Investors are expected to pump billions into the Saudi bourse, known as the Tadawul, if the Kingdom is included in the key MCSI-emerging markets index in 2019. The decision is expected on Wednesday.
Analysts interviewed by Arab News gave a unanimous thumbs up to KSA’s widely anticipated inclusion that will see huge US “trackers” run by the likes of BlackRock and Vanguard, sign off on multi-billion dollar cheques on behalf of investors in their pension, insurance and savings funds in North America and elsewhere.
There is about $2 trillion in global emerging (EM) market funds, according to EFG-Hermes in Cairo, a huge pool of capital that could be tapped for future IPOs, with state-owned Saudi Aramco a prime target when it floats in what is expected be the world’s biggest listing of all time.
The macro-story is important, too.
“The positive narrative around reforms being pushed by Crown Prince Mohammed bin Salman makes for a compelling backdrop,” said Charles Robinson, global chief economist at London-based Renaissance Capital.
One of the main advantages of inclusion in the index is that it would herald “a more efficient allocation of capital” in that foreign cash would find its way to those Saudi Arabian-listed companies that offer the best prospects, said Robinson.
Currently, 95 percent of Tadawul investors are made up of smaller retail or private shareholders. But Robinson added: “You would hope that there would be an increasingly professional approach in the Saudi stock market by professional investors who are going to influence the price/earnings ratios of the better companies, pushing up their share prices, allowing them to raise more capital and therefore enabling them to become bigger companies in the future.”
Those doing less well, which currently might be attractive to retail investors, could end up getting less cash, he suggested.
The inclusion of Saudi Arabia in the MSCI EM index may help to “turbocharge” the Vision 2030 plan that aims to reduce the Kingdom’s reliance on oil, and boost the private sector, he added.
In turn, this would pave the way for greater employment of Saudi nationals, especially young people who make up a large proportion of the potential and actual workforce.
Hootan Yazhari, head of Middle East and global frontier markets research at Bank of America Merrill Lynch, told Arab News: “Global Emerging Market fund managers will effectively be forced to have a view on Saudi Arabia, especially as it will be a material part of the MSCI index (more than 2.6 percent weighting). Therefore, Saudi Arabia’s profile and awareness among fund managers globally will increase,” he said.
Others were equally enthusiastic. Mohammed Al-Hajj, Middle East equities strategist at EFG-Hermes, told Arab News that an upgrade to emerging market status meant that from 2019 Saudi Arabia would be part of global emerging market (GEM) benchmarks followed by GEM investors which he expected would lead to inflows of $30 billion-$45 billion into the Kingdom by the end of 2019 (excluding Aramco).
He said: “Ownership of Saudi businesses by foreign financial institutions is only 1.8 percent of total (Tadawul) market value versus an emerging market (EM) average of 17 percent, as such we see big potential for inflows into the country,” said Al-Hajj.
Importantly, analysts said MSCI inclusion would make the Kingdom a more sophisticated market as seasoned investors exerted greater influence on its corporates. KSA companies would be increasingly compared to international peers by investors, it was suggested, making management teams more likely to focus on improving strategy, efficiency and overall performance as they seek to compete for capital. “Accountability to shareholders will increase,” said Al-Hajj.
EFG-Hermes has highlighted the appeal of KSA-listed banks and petrochemical companies, tipping Samba, Kayan, SABB, SABIC and Al-Rajhi.
Hajj saw scope for about $10 billion of inflows to the market from passive MSCI EM index trackers and a similar amount from active managers. “With FTSE having elected to include the country in its EM benchmark in 2019, this necessitates another $6 billion of passive flows taking potential total inflows close to $30 billion.
“We see these flows providing tail winds to the market and supporting the country’s FX position,” he said.
Foreign ownership limits in KSA have been capped at 49 percent, and a few companies are fully closed to foreign investors, but the Tadawul embarked on a modernization and reform program in 2015 to make the market more transparent and accountable.
Historically, Saudi Arabian shares have traded at a premium to the average for emerging markets, but with excitement building ahead of MSCI’s decision this week, there are some concerns that stock values have become a bit too toppy.
Bloomberg said in a report that the buying had pushed the capitalization of Riyadh’s market beyond that of South Africa in dollar terms for the first time in 11 months.
