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Friday, Feb 03, 2023

Saudi Arabia Vision 2030 ‘winners’ need more private sector funding

Saudi Arabia Vision 2030 ‘winners’ need more private sector funding

Transport, tourism, and technology are among the sectors set to benefit from massive investments as Saudi Arabia pushes ahead with its Vision 2030 economic diversification plan, according to a report from S&P Global.
The ratings agency argues these industries, as well as healthcare and energy, will see significant spending growth over the medium and long term. 

However, in line with previous reports, S&P Global warned that the banking sector and the Kingdom’s sovereign wealth fund will not be able to provide all the investments required, with debt-capital markets needed to step in.

“It will fall to the debt-capital markets to support a large portion of these new opportunities, as the government and the banking sector alone will not be able to meet all the required funding needs,” said the report.

In its analysis of individual sectors, the report says that as one of the region’s largest countries, and with a significant young population, Saudi Arabia has planned out massive investment in the real estate sector as it continues to launch new programs to provide local housing. 

This is supplemented by a similar focus to develop the business and financial sectors through investments in commercial real estate as the Kingdom wants to become a regional industrial hub.  

On energy supply, the report says: “Utilities face the mammoth task of reducing Saudi Arabia’s fossil fuel dependency and meeting 70 percent of energy needs from renewables by 2030. We expect more public-private partnerships (PPPs) and significant investments in the country's grids.”

The Kingdom’s goal to become a technology hub will see digital infrastructure becoming a key enabler of transformational growth, with telcos staying at the heart of investments, stated the report, adding that high speed broadband, 5G, and a strategic digital hub will drive this change.  

Saudi Arabia’s push to become self-sufficient on food will see investments in the agriculture sectors as the Kingdom aims to increase local production and adopt modern farming techniques.  

“Despite strong demand and price increases, profitability in these sectors remains lower than before the pandemic, with rising input costs obscuring the path to recovery,” said the report.

The report also highlighted the developing tourism sector, “which has already received a substantial boost via aviation developments as well as projects intended to help attract 100 million visitors per year by 2030”. 

In the sector of healthcare, Saudi Arabia’s Ministry of Health will soon assume a regulatory role, stated the report, adding that the private sector is expected to play a more important part in this sector, attracting more than $65 billion in investments.  

“We do not anticipate taking any immediate rating actions on Saudi corporates — even as they carve out significant capital spending budgets over the next two-to-five years — given their healthy balance sheets and strong liquidity,” said the agency, adding: “Over time, however, we will reassess our ratings as projects are executed.”

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