Vision 2030's pivotal role to bring changes in Saudi economy
Saudi Arabia's Vision 2030, launched
in 2016, aims to reduce the Kingdom’s reliance on oil and transform both its
economy and society. The reform program's effects on government budgets,
investments, the non-oil economy, and the social sector can be analyzed by
addressing five key questions:
1. How has Vision 2030 impacted the
social sector, particularly employment and the skilled Saudi labor force?
A central focus of Vision 2030 has
been women’s empowerment, with women’s participation in the workforce rising
from 17.4% in 2017 to 36.2% by the end of 2024. This impressive increase in
just six years has also brought unemployment rates for women to an all-time
low. Additionally, the proportion of women in middle and senior management
roles has surged to 43%.
The Kingdom is investing heavily in
upskilling its workforce, including educational initiatives, training programs,
and the establishment of hospitality academies in collaboration with global
institutions. For instance, EFG Hermes has introduced a $300 million Saudi
Education Fund as part of Vision 2030, and initiatives such as the SME
Development Bank and the Kafala program are aiding small businesses in
obtaining funding, thereby reducing unemployment. Consequently, the percentage
of Saudis working in high-skilled occupations has risen from 32% in 2016 to
over 40%.
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2. How has Vision 2030 shaped the
non-oil economy?
Saudi Arabia has made significant
strides in diversifying its economy, particularly in infrastructure, tourism,
and technology, aiming to reduce dependence on oil. The government has
introduced broad-based tax measures, including VAT, and is investing in more
than 5,000 projects totaling over $5 trillion. These initiatives span sectors
like industry, tourism, sports, and clean energy. Additionally, new residency
programs have been introduced to attract top global talent.
Currently, the non-oil economy
accounts for 52% of total economic activity, with expectations that this will
rise to 65% by the end of the decade. Key sectors driving this growth include
manufacturing, construction, finance, communication, wholesale trade, retail,
hospitality, and logistics. Tourism is one of the most rapidly expanding
industries, growing at an average annual rate of 10%, contributing 10.4% to
GDP. With strong regulatory compliance and VAT increases, non-oil revenue has
doubled in just four years. In 2024, non-oil exports reached a record $136
billion, while private sector investments totaled SR1.18 trillion ($480
billion). Saudi Arabia is also on track to achieve its goal of raising fixed
capital formation to 30% of GDP.
3. What major capital expenditures
are expected under Vision 2030?
Saudi Arabia plans to invest $1
trillion in six sectors by the decade's end, including clean technology, metals
and mining, transportation, and logistics. Mega-projects like the NEOM project
will receive $870 billion, with 73% of investments directed toward non-oil
sectors. Notably, $235 billion will go toward clean energy, including the
construction of the world’s largest green hydrogen manufacturing facility,
valued at $8.4 billion.
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In terms of infrastructure, over
$800 billion has been earmarked, with $206 billion allocated for clean tech,
$170 billion for mining, and $150 billion for logistics. There is also a $147
billion investment in digital transformation, including improvements to 5G and
fiber-optic networks. Additionally, $100 billion is set aside for downstream
energy projects, focusing on technologies like crude oil-to-chemicals.
4. How are Vision 2030 initiatives
impacting government budgets and funding?
Saudi Arabia's budget spending has
risen by 30% over the last three years due to the diversification efforts
outlined in Vision 2030. The government is managing its budget deficit
cautiously, as indicated by the current account dipping into the red in Q3
2024. To balance the current account, the Kingdom now needs a Brent crude price
of about $80 per barrel, up from $55 in 2022.
In 2025, Saudi Arabia plans to
continue raising funds through debt issuance, including a $17 billion Eurobond
in 2024, excluding syndicated loans. The government is set to pay $6.6 billion
in Eurobond debt amortization this year. Despite these obligations, Saudi
Arabia has the capacity to take on more debt thanks to its favorable financial
structure. Foreign investments have surged from $7.4 billion to $29.7 billion,
offering a financial cushion for the Kingdom. The country’s export activities
are increasingly focused on sectors like biotechnology, artificial
intelligence, digital economy services, and logistics infrastructure to
generate foreign currency for Vision 2030 projects.
5. How does Saudi Arabia plan to
make Vision 2030 a success?
Saudi Arabia’s Vision 2030 draws
inspiration from successful models used in countries like South Korea and
Singapore, which have effectively avoided the middle-income trap. The Kingdom’s
expenditure plans are aligned with OPEC+ agreements to ensure oil price
stability. Major progress is expected in sectors such as financial services,
real estate, renewables, mining, metals, consumer goods, retail, entertainment,
transportation, aerospace, defense, and telecom.
To ensure the success of Vision
2030, Saudi Arabia is adopting a proactive approach to managing returns on
capital, investments, and implementing reforms. Vision 2030 is not just a plan
for economic growth—it is a strategy to reduce reliance on past funding sources
and propel the country into a new era of prosperity. The Vision serves as a
springboard for the Kingdom’s future, driving its transformation into a global
economic powerhouse.
Source: Arab News
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