Why Saudi Arabia Is Turning to Asia For Investment 2

Vision 2030

Saudi Arabia (KSA) was forced to rethink the overbearing impact of crude oil on its economy in light of the sharp decline in crude oil prices which began in June 2014. The outcome was their Vision 2030 document, released in April 2016. Some of the major economic and business goals outlined in the document are as follows:

  • Increase foreign direct investment from 3.8% to the international level of 5.7% of GDP (gross domestic product)
  • Increase the private sector’s contribution from 40% to 65% of GDP
  • Increase the localization of oil and gas sectors from 40% to 75%
  • Increase the Public Investment Fund’s assets, from SAR 600 billion to over 7 trillion

Looking east for better ‘vision’?

Saudi Arabia has been making regular announcements in order to convince the international investment community of its intentions to realize its diversification goals. One such measure is the initial public offering (IPO) of 5% of Saudi Aramco.

Another manner in which the country is showcasing its new direction is by visiting other nations and inviting them to do business in Saudi Arabia.

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King Salman recently made a month-long trip to Asia and visited Malaysia, Indonesia, Brunei, Japan and China.

Why looking towards Asia makes sense

For a closed economy like Saudi Arabia, looking towards emerging and frontier markets in general and Asia in particular is easier than to developed markets. These economies are relatively conservative themselves and understand the dynamics that come along with doing business in such systems.

Further, Asia is currently home to the fastest growing economies in the world and is expected to continue pushing global growth, as shown by the graph above. By opening up its shores, Saudi Arabia can partake in the growth story of Asia and also find a ready market for its own goods.

Speaking of a ready market, there was another major reason why the Saudi government toured Asia for a month. Let’s look at this in the next article.

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