Saudi growth sources changing as private sector focuses on diversification: Alibrahim

Faisal Alibrahim, Minister of Economy and Planning 

The sustained growth in the Saudi economy in 2023 is due to the implementation of diverse programs aligned with Vision 2030, Minister of Economy and Planning Faisal Alibrahim said. 

The sources of growth in Saudi Arabia are undergoing a transformation, he added. 

In a program on CNBC Arabia, Alibrahim elaborated on how the expansion of non-oil activities was previously limited to specific sectors but has now diversified to include emerging sources such as financial services, communications, tourism, and other sectors. 

The Public Investment Fund (PIF) and the National Development Fund (NDF) are currently functioning independently of government support, and support for these funds is anticipated to diminish in the future, the minister said. 

Alibrahim highlighted that the private sector's contribution to the GDP was less than 40% before the implementation of Vision 2030, and it currently stands at the mid-40%, aiming to achieve 65%. 

The private sector needs to focus on sectors crucial for economic diversification, the top official said. He specified a focus on sectors capable of exporting services such as entertainment, tourism, and sports, or exporting products such as industry and related sectors, or enabling industries such as logistics services, technology, artificial intelligence (AI), training, education, and others. 

Foreign direct investment (FDI), integral to the private sector, targets reaching 5.7% of the GDP by the end of 2030, with expectations of an increasing percentage over time, the minister added. 

Regarding imposing fees to boost non-oil revenues, the minister noted that before Vision 2030, 19% of expenditures depended on non-oil revenues, which has now risen to 35%.

The current approach focuses on non-oil revenue growth through the expansion of the non-oil economy. 

Addressing misconceptions about fees generating non-oil revenues, the minister pointed out that these fees could impede the growth of non-oil activities in desired sectors.  

The goal is to facilitate growth in non-oil activities, with a competitive percentage contributing to non-oil revenues, attracting external companies and investors from outside the Kingdom. The Kingdom will always have the ability to be competitive in both the business environment and the imposed fees compared to other countries. 

Discussing tax policy reviews, the minister stressed the focus on simplifying fees and financial obligations imposed on private sector companies, aiming to enhance competitiveness for the growth of these sectors and companies in the Saudi economy. 

With increased investment in technology and advancements in labor market policies, the minister anticipated a reduction in informal activities or the shadow economy to less than 15%. 

On the relocation of foreign companies' headquarters to Saudi Arabia, Alibrahim mentioned that approximately 250 to 300 global companies have already made the move, with the number continuing to rise. 

Regarding the reduction in oil production by Saudi Arabia, the multiple cuts aim to stabilize oil markets in the long term, Alibrahim clarified.