Saudi Arabia’s Path to Economic Diversification through Research, Development, and Innovation

Saudi Arabia’s Path to Economic Diversification through Research, Development, and Innovation

All of the GCC member states are taking action to realise economic diversification while minimising dependency on fossil fuels. The most recent ranking of global competitiveness (the IMD World Competitiveness Ranking) shows Saudi Arabia making significant improvements in economic diversification through long-term sustainable value creation in the economy.  The Saudi government has put research, development, and innovation projects at the heart of its economic diversification strategy. By consenting to an annual investment equivalent to 2.5% of the Saudi GDP in 2040, Riyadh hopes to create a high-value labour market essentially centred around technology and science. 

At the end of June 2022, the Saudi government issued a new strategy outlining the country's key research and development priorities over the next two decades.  The government has created the Supreme Committee for Research, Development, and Innovation to oversee the development of the flagship projects. The priority areas at the heart of the Saudi diversification strategy are varied addressing global issues such as food security, water access, health and wellness, energy and environmental sustainability, and industrial development. 

Since the founding of the modern Saudi state in 1932, Riyadh has striven to bring talent into the Kingdom to ensure the development of its economy. The new diversification strategy is no exception. The Saudi government will dedicate a sizeable portion of the project’s substantial budget to building residences aimed at attracting top national and international talents who will be invited to take part in its research projects. Since 2019, the Saudi government has also launched a programme that grants Saudi citizenship to international talents in high-level fields such as medicine, chemistry, and technology.  By putting innovation at the heart of its strategy, Riyadh aims to convince the best talents to come and participate in the national project in the hope of creating unicorns (privately owned start-up companies valued at over USD 1 billion), which could eventually dominate the global innovation market in the Gulf region.

The recently announced research and development strategy builds upon Vision 2030, an ambitious strategic framework from 2016 aimed at enabling the country to reduce its economic dependence on the oil sector.  Human health concerns are a key part of the new strategy with efforts directed at developing technologies in pharmaceuticals and biotechnology.  Access to clean water and food security are also priority areas along with ongoing efforts in support of the energy transition.  The strategy also seeks to support what is called ‘future economies.’  This area seeks to develop smart cities free of carbon missions and explore the future of space.  Existing projects such as NEOM and the Red Sea Project are forerunners in Saudi Arabia’s quest for a sustainable future for coming generations. 

The novelty of the new strategy lies in the public-private partnerships that are the core of the action being taken.  Whereas in the past large national companies would outsource their R&D, the private sector has now been encouraged to conduct research domestically through tax cuts and other incentives.  The growth of the private sector is a key issue in diversification for all Gulf states as well as for the realisation of the Sustainable Development Goals and the energy transition.  Policies for research, development, and innovation being pursued by Saudi Arabia are to be emulated by other GCC states for ensuring the private sector has a leading role in realising economic diversification for the region. 

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