Under the umbrella of the Saudi Vision 2030 – a comprehensive plan to diversify the economy and promote private sector growth – the country is reshaping itself. From projects like NEOM – a megalopolis that will stretch over 450km of coastline in the north-west of the country, to the Red Sea Project – a 50-strong resort portfolio, investment in technology-led tourism is helping re-define the economy.
This opening up of the entertainment and cultural sectors has resulted in the growth of domestic tourism travel and spending, with an increase from 46.4m domestic tourists in 2015 to 77.8m in 2022. 1
Not only are significant investments being made in infrastructure and tourism projects such as these, but they are being delivered with an eye on the region’s overall goal of energy transition. These mega projects will source 100% renewable energy generated from solar power, underpinned by the largest battery storage facility in the world.
The Government is not just throwing dollars at these projects – but strategically building an ecosystem that attracts both tourists and investors – unlocking state-owned assets and industries in an ambitious privatisation program to open opportunities for foreign capital.
The Government has also taken steps to streamline bureaucratic processes and reduce red tape for businesses - simplifying business registration procedures, improving access to permits and licenses, and enhancing overall transparency. This is further enhanced by the new foreign investment laws aimed at providing greater protection and incentives for foreign investors - allowing 100% foreign ownership for private companies (and 49% for publicly listed companies) in many sectors and offering incentives such as tax breaks and residency permits for investors.
Overall, these reforms aim to create a more conducive environment for foreign investment in Saudi Arabia, diversifying the economy, and supporting sustainable long-term growth.
Most global investors remain underweight the Kingdom, which only joined the MSCI Emerging Markets Index in 2019. But as the allure of China weakens and Russia remains sanctioned out of the Index, Saudia Arabia is emerging as a potential winner, with the local index up by 11% in 2023, compared to China, which was down 11%. Saudi Arabia’s weighting in the index has risen from 1.5% in 2019 to over 4% today. At AB, we have started to add Saudi exposure to our portfolios and remain enthusiastic about the potential as we continue to look for opportunities to deploy capital in companies that meet our investment criteria.
Like Saudi Arabia, the UAE has undertaken efforts to diversify its economy away from oil. Situated at the crossroads of Europe, Asia, and Africa, the UAE serves as a hub for trade and commerce. Its strategic location facilitates access to global markets, making it an attractive destination for multinational companies looking to establish a presence in the region.
The country has also invested heavily in sectors such as infrastructure development and technology. Projects such as Dubai Expo 2020, Abu Dhabi's Yas Island development, and Dubai South's Aviation District showcase the country's commitment to enhancing its infrastructure to support economic growth and attract foreign investment. And initiatives such as Dubai's Smart City project, Abu Dhabi's Hub71 startup ecosystem, and the establishment of research institutes and technology parks demonstrate the country's commitment to fostering innovation and attracting tech-driven investment. While visa reforms, residency programs and initiatives such as the Golden Visa – a long term residency visa for investors, entrepreneurs, scientists, students, humanitarian pioneers, and frontline heroes - attract foreign professionals to the region who can help transform the economy and the way of life. The Golden Visas are valid for 10 years and encourage sought after workers to establish deeper ties to the region.
Like the Saudi kingdom, the UAE has also shown growth in both tourism and inbound immigration – a beneficiary of geopolitical uncertainties over the past three years. Two telling indicators of this shift have been the strong growth in private school enrolments in Dubai as a proxy of the growth in the ex-pat community, and the growth of inbound tourist numbers in Dubai, which grew at a CAGR of 5% between 2014 and 2019 and were expected to be 3% above Covid levels by the end of 2023 (Display). 2
