Saudi Arabia And Abu Dhabi Launch Ambitious Drives To Diversify Economies

Oil-rich Middle East governments are making renewed efforts to diversify their economies away from hydrocarbons, even as they continue to reap the benefit of elevated oil prices this year.

Within hours of each other on June 30, Saudi Arabia and Abu Dhabi announced ambitious programmes to expand into new areas of manufacturing and other industries.

In Saudi Arabia, Crown Prince Mohammed bin Salman (MBS) announced a set of “national aspirations and priorities” for research, development and innovation (RDI) over the coming two decades.

The plan encompasses areas such as health, a sustainable environment, energy and industrial leadership, and ‘economies of the future’. The aim, said MBS, is to help make the kingdom globally competitive in the years ahead and to strengthen its position as the largest economy in the region.

“Our ambition for Saudi Arabia is to become a global leader in research, development and innovation with an annual investment equivalent to 2.5% of GDP in 2040,” said the crown prince, who also serves as chairman of a newly-formed Supreme Committee for RDI.

He added that the plans will add $16 billion to Saudi GDP by 2040, while creating high-value jobs in science and technology. Job creation is a key concern for the authorities. Unemployment among Saudis is now at its lowest level in seven years, but it is still at 10.1% and far higher for women.

To reach its target, Saudi Arabia plans to seek partnerships and make co-investments with multinational companies, international research centres, non-profits and other organisations. An RDI Authority is also being set up which, according to a statement issued by the official Saudi News Agency, will “develop moonshots, flagship programs [and] projects.”

It is not yet clear how the new RDI plan fits in with the overarching economic diversification strategy of Vision 2030, launched by MBS in 2016.

The efforts by Saudi Arabia to develop its economy in new directions is being mirrored across the region, as governments try to prepare their economies and their citizens for the end of the oil era – a difficult task at the best of times and even more so now when oil revenues are so high.

Abu Dhabi targets manufacturing

A few hours before the latest Saudi initiative was announced, the authorities in neighbouring Abu Dhabi had unveiled a new industrial strategy of their own.

Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, chairman of the Abu Dhabi Executive Office, said the emirate’s government plans to invest AED10 billion ($2.7bn) between now and 2031 to double the size of its manufacturing sector and create 13,600 jobs.

The strategy will focus on seven sectors: chemicals, machinery, electrical power, electrical equipment, transport, agri-foods, and pharmaceuticals, with one of the aims being to increase Abu Dhabi’s non-oil exports by 143 per cent to AED178.8 billion by 2031.

The government has long-term developments in mind, with Sheikh Khaled saying the strategy will be designed to “create a smart circular economy, develop a sustainable ecosystem [and] invest in future technologies.”

“The Ministry of Industry and Advanced Technology aims to … prepare for the future,” he said, adding that this would “contribute to diversifying the economy, leverage competitive advantages and integrate efforts to build a robust industrial sector.”