Saudi Arabia Monday launched an ambitious program which it hopes will attract $427 billion in investments in the industrial and logistics sectors, as the OPEC kingpin bids to reduce dependence on oil.
To kickstart the 12-year program, the Gulf state announced the signing of 37 agreements worth $55 billion with foreign and local investors at a ceremony attended by Crown Prince Mohammad bin Salman.
Saudi Arabia is getting a makeover under the crown prince, who assumed his de facto leadership in 2017 vowing to steer the economy from its near-total dependence on crude by masterminding reforms known as Vision 2030.
Energy Minister Khalid al-Falih, speaking at a hotel in Riyadh, said the investments would be made in the fields of industry, mining, energy and logistics. The aim is to create 1.6 million new jobs, boost non-oil exports by $267 billion a year and add as much as $320 billion to gross domestic product, almost 40 percent of last year’s GDP, he said.
Among the agreements announced two memoranda of understanding between the Saudi military industry program SAMI and French firm Thales and CMI Defense of Belgium.
Known as the National Industrial Development and Logistics Program, the planned investment will link energy, mining and infrastructure projects and will include new defense industry initiatives seeking to bring technology and manufacturing to Saudi Arabia, Falih said Saturday in Riyadh.
Falih has said the program is expected to contribute $320 billion to the Saudi economy by 2030, equivalent to almost half of the country’s gross domestic product last year, and create 11 new industries from aerospace to biomedicine.
The kingdom plans to restructure its power industry by separating ownership of power plants from the high-voltage lines used for transmission across the country and from the connections to homes and offices.
Some of Saudi Aramco projects will also come under the umbrella of the new program, including an industrial park on the Gulf coast and energy deals between national oil giant Aramco and Saudi petrochemicals firm SABIC for a huge project to produce petrochemicals directly from oil.
Nabil al-Amoudi, the Saudi minister of transportation, said other projects include a 1,200-kilometer railway and five airports in addition to hundreds of kilometers of roads.
At a conference it hosted in October, which was hit by an international boycott over the murder of journalist Jamal Khashoggi, Riyadh announced the signing of investment deals worth $44 billion.
Since the launch of Saudi Vision 2030, mega projects worth hundreds of billions of dollars have been announced in the Middle East’s largest economy but implementation has been slow.
The kingdom’s infrastructure was ranked 40th among 140 nations in the World Economic Forum’s latest Global Competitiveness Report.
But while higher public spending is projected to drive non-oil economic growth to 2.6 percent in 2019, the pace remains below levels achieved before 2014, when crude prices collapsed, according to Bloomberg Economics.
The share of the government’s oil income will grow to 68 percent of total revenue this year.
With Saudi Arabia finding it harder to continue pumping fiscal stimulus into the economy, the infrastructure push will test investor faith after the killing of Jamal Khashoggi sparked global outcry.
The Daily Star