Saudi Arabia’s Shareek is yet another bold move for the country to support its move towards sustainable development and growth as the kingdom shifts away from oil dependence.
Shareek, the Arabic word for Partner, is the kingdom’s latest initiative to strengthen the relationship with the private sector. The project will help the private sector create hundreds of thousands of jobs and boost private sector GDP contribution, according to Saudi Crown Prince Mohammed bin Salman.
Those businesses that have been struggling to get back on their feet following the pandemic will see this as a welcome sign that the Saudi government not only recognises their valuable contribution to the economy, but is ramping up its support to enable them to play a larger role.
With a nearly 12 trillion Saudi Riyal ($3.2 trillion) commitment, the enhancement to private sector businesses in the kingdom is anticipated to be enormous. The vision of the programme is for government ministries to work closely with the private sector. Those participants that can develop a tailored plan will be able to obtain fast track investment which will see them raise output capacity.
The ultimate goal of these investment projects is to assist in the rapid growth of local employment. Furthermore, the increase in production capacity will enable producers to offer more of their goods both locally and internationally.
For those businesses still contemplating to setup a company in Saudi Arabia, the announcement again offers additional confidence that Saudi Arabia is not just an oil and gas one trick pony. Having the government recognise the value of the contributions that non-oil and gas industries can bring enhances the kingdom’s reputation as a regional business hub.
Previously, Saudi Arabia was a predominantly oil and gas fuelled economy, with that industry alone making up more than 87 percent of total budget revenues and around 50 percent of GDP. With the promotion of investment into the private sector, Saudi Arabia is looking to reduce the reliance on this industry and diversify into other sectors.
The giga-projects in Saudi Arabia have been one way in which the paradigm shift towards other industries is most notable. With Neom city (a project worth around $500 billion), the Red Sea project, Qiddiya and Amaala projects all moving ahead rapidly despite the chaos of 2020, the tourism sector is soon to boom. The private sector will benefit greatly from the Shareek program as it supports these growing industries.
Entertainment, tourism and leisure are all proving to be beneficiaries of Saudi Arabia’s rapidly diversifying economy.
Another recent announcement regarding multinationals needing to have Saudi-based headquarters also aligns closely with Vision 2030. The vision is based on three pillars – a vibrant society, thriving economy and ambitious nation. Encouraging multinationals to locate (or relocate) their headquarters to Saudi Arabia not only boosts FDI, but brings with it an influx of expatriates.
The flow on effect of this will be a rapid influx within the tourism and entertainment sectors. Further, this will help attract new talent, expertise and innovative thinkers into the kingdom.
Neom city is a project worth around $500 billion
One of the welcome side effects of an influx of businesses and expatriates is the increase in activity in the real estate sector. With more businesses looking for more office space, the commercial real estate sector is sure to heat up throughout 2021. This will be welcome news to those in construction that felt a slowdown due the impact of coronavirus in 2020.
With more families relocating to the kingdom, education and healthcare are also set to soar. We anticipate demand to increase for international educational facilities to fill the newly created demand.
Similarly, health care providers that offer Western medical facilities will be much sought after.
Overall, the Shareek initiative is just one of the strategies that Saudi Arabia has announced to assist in the future sustainable development of its economy. The theme of the 2030 plan which sees the kingdom move away from its previous oil and gas dependence aligns perfectly with the new initiative to provide investment for the country’s growth.
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