Countries are transitioning to alternative energy sources amid oil crises and energy wars. Oil-producing countries, whose economies are largely reliant on crude oil, have had to devise an Oil-Free Economy.
When we discuss oil, it’s hard not to mention the Kingdom of Saudi Arabia, which is one of the world’s largest oil producers. The country’s leaders have recognized the need to diversify their economy and reduce their reliance on oil. They have taken concrete steps to achieve this goal. As a result, Saudi Arabia is now on the path towards an oil-free economy.
The Oil-Free Economy, Quickest Growth Since October 2021
In August, Saudi Arabia’s non-oil private sector expanded at the quickest pace since October of the previous year. The Purchasing Managers’ Index (PMI) survey revealed that business activity was lifted by better demand conditions in the country.
The seasonally adjusted S&P Global Saudi Arabia Purchasing Managers’ Index (PMI) for the whole economy climbed to 57.7 in August from 56.3 in July, breaking above the series average since 2009 of 56.8.
According to economist David Owen at survey compiler S&P Global Market Intelligence, the Purchasing Managers’ Index (PMI) of Saudi Arabia for August indicated that the non-oil sector of the economy is becoming more resilient. This is because business activity and sales continued to increase significantly, despite reports of a worsening global economic situation.
“Total new orders rose at the quickest pace since October last year, driven by improving client demand, higher exports, and a broad recovery in economic conditions since the pandemic.”
A strong increase in new export orders fuelled the rise in new orders, although they rose at a slightly softer pace than July’s eight-month high.
The output sub-index, which measures business activity, rose to 61.5 in August from 59.9 in July, roughly in line with the series average of 61.4.
The rise in input costs decelerated for a second consecutive month, roughly in line with the series’ average.
A trillion dollars for Tourism
The tourism sector is the first area that Saudi Arabia plans to develop strategically. According to a Wall Street investigation, the government plans to spend $1 trillion over the next decade to turn Saudi Arabia into a mass-market tourist destination. The investigation also addressed talk of a nascent cruise sector, luxury Red Sea resorts and eco-lodges in the desert that are all in the works.
Since Saudi Arabia lifted its last Covid-related travel restrictions in March, tourists have trickled into the country to discover its sprawling capital, six UNESCO World Heritage sites and traditional Arab hospitality.
The Kingdom plans to attract 55 million international tourists annually by 2030, just over half the number that visited France, the world’s most popular destination, in 2019.
Nearly 3.5 million foreigners came last year—excluding religious pilgrims—and 6.1 million in the first half of 2022.
The government assigned $4 billion to encourage private-sector investment. Hotel chain Radisson Hospitality Inc., which has 26 properties in Saudi Arabia, now plans to open 20 more within the next three years, and Hilton Worldwide Holdings Inc. wants to add 75 over a decade to its existing 16.
Attracting high-profile persons:
Saudi Arabia has taken a promotional and strategic approach to appeal to the mass market by attracting high-profile persons in hospitality to oversee the implementation of new tourism plans. One of those helping in that direction is Jerry Inzerillo, a renowned hospitality and tourism executive from Brooklyn who has launched hotels and resorts from the Bahamas to South Africa.
He was hired in 2018 to run Diriyah, a $40 billion development project. It aims to cement the origin story of Saudi Arabia for both domestic consumption and international appeal.
“In a world of wonders, there’s only one Diriyah” is Mr Inzerillo’s catchphrase to market the attraction, which has little name recognition outside Saudi Arabia.
Diriyah is now among the most advanced of a string of massive building projects that includes a skyscraper set to stretch for 75 miles (ca. 121 km). It is closed to the public for renovation, but the aim is to reopen the historic district—one of the Kingdom’s UNESCO sites—before the end of the year, to pull in 27 million visitors annually by 2030.
