Introduction
Around seven years ago the Kingdom of Saudi Arabia unveiled a seemingly all-encompassing reform pathway named Saudi Vision 2030 to diversify Saudi Arabia’s economy, lessen its reliance on oil, and expand public service areas like health, education, infrastructure, recreation, and tourism. The promotion of a softer and more secular image of the Kingdom is one of the main objectives, along with bolstering economic and investment activity.
However, like the rest of the world, Saudi has also faced economic slowdown due to the Corona epidemic and adopted austerity measures to fight the situation. This has also affected the progress of Vision 2030.
Keeping this changed scenario in mind, in this Review we will see how far Saudi Arabia has actually achieved its grandeur Vision 2030 plan with respect to economic opportunities it has created so far for the growth of businesses.
Saudi Vision 2030: The Original Plan
Three pillars serve as the foundation for Vision 2030:
a vibrant society,
a thriving economy, and
an ambitious nation.
1. Vibrant Society:
The first theme is essential to realize the Vision and lay a solid foundation for economic development. Urbanism, culture and entertainment, sports, and UNESCO World Heritage Sites are all included under this theme. Saudi Arabia will put an emphasis on its citizens and the Islamic religion in order to create a vibrant society.
2. Thriving Economy:
The second theme advocates for creating an education system that is in line with market demands in order to create a prosperous economy with opportunities for everyone. This comprises the introduction of investment tools to open up different economic sectors, economic diversification, and job prospects. Additionally, from early education through higher education, the curriculum and standards of Saudi educational institutions will be modernized. The country will also be refocusing on small and medium-sized enterprises (SMEs) by promoting financial assistance.
3. Ambitious Nation:
The third theme is based on a highly functional, accountable, open, and transparent government. These three pillars work together to provide the ideal environment for business owners, startups, and established companies. The Kingdom will adopt a zero-tolerance policy for corruption at all levels, increase transparency by enhancing online services and governance standards, establish the Human Capital Development program to train more than 500,000 public servants in best practices, and support the nonprofit sector by boosting its effectiveness and efficiency.
Saudi Vision 2030: Achievements So Far
Saudi Arabia’s ambitious Vision 2030 program was launched around seven years ago. In several areas, including increasing business opportunities, women’s empowerment, tolerance, international relations, tourism, and cultural events, among many others, the Kingdom has already started making dramatic transformation. To get a better picture of the improvement in the business ecosystem, let’s discuss the achievements under each theme separately.
1. Vibrant Society
To empower women Saudi Arabia has loosened its guardianship regulations to enable women with more independence, access to job possibilities and improved position in society. The Kingdom made significant progress toward women’s emancipation in 2018 by lifting the restriction on women driving motor vehicles . With legislation addressing sexual harassment, retirement rights, and women’s movement both inside and beyond the Kingdom, Saudi Arabia has made appreciable advancements in women’s rights on a global scale.
In addition, Saudi women now have the social freedoms to start their own enterprises, go to sporting events, musical performances, and other entertainment-related events that were previously not accessible to them. This program has also resulted in a significant increase in the number of women in the workforce, particularly in senior roles. Many industries have employed women for the first time as part of Vision 2030.
2. Thriving Economy
One of the main goals of Vision 2030 is to open up the Kingdom to foreign tourists, businesses, and investors. The development of Saudi Arabia’s tourism industry has become a major pillar, and many successes have been established in this field. The declaration that the Kingdom would start issuing tourist visas in 2019 was noteworthy.
There are three major goals behind this declaration:
First, making the tourism sector a >10% contributor to the gross domestic product (GDP);
Second, providing one million additional job opportunities; and
Third, attracting 100 million annual visits by 2030.
The initial success of this step was outstanding, in 2019 Saudi Arabia earned $19.85 billion from tourism, which is about 2.4% of the country’s GDP.
Saudi Arabia has made significant efforts to improve local industry, national content, launch and develop promising economic sectors. Efforts are also being made to add an enabling component aimed at maximizing the contribution of the private sector and SMEs as well as improving the sustainability of public finances. Given a number of investment projects under the Public Investment Fund and leading businesses, it is anticipated that the pace of this structural transformation would continue in the upcoming years.
3. Ambitious Nation
Saudi Arabia has emphasized internal cooperation between people in order to make a thriving society that will contribute to the ultimate aim of becoming an ambitious nation. As a step Saudi has digitized their Health Volunteering Platform to enable more generous Saudis to contribute their time for society.
