Saudi Arabia’s investment minister offers green pillars on the path to diversification

Saudi Arabia’s investment minister, Khalid al-Falih, has pushed back against skepticism over plans to diversify the country’s economy, as Riyadh touts “greenback” investment opportunities to attract foreign funding.

“There were a lot of people who doubted the vision, the ambition, how broad, deep and comprehensive it was, and how a country like KSA, which has been so dependent on the commodity business like oil for decades, could develop. What we aspire to do with Vision 2030,” al-Falih told CNBC’s Steve Sedgwick on Saturday at the Ambrosetti Forum in Cernobbio, Italy.

Saudi Arabia, one of the largest economies in the Middle East and the main ally of the United States in the region, is increasing investments to implement the “Vision 2030” economic diversification program of Crown Prince Mohammed bin Salman, which includes 14 giga-projects. Neom industrial complex.

Under the initiative, Riyadh seeks to wean itself off its historic dependence on oil revenues – which the International Monetary Fund now sees increasing until 2026 before beginning to decline – and hopes to attract more than $3 trillion in financial flows to the domestic economy, as well as foreign aid by 2030. to increase domestic investment to 100 billion dollars per year.

Eight years after Vision 2030 was unveiled, the kingdom is now “more committed, more determined” to the program and has already achieved or is close to completing 87% of its goals, a Saudi minister said on Saturday. Critics of the plan have previously questioned whether Riyadh will achieve its goals by the stated deadline.

In recent years, the kingdom has attempted to liberalize its market and improve its business environment by reforming investment and labor laws, but it has also created less popular requirements for companies to set up regional headquarters in Saudi Arabia to secure government contracts.

The number of foreign investment licenses issued in Saudi Arabia will nearly double in 2023, the IMF said, with government data showing net inflows of foreign direct investment rose 5.6% year-on-year in the first quarter.

However, concerns remain about the potential uncertainty and unpredictability of the kingdom’s legal framework and its dispute resolution system for foreign investment. Al-Falih insisted that Saudi Arabia has domestic political and economic stability as well as predictability.

Saudi Arabia’s investment minister said part of Riyadh’s pitch to foreign investors is a “green coast” initiative that seeks to decarbonize supply chains in areas with renewable energy sources.

“The green pillar is basically saying that you have to do more than high energy processing (and) added manufacturing value in areas where materials as well as energy (are located),” said al-Falih, Saudi Arabia’s logistics, capital and infrastructure to achieve this.

As part of “Vision 2030”, the world’s largest oil exporter aims to achieve net zero emissions by 2060. The United Arab Emirates, which is hosting the 2023 annual meeting of the UN Conference of the Parties together with its neighbor, Riyadh, has been a high-profile country. attends climate summits but still raises questions about commitment to decarbonisation.

Riyadh – along with other members of the Organization of the Petroleum Exporting Countries’ oil alliance – has repeatedly called for the simultaneous use of hydrocarbons and green resources to avoid energy shortages during the global transition to net zero emissions.

Some climate activists have also criticized Saudi Arabia’s promotion of solutions such as carbon capture and storage (CCS) technologies as a smokescreen to advance its lucrative oil business.

As part of the Green Pillar, Saudi Arabia is committed to “addressing global supply chain sustainability issues” and “as we import copper, lithium, cobalt, other critical materials, rare earth metals, we address semiconductor shortages, green fertilizers, green chemicals.” said al-Falih.