Despite Global Challenges, Saudi Arabia Continues Economic Diversification Efforts
As global economic challenges intensify—driven by fluctuations in interest rates, trade policies, and geopolitical tensions—Saudi Arabia continues to advance steadily towards diversifying its economy through its Vision 2030.
This ambitious initiative has bolstered key sectors such as tourism, industry, and technology, leading to significant progress, despite the ongoing need for further reforms and investments to ensure sustainability and competitiveness.
In this context, S&P Global upgraded Saudi Arabia's long-term sovereign credit rating from 'A' to 'A+' in March 2024, citing strong growth in the non-oil sector and the development of local capital markets.
Saudi Arabia's economy regained momentum in 2024, growing by 1.3%, with a notable surge of 4.4% in the fourth quarter—the highest in the past two years. This growth was primarily driven by a 4.3% increase in non-oil activities.
Saudi Arabia is adopting a multi-pronged approach to achieve economic diversification, as confirmed by former International Monetary Fund official Tim Cullen during a virtual seminar hosted by the Saudi Economic Association.
This strategy includes financial market reforms, the introduction of tourist visas, legal system development, the implementation of VAT, and energy price increases.
Efforts are also underway to enhance infrastructure through investments in airports, ports, railways, metro systems, and digital infrastructure, alongside major government projects like Neom and Qiddiya.
'Large-scale projects play a crucial role in achieving economic diversification. They attract foreign direct investment, enhance competition, improve product quality, and increase corporate profits,' Dr. Abdullah Almeer, Assistant Professor of Economics at King Fahd University of Petroleum and Minerals, told Asharq Al-Awsat.
'These projects also accelerate economic transformation and encourage the private sector to actively participate in production,' he explained.
Almeer noted that this strategy is not new to Saudi Arabia, citing significant government investments in the petrochemical sector during the 1970s and 1980s, which prompted the private sector to enter the field and drive its growth.
Economic diversification involves reducing reliance on a single sector as the main source of income—an essential step for resource-dependent economies like Saudi Arabia, given the volatility of oil prices and the global shift towards alternative energy.
Diversification is typically measured by the spread of exports, production, government revenues, and employment opportunities.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Arab News
14 hours ago
- Arab News
Saudi ports post 13% rise in container volume in May: Mawani
RIYADH: Saudi Arabia's seaports handled 720,684 twenty-foot equivalent units in May, a 13 percent year-on-year jump, driven by growth in imports, exports, and transshipment activity, official figures showed. According to data from the Saudi Ports Authority, also known as Mawani, imported containers rose 15.84 percent from a year earlier to 292,223 TEUs, while exported volumes increased 9.38 percent to 279,318 TEUs. Transport, or transshipment, containers also climbed 12.89 percent to 149,143 TEUs, reflecting the Kingdom's growing role as a regional trade hub. The uptick in activity highlights the ongoing expansion of port infrastructure and logistics services across the country. It also supports the goals of Saudi Arabia's National Transport and Logistics Strategy, which seeks to position the Kingdom as a global logistics center under Vision 2030. In a release, Mawani stated: 'The total tonnage handled — general cargo, solid bulk cargo, and liquid bulk cargo — increased by 1.40 percent to reach 21,337,699 tonnes compared to 21,042,684 tons during the same period last year.' It added: 'The total general cargo amounted to 935,932 tonnes, solid bulk cargo 5,059,899 tonnes, and liquid bulk cargo 15,341,868 tonnes.' The ports received 1.63 million heads of livestock, up 61.22 percent compared to 1.01 million during the same period last year. Maritime traffic also picked up, with vessel calls rising 9.39 percent to 1,083 ships, while the number of passengers grew 68.15 percent to reach 95,231. The number of vehicles handled increased by 13.09 percent year on year to 84,352 units. The positive momentum follows a strong performance in April, when Saudi ports handled 625,430 standard containers, up 13.4 percent from a year earlier. In 2024, Mawani announced several major initiatives, including agreements and groundbreaking projects to establish eight new logistics parks and hubs at Jeddah Islamic Port and King Abdulaziz Port in Dammam, with a combined private sector investment of approximately SR2.9 billion ($773 million). These efforts are part of a broader strategy to enhance the competitiveness of Saudi ports and reinforce the Kingdom's position as a global trade and logistics hub. The initiatives form part of a larger SR10 billion investment plan to develop 18 logistics parks across Saudi terminals, all overseen by Mawani.
