Saudi Arabia’s Vision 2030.. An avant-garde and widespread strategy

The Kingdom of Saudi Arabia prides itself on being determinant to become a global hi-tech investment powerhouse, a mecca of trade and a business hub connecting three continents; Asia, Europe and Africa, owing to its strategic geographical position between the Red Sea and the Persian Gulf.  

In order to achieve its Vision 2030, the country strives to develop an affluent ecosystem through defining a list of key milestones that might take a bit longer than 2030 to be implemented, but they will definitely act as a platform for future driving forces.  

How will the Kingdom stimulate its long-term economic growth? 

Untapped Resources 

Following the plunge of oil prices during the last few years, reducing reliance on oil and the predominance of hydrocarbons is of significant importance to the Kingdom, but how will this plan succeed? 

In fact, Saudi Arabia is planning to evolve investment tools and get to the bottom of other economic sectors. In addition to being the largest global exporter of oil, the Kingdom has been since 2016 targeting to position itself outside the petroleum scheme, rather as producer of substantial natural resources such as but not limited to gold, phosphate, uranium, copper, iron, cement, methane and propane. 

Within its pursuit to amplify its oil and gas spare capacity, Saudi Arabia is also growing its quest for natural gas supplies from the United States, Russia, and Australia. It aims at decreasing its dependence on crude sales, as well as guaranteeing its domestic consumption’s needs that primarily include supporting power stations and producing petrochemicals. 

Privatization  

The promising improvement on the energy level could stem from a broader action plan that takes into account increasing the number of government-sponsored projects, while focusing at the same time on the role of the private sector through diversifying investment prospects and providing incentives for Saudi and foreign investors. 

In addition, it is crucial to underpin the private sector’s role in achieving merger and acquisition with leading global firms. 

Fiscal Reforms  

Amplifying fiscal and monetary strategies to further advance the development of financial sectors is certainly a key element to look into thoroughly. As part of its fiscal balance program, the government also started to monitor the existing capital expenditures, assess the rules and regulations, and adjust where necessary which would lead to the increase of non-oil revenues.  

Financial Inclusion 

The Saudi Arabian Monetary Authority (SAMA) is seeking to enforce financial inclusion, which constitutes to be one of its strategic goals. This will entail expanding banking and financial sectors and taking a list of measurements and alterations.  

These amendments comprise of enabling the access of individuals especially the young generation, entrepreneurs, small and medium enterprises (SMEs) and other corporations to the official financial system, as well as growing a competitive environment for investments and businesses.  

Additionally, guaranteeing the support of SMEs is of high importance, as this sector generates between 60% and 62% of Saudi work force, according to the Media and Banking Awareness Committee of Saudi Banks.  

To trigger their creativity and stack up against their peers’ benchmarks, financial institutions and banks are now called to provide customers with a range of competitive services and value-added products and offer them aggressive incentives. These steps include improving digital payment services and transactions processes, defining an upper limit of products charges, and waiving commissions and high deposits. 

The government thought through joint efforts and did not leave the financial institutions fight this battle alone, the new regulations allowed banks to perform more freely and extend their outreach to a broader range of clients. For example, banks are now authorized to refer to accredited agents to reach out to potential customers who live in areas with limited banking services. 

FinTech 

Increasing the level of financial inclusion must come in line with adopting financial technologies (FinTech) more extensively to allow fiscal institutions to increase productivity, and customers to easily and efficiently access their accounts through multiple channels. Reducing paperwork and avoiding bureaucratic delays will lead to attaining a cashless financial system in due course.  

Moreover, the aforementioned financial inclusion strategy seeks to reflect a 360 degree framework, by offering financial institutions and FinTech firms the opportunity to be part of the decision-making process. SAMA has launched the Sandbox experimental environment in February 2019, and granted 14 fintech firms permits to join it and offer FinTech services. 

Read more: SAMA awards licenses to 14 new fintech firms to join Sandbox

This step opens the door for financial companies and start-ups to test advanced digital solutions including e-wallets, digital payments, P2P transfers, QR codes purchases, international transfers, point of sale (POS) devices, SADAD bills, SADAD account and mada online. 

