Overview
Pillar 2 of Saudi Vision 2030 — A Thriving Economy — constitutes the strategic core of the national transformation agenda. It addresses the fundamental challenge that has defined Saudi economic policy for decades: the need to diversify the Kingdom’s revenue base, productive capacity, and employment structure away from dependence on hydrocarbon extraction and export.
The pillar’s ambition is comprehensive. It mandates the transformation of the Public Investment Fund into a global investment powerhouse, the expansion of private-sector contribution to GDP from 40 percent to 65 percent, the creation of millions of private-sector jobs for Saudi nationals, the attraction of foreign direct investment at scale, the development of small and medium enterprises as growth engines, the expansion of non-oil exports, and the cultivation of entirely new economic sectors including tourism, entertainment, mining, logistics, and the digital economy.
The economic targets embedded in Pillar 2 are the most frequently cited and closely monitored metrics in the Vision 2030 framework. They are also, by nature, the most subject to external variables — global commodity prices, international capital flows, geopolitical dynamics, and technology trends — that lie partially or wholly outside the Kingdom’s control. This combination of ambition and exposure to external factors makes Pillar 2 the dimension of Vision 2030 that demands the most rigorous analytical scrutiny.
The Public Investment Fund
Transformation Mandate
The Public Investment Fund stands as the single most consequential institutional actor in Vision 2030’s economic pillar. Originally established in 1971 as a vehicle for holding the government’s domestic equity stakes, PIF has been transformed into one of the world’s largest and most active sovereign wealth funds, with a mandate to drive economic diversification through strategic investment both domestically and internationally.
The fund’s assets under management have grown from approximately USD 160 billion at Vision 2030’s launch to USD 941.3 billion — a sixfold increase that reflects a combination of government capital transfers, investment returns, and the revaluation of existing holdings. The stated target of USD 2 trillion in AUM by 2030 remains one of the most ambitious objectives in the global sovereign wealth fund landscape.
Domestic Investment Strategy
PIF’s domestic investment strategy operates across three principal channels.
Giga-Projects — PIF is the anchor investor and, in most cases, the sole or majority shareholder of Saudi Arabia’s transformative mega-developments. These include:
NEOM: The USD 500 billion futuristic city development in Tabuk Province, encompassing The Line (a 170-kilometre linear city), Trojena (a mountain tourism destination designed to host the 2029 Asian Winter Games), Oxagon (a floating industrial city), and Sindalah (a luxury island resort). NEOM represents the most ambitious single development project in global history by capital commitment.
The Red Sea Global: Development of luxury and eco-tourism destinations across Saudi Arabia’s western coastline, including 50-plus islands and extensive marine conservation areas.
Qiddiya: A 366-square-kilometre entertainment, sports, and cultural destination southwest of Riyadh.
ROSHN: A national community developer delivering large-scale residential communities across the Kingdom, directly supporting the housing ownership target.
Diriyah Gate: A historical, cultural, hospitality, and retail destination surrounding the UNESCO World Heritage Site of At-Turaif.
Sector Creation — PIF has established wholly owned companies to catalyse new economic sectors where private-sector activity is insufficient or absent. These include entities in automotive manufacturing (Ceer and Lucid Motors investment), aviation (Riyadh Air), steel manufacturing (Saudi Iron and Steel Company — Hadeed restructuring), agriculture, aquaculture, and renewable energy (ACWA Power stake).
Strategic Stakes — PIF maintains significant equity positions in Saudi blue-chip companies including Saudi Aramco, Saudi Telecom Company (stc), Saudi National Bank (SNB), SABIC, and Ma’aden, as well as a growing international portfolio spanning technology (significant investments in global tech companies), gaming, infrastructure, and financial services.
International Portfolio
PIF’s international investment programme serves multiple objectives: generating returns to grow AUM, securing technology transfer and knowledge partnerships, and positioning Saudi Arabia within global investment networks. The fund has made notable investments across sectors including electric vehicles, autonomous driving, space technology, biotechnology, and digital infrastructure.
The international portfolio also functions as a diplomatic and commercial bridge, creating bilateral investment relationships that support Saudi Arabia’s broader foreign policy and trade objectives.
Performance Assessment
PIF’s growth trajectory is impressive by any measure. The fund has successfully executed its mandate to become a proactive, globally engaged investment institution. However, the path from USD 941.3 billion to USD 2 trillion in four years presents a significant mathematical challenge. Achieving the target likely requires some combination of additional Aramco share transfers (the government currently holds approximately 82 percent of Aramco, with PIF holding roughly 16 percent), sustained strong investment returns, and potentially the absorption of other government investment entities.
Market conditions, oil price trajectories, and the performance of PIF’s concentrated positions — particularly in Saudi equities and giga-projects whose valuations are inherently uncertain — will all influence the outcome.
Non-Oil GDP Diversification
The Central Challenge
Non-oil GDP diversification represents the existential imperative of Vision 2030. At the strategy’s launch, oil revenues accounted for approximately 87 percent of government income and the hydrocarbon sector dominated GDP composition. The target of increasing the private sector’s contribution to GDP from 40 percent to 65 percent, and raising non-oil exports as a share of non-oil GDP from 16 percent to 50 percent, requires a structural reorientation of the Saudi economy at a scale without recent precedent among major oil-exporting nations.
