Vision 2030: Saudi Arabia to Adopt Economical Approach

The Gulf nation of Saudi Arabia has recently announced plans to adopt a more economical approach to achieve its vision of 2030.

The kingdom had earlier planned to invest $ 7 trillion to implement Vision 2030 through funding from its sovereign wealth fund, the Public Investment Fund (PIF), and the private sector.

Announcing this plan, a PIF insider reveals, “We do not have unlimited money. We need to calibrate our spending more carefully”.

“Ultimately we are confident that Vision 2030 is on the right track, but we need to fine-tune things a bit.”

This has been forthcoming, as according to a Bloomberg report published in July 2024, Saudi Arabia was likely to cut billions of dollars in spending on some of its biggest development projects and place other plans on hold.

The report stated that a government committee led by Crown Prince Mohammed Bin Salman was close to completing a review of mega projects as part of cost-saving measures to save billions of dollars out of budgets from projects like the mega-city NEOM, Qiddiya coast (the unannounced tourism and entertainment project in Jeddah), and plans to launch a new airline in the area.

The Saudi Arabia Vision 2030: What is it?

The Saudi Arabia Vision 2030 was launched in 2016 as a transformative and ambitious blueprint to unlock the potential of its people and create a diversified, innovative and world-leading nation. 

Since its launch, Saudi Arabia has embarked on a remarkable transformation story, which is steering the nation towards a more diversified and innovative economy. Reforms related to the vision 2030 have enhanced the business climate, created jobs and brought in investments to the kingdom nation.

Vision 2030: Notable achievements

• Greater female involvement: Since the announcement of the Vision 2030 in 2016, the kingdom of Saudi Arabia has doubled the participation of women in the workforce, achieving a rate of 37% in 2022, well ahead of the 30% target initially set for 2030. There has also been increased female involvement in areas like sports, tourism, entertainment, arts, culture etc. as women who couldn’t drive until 2018 now have access to education, work and public spaces.

 

• Economic diversification: at the vanguard of vision 2030 was the need to reduce the oil rich nation’s dependence on oil revenue. That is paying dividends currently as Saudi Arabia emerged the fastest growing economy among G20 countries in 2022. This is evident in SMEs doubling since 2016 with over 70 reforms targeting the private sector, ensuring citizens enjoy the advantages of a more inclusive and prosperous economic future.

 

• Global Recognition: The world bank recognized Saudi Arabia as the best female empowerment reformer while the country has also made giant strides in numerous other global rankings. 22 Saudi Institutions placed in the Times top 200 Higher education world university ranking in 2022. In 2023, Saudi Arabia achieved the top global ranking the Government strategy index for artificial intelligence, the country ranked second in the global cybersecurity index published in the world competitiveness yearbook for 2023, it secured the third position as one of the happiest countries in the Arab world for 2022.

 

• Tourism: as part of its plans to position itself as a global tourism hub, a $1trillion investment in the tourism sector has been made to develop major entertainment, heritage and cultural sites across the country in addition to streamlining travel procedures through extensive digitization of services and introducing e-visa systems that has significantly increased the number of tourists in the country.

 

Why the Sudden Frugality:

A major reason why Saudi Arabia is suddenly becoming frugal in its spending is the recent fall in global oil prices, with oil prices remaining below what the government needs to finance its budget deficit.

According to the IMF, the kingdom needs oil prices at $96 per barrel to balance its budget with Bloomberg Economics putting the breakeven at $112 per barrel once the country’s domestic spending by its sovereign wealth fund is taken into account.

Monica Malik, chief Economist at Abu Dhabi Commercial Bank states, “A pull back in planned spending next year is hardly surprising given the earlier indication of project timelines being extended and the recent fall in the oil price.

“We see the fiscal projections as looking to balance support to the transformation programme, while maintaining contained deficits.” He concluded.

 

According to The Business Times, another major reason for the cuts is the weaker than projected foreign investment as the Saudi government has not had as much foreign direct investment as expected only seeing an inflow of $4.5billion in foreign direct investments for the first quarter of 2024, a situation which suggests significant increases would be needed to reach the 2024 target of $29billion.

Furthermore, the PIF who are major backers of the Saudi Vision 2030 currently faces its own problems having become an active debt issuer itself and encouraging its subsidiaries to borrow more. Aramco, whose dividends are a crucial source of cash for the PIF and the government recently raised $6billion dollars in its fist bond sale in three years this week.

 

What do you need to know?

The kingdom of Saudi Arabia is now expected to prioritize projects in Riyadh over other parts of the kingdom which means the vast desert development project ‘Neom’ which is the centerpiece of vision 2030, the entertainment city on the outskirts of Riyadh, multiple luxury island resorts on the ‘Red sea’ and a host of other tourist and cultural destinations would be scaled back.

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