Saudi Arabia's Economic Transformation

By Yousef Saba and Federico Maccioni

RIYADH (Reuters) – Saudi Arabia is strengthening its commitment to an economic transformation plan designed to wean the economy off oil, its finance minister said on Wednesday, as the Gulf country focuses on domestic projects.

Addressing the second day of the Future Investment Initiative (FII) conference, which is gathering global business, technology, and financial leaders in Riyadh, Finance Minister Mohammed Al Jadaan expressed satisfaction with progress but noted he was not "complacent".

Vision 2030

Crown Prince Mohammed bin Salman is overseeing Saudi Arabia's ambitious economic overhaul, known as "Vision 2030", which aims to boost non-oil growth, expand the private sector, and create jobs and new industries.

The plan, driven by the $925 billion PIF sovereign wealth fund, involves massive infrastructure projects, including building entirely new urban and industrial areas, such as a futuristic desert city called NEOM.

The fund, known for high-profile deals, including investments in Uber and SoftBank, now plans to scale back its overseas investments by about a third to focus on domestic projects, as noted by its governor during the FII.

Foreign Direct Investment (FDI)

Foreign direct investment (FDI), which had stalled in recent years, is key for driving the transformation. The government aims to attract $100 billion in FDI by 2030, representing almost 6% of its GDP. However, midway through Vision 2030, FDI signals indicate challenges in meeting this goal.

Despite efforts to diversify, oil remains a critical part of the Saudi economy. Lower oil prices and production have led to decreased government earnings, prompting a spending review. As a result, some Vision 2030 projects will be delayed or scaled back, with others prioritized.

The annual FII event serves as an opportunity for Riyadh to attract foreign investments. Jadaan assured the audience that investors remain confident in the kingdom's plans, citing a prominent investor who emphasized the importance of tangible results from Saudi Vision.