Ahmed Al-Faifi
JEDDAH — Digitization will supercharge the Kingdom of Saudi Arabia’s potential $4 trillion non-oil economic investment needed through 2030, industry experts announced at the recently Mobile World Congress in Barcelona, Spain.
Facing a volatile oil and gas market, and with half of the population under 25 years old, the Kingdom’s economic transformation could double GDP by $800 billion, create 6 million jobs, and raise Saudi household income by 60 percent, according to a new report by the McKinsey Global Institute.
“By harnessing the potential of the Internet of Things era and hyper-connectivity with real-time analytics, and massive capital investment, the Kingdom can super-charge its economy, unleash the private sector potential, and leapfrog established economies in raising productivity and investment,” said Ahmed Al-Faifi, Managing Director of Saudi Arabia at SAP, a leading technology company.
Up to 75 percent of productivity gains can be achieved by matching best practices, the report said.
“Technology alone cannot solve all problems, but will be key to transforming all of the Kingdom’s verticals. Digital platforms across the public, private, and people sectors can match job skills to careers, deliver new government services, and drive healthcare, retail, and manufacturing innovation,” added Ahmed Al-Faifi.
SAP co-innovates with the Kingdom’s leading organizations, including telecoms Mobily and STC, and Al Nasser Group, Bin Sammar Trading and Contracting Company, SABIC, and Saudi Arabian Airlines.
In the next 15 years, to 2030, Saudi Arabia could potentially double its GDP again, increase real Saudi household income by about 60 percent and create as many as six million new Saudi jobs, McKinsey Global Institute report said.
The GDP increase amounts to about $800 billion, the equivalent of adding Turkey’s economy today, or three Finlands. Unemployment would decline to about 7 percent. In this report we have projected outcomes for Saudi households.
Projecting gains in their living standards and income is subject to specific policy implementation. However, foreigners will benefit—as Saudis will—from changes that will make the entire workforce more productive, thus raising wages and improving working conditions.
This transformation would wean Saudi Arabia off its heavy dependence on oil: under this scenario, non-oil revenue could increase from 10 percent of total government revenue to 70 percent. The change could also fundamentally alter the dominant role of the public sector in society, with wages from private-sector employment rising from 19 percent of total household income to 58 percent, the report said.
Achieving such growth would require an acceleration of productivity growth combined with a continued high rate of investment. Together, these would drive a very robust expansion of the non-oil private sector. We estimate the investment needs at about $4 trillion. This is about three times the size of the investment made in the Saudi economy during the 2003–13 oil boom, which in itself was three times the investment of the previous decade. Much of it would come from non-government sources including both Saudi and foreign investors.
While the non-oil private sector is relatively small in Saudi Arabia, it has potential to drive much of the growth. Already during the 2003–13 period, the non-oil private sector outperformed the economy as a whole, albeit starting from a low base. It grew at about 10 percent annually, much faster than the overall 6 percent GDP growth rate. Growth was broadly based, with consumption-based sectors such as transport, communications, retail and wholesale trade, and business services growing the fastest. The non-oil private sector’s productivity growth was also more rapid than the rest of the economy, with an average of 2.5 percent per year. Sectors such as manufacturing were among the brightest spots. Between now and 2030, there are opportunities throughout the economy to supercharge this non-oil growth. In this report, we highlight eight sectors that analysis suggests have some of the biggest potential, and could contribute more than 60 percent of the overall growth needed to double GDP by 2030. They are mining and metals, petrochemicals, manufacturing, retail and wholesale trade, tourism and hospitality, health care, finance, and construction.
Supporting sustainable work possibilities for Saudi Millennials, the SAP Training and Development Institute has conducted over 350,000 student-training days in the Kingdom over the past two years, and counts more than 35 University Alliance Partners who have trained over 5,400 graduates. — SG
