DUBAI — For Saudi Arabia to achieve its Vision 2030, “it is important to set clear targets and identify indicators that allow progress to be tracked. This will provide focus and highlight areas of success and failure,” said Richard Thompson, editorial director, MEED in an interview.
He noted that the previous diversification initiatives such as those huge strategic investments by companies like Aramco, Sabic, Ma’aden and the Royal Commission for Jubail & Yanbu have driven the development of industrial cities at Jubail and Yanbu have broadened and deepened the Saudi economy, and also created jobs for Saudis. Also the development of religious tourism. “These investments have put in place important building blocks for growth,” he added.
However, “true diversification…. needs comprehensive strategic vision” to seize the opportunities. “In particular, the development of a broad-based manufacturing sector produced higher-value consumer products, the expansion of tourism beyond pilgrims, and encouraging entrepreneurs and small businesses,” he said.
Thompson said “none of these things is easy to achieve however and they sometimes require difficult political decision to be taken that can involve cuts to jobs, subsidies and taxes that change the nature of the relationship between government and society.”
“That is why Vision 2030 is so important. It provides a framework and a direction that enables the difficult decisions to be taken in the knowledge that they have a bigger purpose,” he pointed out.
Excerpts of the interview follow:
• What are the key measures necessary for the government to implement to see its strategies through?
It is important to set clear targets and identify indicators that allow progress to be tracked. This will provide focus and highlight areas of success and failure.
• How can smart government initiatives/digitization help Saudi Arabia fully develop its economy? Are the infrastructures in place sufficient to warrant positive change?
The digitalization of life and work provides a massive opportunity to improve the world in which we live. It allows us to create data about how we live and work, that can be used to make cities function more efficiently, and infrastructure to be operate more efficiently. The challenge however is that Big Data and digitalization require new skills that are currently not available. So, in parallel with investment in digitalization, the kingdom must invest in data specialists.
• How should the government, with the help of the private sector, foster more vibrant industries, promote local content creation, spawn advanced technologies and innovation, and provide new high-paying job opportunities?
I feel that there are three broad areas where the government can help. The first is to reduce bureaucracy. By streamlining the number of approvals and permits that a business requires, entrepreneurs can be freed up to focus on growing their businesses rather than dealing with red tape. This also applies to foreign investment.
Secondly, providing access to capital is critical. So encouraging banks to lend at favorable rates to businesses in strategic areas and establish support finds and incubators for start ups. Increasing regulatory support and streamlining legal processes that can encourage business risk takers while protecting investors. Ideally, all of the above can be supported by a single organization that can be accessed easily online. A one-stop shop to support entrepreneurs and private businesses.
• One of the best – yet often overlooked – ways to improve any economy is to develop the effectiveness of local company management. Is Saudi Arabia capable of doing so? What is holding it back?
Saudi Arabia is capable of anything. It is a question of knowing what it wants to focus on. In terms of attracting new private investment, it is vital to increase transparency in both the government and corporate sectors. Investors want to know what and who they are investing in. And they want to understand how decisions are taken, and even to have a voice in these decisions. Greater transparency also increases accountability that allows decisions to be scrutinized. The challenge of course is that you do not want an overbearing set of regulations that hampers business. So the government has to find the right balance between allowing investors to be able to get the information they require, and companies being able to focus on operations.
• How about developing robust, globally competitive SMEs? Can Saudi do it?
Saudi Arabia can create new, innovative, globally competitive businesses. But that is down to the entrepreneurs and the businesses themselves. The role of government should be about creating a business environment that fosters new business. It must create an ecosystem for private business growth and then step back
• What does Saudi Arabia need to do to attract FDI away from traditional sectors? How successful will it be? Where do you think investments will come from and in which sectors will the money pour in?
If someone is to make an investment, it is fundamentally important to them that they have a clear sense of the opportunity available to them, and also a clear picture of the risks that they face. This means that above everything, investors require transparency. This is where the government can help, by requiring business information to be open and regularly updated. In fact, this is why MEED has been so important for businesses in the region for 60 years. It is a very reliable source of accurate and up-to-date information.
I can see huge opportunities across a wide range of non-traditional sectors. I think tourism, leisure, sport and entertainment is an area of huge potential.
• How do you see Saudi Arabia 10 years from now?
The decisions that are made this year will define how the kingdom looks 10 years from now.
If we can see rapid progress with the Vision 2030 reforms in the next 12 months, we will have the foundations in place for a far more dynamic and diversified private sector in Saudi Arabia. This will create new and unexpected jobs and reduce dependence on oil. The drive to reduce energy subsidies will stimulate energy efficiency and conservation and encourage renewable energy. And the investment in science and engineering education will help get young Saudis into important value-creating jobs. So, there will be a reduction in the kingdom’s dependence on expatriate workers.
However, if the recovery in oil prices coupled and regional geopolitical events in Yemen, Syria, Egypt or Iran are allowed to divert the governments focus on implementation of the reforms, we could see this opportunity being missed and 10 years from now we will have gone backwards. The kingdom will still be dependent on oil exports and expatriate workers, except that oil revenues will be reduced because of an increase non-Opec capacity and unemployment will be higher. The kingdom’s financial strength will have weakened and confidence will have fallen. The result will be a weaker, less stable environment for the whole region.
So, 2017 is a key year.
MEED’s goal in the upcoming ‘The Saudi Arabia Forum 2017’ on May 9 at Movenpick Hotel Riyadh is to help Saudi Arabia achieve its ambitions. We want to bring together key actors and stakeholders from government to discuss the opportunities and challenges, and crucially, we want to be able to provide some constructive input to help Vision 2030 succeed.