Historic transformation How the Saudi economy moved from insolvency in 2015 to diversification of resources in 2021


I am a businessman .. If I say I did, a famous saying by the founding king – may God rest his soul – but it is more than just words that the people of Saudi Arabia memorize. Rather, it is a practical reality that they see, and a covenant with their leaders from the era of King Abdulaziz to the era of the Custodian of the Two Holy Mosques King Salman bin Abdulaziz … a tangible reality in all parts of the Kingdom on all economic, social, health and humanitarian levels. Words put before the Saudis visions of reality and anticipating the future. Indeed, it says that the Saudi ambition knows no boundaries, as this capital, “Riyadh”, which the government of the Custodian of the Two Holy Mosques plans to develop, already has high-level indicators at the regional and global levels .. Did you know that Riyadh, which It is being planned for its development, one of the ranks of global capitals, and advanced in the index of the smartest cities in the world to major capitals, such as Tokyo, Paris, Rome, Beijing, Ankara, Kuala Lumpur, Moscow, Athens and Milan? Did you know that Riyadh is the first digital capital at the Arab level? It is also the first in the world in the field of business digitization reforms, as well as the first in the Middle East in the field of digital security, and the twenty-sixth in the world in the field of quality of life, unsuccessful in New York, Madrid, Milan and Paris.Global capital

This is what King Salman put on top of his priorities, nearly 50 years ago … a global capital covered with modernity and development, and this is how his government plans for the future of Riyadh, which constitutes 50% of the non-oil economy in Saudi Arabia, to be one of the 10 largest city economies in the world, according to what His Highness the Crown Prince announced, when he confirmed that all the properties that Riyadh possesses give enablers to create jobs, create growth in the economy, create investments and create many opportunities, and added: “We aim for Riyadh to be one of the ten largest economic cities in the world, today it is number forty. “From the forty largest economy in the world as a city, we aim in Riyadh to reach from 7.5 million people to between 15 and 20 million in 2030 .. Riyadh constitutes approximately 50% of the non-oil economy, and 45% of the Saudi economy.”

Future shaping

But looking forward to the future, not waiting and being surprised by challenges before they accumulate and create ambition, is the strategy of the Custodian of the Two Holy Mosques for many decades, so between King Salman and Riyadh a story of another kind, he is the founder of its renaissance and the builder of its leadership, since he assumed the position of Prince of Riyadh in 1954. Riyadh is known for its mud wall that surrounds it from all its gates, before it turned into a charming city of about 8 million people, and a towering sign of development, modernity and sustainable development, and most importantly, it became the capital of Arab decision-making in times of peace and war.

Promote investment

Saudi Arabia is taking deliberate steps to boost investment in general in the Kingdom, and Riyadh in particular, including legislative reforms, establishing 20 special economic zones, 6 of which are in Riyadh, in addition to financial centers that will host international companies, and economic zones devoted to digital, creative and logistical matters, All of them will be supported by a regulatory and regulatory environment that is attractive to investors, as it reduces the risks of doing business and makes doing business in the Kingdom more competitive.

Features of strategy

Developing Riyadh a few months ago, and the government of the Custodian of the Two Holy Mosques announces the complete strategy for developing Riyadh, which Crown Prince Mohammed bin Salman revealed its features during his participation in a dialogue session entitled “The Future of Riyadh” within the fourth session of the Future Investment Initiative, where he mentioned that “Riyadh Strategy It will be ambitious and a surprise to the Saudis and the world. ” According to what was announced by the CEO of the Royal Commission for Riyadh, Fahd Al-Rasheed, the features of the Riyadh development strategy, which will be announced after months, will be according to 4: – Strengthening the economic footprint of Riyadh, through the development of the sectors of industry, logistics, technology, biotechnology, digital transformation, and others. Improving the quality of life, especially through environmental projects and parks. Developing talent through developing education, and launching initiatives that stimulate talent, especially since 65% of the population of Riyadh is young. Enhancing absorptive capacity, as the population will double from 7 to 15 million, which requires massive infrastructure development. The new strategy comes about two years after the government of the Custodian of the Two Holy Mosques launched 4 major projects in the city of Riyadh, with a total cost of 86 billion riyals, including: King Salman Park Project, Green Riyadh Project, Sports Track Project and Riyadh Art Project.

Mega projects

And the movement in Riyadh does not stop at this point, but other mega projects at the level of infrastructure and sustainable development, as well as cultural and tourism projects, such as the Qiddiya project, which is one of the huge tourism projects that are going according to the Kingdom’s vision 2030-2020 as one of the most important signs of diversification of economic resources, Qiddiya is located 40 km from the center of Riyadh, at a cost of $ 10 billion, and the total project area is 334 km2, which means that its area is twice that of Disneyland, which has an area of ​​110 km2.