“As the gains pile up, Saudi stocks have become increasingly more expensive than the group the country is poised to join,” claimed the report.
As markets anticipated an MSCI upgrade, “valuations have gone so much ahead of fundamentals,’’ Aarthi Chandrasekaran, vice president at Shuaa Capital, said in an interview with Bloomberg TV.
“I’m sure there will be a cool-off period post the decision announcement, when valuations will start catching up more with reality on the ground.’’
Another analyst cited by Bloomberg advised investors to be more selective and go for ‘bottom-up’ names.
There are, of course, disadvantages to being included in the index. In the good times, capital flows would pour in, but in less benign periods, outflows were possible, depressing market values, damaging sentiment and knocking balance sheets.
Timothy Ash at Blue Bay Asset Management in London told Arab News: “It’s a story about managing success: Portfolio managers, for a variety of reasons, could decide they don’t like the KSA story any more and they can leave … look at Argentina.”
Al-Hajj said: “What we have seen in previous upgrades is that multiples expand, making markets expensive on a fundamentals basis, which could make it prone to weakness (short-term) in the post-implementation period (after May 2019).
“In addition, once a market is part of EM indices it will be more prone to EM outflows and risk-off periods that lead to EM weakness.”
He also said: “However, the benefits far outweigh the negatives in our view. As the inclusion will increase the institutional share in the Saudi market, and offer companies access to funds during capital raising by Saudi companies (new listings) in the future.”
The MSCI proposal, which was laid out in a document published in February, is to implement the potential reclassification in two steps in May and August 2019.
Saudi shares-index upgrade likely to ‘turbocharge’ private sector growth
Saudi shares-index upgrade likely to ‘turbocharge’ private sector growth
- $2 trillion in global emerging market funds
- Saudi bluechips set to gain from inflows
Saudi Arabia forms new committee to spur private sector role in petrochemicals
RIYADH: Saudi Arabia has launched its first-ever national committee for energy and petrochemicals under the Federation of Saudi Chambers to bolster private sector participation.
This comes as investments in the petrochemical sector are projected to reach $600 billion by 2030, with the council set to collaborate with ministries, authorities, and major companies to unlock opportunities for local and foreign investors.
This initiative marks a significant step in fostering closer ties between the private sector and government to shape policies and accelerate investment in energy and petrochemicals.
Jaber bin Ayed Al-Fahad was elected chairman, with Saad bin Ajlan Al-Ajlan as vice chairman.
Saudi Arabia’s non-oil exports surge 16.8% in Q3: GASTAT
RIYADH: Saudi Arabia’s non-oil exports reached SR79.48 billion ($21.17 billion) in the third quarter of 2024, a rise of 16.76 percent compared to the same period in 2023, according to official data.
As reported by the General Authority for Statistics, the Kingdom exported non-oil goods worth SR19.58 billion to the UAE, followed by India and China at SR6.78 billion and SR6.48 billion.
Chemical products led Saudi Arabia’s non-energy exports in the third quarter, accounting for 25.5 percent of total shipments, marking a 5.3 percent annual rise. Plastic and rubber products followed, comprising 24.9 percent of the total, with an 8.9 percent increase compared to the third quarter of 2023.
Strengthening the non-oil private sector is a key objective under Saudi Arabia’s Vision 2030 as the Kingdom works to diversify its economy and reduce reliance on crude oil revenues.
“The ratio of non-oil exports (including re-exports) to imports increased to 36.6 percent in the third quarter of 2024 from 34.9 percent in the third quarter of 2023. This was due to a 16.8 percent increase in non-oil exports and an 11.4 percent increase in imports over that period,” said GASAT.
In October, Moody’s projected the Kingdom’s non-hydrocarbon real gross domestic product would grow between 5 percent and 5.5 percent from 2025 to 2027, driven by increased government spending.
The International Monetary Fund projected the Saudi economy would expand by 4.6 percent in 2025, supported by diversification efforts to strengthen the non-oil private sector.
However, GASTAT highlighted that overall merchandise exports decreased by 7.3 percent year on year in the third quarter, primarily due to a 14.9 percent drop in oil exports.
Consequently, oil exports as a share of total exports fell to 71.3 percent in the third quarter from 77.3 percent recorded during the same period last year.
