In the meeting that was held on Saturday (July 8) at the Tehran Chamber of Commerce, a group of private sector activists, members of the Chamber of Commerce delegation, ambassadors and former advisors of Saudi Arabia were present.
The purpose of holding this meeting, which was held with the efforts of the Tehran Chamber of Investment Services Center, was to examine the fields and prerequisites of the private sector to operate in the Saudi market after the improvement of relations between the two countries.
In the following, we will describe some of the achievements of this meeting.
Azadeh Entezari – July 2023
Economic developments in Mena region
(with emphasis on Iran and Saudi Arabia)
MENA member countries include 22 economies, of which 10 are oil exporting countries and 12 are oil importing countries. 14 countries are located in the South Asia region and 8 countries are located in North Africa, and among them 21 are Arab countries and only one is a Persian country.
According to the statistics of 2022, Saudi Arabia is in the fourth place among high-income countries with a gross national income of 27,590 dollars per capita. While Iran with a gross national income per capita of 3900 dollars is among the middle and low income countries. Also, the gross domestic product of Saudi Arabia was 1108 billion dollars in this year and the 17th largest economy in the world, while Iran is the 43rd largest economy in the world with a gross domestic product of 352 billion dollars. The annual trend of gross domestic product between the four largest economies of the MENA region shows that Iran’s economy has entered a phase of divergence and severe weakening after the start of sanctions, and is severely lagging behind its competitors in the region.
Inflation analysis in 2023 and 2024.
According to studies by the International Monetary Fund, crude oil prices are expected to rise from $96 per barrel to $73 in 2024 and oil-dependent economies such as Saudi Arabia and Iran will experience stable inflation due to the decrease in oil prices, and it is expected that we will see the growth of the non-oil sector in these countries.
Also, another statistic that is interesting is that Iran has the lowest ratio of export to production in the oil sector among the MENA countries.
Analysis of Saudi Arabia’s foreign investment
Statistics show that Saudi Arabia has the highest inflow of foreign direct investment in 2022 with a figure of 22,737 million dollars, while this figure for Iran was 1,500 million dollars. Political conditions and economic stability are definitely the main factors for the confidence of foreign investors in other countries.
The vision of Saudi Arabia in 2030
Saudi Arabia’s Vision 2030 document was approved in 2016 and is the basis of Saudi economic diplomacy policies. This document is actually an ambitious strategic plan designed to diversify and modernize the Saudi economy mainly through reducing dependence on oil, developing alternative sources of income and increasing the participation of the private sector in the economy. This grand plan has three main pillars:
- Improving the position of Saudi Arabia as “the heart of the Arab and Islamic world”
- Becoming a global center of capital attraction and investment
- Becoming a hub that connects Asia, Europe and Africa
Also, in this plan, there are measurable goals and plans that are helpful to know.
- Creating more jobs in the private sector for Saudi nationals
- Increasing participation of women in the workforce
- Supporting small and medium-sized companies
- Increasing investment in non-oil sectors such as renewable energy, advanced industries, tourism, etc.
- Increasing domestic content in industrial production
- Privatization of public companies and public services (such as health, education and housing)
- Deregulation of the energy market
- Reducing energy subsidies
One of the significant goals of Saudi Arabia for 2030 is to achieve a “productive and green economy” and it plans and pursues the following goals to reduce greenhouse gases:
- Increasing renewable energy with a capacity of about 2 GW by 2024, saving through efficiency programs, applying carbon capture, utilization and storage technologies and becoming the largest hydrogen exporter in the world.
- Annual reduction of greenhouse gas emissions by 278 million tons and achieving the goal of net zero emissions by 2060.
- The complete removal of fuel subsidy until 2030 and its 30% impact on achieving the goal of reducing emissions in the said year.
We have been hearing a lot of news from Saudi Arabia for some time now. From the construction of Saudi Arabia’s Neom urban project to large investments in the construction of electric cars, attracting famous athletes, sending female astronauts into space, and many examples that show the country’s movement towards its grand plan. Now the question is whether the improvement of relations between Iran and Saudi Arabia will lead to economic openings for the private sector of the country?
The collection of opinions of experts in this meeting shows that from this improvement of the relationship, one cannot expect quick and easy results for the private sector activists of the country, and this relationship can be both stable and very fragile, Because the Saudi economy is still influenced by the kingdom of Bin Salman, and the private sector will not enter into economic activities with other countries without the king’s approval and green light, and also some soft infrastructures for these interactions and communications are still not available, and if we want to enter this space, we must first understand our position correctly and believe that we are far away from the economies of the region, especially Saudi Arabia And in this situation, we cannot compete in the region with the same method and game as before, and we must refrain from some of our past positions, just as Saudi Arabia has adopted a policy of zero tension in the region in order to achieve its long-term goals, and it seems that it is on the correct way.