Saudi Arabia, a country known for their oil-based economy and conservative views, is transforming into a modern and innovative country. The reforms reshaping their economy and society are a result of King Salman’s Vision 2030.
Vision 2030 is built on 3 pillars – a vibrant society, a thriving economy, and an ambitious nation. The plan outlines objectives such as raising the private sector contribution of GDP from 40% to 65%, the SME sector from 20% to 35% and to increase female participation in the workforce from 22% to 30%.
Although these are ambitious goals, what makes Saudi Arabia such a lucrative country for foreign investors looking to expand? What gives the country, despite its’ current oil challenges, such fertile ground for growth? And, what makes this nation a first choice for many foreign investors?
Saudi Arabia is in the top 20 economies in the world and the largest in the Middle East and North African (MENA) region. Despite the current challenges associated with the low oil prices, Saudi are still thriving because of their Vision 2030 and National Transformation Plan (NTP). These reforms have revolutionized Saudi Arabia, reduced the barriers to entry and created an environment (and incentives) that are attractive and welcoming to foreign investors.
Under Vision 2030, the Saudi Arabia General Investment Authority (SAGIA) along with other related ministries have created the National Investment Plan (NIP) where confirmed investments have been consolidated into one program. These investments are collectively valued at hundreds of billions of dollars over the next 15 years and are available in many sectors to foreign investors.
The NIP aims to diversify the economy, increase the knowledge base in the Kingdom, enable high productivity employment and maintain the ease of doing business in Saudi. The NIP currently have over 90 projects that are available in a broad range of sectors. These projects are posed for growth every step of the value chain.
Alongside the NIP is Saudi’s privatization plan which aims to increase the participation of the private sector in the economy, decrease reliance on oil-related revenues and improve the quality of services offered. The privatization plan intends to raise $200 billion in the next few years through this program. In order for the government to continue raising capital, the privatization plan will be implemented in 3 major ways; identifying assets suitable for privatization, public-private partnerships (PPP) and Optimize to Privatize (IPOs) entities.
As the realisation that high reliance on oil revenue is not sustainable for the Kingdom, the resulting strategic reforms for future development are another reason foreign direct investors have high hopes for their investments in the Kingdom. The outcome of these reforms are expected to assist the government in bringing in new revenue streams, as well as attract new foreign investors into the Kingdom by creating a market with low barriers to entry and easy navigation.
The Saudi market, fairly untapped compared to its’ GCC counterparts, has a population with high spending power and a government setting investors up to succeed in their market. Additionally, with the NTP and Vision 2030 already producing positive results and an economic increase, investors can see that the Saudi market is conducive with the changes.
The growth in Saudi Arabia in the coming years is expected to be immense with continued reformation and the Saudi Aramco IPO. Vision 2030 objectives are already showing the progress that foreign investors are looking for and are acting on the opportunities availed. The Saudi Crown Prince’s dedication to modernity and innovation in the Kingdom has allowed foreign investors to bring new ideas into the country and expand the fertile ground available for foreign investors coming to the Kingdom.