Goldman Sachs Research highlights the successful strides made by Saudi Arabia in diversifying its economy beyond oil industry
In 2021, the Saudi government introduced the National Investment Strategy (NIS) aimed at revitalizing the economy by promoting innovation, incentivizing private sector involvement, and providing targeted support to vital sectors. It’s projected that approximately $1 trillion (of the overall estimated NIS investments totaling $3.3 trillion) will be allocated for initial investments in six specific sectors, including clean technology, metals and mining, and transport and logistics, by the end of the decade. Moreover, the country has ambitious plans to invest $870 billion in “mega projects” by 2030, including the visionary NEOM project, a futuristic city on the Saudi coast of the Gulf of Aqaba.
Goldman Sachs Research Analyst, Faisal AlAzmeh, anticipates further strategies and announcements as initial targets are met, supported by ongoing technological advancements across various sectors.
Key Sectors Benefitting from Saudi Arabia’s Economic Rejuvenation:
1. Clean Technology: The country aims to add nearly 60 gigawatts (GW) of renewable energy capacity and 2 to 3 GW of nuclear energy capacity by 2030. Additionally, there are targets for increased production of clean hydrogen and electric vehicles. Total estimated investment: $206 billion.
2. Metals and Mining: The government introduced a new mining investment law in 2021 to streamline the issuance of exploration licenses and leverage an estimated $1.3 trillion worth of “largely unexplored” metals and minerals. Total estimated investment: $170 billion.
3. Transportation and Logistics: Striving to become a leading travel and shipping hub, Saudi Arabia recently launched an updated National Transport and Logistics Strategy, a Saudi Aviation Strategy, and a new national airline. Expansion of the King Salman International Airport is also in the works. Total estimated investment: $150 billion.
4. Digital Transformation: Core Saudi economic plans hinge on capital expenditures by the nation’s telecommunications providers, particularly focused on network capacity, including 5G and fiber-to-the-home expansions. Total estimated investment: $147 billion.
5. Upstream Energy: Traditional energy production remains a significant component of the nation’s economic strategy, with plans for expanding oil and natural gas capacity. Total estimated investment: $245 billion.
6. Downstream Energy: Anticipating growing demand for petrochemical products, investments are directed towards areas like crude oil to chemicals technology. Total estimated investment: $100 billion.
The National Investment Strategy’s Broader Focus:
The NIS emphasizes bolstering foreign direct investment (FDI), expected to increase to 3.4% of GDP by 2025 and 5.7% by 2030. Gross fixed capital formation, currently contributing about a quarter of GDP, is projected to rise to 26.4% by 2025 and 30% by 2030. The NIS serves as the enabler of Vision 2030, the government’s blueprint for economic transformation announced in 2016.
Shareek, a 2021 program under the NIS, aims to boost domestic investment by listed and non-listed private sector companies to $1.3 trillion by 2030. This initiative, involving 28 private firms, aims to increase non-oil exports from 16% to 50%. The first wave of supported projects for large companies under Shareek was announced on March 1 of this year.
Saudi Arabia’s substantial oil-generated wealth uniquely positions it to follow through on these commitments. With significant gains in oil revenue, the country’s international investment position improved by $150 billion between the first quarters of 2021 and 2023. Saudi Arabia is home to some of the world’s largest sovereign wealth funds, including the Public Investment Fund, which has seen its assets under management surge from $250 billion in 2018 to approximately $700 billion.
AlAzmeh concludes, “Investment plans are likely to develop further in tandem with technological progress/availability over time as sector strategies are finalized.”