The ambitious plan

The ambitious plan announced by the Crown Prince, we see it historical, given that our indicators confirm that one of its most important goals is to break the dependence of the Saudi economy on the oil barrel, and to shift towards a sustainable and strong non-oil economy .. How is that? Riyadh is one of the largest Arab capitals in terms of GDP, but the great ambition of the government of the Custodian of the Two Holy Mosques led it to plan for the city to occupy an advanced position in the list of adults, by investing about 440 billion dollars to raise the efficiency of the capital and improve its attractiveness for investment, companies, housing and business during the 10 years. The coming years, from here, Riyadh’s strategy, whose features have been announced, is but one cog in a multiple machine led by the Kingdom’s government to disengage the country from oil, which has been for 70 years.

How do we see the future?

Because we often talk about the three most important questions, and that is, Where have we been? How did we become? What do we aspire to? Hence, we must first look at the economy of the city of Riyadh. With the discovery of the first well in the history of Saudi oil – the Dammam Well – in March of 1938, Saudi Arabia became the oil capital of the planet, and since then Saudi Arabia has controlled one of the first three positions in the list of the largest oil producers and exporters during the last 50 years, which made Its economy is oil par excellence, but at the same time it has made it the largest country in the world to apply the concept of the “sponsor state” literally since the discovery of oil until 2015, and among the forms of the sponsoring state is the application of zero taxes, zero customs policies, support for utility bills, providing cheap loans, and others.

2015 … the seed of reform is sown

Until 2015, the situation in Saudi Arabia remained represented in spending on public services and the state’s operating expenses from oil revenues, until the economy became almost hostage to fluctuations in oil prices. In January 2015, with the Custodian of the Two Holy Mosques King Salman bin Abdulaziz assuming the reins of power, the project began to move towards achieving a diversified economy based on balance, anticipating the future, exploiting available potentials and wasted investment opportunities, and most importantly removing uncertainty and uncertainty regarding reading the present and the future, but Ambition always faces great challenges, which can only be broken by energy and a rush to the top.

What was threatening our economy 5 years ago ?!

In 2016, Prince Mohammed bin Salman held a lengthy dialogue with 5 journalists from the Bloomberg Agency, which mentioned in the transcript that the conversation began to bifurcate, His Highness the Prince asked his financial advisor, graduate at Harvard University, “Muhammad Al Sheikh”, to give an explanation of the new situation, and he said: “ Sheikh “During the sharp rise in oil prices from 2010 to 2014, Saudi Arabia spent money lavishly. The previous requirements required the king’s approval of all contracts, which exceed 100 million riyals, but they gradually changed to reach 200 million riyals, then 300 million riyals, before they reached 500 million riyals, a law that was later canceled in the college. Then the journalist asked: How much money were wasted ?! Al-Sheikh looked at the recording device placed on the table, and asked to close it, before His Highness Prince Muhammad intervened, saying, “No! You can say that and the recording device works. ”The Sheikh replied: It reaches between 80 and 100 billion dollars of unnecessary expenditures every year, which means exactly a quarter of the Saudi budget. Then Prince Muhammad bin Salman initiated a question: What is the distance that separates us from The financial crisis? Al-Sheikh said: It is better now, but if you asked me this question a year ago from now, you would find me on the verge of a nervous breakdown. He added in the same interview: “Last spring, when the International Monetary Fund and others expected that Saudi reserves would help save the country for at least five years from low oil prices, the prince’s team discovered that the Kingdom would quickly become insolvent. Had the spending situation remained at the levels of April of last year, the Kingdom would have been “completely bankrupt” in just two years, in early 2017 .. In order to avoid disaster, the prince reduced the budget by 25 percent, re-enforced strict spending controls, and resorted to markets. The debt, as well as the development of value-added tax and other fees, worked to reduce the rate of depletion of Saudi Arabia’s cash reserves, which reached 30 billion US dollars per month during the first half of 2015. 2016 was only the beginning of the reform and the start, towards the historical transformation. The Saudi economy, in conjunction with what can be described as revolutionary social reforms, including laws relating to the status of women in Saudi Arabia, as well as entertainment, art and tourism.

Women’s indicators

Some people may ask a question, which they may see as logical, why do we care about women’s indicators when talking about the economy? The answer is simply because it represents the large relative weight in the two wings of the “employed and unemployed” labor market, and Saudi women represent 22% of the employed and 64% of the unemployed. Therefore, their greater integration into society means crossing the halfway point towards solving the problems of the labor market and unemployment.