To stabilize the market, Saudi Arabia implemented a production cut of 500,000 barrels per day in April 2023, a reduction extended until December.
Key trade partners
China remained Saudi Arabia’s top export destination in the third quarter, receiving SR41.94 billion worth of goods. Japan and South Korea followed at SR25.62 billion and SR25.50 billion, respectively, while India received SR24.35 billion.
GASTAT data revealed that imports to the Kingdom increased by 11.4 percent year on year in the third quarter, reaching SR217.25 billion, while the nation’s surplus of the merchandise trade balance decreased by 43.4 percent.
In the third quarter, China accounted for the largest share of imports at SR53.78 billion, followed by the US and India at SR17.58 billion and SR11 billion, respectively.
King Abdulaziz Sea Port in Dammam was the primary entry point for goods in the third quarter, with imports valued at SR64.88 billion, representing 29.9 percent of the total inbound shipments.
Among the other major terminals of entry for imports was Jeddah Islamic Sea Port, which handled 20.1 percent of the incoming shipments, followed by King Khalid International Airport in Riyadh and King Abdulaziz International Airport, which handled 12.6 percent and 6.4 percent of the imports to the Kingdom.
September figures
In a separate report, GASTAT revealed that Saudi Arabia’s non-oil exports increased by 22.8 percent year on year in September, reaching SR25.95 billion.
The authority revealed that the Kingdom sent non-energy goods valued at SR6.54 billion to the UAE in September, while India and China received inbound shipments worth SR2.35 billion and SR1.73 billion, respectively.
Plastic and rubber products comprised 25.7 percent of non-oil exports in September, a 19.5 percent annual rise, while chemical products accounted for 25.3 percent, marking a 4.4 percent increase.
The ratio of non-oil exports to imports rose to 37.1 percent in September, compared to 34.8 percent during the same month in 2023.
Despite the growth in non-oil exports, overall merchandise exports dropped 14.9 percent in September due to a 24.5 percent decline in oil exports. Consequently, the share of oil exports in total exports fell from 79.7 percent in September 2023 to 70.7 percent in September 2024.
China remained the leading trade partner, receiving SR13.91 billion in exports, followed by Japan at SR7.98 billion and the UAE at SR7.49 billion.
Other major destinations for Saudi Arabia’s exports include India, South Korea, the US, and Egypt, as well as Singapore, Bahrain and Poland.
In September, Saudi Arabia’s exports to the Gulf Cooperation Council countries stood at SR12.08 billion, while the value of outbound shipments to Islamic non-Arab nations was SR6.71 billion.
According to GASTAT, the Kingdom’s imports increased by 15 percent year on year in September, reaching SR69.88 billion, while the surplus of the merchandise trade balance decreased by 56.9 percent during the same period.
China held the first position in the Kingdom’s imports, constituting 25.8 percent of total imports in September, valued at SR17.99 billion.
In September, Saudi Arabia received incoming shipments valued at SR5.39 billion and SR3.45 billion from the US and Germany, respectively.
The report revealed that the Kingdom handled inbound shipments valued at SR19.65 billion or 28.1 percent of the overall imports at the King Abdulaziz Sea Port in Dammam in September.
Jeddah Islamic Sea Port handled 17.9 percent of the overall inbound shipments, while King Khalid International Airport managed 13.1 percent of the total incoming goods.
Saudi Arabia’s non-oil sector is a key focus of its Vision 2030 plan to reduce reliance on oil and diversify the economy.
Initiatives like giga-projects, renewable energy investments, and expanding industries such as manufacturing, logistics, and tourism aim to drive growth and boost job creation.
These efforts are strengthening the Kingdom’s global trade position and attracting foreign investment, with the non-oil sector playing an increasingly vital role in its economic transformation.
Startup Wrap – International venture capital interest in MENA rises despite global challenges
RIYADH: International venture capital investors have increased their presence in the Middle East and North Africa region despite a challenging global economic climate, according to a new report by MAGNiTT.
The study highlights significant growth in global participation, with their share of MENA-based startup investments rising from 28 percent in 2020 to 51 percent in 2024.
