KEY REFORMS BOLSTER SAUDI ECONOMIC DIVERSIFICATION AGENDA

Aprile 27, 2023

KEY REFORMS BOLSTER SAUDI ECONOMIC DIVERSIFICATION AGENDA

The MED This Week newsletter provides expert analysis and informed insights on the most significant developments in the MENA region, bringing together unique opinions on the topic and reliable foresight on possible future scenarios. Today we place the spotlight on Saudi Arabia, which has recently displayed a vibrant economic dynamism thanks largely to the sharp rise in oil prices and production, as well as extensive pro-business reforms.

Saudi Arabia has recently accelerated its efforts to become an international business hub, by embarking upon numerous initiatives to develop its non-oil sector. In mid-April, the Saudi government announced the establishment of four new Special Economic Zones (SEZs) that will offer incentives – such as competitive corporate tax rates and flexibility in employing foreign labour – to foreign investors. In Riyadh’s view, these incentives would facilitate an increase in inflows of much-needed Foreign Direct Investments, currently set at 5.7% of the Kingdom’s GDP by the Vision 2030 strategy (which alarmingly plunged by nearly 60% from 2021 to 2022). Furthermore, SEZs’ strategic locations would allow the country to enhance its presence and competitiveness in both the African and Asian markets. Following the same economic strategy, shortly after establishing the SEZs, the Saudi government transferred 4% of the shares of energy giant Saudi Aramco to Sanabil, the venture arm of the Public Investment Fund (PIF) and a key source of investments for Vision 2030. Together with safeguarding the national economy from oil price fluctuations, this move will allow the PIF to expand the Kingdom’s investment strategy well beyond oil. Yet, despite these recent developments, Saudi Arabia remains strongly dependent upon crude oil export revenues and firmly committed to its energy sector. Since early April, Riyadh has spearheaded the OPEC+ decision to cut oil production to help support prices that recently exceeded $85 per barrel.