Diversifying our economy is vital for its sustainability. Although oil and gas are essential pillars of our economy, we have begun expanding our investments into additional sectors.
We understand that there are complicated challenges ahead but we have long-term plans to overcome them. In the past 25 years, the Saudi economy has grown by an annual average rate of more than 4 percent, contributing to the creation of millions of new jobs. Although we are already among the 20 largest economies in the world, our ambitions are even greater. We aspire to have an even higher ranking by 2030, despite the headwinds of the global economic slowdown and the expected impact of our structural economic reforms. This requires us to invest in all our resources in order to diversify the economy, unleash the capabilities of our promising economic sectors and privatize some government services.
The ongoing privatization of state-owned assets, including leading companies, property and other assets, will bring in new and more diverse revenues for the Saudi government. This will further enhance our financial resources and economic stability, which will be reinvested for long-term impact. We will develop further the sophistication of our investment vehicles, particularly after transferring the ownership of Aramco to the Public Investment Fund, which will become the largest sovereign wealth fund in the world. We will increase the efficiency of the fund’s management and improve its return on investment, with the aim of diversifying our government resources and our economy. The Public Investment Fund will not compete with the private sector, but instead help unlock strategic sectors requiring intensive capital inputs. This will contribute towards developing entirely new economic sectors and establishing durable national corporations. Building on the Kingdom’s leading position and historic alliances, we plan to enter long-term partnerships with neighboring and friendly countries for knowledge transfer and trade. Our Vision is to maximize our investment capabilities by participating in large international companies and emerging technologies from around the world. This will ensure that we become market makers in selected sectors, as well as a leader in competitively managing assets, funding and investment. All of this will require the formation of an advanced financial and capital market open to the world, allowing greater funding opportunities and stimulating economic growth. To this end, we will continue facilitating access to investing and trading in the stock markets. We will smooth the process of listing private Saudi companies and state-owned enterprises, including Aramco. This will require deepening liquidity in our capital markets, fortifying the role of the debt market and paving the way for the derivatives market.
We will support promising sectors and foster their success so that they become new pillars of our economy. In the manufacturing sector, we will work towards localizing renewable energy and industrial equipment sectors. In the tourism and leisure sectors, we will create attractions that are of the highest international standards, improve visa issuance procedures for visitors, and prepare and develop our historical and heritage sites. In technology, we will increase our investments in, and lead, the digital economy. In mining, we will furnish incentives for and benefit from the exploration of the Kingdom’s mineral resources. At the same time as diversifying our economy, we will continue to localize the oil and gas sector. As well as creating a new city dedicated to energy, we will double our gas production, and construct a national gas distribution network. We will also make use of our global leadership and expertise in oil and petrochemicals to invest in the development of adjacent and supporting sectors.
Although we believe strongly in the important role of the private sector, it currently contributes less than 40 percent of GDP. To increase its long-term contribution to our economy, we will open up new investment opportunities, facilitate investment, encourage innovation and competition and remove all obstacles preventing the private sector from playing a larger role in development. We will continue to improve and reform our regulations, paving the way for investors and the private sector to acquire and deliver services – such as health care and education – that are currently provided by the public sector. We will seek to shift the government’s role from providing services to one that focuses on regulating and monitoring them and we will build the capability to monitor this transition. We will seek to increase private sector contribution by encouraging investments, both local and international, in healthcare, municipal services, housing, finance, energy and so forth.
The benefits of localizing our own defense industries are not limited to solely reducing military spending. It also stimulates other industrial sectors such as industrial equipment, communications and information technology, which in turn creates more job opportunities. Although the Kingdom is the world’s third biggest military spender, only 2 percent of this spending is within our Kingdom. The national defense industrial sector is limited to only seven companies and two research centers. Our aim is to localize over 50 percent of military equipment spending by 2030. We have already begun developing less complex industries such as those providing spare parts, armored vehicles and basic ammunition. We will expand this initiative to higher value and more complex equipment such as military aircraft. We will build an integrated national network of services and supporting industries that will improve our self-sufficiency and strengthen our defense exports, both regionally and internationally. Localization will be achieved through direct investments and strategic partnerships with leading companies in this sector. These moves will transfer knowledge and technology, and build national expertise in the fields of manufacturing, maintenance, repair, research and development. We will also train our employees and establish more specialized and integrated industrial complexes.A mining sector contributing to the national economy at full potential
We have been blessed with rich mineral resources such as aluminum, phosphate, gold, copper, uranium and other raw materials. Although the mining sector has already undergone improvements to cater to the needs of our industries, its contribution to GDP has yet to meet expectations. As such, we are determined to ensure it reaches SAR 97 billion by 2020, creating 90,000 job opportunities in the process. We are planning a number of structural reforms, which include stimulating private sector investments by intensifying exploration, building a comprehensive database of the Kingdom’s resources, reviewing the licensing procedures for extraction, investing in infrastructure, developing funding methods and establishing centers of excellence. We will also form strategic international partnerships and raise the competitiveness and productivity of our national companies. This will boost their contribution to the sector’s growth, as well as to the localization of knowledge and expertise.A renewable energy market
Even though we have an impressive natural potential for solar and wind power, and our local energy consumption will increase three fold by 2030, we still lack a competitive renewable energy sector at present. To build up the sector, we have set ourselves an initial target of generating 9.5 gigawatts of renewable energy. We will also seek to localize a significant portion of the renewable energy value chain in the Saudi economy, including research and development, and manufacturing, among other stages. From inputs such as silica and petrochemicals, to the extensive expertise of our leading Saudi companies in the production of different forms of energy, we have all the raw ingredients for success. We will put this into practice with the forthcoming launch of the King Salman Renewable Energy Initiative. We will review the legal and regulatory framework that allows the private sector to buy and invest in the renewable energy sector. To localize the industry and produce the necessary skill-sets, we will also encourage public-private partnerships. Finally, we will guarantee the competitiveness of renewable energy through the gradual liberalization of the fuels market.
To move from our current position as the 19th largest economy in the world into the top 15
To increase the localization of oil and gas sectors from 40% to 75%
To increase the Public Investment Fund’s assets, from SAR 600 billion to over 7 trillion