- August 14, 2023
- Posted by: Waqas Siddiqui
- Category: Business & Economy
Saudi Vision 2030 – Transitioning to Non-Oil based Economy
The central objective of Saudi Vision 2030 strategy is to transition the economy away from its dependence on fossil fuels. This strategic shift comes at a time when greenhouse gas emissions need to be reduced (45%) by 2030 and net-zero emissions achieved by 2050. Simultaneously, it cannot be overstated how daunting this challenge is. Because, the majority of Saudi Arabia’s economic growth is linked to its petroleum reserves. Making the potential risks of these resources losing value could be a critical concern for the country’s survival.
While Saudi Arabia is not the only country striving to reduce reliance on hydrocarbons, the United Arab Emirates has successfully transformed itself into a business, logistics and tourism hub as a means to diversify from oil and gas.
Saudi Arabia’s Transformation Amid Challenges
Despite Dubai’s overwhelming success in the Middle East region, Crown Prince Mohammed bin Salman of Saudi Arabia remains determined. He has dedicated substantial resources to expedite the nation’s socio-economic evolution on par with the UAE. Endeavors are in progress to establish the country as a dominant force in eco-friendly energy, mining, logistics, infrastructure, sports, music, tourism, digital services, finance and entrepreneurship. The administration has additionally aimed to boost the involvement of women in the workforce by permitting them to drive and imposing charges on private companies employing foreign labor.
In 2022, Saudi Aramco, announced profit of $161.1 billion and channeled revenues into domestic and global investments via the nation’s sovereign wealth fund. Investments are made on grand-scale projects aimed at enhancing transportation, redefining urban advancement, expanding the energy domain and fostering tourism. Neom, a visionary carbon-neutral city under construction along the Red Sea, exemplifies the audacious spirit driving these initiatives.
Shifting of Saudi Arabia’s Economic Landscape
Saudi Arabia has also increased its value-added tax rate from 5% to 15%, introducing a new domestic revenue stream. This holds significance in a nation where citizens have historically received subsidies and allowances in exchange for political compliance. The outcomes are already evident. The oil-based funds have typically constituted approximately 90% of the government’s budget. Earnings from non-oil revenue contributes to 32% of the budget revenue in 2022.
Furthermore, there exists evident optimism surrounding Vision 2030, particularly among the younger generation. The Arab Youth Survey demonstrates that young Saudis hold a strong belief that the country is on a positive trajectory. It is to be noted that Saudi Arabia is the biggest nation in the Gulf with a population of nearly 37 million people.
Saudi Vision 2030 is geared toward liberalization and attracting foreign investment, in contrast to broad nationalization and wealth redistribution. A striking illustration of this shift is the initial public offering of Saudi Aramco in 2019.
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