Coinciding with a visit from US President Donald Trump, the inaugural Saudi-US CEO Forum on May 20 in Riyadh saw a series of deals signed between numerous companies in both the oil and non-oil sectors, with Saudi Arabia looking to enhance private sector involvement in its economy and increase foreign investment as part of its Vision 2030 economic blueprint.
Saudi Aramco alone signed memorandums of understanding (MoUs) valued at around $22bn with numerous US engineering and drilling companies – including McDermott, Weatherford, Rowan Companies, Nabors and Honeywell – largely aimed at localising goods and services along the oil giant’s supply chain. The state-owned oil company and Jacobs Engineering also announced they would be setting up a joint venture with the aim of providing professional programme and construction management services for social infrastructure projects across the MENA region.
“The agreements signed today by Saudi Aramco with major American companies underscore the purposeful collaboration between Saudi Arabia and the US in areas of strategic importance linking Saudi Vision 2030 and America’s own economic depth and strength,” Amin Nasser, Saudi Aramco president and CEO, told media following his participation in the event.
Combined, the newly inked deals are expected to create more than 3700 jobs and should go some way towards fulfilling Vision 2030’s aim of maximising local content and creating job opportunities across all sectors, while also strengthening Saudi Arabia’s partnerships with private enterprises.
The moves marked a significant step forward for the country’s hydrocarbons industry; however, non-oil interests were also given a boost at the forum.
In this regard, US technology and engineering company General Electric (GE) and Saudi Arabia confirmed MoUs and agreements valued at around $15bn. The raft of deals span the health care, power and mining sectors, and will also see GE work to bring about the goal of $4bn of productivity improvements per year at Saudi Aramco through digital transformation.
Speaking to OBG in March, Hisham Al Bahkali, president and CEO of GE Saudi Arabia and Bahrain, highlighted the positive moves the Kingdom has been making to engage the private sector even before the recent CEO forum.
“The government has taken continuous steps to drive efficiency by pushing privatisation plans and incentivising private sector partners, especially within the power generation sectors through independent power producer contracts. In line with the aims of Vision 2030, health care provision is also rising as a major opportunity for private sector,” he said.
The range of sectors covered by the new GE partnerships are key, given the centrality of economic diversification to the Kingdom’s development plans. Vision 2030 calls for the non-oil sector to contribute 50% to the national export mix by 2030, up from a present level of between 12% and 16%, according to the blueprint.
To achieve this goal, non-oil exports will need to rise by a compound annual growth rate (CAGR) of 15% through to 2030, well above the 8.9% CAGR posted between 2005 and 2015. This combines with the broader goal of increasing non-oil private sector GDP from 40% to 65% over the next 13 years.
In the medium term, the National Transformation Programme 2020 – the first implementing stage of Vision 2030 – aims to increase the export value of non-oil commodities to SR330bn ($88bn) by 2020, up from the SR177.7bn ($47.4bn) posted in 2016, as per General Authority of Statistics (GaStat) figures.
More recent monthly figures show mixed results. Non-oil exports rose 10.3% year-on-year in January to SR14.01bn ($3.7bn) – the first substantial y-o-y increase since May last year. However, this was immediately followed by a month-on-month decrease to SR12.62bn ($3.4bn) in February, the lowest monthly value since July 2016, and a y-o-y drop of 8.8%.
In the 12 months to January, non-oil exports were led by the plastics and rubber segment, which accounted for 32.7% of all shipments over the 12 months to January and increased by 17.9% y-o-y. They were followed by the chemicals and allied products segment, which posted a 24.6% share and a 25.4% rise in shipments.
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