Saudi Arabia’s Economic Shift: Beyond Oil to Sustainable Growth
Saudi Arabia has historically depended on oil for its economic growth and development. But in recent years, the Kingdom has shifted towards diversifying its economy to reduce reliance on oil and better manage economic risks.
2 min
By 2023, Saudi Arabia achieved a landmark by having non-oil sectors contribute to 50% of its gross domestic product. This milestone underscores the success of its economic diversification efforts.
Non-oil GDP encompasses outputs from industries like agriculture, tourism, manufacturing, technology, and telecommunications. This diversification is vital as oil prices can be unpredictable, potentially destabilizing the economy. By expanding non-oil sectors, Saudi Arabia aims to insulate its economy from global oil price swings, benefiting from the relative price stability of non-oil commodities.
The country’s move towards a non-oil economy is supported by policies that aid micro, small, and medium-sized enterprises (SMEs), and the National Investment Strategy. Schemes such as the Kafala Program facilitate government backing for SMEs, enhancing the non-oil economy. The National Investment Strategy promotes innovation, private sector growth, and targets key industries, reflecting Saudi Arabia’s dedication to economic diversification.
The diversification strategy offers several benefits, including a buffer against oil price volatility, more local job opportunities, and bolstered economic growth and sustainability. Reducing oil dependency decreases vulnerability to global oil market disruptions, such as renewable energy advances or global crises like pandemics.
Moreover, diversification increases local employment as new industries create demand for labor, contributing to economic stability and private sector enhancement. However, attracting foreign investment remains a challenge in achieving the scale of investment necessary for comprehensive economic diversification.
Diversification also supports sustainable economic growth by broadening export varieties and promoting income growth per capita. For instance, in 2022, Saudi Arabia’s focus on non-oil sectors led to a record $84.4 billion in non-oil exports, with the manufacturing and services sectors expanding by 15%.
Efforts to attract foreign investors include initiatives like the Saudi privatization program, which aims to increase private sector participation in the economy and improve efficiency. For example, Saudi Arabia has identified 140 projects, including four major airports, open for private investment under its privatization and economic diversification strategies.
Looking ahead, Saudi Arabia is likely to continue enhancing government spending to support non-oil GDP growth and implement social and cultural reforms under Vision 2030. The Saudi Public Investment Fund plans to launch IPOs, bond sales, and equity offerings to fund these diversification efforts.
Additionally, Saudi Arabia is reforming its social and cultural landscape to create a more investor-friendly environment. Significant reforms include reopening cinemas, lifting the ban on women driving, eliminating male guardianship, and allowing gender mixing, which are crucial for fostering a welcoming setting for foreign investors.
In conclusion, Saudi Arabia’s strategic shift from an oil-centric to a diversified economy not only minimizes its vulnerability to global oil fluctuations but also promotes economic growth, sustainability, and job creation. This model of economic diversification may serve as a valuable example for other nations seeking to reduce their reliance on oil.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Preparations have begun on the transformative UAE to Oman Hafeet Rail network, revealing significant construction details during a site visit.
3 min
The $3bn Hafeet Rail project between the UAE and Oman will feature 60 bridges and a 2.5km tunnel, making it an “architectural and engineering marvel,” according to CEO Ahmed Al Musawa Al Hashemi.
Hafeet Rail has announced that preparatory work is moving full speed ahead for constructing the transformative railway link between the UAE and Oman. This announcement was made during a site visit attended by key officials, members of the Asyad and Hafeet Rail executive management teams, project contractors, and consultants.
Key Highlights
During the visit, attendees were introduced to the main components of the project, including passenger, repair, and shipping stations, as well as major bridges and tunnel sites.
The Hafeet Rail project is set to play a very important role in enhancing local and regional trade, unlocking new opportunities in the infrastructure, transportation, and logistics sectors, and fostering economic diversification. It will also strengthen bilateral relations between the UAE and Oman.
The project will involve constructing 60 bridges, some reaching heights of up to 34 meters, and tunnels extending 2.5 kilometres. The Hafeet Rail team showcased the latest rail technologies and innovative engineering and architectural solutions designed to navigate the challenging geographical terrain and weather conditions while maintaining high standards of efficiency and safety.
The rail network will boost various industrial sectors and economic activities and significantly impact the tourism industry by facilitating easier and faster travel between the two countries.
Ahmed Al Bulushi, Asyad Group Chief Executive Asset, noted that the project’s rapid progress reflects the commitment of the UAE and Oman to developing and realizing the project’s multifaceted benefits.
Investment and Future Impact
Al Bulushi added that investments in developing local capabilities and expertise in rail-related disciplines over recent years have enabled the project to reach the implementation phase successfully under the leadership of highly efficient and professional national talent.
Hafeet Rail’s CEO Ahmed Al Musawa Al Hashemi emphasized, “The commencement of preparatory works for construction is a testament to the robust synergy between all parties involved in both nations, achieving this milestone in record time. We are confidently laying down the right tracks thanks to the shareholders of Hafeet Rail and the expertise of local companies in Oman and the UAE, alongside international partners.”
During the site visit, the visitors explored some of the key preparatory sites, including Wadi Al Jizi, where a 700-meter-long bridge towering 34 meters will be constructed. This ambitious project is envisioned as an architectural and engineering marvel in a complex geographical landscape.
Future phases will require more collaboration, with a continued focus on quality, safety, and environmental considerations in line with the international industry best practices.
The Hafeet Rail project represents the first-of-its-kind railway network linking two Gulf nations, marking a significant shift in regional goods transportation. This efficient and reliable transportation option will reduce dependence on slower and less sustainable road transport.
Hafeet Rail promises a 40% reduction in shipping costs and a 50% in transit times compared to traditional land transportation methods, as it will be connecting five major ports and several industrial and free zones in both countries.
This shift will reduce reliance on road transport by cars and trucks and promote more sustainable shipping practices. The establishment of the railway network will also create significant opportunities for SMEs in construction, engineering, and logistics support, acting as a catalyst for economic growth and innovation within the domestic economy.
By linking major ports, the Hafeet Rail project will enable local SMEs to import, export, and distribute their products more effectively, enhancing their market reach and global competitiveness.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
