A new perspective on ¶¶Òõ¶ÌÊÓƵ’s Vision 2030
https://arab.news/r6sf2
There is a certain amount of confusion among observers about Saudi economic strategy. We can gain clarity on this if we look at the many initiatives of Vision 2030 in the manner that a venture capitalist would look at his portfolio of investments. Doing so, we would see Crown Prince Muhammad bin Salman as placing bets on a large number of sectors, thereby hedging his risks since the economy only needs to win a few of these bets for actual diversification away from oil to take a meaningful step forward.
Here, key chips will obviously remain on the core oil, gas, and petrochemical sectors, still with decades of productivity and market demand ahead of them. They will be developed further upstream and downstream with an additional emphasis on research in petrochemicals to produce more products that can be derived from crude oil. Oil demand is not going away, and the Kingdom, as the lowest-cost producer, maintains a massive competitive edge in this industry for the foreseeable future. Recent discoveries of gas reserves have further cemented this advantage and will also increase Saudi industrial competitiveness with abundant gas feedstock in the pipeline.
Four new and important sectors, namely, mining, tourism, sports, and entertainment, are seen as particularly promising since either they have a clear global competitive advantage or else there is substantial pent-up domestic and regional demand for their products and services. Here, for example, ¶¶Òõ¶ÌÊÓƵ has already discovered more than $2.5 trillion worth of minerals that can be commercially mined and is also going to invest downstream in refining them. Additionally, ventures are already being put together to refine minerals mined in Africa as African-based mining companies see ¶¶Òõ¶ÌÊÓƵ as more stable and better equipped with infrastructure than the countries where the raw minerals are being extracted and, hence, as a more reliable location for their large downstream investments.
Tourism also presents a major opportunity since the Kingdom is endowed with a long virgin coastline on the Red Sea and is home to one of the most beautiful untouched coral reefs in the world. Here, ¶¶Òõ¶ÌÊÓƵ has a competitive advantage in the premium beach tourism industry as its beaches are pristine and within easy reach by plane for Europeans and others. Such an unspoiled tropical location within a few hours’ flights of major global urban centers is probably the last location of its kind available anywhere in the world due to the Kingdom’s being late in opening up to tourism — hence the unique opportunity.
Also in the tourism space, southern ¶¶Òõ¶ÌÊÓƵ with its temperate climate and green mountainous geography is being aggressively developed for local and Gulf tourists. This market is already one that has attracted visitors over the years, yet up till now the Kingdom has lacked sufficient infrastructure to accommodate demand. The issue is now being addressed.
Another sector that has already shown tremendous promise is local entertainment in the form of concerts, art exhibits, and cultural events, which have generated huge interest with hundreds of thousands of youths attending concerts and other public activities. This has allowed the economy to retain a large percentage of Saudi tourism spend, which used to be deployed regionally and globally. This new access to entertainment clearly has met a huge and previously unsatisfied local demand.
Aside from major health benefits to Saudi society from sports, this sector has strong potential to make a material contribution to GDP growth as it has in many other economies.
Ali Shihabi
The sports sector is also proving to be a good investment bet because of the local population’s huge pent-up demand for sports (for women particularly, who did not have access before) and sporting events. Aside from major health benefits to Saudi society from sports, this sector has strong potential to make a material contribution to GDP growth as it has in many other economies. All this is being turbocharged with the construction of a new sports/entertainment city next to Riyadh called Qiddiya.
Furthermore, chips are also being placed on more speculative sectors such as the EV industry with three car companies, Hyundai, Lucid, and Ceer, already breaking ground to establish assembly and manufacturing facilities and the requisite support services industries. Other high-tech initiatives include alternative energy sectors such as solar, and green and blue hydrogen. This process has already begun with a large green hydrogen plant being developed in NEOM with a joint venture between US-based Air Products and Saudi-based ACWA Power. It will be the world’s largest utility-scale, commercially based hydrogen facility powered entirely by renewable energy.
Big bets are also being made on an innovative urban, tourism, industry, and tech development project in NEOM and the New Murraba real estate project in Riyadh. While these ventures have raised eyebrows because of their massive scope and associated large capital costs, their buildup and that of some other initiatives is being tempered by financial and capacity constraints as the government responds to market signals and slows down the execution of some elements of these projects to cover a longer time horizon than originally stated, although some elements of NEOM, for example, Sindalah Island, are expected to launch this year.
Vision 2030, which has also been fueled by women’s massive increased participation in the labor force, only has to succeed with a few of the foregoing initiatives to move the needle materially forward toward a diversified economy.
- Ali Shihabi is an author and commentator on the politics and economics of ¶¶Òõ¶ÌÊÓƵ.
