The diversification drive of Saudi Arabia’s economy took a major leap early this year when His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince, Deputy Prime Minister and Chairman of the Council of Economic Affairs and Development, announced The Line, a 170-km-long strip that will form the backbone of the high-tech economic zone called Neom.

A cornerstone of Saudi Vision 2030 and an economic engine for the kingdom, it aims to contribute 380,000 jobs of the future and SR180 billion ($48 billion) to domestic GDP by 2030.

Clearly, the new announcement of The Line with which Saudi Arabia is poised to lead the globe in innovation is one more opportunity as part of the Kingdom’s Vision 2030, aimed at ending the kingdom’s dependence on oil and transforming it into a global investment power.

Saudi Arabia granted new licences to 903 factories in 2020

Accelerating the drive, a week later, the Crown Prince unveiled a bigger plan as he announced the next phase of Saudi Vision 2030 in the shape of Public Investment Fund’s (PIF) strategy for five years. PIF is the kingdom’s sovereign investment fund that acts as the main vehicle boosting investments at home and abroad.

Vision Realization Program (VRP2) 2021-2025 will launch new sectors of the economy, and enhance ones already up and running from the first VRP, dating to 2017, as part of the transformational strategy. The 2021-2025 strategy will empower the private sector, developing the PIF’s portfolio, achieving effective long-term investments, supporting the localisation of sectors and building strategic economic partnerships.

“We’ve launched many vital sectors and investment projects in Saudi Arabia and the private sector is a strategic partner for the PIF,” said the crown prince, the fund’s chairman, as he launched a new five-year strategy for the Kingdom’s sovereign wealth fund, late last month.

Additionally, the Crown Prince announced that major investment opportunities worth $6 trillion will be available in the kingdom over the next 10 years within the framework of the opportunities provided by the Kingdom’s Vision 2030.

The opportunities included $3 trillion in investments in new projects, he added.

PIF will finance 85 per cent of these opportunities along with the Saudi private sector, while the remaining financing will come from capital investments from investors in the Gulf and globally.

The PIF is the cornerstone investor in a number of mega projects including Neom planned for an area close to the size of Belgium, an entertainment park outside Riyadh called Qiddiya being built on a site 2-1/2 times larger than Disney World, and a luxury tourist resort off the Red Sea coast that will span 50 islands, according to an Arab News report.

Yasir Al-Rumayyan, the governor of PIF announced that PIF will pump $266.55 billion during the next five years into the local economy, double its assets to $1.07 trillion, contribute $320 billion to non-oil GDP and create 1.8 million jobs by 2025.

Al-Rumayyan said: “Over the past four years, PIF has demonstrated its important role in contributing to the Kingdom’s economy, in line with the ambitions of Vision 2030. Up to the end of 2020, we tripled assets under management to nearly $400 billion, created 10 new sectors and generated 331,000 direct and indirect jobs.

Al-Rumayyan said that during the next five years the fund aims to focus on 13 vital sectors such as food, agriculture, aviation, defense, entertainment, tourism, sports, minerals, mining, transportation, logistics, financial services and others.

He stated that the fund has made great achievements during the period between 2018 and 2020. It contributed to achieving a clear impact at the local and global levels, such as raising the volume of assets by the end of 2020 to nearly SR1.5 trillion, and achieving a significant increase in the total shareholder return, which doubled from about 3 per cent in the period between 2014 and 2016 to about 8 per cent in the period between 2018 and 2019.

On the most prominent targets of the new strategy, Al-Rumayyan said that the fund aspires to raise the value of its assets under management to SR4 trillion; SR 1 trillion cumulative investment in new projects locally; and raising the percentage of investments in new sectors of the fund’s assets from 15 per cent in 2020 to 21 per cent in 2021.

investment peaks at $290bn

Since the launch of Saudi Vision 2030 in 2016, Saudi Arabia has already initiated significant growth within nearly every private sector, with an emphasis on small to medium-sized enterprises (SMEs).

In fact, business conditions in Saudi Arabia’s non-oil sector saw robust growth in December, driven by a substantial increase in output and the fastest rise in new businesses in 12 months, a survey from HIS Markit revealed. The IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI) rose to its highest reading for 13 months in December, up from 54.7 in November to 57.0, signalling a sharp improvement in operating conditions.

David Owen, Economist at IHS Markit, said: “The Saudi Arabian non-oil economy is well on the path to recovery, according to December’s PMI results, which indicated the strongest output growth since November 2019. Moreover, the PMI is now (just) above its series trend level, suggesting the economy is growing at a relatively normal pace, albeit with a lingering output gap to recover.

New projects in 2020 boosted Saudi Arabia’s investment in the non-oil industrial sector to a record high of around SR1.086 trillion ($290 billion) at the end of November, according to the Saudi Ministry of Industry and Mineral Resources.

The Kingdom, one of the world’s largest 20 economies, now has 9,563 factories producing metals, building materials, chemicals, paper, home appliances, machinery and equipment, auto parts and other products, it said in a report.

Metal products had the lion’s share of industrial projects, accounting for nearly 20 per cent of the total investments, the report showed. Steel investments resulted in the construction of 41 plants, producing around 18 million tonnes per year, making the Gulf country the region’s largest steel producer. Nearly 40 per cent of the industries are concentrated in the Riyadh province while around a fifth are based in the Eastern region.

“There will be more industrial investment in the coming years as part of the Kingdom’s drive to expand the manufacturing sector within its Vision 2030,” the report said.

licences to 903 factories

Saudi Arabia granted new licences to 903 factories with total investments of SR 23.5 billion in 2020 and with 39,404 licensed workers.

A total of 515 factories have started their operations in 2020, according to the data issued by the Saudi Ministry of Industry and Mineral Resources. The total number of Saudi workers in the new facilities stood at 39,404. The total number of workforce in the industrial sector rose to more than 17,807 in 2020, of which 9,495 were Saudis and 8,312 expat workers. The total number of the existing and under-construction factories increased by 9.9 per cent to 9,681 by the end of December as against 8,807 by the end of 2019.

In 2020, non-metallic minerals plants accounted for 20 per cent, or 1,935. Rubber products plants came second with 1,268, followed by plants of unclassified machinery and equipment with 1,162.

Meanwhile, a total of 73 new plants were licensed in December 2020, with 30 facilities commencing production.  The total investment cost of these plants stood at SR 2.15 billion.

The industrial sector offers qualitative investment opportunities in a number of activities, providing space for the participation of women and enabling them to invest in this sector, said Saudi Minister of Industry and Mineral Resources Bandar Al-Khorayef, adding that it is one of the promising sectors that created last year over 39,000 job opportunities for both men and women with the 37 per cent Saudisation rate.