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Ongoing Drastic Social Reforms in Saudi Arabia and its Economic Impacts

Hany Kenawi

Author: Hany Kenawi
Senior Lawyer.

Guiding Principle
The ongoing drastic reforms taking place in Saudi Arabia in line with the country vision for the year 2030 are having several planned impacts on the life in the Kingdom. The impacts include gradually changing the social environment of a country considered one of the most conservative communities in the world into an open society that empowers citizens and lures investors. Lifting the ban on women driving cars as well as allowing them to attend events in the stadiums and similar facilities; announcing a huge tourism project for building co-resort across a lagoon of 50 virgin islands in front of the Saudi Red Sea coastline and granting tourist visas to the country for the first time; establishing the General Authority for Entertainment that already organized dozens of entertainment events never been allowed inside the country before, and last but not lease granting licenses to cinemas are all examples of the frequent major social reforms taken by the Saudi government for that target. Yet more reforms are planned. These reforms together with the recent amendments of the local investments regulations making the Saudi market more liberal for foreign investment should cause major expansion of the Saudi economy replacing the decline at oil prices being the main source of income to the Kingdom. Brand new fields for investment in the Saudi market in particular at the entertainment and recreational fields are emerging with huge opportunities. Several multinational corporations have already taken part in the new opportunities.

A. Reforms in Saudi Arabia and Vision 2030
Following the transfer of power in the Kingdom of Saudi Arabia to King Salman Abdul-Aziz and Crown Prince Mohamed bin Salman starting from 2015, the new leadership has prepared a strategy for the Kingdom under the title of “Saudi Vision 2030”[1], which includes plans to address the many challenges that the Kingdom is facing. Most importantly is the decline in oil prices, the Kingdom’s main source of income.

The new vision is a plan to reduce Saudi Arabia’s dependence on oil, diversify its economy, and develop public service sectors such as health, education, infrastructure, recreation, and tourism. Goals include reinforcing economic and investment activities, increasing non-oil industry trade between countries through goods and consumer products, and increasing government spending on the military, manufacturing equipment and ammunition.

B. Major Social Changes in Saudi Arabia
Saudi Arabia has been adopting a strict interpretation of the Islamic teachings including the separation of men and women. Women should wear veils to cover themselves. It is also the law in Saudi Arabia that every woman must have a male guardian. This is often a relative or the woman’s husband.

The former king, King Abdullah Abdul-Aziz was already working from 2011 to ease some of these strict laws. While Crown Prince, Mohammed bin Salman, has intensified efforts in that direction by vowing to return the country to “moderate Islam” and to transform the conservative country into an open society that empowers citizens and lures investors. Such vow was already reflected in many major changes occurred in the social environment in the Kingdom.

I. Lifting the Ban on Women Driving Cars
Though no legal base exists in Saudi Arabia for banning women from driving, still, women who drove in public risked being arrested and fined. This was the case before King Salman issued a decree granting women permission to get driving licenses starting from June 2018.

As a direct result of this decree, it is expected that the demand for cars in Saudi Arabia will increase to the double. Around 750,000 cars were imported to Saudi Arabia during 2016.

The decree will also indirectly allow Saudi women to be able to engage more with the local business community as moving around would be much easier. This means more workforce and entrepreneurs will enter the Saudi market. Cars services centre will benefit also from a large number of cars expected to be imported.

Uber and Careem – the international and regional transportation technology companies – had already started benefiting from the new reforms by announcing that they are currently recruiting Saudi female drivers.

II. Allowing Women to Attend Events in the Stadiums and Similar Facilities
Friday, January 12th, 2018 was a new turn in the social reforms in Saudi Arabia. Saudi women were allowed to attend a football match at King Abdullah stadium in the coastal city of Jeddah, Saudi Arabia. The Government have removed the ban on women attending similar events.

From an economic aspect, this means more customers to entertainment facilities. All member of the family will be even more willing to attend such events together. This will be reflected in making organizing such events more profitable, now having half of the community eager to attend.

III. Tourism
On August 2017, Saudi Arabia has announced the launch of a huge touristic project as a part of the Saudi Vision 2030 for diversifying its economy. Saudi Arabia intends to build a resort across a lagoon of 50 islands in front of the Saudi Red Sea coastline.

The project extends over 180 kilometres between the cities of Amlaj and Al-Wajh on the western coast of the Kingdom. The Saudi Public Investment Fund (PIF) will finance the project before opening up to foreign investors. Construction will begin in the third quarter of 2019 in the first phase, during which the airport will be expanded and, hotels and luxury homes will be built. It is expected to be completed in the third quarter of 2022.

The project will contribute to a qualitative leap in the concept of tourism and hospitality and will form together with the other expected touristic projects in the Kingdom a very new field for the investors engaged in this field.

For the first time, Saudi Arabia has announced now it is going to grant touristic visas for tourists desiring to visit the country.

IV. The General Authority for Entertainment
In 2016, King Salman has ordered the establishment of an Authority for Entertainment with a purpose of organizing and supervising entertainment events taking places in Saudi Arabia .

Since then, the Authority has managed to organize and supervise dozens of entertainment events including music concerts and circus performance that were never been allowed in the Kingdom before creating a new field for investment in the Kingdom.

V. Cinemas
Few days before 2017 ends, the news came about the new reform that Saudi Arabia is taking by granting licenses to build cinemas in the Kingdom. The Saudi government is expecting a huge market to be created from the expected projects in this field. Several multinational and regional corporations active in the field had already expressed their interest to enter the new market.


[1] For more information, please revert to the Vision website: http://vision2030.gov.sa/en

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