Besides, the nation has fast paced the digitization process of the government facilities to serve people more swiftly and efficiently. The combined result of these initiatives reflected Saudi Arabia’s top rank in government and entrepreneurs’ response to Covid-19 situation.
Saudi Vision 2030: Challenges
Since the inception of Saudi Vision 2030, the country has achieved many feats but has also hit some hurdles along the way. The COVID-19 outbreak and the slump in oil prices are exerting huge pressure on the Saudi economy.
For example: In 2019 Saudi achieved a remarkable growth in tourism (2.4% of GDP) but in 2020 due to Covid lockdown it reduced by 70%, seriously hurting the initiative of developing alternative economic sectors other than oil.
Again, Saudi is trying to develop non-energy sectors, alternative energy sectors, alternative ways of income generation etc. but all these require huge infrastructural developments, hence money. And right now, that money is coming only from the oil industry. Due to the worldwide lockdown during Covid, demand for oil slumped drastically resulting in reduced revenue flow. This hindered the progress of the projects under Vision 2030.
The fact is that Saudi Arabia’s net foreign assets fell to 1.572 trillion riyals ($419 billion) which is at their lowest level since July 2010, according to data compiled by Bloomberg. This is one indication of how serious the situation is.
While Saudi Arabia makes lofty claims about its rising living standards, job opportunities, a thriving economy, etc., the government has taken many measures to reduce expenditure and put more of a burden on consumers in response to the country’s severe financial situation. The value-added tax was recently increased threefold (15%), and the cost-of-living stipend for employees of the public sector was terminated. The government wants to cut spending by over $26 billion, therefore a committee has been formed to look at the pay for employees and contractors who don’t work for the government directly.
The incredibly expensive Saudi Vision 2030 is also being adjusted as austerity measures take effect. Even under more typical circumstances, the growth plan has a lot of lofty objectives. In many other industries, including infrastructure, tourism, and entertainment, initiatives connected to the Vision are currently in danger of being postponed.
For example: The crown jewel $500 billion megacity known as NEOM, which is predicted to be 33 times the size of New York City, was set to be completed by 2025, but is now running delayed.
Saudi Vision 2030: Way Ahead
The grand ambitions of Saudi Vision 2030 are facing some serious challenges, but this is also an opportunity to rework the audacious plan and give it a more realistic and practical form. The desire to build a mega-city or make Saudi Arabia the most popular Middle Eastern tourist destination is not incredibly problematic, but in light of the current financial crisis, now might be a good time to consider how to strike a balance between addressing immediate needs and moving forward with Vision 2030.
Although Vision 2030 presents an impressive façade, it is unable to produce many noticeable economic advantages.
For instance, The Guardian reported in 2021 that Saudi Arabia’s government was still 75% dependent on oil exports for its budget despite its aim to diversify its economy.
Government deficits, unemployment, and declining productivity are becoming chronic in the Gulf. The region needs to give up its fruitless pursuit of megaprojects, massive military spending, and the emphasis on low-productivity, high-volatility businesses like tourism if it wants to survive in the post-oil era.
Instead, it needs to make the most of its comparative advantage in the region’s higher education and research and give the private sector more room in the economy. In simple words, economic diversification and protection from vulnerable dependency on oil are only possible if Saudi Arabia hands over a major portion of economic responsibility to non-oil private sectors.
Saudi Arabia needs to take three important steps:
First, opening up the economy and creating a favorable environment for foreign investors;
Second, promoting local entrepreneurs who can either innovate independently or work as support to the big foreign giants; and
Third, skilling up its population so that they can find employment in the first two sectors.
While Saudi Arabia has taken a few initiatives for the first step, the country needs to pay more attention to the second and third.
Conclusion
Vision 2030 represents Saudi Arabia’s ambitious plan for the future, following a trend observed across various GCC countries, each having undertaken similar initiatives at different points in time. Prior to Vision 2030, Saudi Arabia has pursued smaller-scale initiatives with similar goals. Saudi Arabia already has a history of abandoned megaprojects that primarily serve as a grave for billions of dollars of infrastructure investments.
The Saudi government may be ‘losing the moon while counting the stars’, i.e., while mega projects may be important, Saudi should not ignore the micro-economic and domestic-private sector if it wants to be a global economic superpower.
So, the key factor that can change the game for Saudi Arabia is to develop a business ecosystem that can attract foreign investors and, at the same time, can nurture local entrepreneurship.
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