Saudi Arabia a decade from now
On Jan. 1, 2012, I was living in Kuwait, and my life revolved around oil and OPEC. I didn’t have a plan for the next decade; the only intention I had was to live in Kuwait for a very long time. Moving back to Saudi Arabia wasn’t on my agenda as the country, though wealthy and cheaper than Kuwait, didn’t provide what I needed for a happy life.
In 2018, I decided to return to the Kingdom to join a Vision 2030 project. I was enchanted with the new reality, and wanted to be part of the change and the process of building a new Saudi Arabia.
On the first day of 2012, I would have never thought that Saudi Arabia would undergo all these radical changes. I thought that everything here was carved in stone, believing that all the factors that lead to social discomfort were deeply rooted in the minds of the people.
But I learned that the impossible can become possible with patience. This makes me think more, today, about the future, to understand it in the way I wasn’t able to before.
Looking ahead, let’s try to imagine what the next decade in Saudi Arabia might look like.
Demographic and cultural change
Demographic and cultural changes will intensify with young people inheriting the future. We will see a new Saudi generation with values driven by the reforms of Vision 2030, and we all know what it will mean: More tolerance, and acceptance of others.
Does Saudi Arabia needs this generational shift? Well, it can’t become a top global player, have a thriving tourism industry, or create visions such as NEOM and The Red Sea Development Co. without it. It’s almost certain that the Vision 2030 will be rooted in the minds of the new generation.
Let’s be aware, however, that the speed of change taking place in big cities such as Riyadh, Jeddah or Alkhobar, isn’t the same as smaller cities, where society is still conservative. Hopefully, things will be different with projects like Soudah Development, that might relax the culture in the south, and with NEOM and TRSDC in the north. There remain many Saudis, in their 40s and 50s, still not fully on board with the new changes, though not as firm in their views as hard-liners in their 60s and 70s.
The values that will govern Saudi Arabia will be much more business and economy-related. Vision 2030 is in large part an economic plan, and all the social and cultural changes that we see today are there to support it. Why are women now allowed to drive? Well, you need better quality of life to keep talent within the Kingdom, and ease of access for women to go out and work. In the same manner, we can ask why all these events are taking place now in Riyadh? Entertainment is a new sector that will generate income and jobs, and these events will help Riyadh become a more, disable global hub.
No matter how we look at it, Vision 2030 is reflected in the people’s values and lives. Saudis now speak more about business in their daily lives, and look at the world from a business perspective.
It is similar to what Egypt went through in the 1970s, when “openness” was the driver of the economy and society. This was when making fast money was the norm, and the whole society was obsessed with making cash through private firms over government jobs. Unfortunately, the laws and right governance weren’t developed at the same speed that the economy opened. Saudi Arabia, on the other hand, focused on governance and regulation to ensure its economic development will not lag behind legal infrastructure.
Government will not be a big employer
Third, the government will move away from planning into execution of projects and this is when the need for more government employees will decline and employment pressure will transfer to private companies. Let’s take a look at what’s happening today. A new authority and state-owned enterprise is created almost every two-three months. Once they come to light, they go running to the market to create jobs and attract talent focusing on people who are good in doing strategy plans with excellent presentation skills. How many authorities are there to be created in the next five years? How many state-owned companies will be created? It will get less and less starting from 2025 I believe. NEOM as an example is flooding LinkedIn with ads for jobs but NEOM will reach saturation in just three or four years and this is when the project must create wealth through inviting investors and creating joint ventures such as the green hydrogen project.
The PIF although is creating more companies than any other entity in the economy, it will bring fewer firms in 2-3 years from now and it will look for more partnerships with big players than creating its own champions. That’s the only way to grow with less risk and to achieve Vision 2030 goals. Even if it wanted to keep creating more companies, the labor market will be tight and the supply won’t match the demand, thus limiting its organic expansion.
Riyadh economy overheating
Riyadh will become an economy within a bigger economy. Yet, the economy in Riyadh will overheat at some point, and the cost of living will become on par with Dubai and other Gulf capitals, and due to the riyal-dollar currency peg, the monetary tools to control inflation is limited, which will result in more out-of-the-box solutions or fiscal tools.
For example, when the value of real estate skyrockets in Riyadh — and that will happen, inevitably — the only way to bring the prices down will be adding more supply, or pushing for more rules to force developers to develop units instead of holding on to land. That’s normal for an economy that plans to expand, and China went into overheat for some time. As long as we all know what’s coming and prepare for it, things will be manageable.
Vision 2030 will not only change the Kingdom’s landscape but will also drive change in the wider region. Saudi Arabia is a business-driven country with a clear agenda. It’s now more open to business with its neighbors than ever. This is logical as, when a country plans to invest trillions of dollars over a decade, it must ensure that the environment it operates in is safe and stable and all those around it will benefit from what it’s doing.
Egypt today is no different from Saudi Arabia, and it has a very promising economy where the number of small and medium-size businesses is growing at an exponential rate. Such plans will increase cooperation among the two powerhouses and deepen their economic integration. With everyone speaking business now in the region, business mindset will replace all other ideologies and pave the way for prosperity.
In the end, predicting the future is the most difficult thing to do, and even when I’m almost certain about things, the unexpected can happen. I hope that this will stimulate others to think about the future in order to better prepare and plan for it, and to avoid something I didn’t do a decade ago.
• Wael Mahdi is an independent energy commentator specializing on OPEC and a co-author of “OPEC in a Shale Oil World: Where to Next?”