Arab News
14 hours ago
- Arab News
Next-Gen HNWI prefer Middle East as favorite investment destination: Capgemini
RIYADH: Next-generation high-net-worth individuals consider the Middle East as their preferred investment destination, thanks to geopolitical security and economic stability, according to an analysis. In its latest report, consulting firm Capgemini revealed that Saudi Arabia in particular is aggressively courting international investors and ultra-wealthy individuals, thanks to the Vision 2030 economic diversification program. The findings by the Paris-based company align with the views shared by Henley & Partners in April, which said that Riyadh and Jeddah are among the fastest-growing cities in the world for millionaires. According to Henley & Partners, more than 20,000 people with liquid investable wealth of $1 million or more are now based in the Saudi capital, while Jeddah is home to 10,400 millionaires. According to Capgemini, the UAE is also capitalizing on this trend and is attracting international HNWI investors. 'Investors are targeting high-growth emerging economies for specific thematic investment options, tax regulation, economic and political stability, better wealth management services, and enhanced market connectivity. As a result of this search for geopolitical security and economic diversification, Asia and the Middle East have become appealing destinations,' said the report. It added: 'Singapore, Hong Kong, the UAE, and recently Saudi Arabia have established themselves as prime alternatives, utilizing advantageous tax policies, strong financial ecosystems, and political stability to draw global wealth.' The analysis added that enhanced market connectivity and improved wealth management options are among the other crucial factors that make the Middle East a desirable investment destination among next-gen HNWIs. Saudi focus The report said the Kingdom 'has introduced new residency programs aimed at HNWIs, positioning itself as a regional wealth hub.' It added: 'As global wealth patterns shift, Saudi Arabia is actively enhancing its legal and financial frameworks to compete with traditional wealth hubs.' In 2019, Saudi Arabia introduced the premium residency visa option, which allows eligible foreigners to reside in the Kingdom and enjoy benefits such as exemption from expat and dependents' fees, visa-free international travel, and the right to own real estate and operate a business without requiring a sponsor. In January 2024, the Kingdom added five new products to its premium residency program. Under the new addition, the most notable one was the ability to own residential real estate assets worth a minimum of SR4 million ($1.07 million) within the Kingdom. The rise in the number of HNWIs in Saudi Arabia coincides with the extensive Vision 2030 economic reform program launched in 2016. Efforts to diversify the Kingdom's economy have also included a push to attract international companies to establish their regional headquarters in Riyadh, and as of March, over 600 global firms have opened their regional base in Saudi Arabia. Affirming the growth of Saudi Arabia, Knight Frank, in April, said that HNWIs from nine Muslim-majority countries are preparing to commit $2 billion toward property purchases in Makkah and Madinah. The trend comes as Saudi Arabia overhauls its property sector to position itself as a global tourism and business hub by the end of this decade. Growth of Middle East region The report also said the Middle East and Africa registered modest growth in HNWI wealth in 2024, gaining 0.9 percent and 4.7 percent, respectively, compared to the previous year. In 2024, the HNWI population in the Middle East witnessed a decline of 2.1 percent, while it grew by 3.4 percent in Africa. 'In the Middle East, OPEC's extension of oil production cuts and comparatively low oil prices, well below their peak in 2022, contributed to weak growth,' said Capgemini. Global outlook According to the report, the global HNWI population increased by 2.6 percent year on year in 2024. Capgemini said the increase was driven by the growth in the population of ultra-HNWIs — those who hold at least $30 million in assets — which grew by 6.2 percent, as strong stock markets and artificial intelligence optimism boosted portfolio returns. North America saw the biggest gains, with the HNWI population rising by 7.3 percent. Europe's HNWI population declined 2.1 percent due to economic stagnation in major countries like the UK and France, while Latin America also witnessed a drop of 8.5 percent, due to currency depreciation and fiscal instability. Asia-Pacific's HNWI population increased 2.7 percent year on year in 2024. Within the largest individual markets, the US topped the list, adding 562,000 millionaires as the country's HNWI population grew by 7.6 percent to 7.9 million. India and Japan were standouts in the Asia-Pacific region, with both countries registering 5.6 percent growth, adding 20,000 and 210,000 millionaires, respectively, last year. The HNWI population in China declined by 1 percent.