The global economic climate in recent years has been marked by persistent challenges, including rising inflation, geopolitical tensions, supply chain disruptions, and tightening monetary policies by central banks.
These factors have created a volatile environment for investors, prompting cautious capital deployment and heightened scrutiny of high-risk markets.
In particular, the venture capital landscape has faced headwinds due to declining valuations, slower funding cycles, and a shift toward profitability over rapid growth.
Despite these challenges, regions like MENA, Southeast Asia, and Africa have demonstrated resilience, attracting both local and international capital due to their untapped potential and strategic efforts to foster innovation.
This 23-percentage-point increase underscores MENA’s growing appeal as a destination for venture capital.
The ecosystem continues to be shaped by strong regional investor engagement, driven largely by sovereign wealth fund mandates such as Saudi Arabia’s Saudi Venture Capital Co.
Local investors accounted for 49 percent of the 1,361 unique investors in the region’s startups, with 62 percent of all disclosed capital invested in MENA coming from within the region, MAGNiTT revealed.
However, international interest has surged, with the first nine months of this year marking a 60 percent increase in global investors compared to the previous year.
Philip Bahoshy, CEO of MAGNiTT, attributed the region’s growth to the role of regional Limited Partner programs and high-profile events that spotlight opportunities in emerging markets.
“If you recently attended events like FII in Riyadh, GITEX in Dubai, or Web Summit in Qatar, you would have seen firsthand the growing presence of international investors interested in Emerging Markets. Many of these investors are exploring opportunities but are yet to make substantial commitments,” Bahoshy said.
The UAE has been a standout in the region’s venture growth, with international investor participation climbing from 25 percent in 2020 to 62 percent in 2024, positioning the market as a global hub akin to Singapore.
Saudi Arabia has also seen notable progress, with international investor participation rising from 18 percent in 2020 to 25 percent in 2024, reflecting the Kingdom’s increasing focus on venture capital.
Events such as LEAP and the Future Investment Initiative have played a key role in attracting global attention to Saudi Arabia’s burgeoning venture ecosystem.
In Africa, international development finance institutions have helped foster a growing local investment base.
African investors’ share of total capital deployment increased from 15 percent in 2021 to 35 percent in 2024. This upward trend reflects efforts to strengthen regional ecosystems while still leveraging international expertise.
Internationally, US-based firms such as 500 Global and Y Combinator emerged as the most active of these investors across MENA, Africa, and Southeast Asia between 2020 and 2024.
The influence of American venture capital remains dominant, with US investors topping deal counts in all three regions. However, Southeast Asia attracted the largest capital deployment, with $11.65 billion invested by top international players, compared to $1.177 billion in Africa and $947 million in MENA.
Saudi Arabia-based EdfaPay secures $5m to scale tap-to-pay solution
Fintech startup EdfaPay has closed a $5 million pre-Series A funding round led by OmanTel Innovation Labs, with participation from Aljabr MENA and Waad Investment.
Founded in 2022 by Ghormallah Al-Ghamdi and Nedal Sabbah, EdfaPay offers a tap-to-pay solution that allows small and medium-sized enterprises to use smartphones as point-of-sale devices.
The funding will be used to strengthen the company’s market position in Saudi Arabia and expand its footprint across the MENA region and Pakistan.
The startup previously raised $1.6 million in a pre-seed round in early 2022 and has since entered several new markets, including Tunisia and Morocco.
Social networking app Bubbl raises $350k pre-seed
Saudi social networking platform Bubbl has raised $350,000 in a pre-seed funding round led by angel investor Abdullah Al-Dosari.
Launched in 2024 by Aya Al-Hammoud, the app has already attracted 60,000 daily active users.
The funds will support Bubbl’s plans to scale its user base, with a goal of reaching 1 million daily active users in the near future.
PIF’s Jada commits investment in SEEDRA Ventures Fund II
The Public Investment Fund’s Jada Funds of Funds has announced a commitment to invest in SEEDRA Ventures Fund II, a newly launched venture capital fund managed by SEEDRA Ventures.
The fund aims to invest in early-stage startups with a sector agnostic approach, which coincides with Jada’s strategy.
Bandr Al-Homaly, managing director and CEO of Jada, said: “Our commitment to SEEDRA Ventures Fund II underscores our focus on enabling early-stage businesses that contribute to the Kingdom’s economic transformation in alignment with Vision 2030.”
