This is everything you need to know about Saudi Arabia’s Vision 2030 economic diversification program – and what you have to do to tap into its commercial opportunities
17 May 2024
Saudi Arabia’s Vision 2030 program is a sweeping strategic framework for diversifying the nation’s economic, social and cultural life. It was launched in April 2016 by Crown Prince Mohammed bin Salman. The program aims to diversify the oil-dependent Kingdom’s economy, demonstrate social progress and raise the profile of various sectors. It offers huge opportunities for any company looking to expand into Saudi Arabia.
Why Vision 2030?
Saudi Arabia is the world’s largest oil exporter, and a kingpin of OPEC. The oil industry makes up 43% of Saudi Arabia’s economy and provides 75% of government revenues.
Yet the International Energy Agency (IEA) predicts that the world will reach ‘peak oil’ – the point at which oil demand and production goes into terminal decline – at some point around 2030.
This looming inflection point has convinced the ruling House of Saud that the nation’s future prosperity depends on broadening its economic base. At current level of oil dependency, any marked decline in demand for oil would see Saudi Arabia’s GDP plummet. Vision 2030 is the masterplan to prevent this.
The Crown Prince’s reformist tendencies have expanded the project’s parameters beyond industrial strategy. Bin Salman, or ‘MBS’ as he is popularly known in the Western press, is using the scheme to move closer towards his promise to make Saudi Arabia a more ‘moderate’ nation.
A slew of (limited) social and cultural objectives accompany Vision 2030’s economic aims, from increasing women’s presence in boardrooms and the civil service to developing the arts sector.
Let’s examine the Vision 2030 program’s stated aims more closely and assess its progress at the halfway point.
The three pillars of Vision 2030
The Saudi government has outlined three pillars for Vision 2030: to create a ‘vibrant society’, a thriving economy, and an ambitious nation.
Each pillar encompasses specific goals and initiatives that will work together to reshape the Kingdom’s economy, society and politics.
‘Vibrant society’
This pillar focuses on improving Saudi citizens’ quality of life and sense of national identity through social and cultural development.
The topline initiatives include increasing the number of Umrah visitors from 8 million to 30 million annually, establishing the largest Islamic museum in the world, and doubling the number of Saudi heritage sites registered with UNESCO.
Headline vibrant society targets by 2030
- Increase average life expectancy from 74 to 80 years
- Achieve tenth place in the Social Capital Index Ranking
- See three Saudi cities ranked among the top 100 global cities
- Make sure 40% of citizens exercise at least once a week (up from 13%)
- Welcome 30 million annual Umrah visitors
- Increase household spending on local culture and entertainment to 6%
- Double the country’s presence on the UNESCO World Heritage List
Beyond these targets, the government wants to expand access to healthcare services, promote the Arabic language and ‘foster values of moderation and tolerance’.
‘A thriving economy’
This pillar is the ultimate test of Saudi Arabia’s Vision 2030 program. It gives shape and direction to the ambition of widening the state’s industrial base.
To do so, the Saudi government is angling for huge amounts of foreign direct investment in sectors with little connection to petrochemicals. This will be partly achieved by privatising state-owned entities and creating several tax-free special economic zones. The Kingdom is also advertising its much-vaunted, science fiction-esque ‘gigaprojects’ like the NEOM megacity to businesses, governments and prospective tourists across the world.
Sustainability is another impetus. The oil titan is seeking to grow the already formidable assets of its Public Investment Fund (PIF) and use them to invest in renewable energy, mining and R&D.
Headline ‘Thriving Economy’ targets by 2030
- Increase KSA’s share of non-oil exports
- Raise private sector contribution to 65% of GDP
- Increase FDI contribution to GDP to 5.7%
- Enter the top ten rankings in the Global Competitive Index
- Increase PIF’s assets from $159bn to $1.86trn+
- Enter the top 15 largest world economies
- Increase localisation of oil and gas sector to 75%
- 30% of women participating in the workforce
- Increase small-to-medium-enterprise contribution to GDP from 20% to 35%
- Lower unemployment to 7%
Over the last few years, Saudi state agents have glutted foreign media with artists ‘ impressions of gleaming, horizontal gigaprojects snaking through the desert. This press campaign is the eye-candy for Vision 2030, hooking investors’ attention with the project’s most grandiose aspects. Most of Vision 2030’s long term objectives are much less flashy, but no less striking.
