Investors discover Saudi Arabia’s untapped potential

By Gregory DjerejianGroup Head of Legal, The Red Sea Development Company

Ohen considering investment opportunities and hidden treasures with great potential, Saudi Arabia is not necessarily the first place that many international investors and companies think of. But that is increasingly set to change. In recent years, the Kingdom has made rapid and sustained economic and social progress. Its economy is expected to more than double in 2022. Indeed, in the last second quarter alone, the Saudi economy grew by an astonishing 11.8%.

The country is already established as one of the world’s leading economies, a member of the G20 and the largest economy in the Middle East and North Africa region. Saudi Arabia continues to establish and develop trade and economic ties with countries around the world, including deals worth $5.5 billion with China and recent visits by US President Joe Biden. and British Prime Minister Boris Johnson, all of which demonstrate the growing economic interest in the country and its growing importance in the international marketplace.

The Kingdom’s ambitious Vision 2030 plan is a key driver of this progress. Launched by Crown Prince Mohammed bin Salman bin Abdulaziz in 2016, the plan aims to diversify the country away from oil dependence while increasing opportunities for Saudis.

A key part of Vision 2030 is championing new industries such as tourism. The Red Sea Development Company (TRSDC) plays a key role in this ambition by developing luxury and regenerative tourism destinations that The Red Sea Project and AMAALA have designed to actively improve the well-being of guests, communities and environments.

By opening up the country internationally, the objective is to attract more foreign and national investment. And we are already seeing positive results.

Opportunities awaiting you

The basis of a booming economy is an engaged, educated and large workforce. The ambitions of Vision 2030, along with a thriving economy, an enthusiastic and young workforce and engaged businesses, persuade investors to see Saudi Arabia in a different light and its increasingly open borders as a tangible and profitable opportunity.

The Kingdom is home to a talented and ambitious young workforce of over 30 million people eager to explore new industries, learn new skills and work with companies and brands around the world. This enthusiasm was recognized in a 2022 Talent Enterprise study, which described Saudi Arabia as a country “at the forefront of the world” in preparing for the future of work, equipping its young people with the education and opportunities to achieve their ambitions.

The country is also gradually moving towards more progressive policies, with the significant increase in female employment being a key aspect. As part of Vision 2030, the Kingdom has set itself a target of 30% participation of women in the labor market. It was achieved earlier this year; although there is still more progress to come, this is symbolic of the pace of change and new attitudes in the Kingdom.

A thriving new industry that puts Saudi Arabia on the world tourism map

As mentioned above, the country is also on its way to becoming an internationally recognized tourist hotspot as it opens up its borders, natural beauty and cultural heritage to both domestic and international visitors. The Kingdom’s ambitious target of 12 million international visitors in 2022 – a target three times higher than the four million visitors last year – is not only a sign that the country is open for business, but also represents a new range of opportunities for investors and global brands. .

To accommodate this influx of new visitors and international businesses, the Saudi tourism industry is being built from the ground up and to the highest standards, with the ambition to increase tourism revenue from its current value of 3% of national GDP (gross domestic product) to 10% by 2030. Tourism in Saudi Arabia will be a shining light for the industry globally, setting new standards in luxury, wellness , cultural trips, sustainable development and more. To achieve these goals and set this new benchmark, the Kingdom is becoming bigger and bolder in its developments than ever before.

This is where Saudi Arabia’s gigantic, ambitious plans come in.

Our two flagship projects, The Red Sea Project and AMAALA, are already nearing completion. These two groundbreaking developments are set to disrupt global tourism and be cornerstones for the growth of an industry with huge potential for investors. Together, the two projects are expected to create 120,000 new jobs to support the next generation of Saudi talent, including specialized leadership programs for recent graduates and women.

At the same time, we are setting new standards for sustainability and regeneration around the world, going beyond current practices to not only protect the natural environment surrounding our developments, but also to enhance it for people. future generations. This includes a commitment to run 100% renewable energy 24/7 and to become the world’s largest destination powered solely by clean energy. We have also committed to a 30% conservation net benefit of the local environment by 2040, ensuring not only to avoid negative environmental impact, but also to leave a local ecosystem in a better place than where we found it.