One of the essential aftermaths of the sandbox is eliminating the hassle of physically being present at the bank to open an account; customers are now allowed to open accounts and undertake financial operations via their smart devices. 

Enabling Investment Opportunities  

The inclusion of the Saudi Arabian equities in the global indices generated the attention of global investors and led to pouring billions of dollars into Saudi Arabia, but this would have not been attained without the decision of the senior leadership to open up the market to international investors and enhance the regulatory framework of the Saudi capital market which further reassured them, and strengthened the business confidence. 

The stimulation of foreign direct investment (FDI) and bolstering of Giga projects that span the country have been successful so far due to fast business authorizations, proficient accreditation and licensing processes, acquainted with highly competitive rates for debt and equity.  

These efforts have been put into action to facilitate the work of financiers and investors, on top of creating a striking business hub for Saudi, regional and international investors to enhance their confidence in the Kingdom’s economy. The top tier projects are Neom, Amaala, Red Sea, and Qiddiya. 

The investment opportunities encompass the following critical sectors; energy, infrastructure, transport, aviation, military, healthcare, environment, construction and housing, IT and Communications, hospitality, tourism and religious tourism, entertainment, art and culture.  

Saudi version of “Green Card” 

Following the announcement of the new residency scheme, businessmen, investors, entrepreneurs, financiers, and capitalists will now rest assured that the new visa regulations will lead to incorporate equality with their Saudi counterparts because this will eliminate the previous obligation of having a Saudi partner or sponsor “Kafeel”.  

This step offers a number of privileges and benefits to qualified expatriates, including entering and departing the country freely, sponsoring visit visas for family members, hiring domestic personnel, as well as owning properties and other assets.  

International Expansion  

Developing an international business strategy to manage a broader portfolio of assets will put Saudi leading companies and corporations on the map of top tier global firms. This international expansion will also lead to strengthening commercial ties with key economic players across the world. 

For example, the Memorandum of Understandings (MoUs) signed between Saudi Arabia and China to cooperate on renewable energy investments will be a step stone towards the Kingdom’s eagerness to develop its solar and wind power ambitions, and consequently reshaping the job market. 

In addition, the Kingdom has previously invested in the United States, South Korea, Japan, Russia, France, Germany, Egypt, Kuwait, United Arab Emirates and many more, in Giga projects such as SoftBank Group, POSCO, Coface, Lucid Motors, Tesla, Blackstone, Magic Leap, AccorInvest, Adeptio, Hapag-Lloyd, Noon, Uber.  

Integrated Roadmap 

Following the launch of the National Industrial Development and Logistics Program (NIDLP), which aims at turning Saudi Arabia into an industrial powerhouse and a competitive global logistics platform, tremendous developmental projects and major transport infrastructures are on the go to strengthen the infrastructure, transport networks, and ports.  

NIDLP plans to construct five airports, expand three air freight stations and construct two new ones, in addition to the construction of more than 2,000 kilometers of high-speed railway lines for freight and passenger transport. 

The growth plan encompasses a road map to develop four fundamental sectors; mining, industry, logistics services and energy, which is expected to introduce 1.6 Million new jobs to the market by 2030. The NIDLP emphasizes on accomplishing progress within these sectors through policy and regulations endorsement, human capacity building, localization and supply chains rearrangements, and research and innovation focused initiatives. 

The localization process includes focusing on the manufacturing of industrial machinery and military equipment, as well as the development of renewable energy programs, and establishing a special economic zone (SEZ) that acts as a logistics zone near Riyadh airport to attract further investments.  

Bringing all the aforementioned comprehensive programs and mission-critical projects to life is now the most pressing requirement to improve the business climate, ensure economic growth for Saudis and expatriates, drive new employment opportunities, achieve prosperity and sustainable development, and position the Kingdom of Saudi Arabia a fundamental global trailblazer away from its stereotyped persona as oil giant.  

Write to Christine El Cheikh at christine.elcheikh@argaamplus.com