The most prominent achievements of the economic reform plan

With Emiratisation initiatives, mega projects in infrastructure and investment, tourism, and new cities, one of the most important indicators of success remains: raising the percentage of non-oil revenues’ contribution to the total revenues of the Saudi public budget, reforming the financial system, and introducing taxes as one of the state’s resources like any other country. In the world, without any consideration of the price movements of a barrel of oil, whether in decline or rise, which confirms that the diversification plan, creation of new resources, and the disengagement from oil are continuing without stopping or turning back. As for the great and complete boom in diversification of the economy, it is certain that the Saudis are moving steadily towards achieving it, as there is no way but to fully disengage the link between the Saudi economy and the oil barrel, which is what the government is working on through what can be described as changing the economic structure.

What do we have besides oil?

Perhaps you are asking yourself this question, while we talk about the disengagement between oil and the economy, and the truth is that our reality says that we have a lot other than oil, as potential capabilities of Saudi Arabia that are being exploited in strategies to diversify the economy, the most important of which is the following: spending abroad that can be directed to the inside, represented by 20 One billion dollars is the cost of importing cars, gold reserves estimated at $ 420 billion, reserves of various minerals estimated at $ 1.06 trillion, $ 22 billion annual spending on tourism and entertainment abroad, a global ranking in the production and industry of dates. These are some capabilities, for example, but not limited to, and perhaps you also come to your mind the same question, which surprised us when we started our research at that point, and we already have those resources and capabilities, but they need funding for production, manufacturing, export and so on, so from where will we get this? Financing? During the coming period, it will be natural for a Saudi tourist to spend the summer in Saudi Arabia, instead of the beaches of southern France, and buy a locally assembled car, instead of importing it at several times its price, and the huge funding needed to cover the extraction and production of all these resources, hidden in the ground and the sea. It has practical solutions that have been tried around the world, including the return on offering a small percentage of Aramco to investors, the return on recycling and exploiting the untapped state assets, and the return on offering bonds in the global debt market. It is worth noting that with the outbreak of the Corona pandemic in the world 2020, the world thought that the pace of reform and change, led by Crown Prince Mohammed bin Salman, would slow down, but reality was saying his word through the opening of the “The Line” project and the announcement of the Riyadh development project, despite the continuation of the pandemic, This confirms the solid will of the Saudi leadership, the real desire to continue reform and economic transformation, whatever the cost.

The largest economies of cities around the world

The city The city’s GDP is a trillion dollars.

New York 2.5 US 20 2.

Tokyo 1.9 Japan 4.8

Los Angeles 1.5 US 20

London 1.3 Britain 2.6

Shanghai 1.3 China 12.2 6.

Beijing 1.1 China 12.2

Paris 1.1 France 2.5 8.

Chicago 1 US 20

Guangzhou 0.9 China 12.2

Shenzhen 0.9 China 12.2

Riyadh 0.1 Saudi Arabia 0.8

Macroeconomic information in Saudi Arabia

Indicator Value Exchange rate 3.7 riyals against the dollar The size of the economy 800 billion dollars Growth and contraction rate 0.3% in 2019 -3.7% in 2020 Per capita $ 20 thousand Labor force Total: 14 million employed • Residents: 11 million • Citizens: 3 million unemployment rate « June 2020 »9% interest rate« December 2020 »1% inflation rate« November 2020 »5.8% reserves of hard currencies« November 2020 »1.7 trillion riyals exports per month« July – September 2020 ») 158 billion riyals 42 billion dollars imports per month« July – September 2020 »103 billion riyals 27 billion dollars daily production of oil« November 2020 »9 million barrels Oil reserves 266 billion barrels Gas reserves 8 trillion cubic meters

Economic reform: the start in numbers

Year / Events // The price of a barrel of oil in dollars “The average for the year” // Oil revenues “billion riyals” // Non-oil revenues “billion riyals”

2010 79 670 71

2011 111 1034 83

2012 111 1145 102

2013 108 1035 118

2014 ‘The Beginning of the Oil Barrel Collapse’ 98 913 127

2015 “The Beginning of King Salman’s Rule” 53 446 166 2016 45 334 186

Evolution in the price of oil

Year / Events // The price of a barrel of oil in dollars “The average for the year” // Oil revenues “billion riyals” // Non-oil revenues “billion riyals”

2016 «Aramco IPO Proposal Announcement» 45 334 186 2017 54 436 256 2018 «Paving the way for the Aramco IPO» 71 611 294 2019 «November 17 – Aramco IPO» 64 594 332 2020 «Corona Pandemic» 41 513 320


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