EFG Hermes launches $300m Saudi education fund
EFG Hermes’s private equity arm has unveiled a $300-million Saudi Education Fund to develop a world-class K-12 operator in Saudi Arabia.
The fund seeks to capitalize on the growing demand for private education, fueled by an expanding student population.
SEF will also acquire a portfolio of international schools in Saudi Arabia, the UAE, and Bahrain, currently managed by GFH under the Britus Education brand.
Amenli secures $2.3m to expand insurtech offerings
Egypt-based insurance tech company Amenli has closed a $2.3 million funding round led by the European Bank for Reconstruction and Development’s Venture Capital arm, with additional participation from Y Combinator.
Founded in 2020 by Adham Nauman, Omar Ezz El-Din, and Shady El-Tohfa, Amenli provides accessible insurance solutions tailored for individuals, families, and SMEs.
The funding will support technology upgrades, product innovation, and market expansion.
Qara raises $2.6m to advance supply chain traceability
Supply chain startup Qara, based in Egypt, has raised $2.6 million from undisclosed investors to fuel its expansion.
Founded in 2021 by Hassan Abouzeed and Khaled Hassan, Qara provides a digital platform enabling product authentication and full traceability for producers.
The company, already active in Egypt, Saudi Arabia, and Kenya, plans to use the funding to expand further into Saudi Arabia under the National Technology Development Programme’s Relocate Initiative.
Logistics startup Locad secures $9m for global growth
Singapore-based logistics platform Locad has raised $9 million in a pre-series B funding round co-led by Global Ventures and Reefknot Investments.
Other participants included Sumitomo Equity Ventures and existing investors such as Antler Elevate and Febe Ventures.
Founded in 2020 by Constantin Robertz, Jannis Dargel, and Shrey Jain, Locad provides a cloud-based logistics engine that helps e-commerce businesses optimize their supply chains.
The funds will support Locad’s international expansion, with a focus on launching in the UAE and Saudi Arabia by the end of 2024.
Furniture e-commerce platform ariika secures $3m to expand
Egypt-based furniture and home decor e-commerce platform ariika has raised $3 million in a series A extension round led by Beltone Venture Capital and Citadel International Holdings.
Founded in 2016 by Khaled Attallah and Shahir Arslan, ariika collaborates with artisans worldwide to design and curate modern home décor products.
Having recently launched in Iraq, ariika plans to enter the Saudi market by January 2025. This follows a previous series A round in which Beltone acquired a 20 percent equity stake.
Natural resources and young population driving Saudi Arabia’s economic growth: BlackRock Investment Institute
RIYADH: Saudi Arabia can attract global investments and successfully diversify its economy thanks to the Kingdom’s abundant natural resources and youthful workforce, said BlackRock Investment Institute.
In its latest report, the asset management firm said Saudi Arabia offers substantial opportunities across public and private markets, though success will depend on the progress of governance, regulatory improvements, and labor market reforms.
The Kingdom is currently embarking on an economic diversification journey known as Vision 2030 by strengthening the non-oil private sector and reducing its decades-long dependence on oil revenues.
With its predominantly young population and labor reforms, the Kingdom reduced the unemployment rate among Saudi nationals to 7.1 percent by the end of the second quarter of 2024, representing a quarterly drop of 0.5 percentage points and an annual decline of 1.4 percentage points.
By the end of the second period of the year, joblessness among Saudi females also witnessed a sharp quarterly decline of 1.4 percentage points, reaching 12.8 percent.
In terms of natural resources, Saudi Arabia holds abundant mineral wealth estimated at $3 trillion, and Vision 2030 aims to turn the mining sector into the Kingdom’s third pillar of economy.
“Saudi Arabia stands at the crossroads of economic transformation. Unlike many developed economies, we think it benefits from low debt levels, ample energy resources, and a young, expanding workforce — a combination that supports long-term economic growth and creates opportunities in infrastructure and urban development,” said BlackRock.
It added: “However, realizing these opportunities hinges on sustained investment. Historical data shows that Saudi Arabia is already an outlier in terms of population growth and has room to increase investment further.”
