GENERAL AUTHORITY FOR STATISTICS (GASTAT)
Recent data from the GASTAT reveals notable economic trends in Saudi including:
GDP GROWTH:
- Q1 2023: 3.8%
- Q2 2023: 1.2%
- Q3 2023: 4.5% contraction (attributed to voluntary sharp oil production cuts)
NON-OIL SECTOR GROWTH:
- Q3 2023: 3.6%
- Q2 2023: 6.1%
- Q1 2023: 5.4%
These figures reflect the ongoing success of the implemented national transformation policy, diversifying sources of income beyond oil. As highlighted by the Minister of Finance, Mohammed Al-Jadaan, “the country is no longer relying solely on GDP numbers.” Instead, the nation’s focus has shifted to genuine development and investments in the non-oil sector. This shift has proven instrumental in the emergence of the Saudi economy as the top performer in terms of growth rate in 2022 and the second highest to date among G20 nations.
The IMF assessment report further validates Saudi Arabia’s robust economic growth and strong fiscal position, projecting an expected non-oil GDP average growth rate of 4.9% in 2023 and an overall GDP of 4% in 2024. Additionally, a stable inflation rate of 2% is anticipated.
DIVERSION OF OIL RELIANCE
The Saudi government’s ongoing commitment to legislative and regulatory reforms plays a pivotal role in stimulating economic growth and diversification. This strategic approach actively encourages private sector involvement in the economy through privatization, fostering strategic partnerships, and attracting foreign investment to the local market. The following are some examples of these initiatives:
1. Saudi Arabia announced an $800 billion investment plan in the tourism sector and over SAR 50 billion to build more than 21 entertainment destinations across the country. These developments aim to elevate the tourism contribution to GDP to 10% and attract 100 million tourists by 2030.
2. The Saudi Agricultural Exhibition 2023 recorded 16 agreements worth $800 million in investments in the agricultural sector on its first day. The Minister of Industry and Mineral Resources further affirmed the Kingdom’s vision to attract industrial investments estimated at SAR 1 trillion by 2030. Foreign investments in new licenses have amounted to SAR 1.6 billion to date, particularly in key fields such as the manufacturing of food products, non-metallic minerals, rubber, and plastic products, as well as paper and paper products.
3. As part of a bid to elevate Saudi Arabia’s economic diversification and position the Kingdom as a premier investment destination and a global hub for logistics, Saudi Arabia announced its investment to inaugurate 60 logistics zones by the year 2030.
4. Furthermore, the Saudi Central Bank has undertaken a comprehensive review of its fintech strategy, targeting an increase in the number of Fintech companies to 525. This is projected to contribute more than SAR 13 billion to GDP by 2030. Investments in the IT and educational technology sectors are anticipated to reach SAR 103 billion by 2025.
5. Not only that, but also the Kingdom recently approved amendments to the Code of Law Practice regarding licensing regulations, paving the way for foreign law firms to apply for a license to practice in the Kingdom with 100% foreign ownership. Since then, the Ministry of Justice has reported that 15 law practice licenses were granted to foreign law firms to date.
PUSH ON SETTING UP A REGIONAL HEADQUARTERS (RHQ)
The enforcement of the Regional Headquarters policy, allowing multinational companies to move their regional offices to the Kingdom before 2024 to take advantage of government contracting, closely aligns with the objectives of Vision 2030. This initiative presents a promising opportunity to attract foreign investments from multinational companies, fostering value creation, and expanding the Kingdom’s economy beyond oil reliance.
As of the end of Q3 2023, the Kingdom announced the issuance of more than 180 RHQ licenses, indicating a growing interest in this strategic approach. In return, the government has set several incentives for RHQ licenses, including:
- 10-year Saudization exemption, provision of spouse work permit
- Extension of dependent age limit to 25 years old
- Visa limit exemption
- Waiver of professional accreditation
- Tax exemption
More interestingly, the Ministry of Investment Saudi Arabia (MISA) has recently introduced a package of new incentives to RHQ licenses, including a mechanism to grant a one-year premium residency, eligible for renewal, specifically tailored for executive-level personnel within RHQs, namely the Chairman, Chief Executive Officer, and General Manager, in coordination with the Premium Residency Center.
These substantial investments and business incentives mark a significant milestone in stimulating new prospects for multinational corporations across various sectors and supporting the development of the non-oil segments of the economy.
SAUDIZATION
Amid the swift advancement of Saudi’s giga-projects, such as the $500 billion city of NEOM, and substantial investments across diverse sectors instrumental in driving economic growth, the labour market has undergone significant concurrent reforms to foster the active engagement of Saudi nationals in the private sector—a key element and objective of the Saudi Vision 2030 to empower Saudi youth through Saudization. The implementation of the Saudi nationalization scheme, Nitaqat, has been a crucial measure in creating a sustainable national workforce and effectively addressing the existing shortage of skilled labour in the country.
According to the Ministry of Human Resources and Development, the Saudization initiative has created jobs for more than 500,000 male and female Saudi nationals within the private sector since 2019. The Saudization drive is noticeably expanding its reach to encompass new professions and activities, including project management, shipping and freight brokerage services, procurement, and sales. For example, the localization rate stands at 60% for health specialization professions, 60% in the aviation sector professions, 100% in customer service professions, 70% in seasonal fun cities and family entertainment centres, and 100% in entertainment cities within closed commercial complexes.
Furthermore, the introduction of different work patterns, such as freelance, flexible, and remote working options for Saudi nationals, aims to increase the contribution of local talent to the economy and foster a participatory economy contributing to the overall increase in GDP while mitigating the prevalence of a shadow economy. Nevertheless, special economic zones in the Kingdom remain exempt from the Saudization requirement as an incentive to attract international companies in certain industries during their early stages and facilitate their transition to the Kingdom.
These implemented Saudization reforms, aligned with the objectives of Vision 2030, have successfully reduced the average unemployment rate of Saudi citizens to a historic low of 8% in both 2022 and 2023, as reported by the IMF. This reduction has been attributed to the Saudization framework’s empowerment and engagement of the country’s young population through access to quality education, training, and employment opportunities.
TAKEAWAY
The transformative reforms and strategic initiatives undertaken by the Saudi Arabian government under the ambitious Vision 2030 have led to a notable shift in the nation’s economic landscape. This shift is designated to foster an ambitious nation, a thriving economy, and a vibrant society that aligns with global changes, reduces reliance on oil resources, and secures a prosperous future for the country.
To learn more about Saudi Vision 2030 and ensure your participation in KSA’s economic growth journey, Creation Business Consultants will guide you through the necessary procedures and requirements for your commercial registration in Saudi Arabia. Our team of experts will utilize their industry experience to streamline the process and maximize your business continuity and return on investment in KSA.
Contact a member of our team for your free expert consultation on your Saudi Arabia entity: email [email protected] or call Saudi Arabia +966 54 511 2494
, UAE +971 4 878 6240 today
