It might seem somewhat strange for one of the biggest electric car producers to open a factory in one of the world’s major oil-producing countries, but it actually boils down to the story of the most exciting economic transformation of the 21st century.
“It is one of the most exciting projects for us, and a project that I am personally proud of,” said Saudi Investment Minister Khalid al-Falih about Lucid Motors opening a factory for assembling electric automobiles in Saudi Arabia.
During an interview with Asharq Al-Awsat on the sidelines of the World Economic Forum in Davos, al-Falih said that he expects the size of the Saudi economy to grow to between $1.7 and $1.8 trillion by 2030, placing Saudi Arabia among the 15 largest economies in the world.
Al-Falih praised significant improvement in the performance of investment indicators. He pointed out the doubling of foreign direct investment flows by about four times in recent years.
The minister highlighted the series of reforms pursued by Saudi Arabia in its business environment and investment systems.
He also revealed that Saudi Arabia aims to attract more than $100 billion in foreign investments by 2030.
A trillion dollar economy
Voicing great optimism about economic growth in the Kingdom, al-Falih said the Saudi economy is on the right path to cross the threshold of one trillion dollars in 2022, compared to about $650 billion before launching its national economic transformation plan Vision 2030.
In addition to economic growth, he stressed the importance of examining the composition of the Saudi economy.
“The oil and gas sector will remain important during the next three decades and will continue to grow, but its contribution to the economy will decline,” he went on to say.
“The year 2021, for example, witnessed a growth of non-oil activities by 6%, while the growth of oil activities amounted to about 0.2% due to the consequences of the coronavirus pandemic,” he added.
The minister expected non-oil industries to grow significantly in the coming years, pointing out that the contribution of the tourism sector, for example, to the gross domestic product will exceed 10% by 2030.
Al-Falih believes that the growth of new and promising sectors would contribute to stimulating investment in entire value chains, such as: tourism, hotels, entertainment, retail, logistics, culture, and others.
He shed light on the importance of the information technology sector, adding that it is expected to witness significant growth in coming years.
“As a sector in itself, it provides infrastructure that serves all other sectors,” said the minister, citing the two examples of financial technology (Fintech) and e-commerce.
Moreover, al-Falih highlighted the importance of the logistics sector as one of the promising sectors in the plan for growth and diversification of the Saudi economy.
He predicted that significant investments will be made in this sector, which includes several areas such as transporting people, goods, and commodities, and distributing parcels by air, sea, and land.
Al-Falih also believes that the value chains associated with the health sector are “very large,” and include scientific research, entrepreneurship, health technology, and others.
The official pointed to some other sectors that will play a pivotal role in supporting growth. They include education, modern agriculture, and water.
“We traditionally view them as a burden on the state, but this will transform as they witness privatization, and become attractive to investment. This will allow these sectors to generate their own revenue,” al-Falih told Asharq Al-Awsat.
Despite predicting a growing demand for oil and gas on a world scale, al-Falih explained that the new restructuring of the Saudi economy necessitates the growth of renewable energy at a rate greater than oil and gas.
Renewable energy sources, whether solar or wind, aim to produce electricity with a capacity that meets 50% of domestic demand in the medium term, clarified al-Falih, adding that there are plans for converting it into energy for export through interconnection cables .
Factors encouraging investment
Al-Falih underscored the important role played by private investments, part of which is led by the Public Investment Fund, in developing economic sectors.
The minister considered that the regulatory environment may be the first obstacle to foreign investment in some sectors, pointing to the most prominent reforms that have been pursued in terms of improving the investment atmosphere.
“We have made it possible for foreign investors to have full ownership of businesses in most sectors, access investment opportunities and conclude partnerships with Saudi investors if they wish to do so,” said al-Falih.
“We have also facilitated entering the Saudi market and obtaining licenses,” he added.
Al-Falih said his ministry is working today to ensure clarity and transparency in all sectoral strategies which are available online in both Arabic and English.
“I am proud that we have been able to multiply foreign investment flows in the Kingdom by about four-fold in recent years (from about $ 5 billion to $ 20 billion in 2021),” he remarked.
He revealed that Saudi Arabia aims to attract more than $100 billion in foreign investments by 2030, pointing out that work is in full swing to enhance investment incentives in non-traditional knowledge-based sectors (such as health technology, education and modern agriculture), by strengthening digital infrastructure, talent development, and research.