Can Saudi Arabia Diversify Away From Oil?
The Saudi government hopes new special economic zones can spur foreign investment and lessen the Kingdom’s reliance on oil. Regulatory reforms are needed, however, to convince foreign firms that Saudi Arabia has more to offer than just cheap energy.
Just off the coast of the Red Sea, about 60 miles north of Jeddah, a massive construction project diverts the eye from an otherwise barren Saudi Arabian landscape. Shiny, modern towers glimmer under the Gulf sun, casting a brief shadow over the empty shipping port and arched gates that boast large billboards of King Abdullah.
The project, known as King Abdullah Economic City (KAEC), named after the late king, is one of five planned special economic zones that Saudi Arabia hopes will bring diversity to the Kingdom’s industrial landscape. Scattered along the Red Sea and throughout the Saudi Arabian heartland, each economic city will focus investment in a different industry intended to wean the country off its most precious resource: oil.
With oil prices plummeting amid Saudi Arabia’s battle for market share, new industries and economic offerings will help to define the country’s global relevance in the coming decades. Diversity will also provide jobs and opportunities for the 13 million Saudis – about half the population – that are under 25 years old. Attracting global businesses to young cities in the Gulf, however, will require strategic investments and reforms that liberalize the Saudi Arabian operating landscape.
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