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Middle EastApril 3 2017

Saudi Arabia looks to realise its 2030 vision

Saudi Arabia's blueprint for the future, Vision 2030, aims to diversify the economy and cement the country's status as a Middle Eastern powerhouse. But the reforms necessary to modernise the country and attract investment will bring challenges as well as opportunities, as James King reports.
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Al Fares

Saudi Arabia’s recent history has been likened to that of a political, cultural and economic island. High oil prices helped to sustain this affluent isolation but a changing global economy is forcing a rethink of the country’s future.

The government’s answer is Vision 2030, a bold outline of where the Saudi economy and society should be heading in the coming years. The objectives are numerous but hinge on three key pillars: leveraging the country’s status as the heart of the Arab and Islamic worlds, pursuing its potential as a global investment powerhouse, and building on its geographic advantage as a hub between Europe, Asia and Africa.

So far, the early signs are promising. In Riyadh today, the engines of reform are humming: international consultants occupy the capital’s hotels, while a younger and more energetic leadership is, for the most part, in control of the levers of government. Infrastructure is being massively upgraded, from airports to roads to port facilities and beyond, helping to oil the wheels of business and improve regional and international connectivity.

Social change

This comes as wider social changes are beginning to reshape Saudi Arabia’s future. The appointment of women to head the stock exchange, the Tadawul, as well as one of the country’s largest banks, Samba Financial Group, may have grabbed the headlines in recent months but more profound changes are taking place elsewhere.

For one, the growth of the country’s financial technology (fintech) scene, centred in Jeddah, is being driven in large part by female entrepreneurs. These young business leaders are finding opportunities for economic and social advancement that are independent of traditional educational and employment frameworks.

Social media is also playing a part in opening up Saudi Arabia, to itself and to the world. Conversations about government policy are more robust, while the recent ‘selfie’ taken by King Salman bin Abdulaziz al Saud and Malaysian prime minister Najib Razak signals a more relaxed attitude on the part of the authorities.

But time is no longer on the country’s side and as the reform plan unfolds, the number and severity of the challenges facing the government will increase. On the ground, most private sector players are bracing for a mix of challenges and opportunities as old doors close and new ones open.

“The reform agenda is targeting both fiscal and economic reforms. While fiscal reforms have put new pressure on the private sector, the government’s economic reforms are opening new opportunities for growth. These include the privatisation drive, the opening of the Nomu [parallel equity] market and efforts to attract foreign investment,” says Tariq Al-Sudairy, chief executive of Jadwa Investment.

SMEs to benefit

The government’s expanding suite of economic reforms are expected to offer a long-term boost to the non-oil economy, with small and medium-sized enterprises (SMEs) in particular benefiting from new growth opportunities. But improving their quality of business administration, as well as corporate governance, will be vital moving forward.

“SMEs represent a big percentage of the Saudi economy. But as much as they need financing, they are even more in need of other professional financial services. For example, these businesses need to understand and manage professionally their cash flow as well other business requirements, such as letters of credit and guarantees. That is something Alinma Bank can assist with,” says Abdulmohsen Al Fares, chief executive of Alinma Bank.

Initiatives such as these, which stimulate the private sector, have never been more important as it is this sector that will answer many of the country’s biggest challenges, from job creation to crucial investment in innovation.

Indeed, many private sector leaders have endured oil price shocks before. And while the current slump looks more like a market-defining shift, this history is ensuring that, for the most part, cooler heads are prevailing in the upper tiers of industry and business. Though Saudi businesses are aware of the risk, they are nevertheless looking to the future with confidence.

“Challenging situations can create opportunities. I believe many businesses have become more efficient in the current environment, and that has led to a more resilient private sector,” says Mr Al Fares.

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Read more about:  Middle East , Saudi Arabia