An ambitious nation
This third pillar promises to rehaul the rigidly autocratic Saudi state.
While any turn towards Western-style democracy is a long way off, the planned reforms point towards a ‘leaner’, more productive and less opaque state.
An anti-corruption drive signals harsh penalties for misconduct. This dovetails with an effort to make all parts of government more transparent.
Vision 2030 also impacts civil society. MBS is calling upon businesses to focus more on their social responsibilities while urging the general Saudi public to take up volunteering.
Headline ‘Ambitious Nation’ targets by 2030
- One million citizens volunteering annually
- Increase nonprofit sector’s contribution to 5% of GDP
- Increase household savings from 6 to 10% of total income
- Enter the top five places of the E-Government Survey Index ranking
- Reach 20th place in the Government Effectiveness Index from 80th
How Vision 2030 is being executed:
Saudi Vision 2030 may be the world’s farthest-reaching industrial strategy in living memory, calling upon every part of Saudi society to contribute.
The state has formed several instruments to marshal this collective action, known as Vision Realization Programs (VRPs).
Let’s go through the most important VRPs.
National Transformation Program (NTP)
This scheme directs organisations from the public sector, education, healthcare and infrastructure to achieve their relevant targets.
Financial Sector Development Program
This action plan seeks to boost the standing of KSA’s banks, stock market and financial institutions.
National Industrial Development and Logistics Program
This task force steers efforts to grow Saudi Arabia’s mining, green energy, logistics and manufacturing sectors.
It incorporates efforts to generate 50% of the Kingdom’s electricity from renewable sources by 2030.
Public Investment Fund (PIF) program:
This scheme looks to develop the PIF into one of the world’s largest sovereign wealth funds through strategic investments to promote economic growth.
Human Capability Development Program:
This education-based initiative promotes lifelong learning and digital upskilling. It also aims to instil core national values and promote the Arabic language.
Health Sector Transformation Program
This VRP is reorganising the Saudi healthcare system via public-private partnerships in the hope of boosting life expectancies. E-healthcare and preventive medicine are top of the agenda.
Saudi Arabia’s Vision 2030: performance so far
At the halfway point of Vision 2030, how is MBS’s master plan faring against its own objectives?
The results paint a mixed picture, with some targets smashed while others still seem a way off. But whichever way you look at it, in 2030, Saudi Arabia will be a very different place from how the Kingdom was in 2016.
The top successes:
- Non-oil revenues have more than doubled, reaching 50% of real GDP for the first time ever in 2023
- The private sector’s contribution to GDP has reached 45%
- The PiF has already surpassed its target of 2.7 trillion SAR assets under management
- Female labour force participation has beaten the target, reaching 35%
- Umrah pilgrims numbered 13.56 million in 2023, considerably higher than the 10 million aimed for
- Home ownership has increased from 47% to 67%
The top areas for improvement
- As of Q4 2023, FDI inflow has only reached SAR13 billion, a far cry from the SAR375 billion targeted by 2030
- Non-oil exports are at 15% of non-oil GDP against a target of 550%
- The defence sector is still overly reliant on external partners for its weaponry
- The unemployment rate still sits one per cent above its target
The NEOM project will also likely undershoot the grand expectations it first raised, as the projected costs begin to bite budgets. The centrepiece ‘Line’, a linear glass city initially set to accommodate a population of nine million stretched over 105 miles of desert, has reportedly been scaled down to 300,000 people over a mile and a half.
Vision 2030’s architects can notch some significant wins at the half-time bell. They still have over half a decade to make up the FDI shortfall.
To tap into Vision 2030, set up your RHQ
The Saudi government has taken a more assertive approach to attracting foreign capital. The Regional Headquarters (RHQ) scheme now affords preferential treatment to companies that set up formal bases in the Kindom to run their MENA operations, with big corresponding disadvantages for those who don’t.
Incentives like tax breaks and exclusive access to government contracts have already persuaded megacorporations like GE, Unilever, PepsiCo and Siemens to set up RHQs in Riyadh and other cities.
If your company sees an opportunity in this global-facing shake-up of Saudi society and economy, you will need an RHQ to seize it.
Our legal team have many years of experience between them operating in the Gulf. We can quickly set up your Regional Headquarters and put you in pole position to capitalise on Saudi Arabia’s Vision 2030.
Want to know more? Read our comprehensive guide to doing business in Saudi Arabia.
Or, if you’re ready to make your move, contact our Saudi experts today.