A recent report released by the International Monetary Fund also echoed similar views, and said that the Kingdom is expected to witness economic growth of 1.5 percent in 2024 and 4.6 in 2025, driven by activities in the non-oil sector.
In October, the World Bank also projected that the economy of Saudi Arabia will grow by 1.6 percent this year and 4.9 percent in 2025.
Capital investments
According to BlackRock, Saudi Arabia has ramped up capital investments, with about $780 billion invested over the past three years, fueled by a bank lending boom and significant public spending.
The report added that Saudi Arabia is successfully leveraging domestic and foreign private financing, while equity and fixed-income markets are developing rapidly through the rising number of initial public offerings and bond issuances in the Kingdom.
A report released in July by the Kuwait Financial Center, also known as Markaz, revealed that the Kingdom led the Gulf Cooperation Council’s initial public offering market in the first half of 2024, raising $2.1 billion in what was an annual increase of 141 percent.
Another report released by Markaz in October revealed that Saudi Arabia raised $512 million from IPOs in the third quarter.
“Building a large, liquid local-currency corporate bond market is key to boosting non-bank financing across corporate bonds, infrastructure debt, and mortgage-backed securities,” said BlackRock.
Attracting investments
BlackRock revealed that Saudi Arabia’s Vision 2030 aims to establish the Kingdom as a leading hub for infrastructure investment.
The Kingdom’s National Investment Strategy seeks to attract $3.3 trillion over the next decade, spanning sectors from energy to health care to tourism.
“The investments are set to cover energy, water, transportation, logistics, digitalization, and services like waste recycling. The transformation involves three main shifts: transitioning to renewable energy, boosting private sector activity, and expanding non-oil sectors like household spending and tourism,” added BlackRock.
According to the report, the Shareek program launched in 2021 could play a crucial role in fulfilling the investment targets of Saudi Arabia.
Through this initiative, the Kingdom targets $1.3 trillion in funding, representing 40 percent of the Vision 2030 goal.
Foreign direct investment, currently a small share of the Kingdom’s GDP, is also targeted to provide 15 percent of Vision 2030’s total investment.
The report added that regulatory improvements such as simplifying business licensing, reducing red tape, enhancing transparency, and introducing investor rights measures are key to elevating investments in the Kingdom.
“Becoming a major investment destination requires broad economic and societal changes, stronger governance frameworks, and regional security assurances to attract capital,” said the analysis.
It added that global investors will also need confidence in regional stability before committing significant capital, as geopolitical tensions remain a major concern determining the future economic growth in the region.
Reliance on oil
According to the report, Saudi Arabia’s future economic growth and diversification plans will not be without any hurdles, as oil revenues have direct impacts on the country’s progress.
“Saudi Arabia’s economic trajectory remains heavily reliant on oil revenue, making it vulnerable to shifts in global energy markets. A decline in oil prices – potentially influenced by increased US production or a slowdown in global demand – could challenge its reform agenda and economic resilience,” the analysis said.
On a positive note, Blackrock added that the Kingdom is aiming to strengthen its position as a low-cost oil and gas producer.
“The BlackRock Investment Institute Transition Scenario sees rising global oil and gas demand over the next decade, with declines approaching 2050. Saudi Arabia’s low-cost, low-emission production positions it to maintain or grow market share across various demand scenarios,” said the report.
It added: “Diversifying energy exports through natural gas/LNG could enhance its competitive edge, though an accelerated low-carbon transition could pressure oil prices.”
According to the analysis, Saudi Arabia is also making significant efforts to reduce greenhouse gas emissions.
The report said that the Kingdom is planning to shift power generation from 40 percent oil and 60 percent gas to an equal mix of gas and renewables by 2030.
“Saudi Arabia’s solar installation costs are 40 percent lower than the global average, boosting energy security, reducing emissions, and freeing up oil for export. Investments in carbon capture and hydrogen production could further support decarbonization,” said BlackRock.
Saudi 2034 World Cup goals include jobs boost and GDP growth
- Saudi Arabia is the only country to submit a bid to host the football tournament
JEDDAH: Saudi Arabia’s hosting of the 2034 FIFA World Cup will not only showcase the Kingdom’s cultural and administrative capabilities but also serve as a catalyst for significant job creation and infrastructure development, according to experts.
