Saudi Arabia has witnessed major reforms recently in an attempt to diversify away from its oil-based economy. State-owned Aramco, the largest oilco in the world, is valued at around USD $2 trillion. Yes, trillion. So, diversifying away from a hydrocarbon economy is by no means a walk in the park.
These government reforms, in line with the country’s Vision 2030, are helping transform the nation into a tech-savvy and vibrant economy that welcomes and encourages entrepreneurship and competition. And it’s entirely possible that the outcome of Saudi Arabia’s Vision 2030 could be to redraw the economic map of the MENA region, with the potential to reverberate around the developed and developing world.
What’s been going on in SME-land?
The strategy has included action to boost the SME sector, with the formation of the Council of Economic Affairs and Development and the SME Bank, as well as the announcement of economic free zones and reforms to company law. As things stand, SMEs in the Kingdom account for over 90% of total enterprises but only about 60% of total employment. What looks increasingly obvious is that Saudi Arabia is taking a few lessons from the UAE’s amazing success story in creating a vibrant SME ecosystem, where more than 350,000 SMEs account for around 40% of Dubai’s GDP and employ more than 40% of its workforce.
Compare Dubai’s incredible success story, and you’ll see how far Saudi Arabia still has to go. Nevertheless, over the past few years, the Kingdom has seen a steep rise in VC investments. In 2023, nine funds worth almost USD $2.5 billion were established to encourage the growth of startups, and in the previous two years, almost USD$1 billion in VC capital found its way to over 140 startups, representing an over 70% increase in VC funding in the Kingdom.
It’s encouraging that, in taking similar steps to UAE’s staggeringly successful path to enterprise freedom, Saudi Arabia is doing everything right. The government is bending over backwards to promote the tech industry, with initiatives like the LEAP conference, supported by the Ministry of Communication and Information Technology, Small and Medium Enterprises (SME) General Authority, as well as the Entrepreneurship World Cup (EWC). The government also organises the Kingdom’s global startup and SME forum, Biban, which aims to bring together Saudi and international entrepreneurs and investors to work together.
Unique potential
It’s true, the startup scene and ecosystem aren’t yet quite as vibrant as Dubai’s, but given the country’s changing economic profile, its emergence as a strong ecosystem for digital entrepreneurship and its young demographic – 15 million digital-native Saudis out of a population of around 35 million will enter a workforce that already has a social-media penetration of a staggering 99% of citizens in the next decade – there is a wealth of opportunities for founders with the right kind of startup.
The startup opportunities of the future
Artificial intelligence (AI)
Cutting-edge tech will certainly feature heavily in Saudi Arabia’s future. The Kingdom’s National Strategy for Data & AI lays out incentives for startups, with the ultimate aim of creating a USD $20 billion AI sector by 2030 through private and government investment. Saudi tech fund Alat, with backing from the Public Investment Fund, has committed USD $100 billion in investment to build out Saudi capabilities in the sector.
The Kingdom has made no secret of wanting to attract AI-driven businesses; its tantalising incentives are a bit of a giveaway, in all senses. Innovative government-backed investment funds and state-of-the-art infrastructure investment are heavily targeting an emergent startup ecosystem.
So, what’s possible in the Kingdom’s AI sector? Global professional-services firm PwC believes that it has the potential to contribute USD $135 billion to the economy by 2030 and recognises the huge potential of the finance, healthcare and logistics sectors, all aided and driven by advances in home-grown AI tech.
Biotechnology & biosciences
Vision 2030 seeks to compete with the best the world has to offer in cutting-edge innovation in science. An integral part of that vision involves the health sector, which, as a highly complex and expensive field, is one of the first beneficiaries of advances in tech, informatics, and AI. So much so that, although reports vary, the government has set aside a staggering USD $40 billion for AI alone.
What that says to me is that not only is the government taking radical steps to diversify the Kingdom’s economy away from oil, but it’s also taking the necessary steps to make Saudi Arabia among the most competitive nations on earth in biosciences, biotech and science.
Demonstrating that determination to diversify into emerging tech and science, the Saudi Genome Program is already up and running, designed to revolutionise healthcare in the Kingdom and reduce the occurrence of genetic diseases.
Fintech
As we’ve seen elsewhere in the world – including Africa – fintech is innovating at break-neck speed. From Saudi Arabia’s perspective, a tech-savvy population with huge numbers of digital natives poised to enter the workforce, fintech is clearly in fertile ground. Add to those ingredients a regulatory regime and financial sandbox that encourage and nurture innovative fintech startups and the formation of important international partnerships in the sector, the potential is huge. And that’s being further encouraged by The Saudi Central Bank’s sandbox for financial innovation and experimentation, as well as Vision 2030’s Alat project.
In fact, I would argue that the circumstances are unique.
Sport
It’s been no secret that the Kingdom’s sovereign wealth fund (PIF) has been investing heavily in sport around the world and has spent around USD $5 billion in the last three years alone. The country has now hosted more than 80 major sporting events, ranging from the Americas Cup, horse racing and golf to Formula 1, boxing and, of course, football. In 2034, Saudi Arabia is set to host the prestigious FIFA World Cup.
As part of Vision 2030, the Kingdom is determined to foster an active population that takes its health and sport seriously. Investment into sports hubs such as the Qiddiya project are focused on improving Saudi citizens’ health and overall well-being. A huge amount of cash is going into grassroots sports to encourage citizens to adopt an active lifestyle, and grassroots initiatives aimed at children and pre-adults are carefully crafted to integrate their ever-growing talent and enthusiasm for sport and exercise with the international sports community of the future. As the Saudi Arabia sports minister, Prince Abdulaziz bin Turki Al Faisal, has made very clear, the aim of such investment is to inspire the Kingdom’s youth to exercise, open the country up to a broader international community, increase tourism and, ultimately, create more employment.
Heritage Tourism
Saudi Arabia’s history, culture and unique geographical features give it untold potential for global tourism. Indeed, the Saudi Commission for Tourism and National Heritage (SCTH) is ploughing cash into this growing sector. In short, the government aims to turn Saudi Arabia into a magnet for global tourism.
As a case in point, the Kingdom’s premier heritage site, AlUla – a unique collection of preserved tombs and sandstone outcrops – is the focus of a major initiative to develop its tourism potential under Vision 2030. Incorporating the Nabataean city of Hegra, the ancient Kingdoms of Dadanite and Lihyanite, as well as AlUla Old Town, the government is both conserving and transforming the site into a unique tourist experience, whilst underscoring the Kingdom’s rich culture and history for a truly international audience.
Such initiatives have gone hand in hand with innovations such as the introduction of tourist visas. Considering these alongside projects like the Red Sea Development, which will eventually have 50 individual resorts dedicated to luxury, sustainability and innovation, it’s clear that these developments and initiatives aimed at international tourism offer huge potential for entrepreneurs. Savvy startups will be able to take advantage of the opportunities the government provides – namely, to reimagine the essence of international tourism by setting a new bar for luxury and sustainability.
Gearing up for a Saudi SME bonanza
A young, tech-savvy population combined with the right strategic vision, and the patience and cash to see it through, position Saudi Arabia for extraordinary growth in the SME landscape and ecosystem. Saudi Vision 2030 offers a robust framework to work within as the Kingdom takes advantage of the unique features driving the new SME economy.
The future’s bright for entrepreneurs in Saudi Arabia, and savvy startups can reap enormous rewards in any number of fertile and burgeoning sectors. And it won’t be long before Saudi Arabia has caught up with and overtaken other international hubs, such as Dubai, which are now rightfully enjoying the fruits of their labours in the SME ecosystem.