Ambitious developments such as The Red Sea Project and AMAALA are symbolic of the broader goals of Vision 2030 and the Kingdom. Exploring new industries, innovating to realize never-before-seen projects and concepts, and collaborating with international partners and investors to unlock new opportunities, showcase a Kingdom open for business, and open new paths to get there.

Collaboration and growing interest from the private sector

The Saudi government has been open in its belief that private investment plays a vital role in achieving Vision 2030 and the country’s future growth and prosperity. It aims to achieve a 15 percentage point increase in the private sector’s contribution to GDP (from 40% to 65%), as well as a 5 percentage point increase in the contribution of foreign direct investment (FDI) to GDP (from 0.7% to 5.7 percent) by 2030. These are ambitious goals that require an ambitious mindset.

The visionary and innovative approach we have shown throughout development has been a key factor in attracting investment and partnerships. We already work closely with some of the world’s leading hotel brands, such as InterContinental Hotels & Resorts, Edition Hotels and Six Senses, and attract some of the world’s most prominent restaurant and hospitality brands. This continued interest and firm commitments demonstrate the appetite for private investment and collaboration in the Kingdom, with opportunities too good to ignore.

By showing the world our commitment to innovative, responsible and sustainable projects, we are seeing growing interest and confidence from the private sector in both TRSDC as an organization and the Kingdom as an investment destination. .

We have seen firsthand the effect that trust can have, demonstrated last month when we entered into our first joint venture agreement, worth more than $400 million. We will be developing our Jumeirah Hotel & Resorts property alongside our new partners, the Almutlaq Real Estate Investment Co. (AREIC), and I am pleased to soon begin serving as a member of the board of directors of this inaugural joint venture.

We also reached financial close on a $3.76 billion green financing with four major Saudi banks, as well as a recent partnership with a consortium led by ACWA Power, which attracted FDI from Standard Chartered Bank of the United Kingdom and the Silk Road Fund of China to design, build, operate and transfer the utility infrastructure of the Red Sea project.

The AREIC partnership, in particular, demonstrates growing investor appetite for the region as TRSDC’s first joint venture deal, and more are expected to follow. The reputation of the organization in the market was essential, as investors see promising and tangible progress being made. At TRSDC, we see an abundance of third-party investment interest, particularly from entities focused on ESG (Environmental, Social and Governance), embodying the alignment of the private sector with our commitment to regenerative tourism. and sustainable development.

I expect this willingness to invest in the region and its projects to only grow, supported in part by extensive aid and incentive programs offered to investors by the Saudi government – aimed at boosting Foreign investments.

The future looks bright

Private sector support, collaboration and partnership are helping to make Saudi Arabia and TRSDC’s vision for the Kingdom a reality. We have already made concrete achievements, with tens of thousands of new jobs created and new business partnerships and networks established internationally as our luxury and regenerative resorts move towards completion.

On a personal level, as The Red Sea Project and AMAALA move closer to welcoming guests in 2023 and beyond, I am decidedly optimistic about the future of these developments and the Kingdom as a whole. I am confident that we will see increasing levels of interest, trust and partnerships with some of the most exciting private investors, businesses and tourism brands in new opportunities and ventures across the region.

On a larger scale, Saudi Arabia’s potential as a private investment opportunity is vast. Vision 2030 continues to drive the Kingdom forward, helping it grow, develop and diversify its economy, through a young and talented workforce and open international borders. The future looks bright for Saudi Arabia and even brighter for organizations and investors who seize the opportunity early on.

ABOUT THE AUTHOR

Greg Djerejian is the Group Legal Manager for The Red Sea Development Company, the developer behind two of the world’s most ambitious regenerative tourism projects. Greg also manages special initiatives, including strategic transactional and regulatory matters. He brings nearly three decades of investment experience in real estate acquisitions and development, private equity and corporate law.

Robert D. Coleman