Saudi Arabia is the only country to submit a bid to host the football tournament, and the decision will be rubber stamped by FIFA on Dec. 11.
It will be the second time the global event has been held in the Middle East, with Qatar staging the competition in 2022.
Experts told Arab News that Saudi Arabia could expect a GDP boost of between $9 billion and $14 billion, the creation of 1.5 million new jobs, and the construction of 230,000 hotel rooms developed across five host cities to accommodate visiting fans and dignitaries.
Yaseen Ghulam, an associate professor of economics and director of research at the Riyadh-based Al-Yamamah University, emphasized that the World Cup will provide a unique platform to attract foreign direct investment, diversify income sources, and boost tourism, aligning seamlessly with Saudi Arabia’s Vision 2030 objectives.
However, he asserted that the associated costs and logistical challenges must be managed strategically to maximize long-term benefits for the nation.
“The event will help the Kingdom to not only get noticed for its administrative capabilities and cultural depth but, more importantly, will help it to showcase the investment opportunities that currently exist in Saudi Arabia,” he told Arab News.
Ghulam pointed out that the event demands a significant commitment to quickly building state-of-the-art facilities, including stadiums, hotels, and roads, as well as training facilities, transportation networks, and tourist attractions.
Ghulam noted that Brazil’s World Cup cost $18 billion, while Russia spent $13 billion, with half allocated to infrastructure, including 12 stadiums, as well as hospitals, airports, train stations, motorways, and hotels.
He said that while Qatar invested $200 billion to $300 billion over a decade ahead of its 2022 hosting, the amount spent on stadiums was no more that $7 billion, with the rest on infrastructure developments.
Ghulam explained that hosting the World Cup offers both direct and indirect benefits, with economists estimating short-term gains from visitor spending and broadcasting rights to be about 1 percent of global GDP.
For Qatar, he said, visitor expenditure on tourism and revenue from event-related programming is believed to have been between $2.3 billion and $4.1 billion.
“Considering the gross value added, this amounts to $1.6 billion to $2.4 billion, which represents 0.7 percent to 1 percent of Qatar’s GDP in 2022,” Ghulam said, adding that South Korea also experienced the same numbers in 2002.
The associate professor believes Saudi Arabia could expect to see a GDP boost of $9 billion to $14 billion, based on previous events, the Kingdom’s geographical location, and Saudi Arabia’s growing tourism infrastructure.
“Qatar attracted around a million spectators, and Saudi Arabia could double this number due to the religious tourism potential of Muslim spectators alongside the geographic diversity of the country,” he said.
Ghulam stressed the importance of affordability when it comes to accommodation for traveling fans, noting that Qatar’s hotels saw only 59 percent occupancy during the 2022 World Cup due to high prices, with many spectators opting to stay in neighboring countries and use shuttle services.
The economics professor noted that indirect benefits could arise before and after the tournament through higher foreign direct investment and increased tourism from improved experiences during the event. He also mentioned emerging evidence of increased FDI following World Cup hosting.
“For most of the countries that have hosted the same event, the impact started immediately after the announcement. One recent study estimates the magnitude of such an impact, concluding that an average increase in inward foreign direct investment of $4.33 billion is linked to hosting the FIFA World Cup,” he said.
Ghulam added that FDI has increased by a greater amount in well-governed countries, indicating that governance quality is a significant moderating element.
“The evidence shows that Qatar managed to increase the contribution of non-hydrocarbon income by 40 percent during the decade of preparation for the World Cup by investing in infrastructure and other diversification related activities alongside attracting FDI,” he said.
He noted that the multiplier effect of these investments has boosted other income sources, emphasizing that Saudi Arabia’s current non-hydrocarbon income of $453 billion could significantly rise over the next decade in preparation for the event.
Ghulam highlighted that the event would significantly influence Saudi Arabia’s infrastructure development, with stadiums and fan zones benefiting local communities and contributing to the non-hydrocarbon GDP share in line with Vision 2030.
He emphasized the importance of maintaining and utilizing these stadiums for long-term gains, noting that maintenance costs could be significant.
Highlighting the long-term economic impact of the World Cup on local businesses and tourism, he noted that Saudi Arabia topped the UN’s list for significant foreign tourism growth in 2023.
