Saudi Arabia can unlock $7.19bn economic boost by narrowing urban-rural economic divide: report

RIYADH: Saudi Arabia could add SR27 billion ($7.19 billion) to its national economy annually by reducing the gross domestic product gap between its major cities and regional areas by just 10 percent, a new report stated. 

An analysis by the US-based consulting firm Arthur D. Little reveals that while metropolitan centers like Riyadh, Dammam, and Jeddah have an average GDP per capita of around SR107,000, regions such as Aseer and Al-Qaseem average closer to SR73,000. 

It underscores that narrowing this gap could significantly boost the Kingdom’s overall economic growth, underscoring the crucial role of regional development in Saudi Arabia achieving its Vision 2030 goal of becoming one of the world’s 15 largest economies. 

Recently, there’s been a notable shift toward exploring the untapped potential of smaller towns and regional municipalities, catching the attention of investors, entrepreneurs, and policymakers. This departure from the traditional focus on urban centers signifies a new era of exploration and diversification. 

As Saudi Arabia advances toward a more resilient and inclusive economy, the newfound interest in these previously overlooked areas highlights the evolving priorities and ambitions set forth by Saudi Vision 2030. 

Eddy Ghanem, partner at Arthur D. Little Middle East, said: “Developing Saudi Arabia’s regional economies is a crucial strategic move with far-reaching economic implications.” 

He added: “By strategically tapping into the potential of areas beyond major cities, the Kingdom paves the way for inclusive growth and gains momentum to become one of the world’s 15 largest economies.” 

The report outlines a framework for success based on five key pillars essential for advancing regional development.  

As a first pillar, the report discusses strategy, which involves aligning regional strategies with national priorities, capitalizing on local strengths, and prioritizing sustainable development. 

Governance, the second pillar, requires ensuring stakeholder commitment, establishing clear frameworks, and implementing coordination mechanisms for seamless collaboration. 

The report emphasizes the third pillar, human capital, which focuses on investing in tailored development programs to equip the workforce with necessary skills and enhance retention through appealing living conditions and incentives.  

Infrastructure, the fourth pillar, advocates for an integrated approach to development, exploring diverse financing models to bridge regional disparities effectively.  

Lastly, the fifth pillar, investment, aims to facilitate private sector engagement through dedicated units, strategic promotion of opportunities, and comprehensive support services, while leveraging entities like the Public Investment Fund to stimulate growth. 

“Unlocking the potential of regional growth demands a multifaceted approach encompassing strategic vision, robust governance, human capital development, infrastructure enhancement, and investment attraction. These pillars serve as the foundation for achieving Saudi Arabia's ambitious socioeconomic goals and propelling its regions toward global recognition,” said Tobias Aebi, principal at Arthur D. Little Middle East. 

The report drew on global benchmarks, including Brazil’s Growth Acceleration Program and Spain’s regional development trajectory, to offer insights into successful regional development strategies.  

By incorporating these elements, the consulting firm noted that Saudi Arabia can not only achieve its Vision 2030 economic aspirations but also unlock social potential across the Kingdom’s regions, fostering a more inclusive and robust economy.