Asharq Al-Awsat
16 hours ago
- Asharq Al-Awsat
Gulf Petrochemical Sector Faces Mounting Challenges Amid Global Shifts
Over the past five years, the Gulf's petrochemical industry has found itself at a critical juncture. A mix of rapid geopolitical developments, the lingering effects of the COVID-19 pandemic, and a slowdown in global economic growth, particularly in key markets like China and other parts of Asia, has disrupted longstanding business models and cast uncertainty over the future of the sector. Industry experts and analysts, speaking to Asharq Al-Awsat, pointed to a convergence of four primary challenges facing Gulf petrochemical companies today. Among them are weak innovation strategies, limited domestic downstream capabilities, ongoing geopolitical volatility affecting supply chains, and increasingly stringent global environmental regulations on hydrocarbon-based products. Fares Al-Qadheebi, an expert in international strategic partnerships and a member of the Saudi Economic Association, stressed that Gulf petrochemical firms must undergo a strategic transformation to remain viable. He argued that the industry's traditional reliance on government-subsidized feedstock is no longer sufficient in an evolving market landscape. For decades, these subsidies provided a competitive advantage. However, with subsidies gradually being phased out or restructured, companies now face mounting pressure to pivot toward higher-value, specialized products that align with strategic industries and evolving global demand. The challenge, Al-Qadheebi said, lies in the sector's historically low investment in research and development. Financial disclosures from several companies reflect limited R&D expenditure, resulting in a lag in innovation and product diversification. This hampers the ability of Gulf producers to shift from commodity chemicals to advanced materials that could drive future profitability. At the same time, the region's domestic manufacturing sector remains underdeveloped. Despite various industrial localization initiatives, Gulf countries continue to rely heavily on export markets, primarily China and India. This overreliance has left companies vulnerable to external shocks and market shifts, making it difficult to redirect surplus production into local value-added industries. Geopolitical uncertainty is compounding the problem. Disruptions to global supply chains due to regional conflicts and shifting trade alliances have introduced logistical challenges and pricing volatility. This has forced some international buyers to seek alternative suppliers in more stable regions, undermining long-term relationships and jeopardizing the sector's global competitiveness. The rise of protectionist policies, particularly in the United States, has also led Gulf companies to reconsider their exposure to the American market and explore options such as relocating parts of their operations overseas. Adding to the pressure are global environmental policies that increasingly target carbon-intensive products. Gulf producers are being pushed to develop low-emission technologies and environmentally compliant alternatives. While necessary, such changes significantly increase development and production costs and complicate market access. Financial analyst Tareq Al-Atiq noted that these combined pressures have eroded profitability across much of the sector, with few signs of a swift recovery. He stressed the need for mergers, strategic alliances, and investments in carbon capture technologies to reduce operating costs and reposition the industry in growth markets, particularly in emerging economies with rising demand for plastics, fertilizers, and other petrochemical derivatives. Looking ahead, experts suggest that the Gulf's petrochemical giants must work more cohesively - potentially in an OPEC-style alliance - to coordinate production, innovation strategies, and market expansion efforts, or risk falling behind in an increasingly competitive global landscape.