When it comes to job creation, the academic cited a report from Knight Frank which estimated the 2022 World Cup contributed to the creation of almost 850,000 additional jobs in Qatar’s residential sector between 2010 and 2022.
“Since the event in Saudi Arabia is expected to be prestigious and in fact better than previous events, one could extrapolate to more than 1.5 million new jobs, equating to 10 percent of the currently employed workforce,” Ghulam said.
Infrastructure boost
Waleed Al-Thabi, founder and CEO of Aljdwa, a leading Saudi firm specializing in project feasibility studies and development, told Arab News that hosting the 2034 FIFA World Cup is key to Saudi Arabia’s Vision 2030 initiative aimed at achieving significant economic growth.
Discussing how the preparation for the event would impact the Kingdom’s infrastructure development, he said that hosting the World Cup will establish a legacy of stadiums and sports facilities for future generations.
He added that over 130 training facilities will support players, teams, referees, and administrative staff participating in this event.
“Moreover, Saudi Arabia has developed logistics services, expanding the rail network, such as the Riyadh Metro project, which serves as the backbone of public transport in the capital. Initially designed to accommodate 1.2 million passengers daily, the network is projected to reach nearly 3.6 million passengers in its final phase,” Al-Thabi said.
The CEO noted that several regional and international airports are being developed, including King Salman International Airport in Riyadh, which will cover approximately 57 sq. km and rank among the largest airports globally, adding that the new Abha International Airport is also expected to serve around 10 million passengers annually by the end of 2027.
He highlighted that these advancements will enhance travel experiences for fans, improve transportation efficiency, and ensure maximum comfort and accessibility during the tournament.
The CEO expected that event will attract millions of tourists from around the world, leading to a significant increase in demand for hospitality facilities.
“Approximately 230,000 hotel rooms will be developed across the host cities. To maximize the Kingdom’s geographical advantages and diverse areas, the hosting plan will extend to ten supporting cities that will accommodate some of the participating teams’ training camps before and during the tournament,” he said.
With anticipated growth in tourism and commercial activity, Al-Thabi stressed the need for efficient Saudi companies in these sectors to capture a significant share of the cash flow generated during the event.
“Such cash flows contribute to reducing unemployment rates and stimulate the flow of funds within the economy, directly impacting the Kingdom’s GDP,” he said.
Al-Thabi added that jobs will primarily be in event management, security, hospitality, and transportation, as well as facility service and operations coordination, allowing employees to benefit from longer hours and higher incomes, thus enhancing living standards.
“Additionally, the construction sector will expand, creating jobs for engineers, architects, and construction workers, further advancing the Kingdom’s economic development,”
FDI rise
Abdullah Al-Maghlouth, a member of the Saudi Economic Association, stated that the Kingdom’s hosting of the 2034 World Cup will showcase an exceptional and unprecedented version of the tournament, harnessing Saudi strengths to delight football fans globally.
He pointed out that all the stadiums are designed to meet the Kingdom’s long-term infrastructure needs, noting that Saudi Arabia is also developing railway plans to connect with Gulf nations, enhancing the movement of fans and teams.
“While the opening and final matches of the 2034 World Cup will be held in the capital, Riyadh, the maximum distance a fan will need to travel within the Kingdom is two hours,” Al-Maghlouth said.
The Saudi economist further noted that the event will play a pivotal role in attracting foreign direct investment, as hosting plans include the construction of 11 new world-class stadiums and the development of 15 existing ones.
“These projects are expected to draw substantial foreign investment in construction and related services, such as transportation, accommodation, entertainment, and technology. This increased economic activity is anticipated to encourage more foreign companies to enter the Saudi market, thereby enhancing the volume of foreign direct investment,” he said.
Beyond the direct economic benefits, he continued, hosting the event represents an opportunity to develop infrastructure in the host cities.
“These cities will witness significant developments, including improvements to public transportation, roads, and public facilities. These enhancements will elevate the quality of life for residents and leave a sustainable legacy after the tournament concludes, strengthening the long-term competitiveness of these cities.” Al-Maghlouth said.
Furthermore, the event will enhance innovation and entrepreneurship, driving entrepreneurs to devise rapid solutions to challenges faced by organizers, he added.
