Saudi Arabia’s fixation with megaprojects may be giving way to more pragmatic initiatives better aligned with investor appetite.
The urgent need for foreign investment crystallized last month when a royal decree replaced veteran cabinet member and investment minister Khalid Al-Falih amid broader funding concerns over the kingdom’s signature Vision 2030 development framework.
Foreign investment amounted to just 2.1% of GDP last year, according to Capital Economics. That’s well below the government’s Vision 2030 target. The research firm also forecasts government debt will balloon to 40% of GDP next year. That’s up from just over 30% last year and above consensus.
Vision 2030, which now appears to be under review, represents Crown Prince Mohammed bin Salman’s blueprint for diversifying an economy still heavily reliant on hydrocarbon revenues.
Replacing Al-Falih is Fahad Al-Saif, sometimes also referred to as Fahad bin Abduljalil Al-Saif, a former HSBC banker.
Until his appointment, Al-Saif held various positions at the Public Investment Fund (PIF), Saudi Arabia’s $1.15 trillion flagship sovereign wealth fund. He was also instrumental in overhauling the kingdom’s capital-raising capabilities. Earlier, he played a role in roadshows aimed at mustering investor support for Saudi bond sales.
But the government’s recent signaling suggests Al-Saif will preside over a period of relative austerity while attempting to maintain investor support for a rolling set of reforms. His stewardship is likely to face an early test as policymakers’ attention is focusing on future foreign investment initiatives.
Recent reports imply that the government will soon announce a streamlined set of priorities and a pivot away from nosebleed-inducing megaprojects such as The Line, a 170-kilometer, multibillion-dollar planned smart city that makes up a segment of the ambitious Neom development.
Posts on social media have broadly welcomed Al-Saif’s appointment, variously describing him as a safe pair of hands fit to carry out a shift towards more mundane revenue-generating projects.
