World’s new focus on Saudi Arabia vindicates Kingdom’s priorities
June 9, 2022 03:39 PM
The global energy crisis caused by the war in Ukraine and Western sanctions on Russia has brought Saudi Arabia into the global limelight. Is it merely because the Kingdom is reaping the reward of the recent increase in oil prices? Or does it have something to do with its leadership’s persistent pursuit of Vision 2030 in recent years?
The price of Brent crude oil has surged above $120 per barrel, from the record low figure of $20 per barrel just two years ago. Saudi Arabia is the world’s largest oil producer and hence a key beneficiary of the oil boom. It is reportedly on course to earn $250 billion in oil revenue in 2022. And the International Monetary Fund forecasts that Saudi Arabia’s gross domestic product will grow by almost 8 percent this year.
Given its historic role as a swing producer, Saudi Arabia is also the last refuge for the world during an energy crisis. On many occasions, it has obliged the US by slashing or raising its oil production to stabilize the global energy markets. Since the Kingdom leads the OPEC+ group, along with Russia, the US seeks its urgent help with an increase in oil quotas.
Saudi Arabia was also the most sought-after nation at the recently held World Economic Forum in Davos. As one Western media outlet reported, it is “one of the few bright spots in an otherwise shaky global economy.” That is why Western financiers are keen to invest in its Vision 2030 giga-infrastructure and tourism projects and why government delegates from around the world want a fair share of the Public Investment Fund, the Saudi sovereign wealth fund that is currently valued at $620 billion.
With growing demand for oil from turmoil-ridden Europe and economically vibrant Asia, Saudi Arabia’s petrodollar power will only grow. This means the PIF, which is the main driver of Vision 2030, may expand further. This will only expedite progress in ambitious development projects such as the futuristic $500 billion NEOM city and $10 billion tourism resort on the Red Sea.
The PIF has also, over time, diversified its international portfolio by investing in a range of strategic sectors across various continents, especially North America, Europe and Asia. By 2025, the PIF hopes to expand its asset base to $1.1 trillion, which is possible if oil rewards and investment returns continue to accumulate. The creditworthiness of the fund is already certified by Moody’s and Fitch. The world’s capital flows where the prospects of making money are brightest. The scale and scope of Vision 2030 is such that the Kingdom will remain the most lucrative place to invest in the coming decade.
This formidable strategic plan to wean the economy off its dependence on oil — and simultaneously empower the youthful Saudi society — was unveiled by Crown Prince Mohammed bin Salman in 2016. The following year, the Future Investment Initiative was launched. The signature annual event, dubbed “Davos in the Desert,” helped to increase net foreign direct investment inflows by 257 percent in 2021.
The prospects of FDI hitting its target of 5.7 percent of GDP by 2030 also look bright, given the expected rush to invest in Vision 2030 projects by Western financiers, China’s expansive investment under its Belt and Road Initiative, and the mandatory requirement for multinational corporations to relocate their regional headquarters to Riyadh by the end of 2023.
The vision’s performance has also been impressive when measured against the odds constraining its implementation, such as the COVID-19 pandemic, which stalled the Saudi economy for almost two years. It caused the National Transformation Program 2020 to fall short of various targets. For example, the share of GDP taken up by non-oil exports was still as low as 18 percent in 2020, as against the planned figure of 50 percent by 2030. The good news is that it has grown by more than 29 percent since last year.
In fact, some of the targets set for 2030, such as the 33 percent share of women in the workforce, have been achieved ahead of time. Progress in women’s empowerment in the social sphere has been revolutionary. Youth employment is another priority, which is to be achieved largely by increasing small and medium-sized enterprises’ contribution to GDP from 22 percent currently to 35 percent by 2030. The target set for the private sector’s share in GDP is 65 percent — it has already reached 51 percent.
Well over $1.5 trillion is earmarked for the tourism sector to generate 1 million jobs and 100 million leisure tourists, both domestic and foreign, by 2030. Saudi Arabia has already become a thriving destination for tourism and entertainment, which is why the WEF’s Travel and Tourism Development Index last month ranked it 33rd globally, up 10 spots since 2019.
Consider these facts and figures against the backdrop of deliberate attempts to sabotage progress toward Vision 2030, such as the unprecedented threat posed to the Kingdom by Iran and its militant proxies like the Houthis in Yemen. The Biden administration has also accentuated this danger by appeasing the aggressors and isolating a traditional ally.
The Saudi leadership has made a goodwill gesture toward the US and Europe by persuading OPEC+ to increase oil production by 50 percent in July and August. Since Russian oil exports to Europe are declining due to sanctions, the Kingdom will have to pump the bulk of this crude.
The Kingdom’s leadership has deep faith in the historic value of Saudi Arabia’s partnership with America and the wider West, which is based on mutual respect and dignity. That is the way forward. One thing that cannot be compromised is Vision 2030 — Saudi Arabia’s journey into a reimagined future. If the US leadership also comes on board, for whatever reason, all the better. If not, it does not matter.–Arab News
Ishtiaq Ahmad is a former journalist who has been vice chancellor of Sargodha University in Pakistan and Quaid-e-Azam Fellow at the University of Oxford.