Shareek to unlock SR5tn worth of private sector investments
Last week, Crown Prince Mohammed bin Salman, along with his council of ministers and business leaders, took a significant step forward in implementing the economic objective of Saudi Arabia’s Vision 2030 blueprint.
They gathered to sign an agreement for the first wave of projects of the Shareek Program, or the Private Sector Partnership Reinforcement Program, which is set to invest in large domestic companies to diversify the economy and develop the Kingdom as a business and tourist hub.
Over the past seven years, there has been much anticipation for the Vision 2030 strategy. With its three pillars of an ambitious nation, a thriving economy and six overarching objectives, the aim is to lead Saudi Arabia to a vibrant and sustainable future by focusing on various aspects, such as enhancing the efficiency of government, ensuring citizens a healthy and fulfilling life, and developing a strong and diverse economy.
The seeds were planted with various legal reforms that have already made vast differences to citizens’ quality of life, such as quick access to healthcare, ease of purchasing a home, improved road safety, regulated tenancy contracts and introduction of women’s sports, including the first women’s football league, building confidence and improving health and fitness.
Shareek focuses on the pillar of the thriving economy. Twenty-eight large companies have signed up to Shareek so far. For this first stage, the government will invest SR192.4 billion ($51.24) into 12 projects across eight companies, contributing to the Kingdom’s economic growth, diversifying industries, promoting innovation and enabling public-private partnerships.
Before the establishment of Vision 2030, 45 percent of the Kingdom’s gross domestic product came from oil, even as the world moved away from global warming, fossil fuels and plastics toward carbon-neutral energy sources and less environmentally damaging materials. Even without the environmental impact, it was not good business sense to base so much of the economy on a single sector; this was very risky. The economy needed to be diverse to maintain security and stability against volatility and failures in the market.
As a result, the government has been providing incentives for businesses to invest and develop, and the plan predicts that Shareek will generate hundreds of thousands of jobs and unlock up to SR5 trillion of investment from the Saudi private sector, providing 65 percent of the GDP and raising its economic ranking to 15 globally. In addition, non-oil exports are expected to rise from 16 percent to 50 percent, which is a worthwhile investment.
Not only is this good on a basic financial level, but it will be excellent for building the Kingdom’s status as a business hub, with its excellent location between Asia, Africa and Europe. Many have questioned why Shareek is focusing purely on large companies. But it makes sense that by growing the large, established businesses, small and medium-sized companies will also benefit, as they will provide essential services and supplies to the growing companies and their employees: caterers, plumbers, electricians, cleaners, stationers, taxi drivers and launders. The companies developed in this first wave include telecommunications and green energy solutions. These will also help build smaller businesses, future-proofing them with carbon-neutral energy and efficient communication systems. These, along with developments for steel and ships engines, will also help secure better prices for new buildings and international supply chains.
Investing in the homegrown industry in this way will be great for developing a sustainable future economy. It will provide lots of new jobs. This first wave alone is expected to provide nearly 65,000 new roles, some of which will undoubtedly be with the eight large companies. Others will be contracted for skilled trade roles involved in building and infrastructure, which should allow new trade companies to form, which will train young people in a profession.
New industries such as green hydrogen and specializing in catalysts will hopefully attract specialists and the best in the field from outside the Kingdom, improving the science and research capabilities of the nation, while improving infrastructure and developing eco-tourist locations such as NEOM will also attract a great many tourists and develop KSA as an excellent tourist spot, again particularly considering its central location.
Overall, it’s great to see Vision 2030 and Shareek being proactively implemented to add to the already great things that the Kingdom is doing to diversify the economy and ensure a solid and sustainable future.
• Dr. Bashayer Al-Majed is a professor of law at Kuwait University, and a visiting fellow at Oxford. Twitter: @Bashayeralmajed