Saudi Investment Minister Khalid Al-Falih during the Bloomberg New Economy Forum in Singapore, Wednesday, November 8, 2023.
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Saudi Arabia's investment minister Khalid al-Falih has responded to doubts about the country's economic diversification plan, as Riyadh touts “green” investment opportunities to attract foreign funding.
“There were a lot of people who questioned the vision, the ambition, the breadth, the depth, the comprehensiveness of it, and whether the development of a country like Saudi Arabia, which has been dependent for many decades on a commodity business like oil, would be able to do what we aspire to do with Vision 2030,” Al-Falih told CNBC’s Steve Sedgwick at the Ambrosetti Forum in Cernobbio, Italy.
Saudi Arabia, one of the largest economies in the Middle East and a key US ally in the region, has been boosting investment in a bid to realise Crown Prince Mohammed bin Salman’s Vision 2030 economic diversification programme, which includes 14 mega-projects, including the NEOM industrial complex.
Under the initiative, Riyadh seeks to shift away from its historical reliance on oil revenues — which the International Monetary Fund now expects to rise until 2026, before they start to decline — and hopes to attract financial flows into the local economy of more than $3 trillion, as well as push domestic foreign investment to $100 billion annually by 2030.
Saudi Arabia’s finance minister said on Saturday the kingdom was now “more committed and determined” to deliver on Vision 2030 eight years after it was implemented, and had already completed or was close to completing 87 percent of its goals. Critics of the plan had previously questioned whether Riyadh would meet its targets by the deadline.
In recent years, the kingdom has tried to liberalize its market and improve the business environment through reforms to investment and labor laws — but it has also formulated less popular requirements for companies to set up their regional headquarters in Saudi Arabia to access government contracts.
The International Monetary Fund noted that the number of foreign investment licenses issued in Saudi Arabia nearly doubled in 2023, with government data indicating a 5.6% annual increase in net foreign direct investment inflows in the first quarter.
However, concerns remain about the potential uncertainty and unpredictability of the Kingdom’s legal framework and dispute resolution system for foreign investment. Al-Falih insisted that Saudi Arabia enjoys predictability, as well as domestic political and economic stability.
“green props”
Part of Riyadh's pitch to foreign investors is the Saudi “Green Support” initiative, which seeks to decarbonize supply chains in areas with renewable energy resources, the Saudi investment minister said.
“Green support basically means you need to do more value-added high-energy processing and manufacturing in areas where the materials are, as well as the energy,” Al-Falih said, adding that Saudi Arabia has the logistics, capital and infrastructure to do that.
Under Vision 2030, the world’s largest oil exporter aims to achieve net-zero emissions by 2060. Along with its neighbor the United Arab Emirates — which will host the annual U.N. COP23 meeting in 2023 — Riyadh has been a prominent presence at climate summits, but it continues to raise questions about its commitment to decarbonization.
Riyadh – along with other members of the OPEC alliance – has repeatedly called for the simultaneous use of hydrocarbons and green resources in order to avoid energy shortages throughout the global transition to net-zero emissions.
Some climate activists have also criticised Saudi Arabia’s promotion of solutions such as carbon capture and storage (CCS) technologies as a smokescreen to push ahead with its lucrative oil business.
Under the “green support,” Saudi Arabia seeks to “address global supply chain resilience issues” and “build a new global economy that is certainly moving more toward electricity, bringing in copper, bringing in lithium, cobalt, other critical materials, rare metals, addressing the shortage of semiconductors, green fertilizers, green chemicals,” Al-Falih said.
