The (new) Saudi Gold Rush

By Abdulaziz Bin Obaid Al Harbi

June 23, 2015 (MMD Newswire) — With oil prices falling and an economy more than half reliant on petrochemicals it is not surprising that the International Monetary Fund recently dropped Saudi Arabia’s 2016 outlook from 3.0% to 2.7%. This drop in the IMF’s expectation for Saudi Arabia is explicable if only focusing on the country’s oil interests, but in the past five years, the Kingdom has shifted its focus outside of petroleum with an eye to the future.

The decades long effort to upgrade and modernize the Kingdom’s infrastructure is coming on stream — and massive projects which were previously planned are currently under development which will invigorate both public and private sectors in ways that has not been seen in decades. In the past three years, Saudi Arabia has spent $1.7 TRILLION on construction alone improving infrastructure and livability.

Additionally, there is renewed emphasis on Public-Private Partnerships (PPP), thanks to King Salman, who has recently committed more than $3 trillion to support these initiatives over the next five years. The Kingdom will outsource projects and roles to Saudi Arabia’s blossoming, innovative private sector; as a result, companies will help build and manage new hospitals and high-speed rail systems, just to name a few. These partnerships will facilitate cooperation on the development of entire cities, building more than 2,000 kilometers of new roads and the excavation and construction of new seaports.

Many private corporations, both Saudi Arabian and international, are involved in an ever growing number of joint ventures. These synergistic JVs will provide new opportunities and facilitate greater understanding of how foreign companies are managing at a higher level of efficiency as well as transferring technical knowhow to their Saudi counterparts. This growth and change in the economic vision of the Kingdom will benefit both Saudi Arabia and the countries where these private corporations are based. The corporations will reap myriad benefits from this growth including new employment opportunities, increased revenues, and new global markets.

The Kingdom is also focused on internal improvements, embarking on an active “Saudisation” effort, which will increasingly replace foreign workers with newly trained Saudis. In a country where half the population is under 25, these new programs are providing greater employment opportunities for this younger generation and will provide greater economic stability for the Kingdom. The underemployment of this age group, pervasive throughout most parts of the Middle East, gives Saudi Arabia the opportunity to be a pioneer in this area helping to invigorate this sector of the population.

Last, and possibly most important, there is a renewed buzz in the Kingdom and entrepreneurial spirit in the air. A new, younger generation is coming of age across the country. There’s a clearer, freer sense of what the private sector can achieve. And the falling price of oil has put an even greater emphasis on other areas where Saudi businesses are focusing and succeeding.

Private-Public Partnerships, Saudisation, joint ventures and a renewed entrepreneurial spirit are reshaping how Saudi Arabia does business. Dropping energy prices are actually driving positive change and sparking diversification and growth; the Kingdom is on the cusp of an economic awakening. The new Saudi Gold Rush has begun.

Abdulaziz Bin Obaid Al Harbi is the founder and CEO of International Trust Construction, a Saudi Arabian development firm, with offices Jeddah, Dubai, Cairo and Beirut. Chairman Al Harbi is currently on a visit to the United States finalizing joint ventures with two American construction firms.

David Whiting
david.whiting@edelman.com
212-446-1890