduced Shareek, a government framework, to facilitate large corporate investments and aims to launch up to 5 trillion SAR of private sector investment by 2030.
• Vision 2030 aims to improve labour market policies by modernizing the system, introducing flexible work arrangements, and enhancing contractual relationships to attract local talent and elevate foreign worker skills.

Building Resilient Economy

Through Vision 2030, the Saudi economy is projected to become 60% more resilient to oil shocks. Diversifying revenue streams and reducing dependence on oil revenues will help shield the economy from fluctuations in oil prices, promoting long-term stability and sustainability. Saudi Arabia has transferred some Saudi Aramco shares to the Public Investment Fund (PIF) to reduce reliance on oil exports. This move allows the PIF to diversify the Kingdom’s investment strategy and expand beyond the energy sector, reducing vulnerability to oil price fluctuations.

Public Investment Fund

The Public Investment Fund (PIF) plays a significant role in the success of Vision 2030. With its strategic goals, the PIF aims to inject substantial funds into the local economy, create job opportunities, and surpass 4 trillion SAR in assets. The PIF’s achievements contribute to the Kingdom’s economic growth., including activating new sectors and tripling its asset size.

Special Economic Zones (SEZs)

Establishing four new Special Economic Zones is a key initiative in positioning Saudi Arabia as an international business hub. These SEZs offer incentives such as competitive tax rates and flexibility in employing foreign labour to attract foreign investors. The strategic locations of these zones aim to enhance the Kingdom’s presence and competitiveness in African and Asian markets.

Empowering the Private Sector and SMEs

Vision 2030 aims to enhance the private sector’s role in GDP growth and has introduced multiple initiatives to facilitate its contribution. The Kingdom has implemented the privatization system, enabling public-private partnerships, and enacted regulations to improve the business environment, including implementing the bankruptcy system and facilitating foreign ownership. Additionally, Vision 2030 has streamlined financing for small and medium businesses and established ambitious capital funds, paving the way for increased GDP contribution from new enterprises.

Developing Promising Sectors

The Kingdom is actively developing promising sectors to serve as new pillars of the economy. Vision 2030 provides policies, regulatory frameworks, and investment facilitation to stimulate growth in renewable energy, oil and gas, mining, and tourism. Infrastructure development and financing support are crucial components of these initiatives.

Strengthening Tourism Sector

Saudi Arabia actively promotes the tourism and entertainment sector by developing tourist sites, streamlining visa issuance procedures, and enhancing historical and heritage sites. The launch of the Tourism Development Fund further supports this sector, fueling its growth and reviving the Kingdom’s pre-pandemic tourism activity. The objective is to amplify its contribution to economic growth and employment opportunities.

Promoting Local Content and Boosting Exports

Vision 2030 aims to enhance local content by promoting the localization of goods and services. This strategy increases competitiveness and creates sustainable job opportunities. Saudi Arabia also focuses on expanding export opportunities, supporting national products, and encouraging investment in industry, mining, and military sectors. To boost exports, Saudi Arabia established Saudi Export-Import Bank (EXIM) to facilitate export financing and the General Authority for Foreign Trade to enhance competitiveness and access to international markets.

Impact of Economic Reforms in Saudi Arabia

Saudi Arabia’s economic reforms under Vision 2030 are reshaping the Kingdom’s economy, reducing dependence on oil, and fostering diversified growth. These reforms have attracted foreign investment, promoted non-oil sectors, and enhanced the resilience of the Saudi economy. Due to extensive pro-business reforms, and a significant increase in oil prices and production, Saudi Arabia is expected to be among the world’s fastest-growing economies.