Oil has brought huge income to Saudi Arabia, helping it to achieve rapid economic development and become an economic power in the Middle East. However, excessive dependence on oil has also significantly affected the Saudi economy by international oil price fluctuations. In order to achieve economic diversification, Saudi Arabia proposed the “Vision 2030” in 2016, and the road to economic transformation has begun.
Now eight years have passed, and the “Vision 2030” has long been deeply rooted in Saudi Arabia, and the economic transformation has achieved obvious results. Saudi Arabia, which has tasted the “sweetness”, is striding towards the grand goal of the “Vision 2030”.
Oil dependence has given birth to reforms
From the discovery of commercial-scale oil in 1938, to the discovery of the world’s largest onshore oil field, Ghawar, in 1948, to the discovery of the world’s largest offshore oil field, Safaniya, in 1951, Saudi Arabia’s crude oil production has continuously broken records in just a few decades, and then became the world’s largest oil exporter.
From 1973 to 1981, the international oil price rose from $3 per barrel to nearly $40, and the Saudi economy ushered in a period of prosperity, with GDP increasing from $15 billion in 1973 to $184 billion in 1981. Relying on huge oil revenues, Saudi Arabia has achieved rapid economic development and established its status as an “oil kingdom”.
Saudi Arabia’s economy has long been supported by the oil industry, and the national finances are heavily dependent on oil export revenues. From 2009 to 2014, Saudi Arabia’s oil revenue accounted for more than 85% of government fiscal revenue, and then declined due to lower international oil prices. While enjoying the dividends of oil resources, the Saudi economy has long been significantly affected by international oil price fluctuations. In particular, with the development of unconventional energy and changes in the international energy production and consumption structure in recent years, Saudi Arabia’s influence in the international energy market has declined significantly, and the oil economic model has become increasingly difficult to maintain.
In the second half of 2014, international oil prices plummeted, with a year-on-year decline of nearly 50%. Saudi Arabia’s oil revenue shrank significantly, and fiscal revenue dropped sharply from US$280 billion in 2014 to US$162 billion in 2015, and the economy suffered a serious impact. In February 2016, Standard & Poor’s downgraded Saudi Arabia’s sovereign credit rating from “A+” to “A-“, and said that given Saudi Arabia’s high dependence on oil revenue, the decline in oil prices will have a significant and lasting impact on the country’s finances and economy. Just two months later, the Saudi government proposed the “Vision 2030” to achieve economic diversification and get rid of dependence on oil.
Saudi Crown Prince Mohammed bin Salman admitted in an interview with the media: “Oil once brought us income far exceeding demand. However, with the slowdown in oil production growth and the rapid growth of population, oil can no longer meet all our needs.”
The diversified transformation has achieved obvious results
Today, “Vision 2030” has long become a household word in Saudi Arabia and is closely linked to social and economic development. The “Vision 2030” takes “a vibrant society”, “a prosperous economy” and “an aspiring country” as its three major themes, and proposes to build Saudi Arabia into a core country in the Arab and Islamic world, a global investment powerhouse, and a hub connecting the three continents of Asia, Africa and Europe, including 96 specific strategic goals.
Eight years after the “Vision 2030” was proposed, Saudi Arabia’s economic diversification transformation has achieved significant results. In 2023, Saudi Arabia’s non-oil industry performed strongly, with its output accounting for 50% of its actual GDP, a record high. In 2023, non-oil revenue reached 457.7 billion Saudi riyals (about 122 billion US dollars), an increase of 11% year-on-year.
Since the “Vision 2030” was proposed, Saudi Arabia has taken a series of measures to vigorously develop its non-oil economy. In 2019, Saudi Arabia launched the “National Industrial and Logistics Development Plan”, which aims to build Saudi Arabia into a world-leading industrial power and logistics hub by promoting the upgrading and integrated development of the industrial, mining, energy and logistics industries. In 2021, Saudi Arabia proposed the “Made in Saudi Arabia” initiative and the “Saudi Arabia Partner” plan to support local products and improve their competitiveness at home and abroad, and to enhance Saudi citizens’ awareness and confidence in their own manufacturing, thereby promoting economic diversification.
Promoting the privatization process is an important part of the “Vision 2030”. In recent years, Saudi Arabia has actively promoted the privatization of state-owned assets, including large enterprises and fixed assets, to seek more diversified sources of income. Saudi Arabia has also actively promoted the development of sovereign fund investment and promoted economic diversification by investing in large-scale projects at home and abroad.
In 2019, Saudi Arabia opened tourist visas to foreign tourists for the first time, and regarded tourism as an important part of economic diversification. In just five years, Saudi Arabia’s tourism industry has developed rapidly, achieving a historic breakthrough in 2023, and completing the previously set goal of “receiving 100 million tourists by 2030” ahead of schedule.
According to the 2023 annual report of “Vision 2030”, 87% of the 1,064 plans implemented in 2023 have been completed or on track, and 81% of the 243 key performance indicators in 2023 have achieved the third-level goals, of which 105 have achieved the goals for the next two years ahead of schedule. Saudi Arabia is obviously not satisfied with its existing achievements. In the past two years, it has been actively exploring new areas and new initiatives to accelerate the development of economic diversification.
In the aviation field, Saudi Arabia plans to more than double its annual passenger volume to 330 million by 2030 and increase its annual cargo volume to 5 million tons. In November 2022, Saudi Arabia announced a plan to build a new airport covering an area of 57 square kilometers. It is expected that the new airport will be able to accommodate 120 million passengers by 2030 and 185 million passengers by 2050. In March 2023, Saudi Arabia announced the establishment of its second national airline, “Riyadh Airlines”, and plans to open flights to more than 100 destinations around the world by 2030.
The road to change is moving forward steadily
Driven by the “Vision 2030”, Saudi Arabia today has entered a new era of economic and social reforms, undergoing major transformations, undergoing significant changes, and giving rise to more opportunities.
In 2023, Riyadh won the right to host the 2030 World Expo, with the theme of “The Age of Change: Working Together for a Better Tomorrow”. 2030 is a key year for the “Vision 2030” plan. It is of great significance to Saudi Arabia to be able to hold the World Expo for the first time in this year. Crown Prince Mohammed said that Saudi Arabia is determined to host an “unprecedented” World Expo.
In addition, Saudi Arabia will host a series of major sporting events in the next few years, including the 2027 Asian Cup, the 2029 Asian Winter Games, and the 2034 Asian Games. Saudi Arabia is also the only bidder for the 2034 World Cup. This summer, the first e-sports World Cup will be held in Riyadh.
In recent years, Saudi Arabia has also actively held various large-scale international conferences to strengthen its connection with the international community in various fields.
In the process of actively promoting economic transformation, the Saudi government was able to face up to challenges and adjust relevant plans in a timely manner. Saudi Finance Minister Mohammed al-Jadaan pointed out at the Qatar Economic Forum held in May this year that Saudi Arabia’s “Vision 2030” was launched in 2016, long before the COVID-19 pandemic, the Ukrainian crisis, a new round of Israeli-Palestinian conflict, inflation, and supply chain disruptions. “The collective shock facing the world requires us to redefine priorities and examine what we are doing.”
Faced with many challenges, the Saudi government considers priorities and development priorities more rationally and realistically. Although the road to economic transformation is not smooth, Saudi Arabia remains determined and steady in promoting the “Vision 2030”.
