Saudi Arabia – The New Realities
As Saudi Arabia continues to make its mark on the retail real estate industry and expand its horizons, David Macadam, CEO of The Middle East Council of Shopping Centres & Retailers (MECS+R) takes a look at the overall market and how the changes in recent times has been the catalyst for major growth.
Once in a Lifetime Opportunity
“The next global renaissance will be in the Middle East” – Mohammed bin Salman Al Saud, Crown Prince of the Kingdom of Saudi Arabia.
The ‘new’ Middle East will be focused on economics rather than democratisation, Islamisation or other distracting ideologies argues the Economist Magazine. The magazine goes onto say that the Middle East accounts for 36 per cent of the world oil production, 46 per cent of oil exports, 22 per cent of natural gas output and 30 per cent of liquified natural gas exports. Reserves in the ground account for 52 per cent of the world’s oil and 43 per cent of the natural gas with very low production costs. 55 per cent of the Middle Eastern countries’ population are under the age of 30.
Oil profit is at the heart of the transformation of the economies from reliance on the sale of the petroleum products to expansion of internal industries which are not petroleum related. In 2022 profits from Aramco were a record $161bn.
In the past, oil wealth created from the vast petroleum reserves in Saudi was exported abroad largely to the US. The direction now for the investment capital is to reinvest in Saudi.
Wide ranging investments in Saudi are proliferating. Investment examples include the massive expansion of non-religious tourism into areas throughout Saudi but specifically in northwest Saudi such as AlUla and Neom.
Heavy investment in industries such as global sporting events, top ranked football teams and international golf has placed Saudi on a global stage.
Through PIF companies, investment in technology with hi-tech start-ups has made Saudi prominent on the world stage for funding early-stage tech companies.
Massive construction and development of housing, new retail centres, hospitals, airports, hotels and the creation of new cities in remote areas of Saudi is taking place.
PIF sponsored companies such as ROSHN are building complete new residential communities and cities in Saudi. In 2022, $51.3bn in construction within Saudi was recorded, Arabnews.com highlighted back in May. The expectation in 2023 is a 35 per cent increase in construction investment to nearly $70bn.
Recently quoted from Mohammed bin Salman Al Saud with respect to the new KSA-based electric vehicle, “Saudi Arabia is not just building a new automotive brand, we are igniting a new industry and an ecosystem that attracts international and local investments. We are creating job opportunities for local talent. We want to enable the private sector and contribute to increasing Saudi Arabia’s GDP over the next decade, as part of PIF’s strategy to drive the economic growth in line with Vision 2030.”
Introduction of foreign manufacturing centres including Tesla, Hyundai and other EV brands are promising to create a $50bn business within ten years in Saudi Arabia.
Massive investment in locally based manufacturing and production of alternate industries such as electric vehicle (EV) components in partnership with Foxconn including the finished EV products such as the new EV brand CEER are a few examples which indicate the direction of Saudi Arabia in the economic transformation of the country.
In line with the Saudi Vision 2030 created by the Crown Prince of Saudi Arabia, Mohammed bin Salman Al Saud, the Kingdom of Saudi Arabia has embarked on a massive transition.
With the intention of bringing all Saudi people into the 21st century, broad and sweeping changes have taken place. More and greater rapid change is coming.
With another seven years remaining to fulfil the Saudi Vision 2030 program and billions of investment dollars slated for this initiative, the velocity of change will accelerate dramatically.
A population base of 30 million spread across the country, Saudi was a closed society until recently. Opening Saudi to the world is a primary objective of the Crown Prince through the Saudi Vision 2030.
Perhaps the game changing initiative with the largest positive consequence is the recognition of the rights of women in Saudi society.
In 2017, 16 per cent of the employment in Saudi was with Saudi women. Today 31 per cent of the employment within Saudi is with Saudi women, explains the Economist Magazine. Most of the employment for women in Saudi has occurred since the lifting of restrictions from Covid lockdowns in 2021. Women in Saudi are now following the local female leaders and friends who have joined the workforce. Further massive employment of women in the Saudi workforce will follow in the coming few years bolstering the empowerment of women.
Improving the role of woman in society is perhaps the single greatest benefit to Saudi Arabia. From a western perspective many of the newfound freedoms now enjoyed by Saudi women were taken for granted abroad. For Saudi women however the list of new opportunities is long and welcome.
Some of the changes which have improved women’s rights in Saudi include the right to drive, the right to work and the right to travel internally and abroad without male guardianship. The integration of women in the Saudi society has resulted in massive progress economically. Just adopting these few rights for women in Saudi has positively impacted the quality of life for half the population. Interestingly 77 per cent of the female population in Saudi under the age of 35 have an advanced university degree.
In the past, restaurants, hotels and public areas throughout Saudi created segregated areas for women, families and men. Workplaces were segregated where women were isolated from men in the offices. In the past women were not able to contribute in a meaningful measure to the wellbeing of the economy through work. These impediments to growth in Saudi have been removed.
Empowering women in Saudi has created new sources of wealth in the society. Women who work purchase cars. Travel and the ability to circulate more freely in society has opened multiple opportunities for Saudi women.
The retail industry in Saudi now benefits in many ways. Women run or are now employed in many industries in Saudi such as fashion or F&B shops. Women hold jobs in shopping centres in leasing, marketing, asset management and other roles. The income earned provides financial independence to purchase goods and services in local communities which otherwise in years past would not occur.
Other firsts in Saudi include the opening of cinemas around the country. Another is the allowing of the first Saudi public concerts with female singers. Stadiums for football matches and concerts across Saudi are now also open to women. Entertainment in retail including cinemas with mixed seating is now the norm.
The opening of the country to international tourists with the introduction of e-visa and visa on arrival for many nationalities has increased interest in international non-religious tourism in Saudi. The customs agents on arrival into Riyadh and Jeddah are now predominately women. Efficiency, expediency, knowledge and willingness to provide a positive experience on arrival has made the arrival experience into Saudi through the major gateways much smoother and better.
Demographically 60 per cent of the population in Saudi is under the age of 35. Household formation in the coming decade will be at an all-time high in Saudi. Retail in general benefited dramatically during the period of family creation. The new generation of Saudi men and women are trending to smaller families with fewer children. Two or three children are now the norm for family size.
Realising the initiatives from the Saudi Vision 2030 will enable Saudi to be the leader in the next global renaissance.