Sectoral Development
The diversification strategy targets multiple sectors simultaneously, reflecting both the breadth of the challenge and the desire to avoid replacing dependence on oil with dependence on any single alternative sector.
Manufacturing and Industry — The National Industrial Development and Logistics Program (NIDLP) oversees the expansion of Saudi Arabia’s industrial base. Key initiatives include the development of special economic zones with preferential regulatory and tax treatment, the expansion of petrochemical downstream processing, the growth of the mining sector (discussed below), the establishment of automotive manufacturing (Ceer, the first Saudi electric vehicle brand), and the development of defence and aerospace manufacturing capabilities through the Saudi Arabian Military Industries (SAMI) programme.
The target of raising industrial GDP contribution requires both the expansion of existing industries — petrochemicals (SABIC), metals (Ma’aden), and building materials — and the creation of new manufacturing sectors. The localisation agenda, pursued through the Local Content and Government Procurement Authority (LCGPA), mandates increasing the proportion of goods and services sourced domestically across government and quasi-government procurement.
Mining — Saudi Arabia possesses significant unexploited mineral wealth, including phosphate, bauxite, gold, copper, zinc, and rare earth elements. Vision 2030 targets the development of mining as a third pillar of the economy alongside oil and petrochemicals, with the goal of increasing the mining sector’s contribution to GDP from SAR 64 billion to SAR 240 billion by 2030.
The Mining Investment Law, introduced in 2020, modernised the regulatory framework to attract international mining companies. Ma’aden (the Saudi Arabian Mining Company), a PIF portfolio company, serves as the national champion, with operations spanning phosphate, aluminium, gold, and base metals. The exploration and licensing programme has expanded significantly, with the Saudi Geological Survey conducting systematic surveys to quantify the Kingdom’s mineral endowment.
Logistics — Saudi Arabia’s geographic position — bridging Africa, Asia, and Europe with coastline on both the Red Sea and the Arabian Gulf — provides a natural advantage for logistics and trade facilitation. The development of King Salman International Airport in Riyadh (designed to handle 120 million passengers annually), the expansion of Jeddah Islamic Port and King Abdullah Port, the enhancement of rail infrastructure (including the North-South Railway and the Land Bridge project connecting the Gulf and Red Sea coasts), and the establishment of special economic zones at transport nodes form the infrastructure basis for logistics sector growth.
The National Transport and Logistics Strategy targets raising the logistics sector’s contribution to GDP and improving Saudi Arabia’s ranking on global logistics indices.
Digital Economy — Saudi Arabia has invested heavily in digital infrastructure and the growth of a technology sector. Investments include the expansion of fibre-optic broadband coverage, the deployment of 5G networks (among the first in the world), the development of cloud computing capacity (through partnerships with hyperscalers including Google, Oracle, and Alibaba Cloud), and the cultivation of a domestic technology startup ecosystem.
The National Technology Development Program, the establishment of technology-focused venture capital vehicles, and the creation of innovation hubs and accelerators support the growth of the digital economy. Saudi Arabia’s technology sector has attracted increasing venture capital investment, with Riyadh positioning itself as a regional technology hub.
Foreign Direct Investment
Strategic Importance
FDI attraction is both an economic objective and a validation mechanism for Vision 2030. The target of raising FDI as a percentage of GDP from 3.8 percent to 5.7 percent reflects the understanding that foreign capital brings not only financial resources but also technology transfer, management expertise, and integration into global supply chains.
Institutional Framework
The Ministry of Investment (MISA), established in 2020 under Minister Khalid Al-Falih, serves as the primary institutional interface for foreign investors. MISA consolidates investment promotion, facilitation, licensing, and aftercare functions that were previously distributed across multiple agencies.
The National Investment Strategy, launched in 2021, sets a target of attracting SAR 388 billion (approximately USD 103 billion) in annual FDI by 2030. The strategy identifies 18 priority sectors for investment attraction and establishes dedicated teams for targeting global corporations and sovereign wealth funds.
Regulatory Reform
Saudi Arabia has undertaken extensive regulatory reform to improve the investment environment. Key measures include the introduction of 100 percent foreign ownership in most sectors (eliminating the previous requirement for local partners), the establishment of special economic zones with preferential regulatory treatment, the modernisation of commercial laws (including bankruptcy, competition, and intellectual property frameworks), the streamlining of business licensing processes, and the expansion of investor protection mechanisms.
The Regional Headquarters Programme (RHQ), launched in 2024, requires multinational companies seeking Saudi government contracts to establish their regional headquarters in the Kingdom. The programme has attracted over 200 multinational companies to Riyadh and represents a significant structural shift in the Kingdom’s approach to international business engagement.
Progress
FDI inflows have grown since Vision 2030’s launch, though achieving the 5.7 percent of GDP target requires continued momentum. The combination of regulatory reform, infrastructure investment, and market opening has improved Saudi Arabia’s competitiveness in global investment rankings. The challenge lies in sustaining inflows at scale while competing with established regional investment destinations and managing the practical friction that foreign companies still encounter in areas such as labour regulation, visa processing, and regulatory implementation consistency.
Employment and Saudisation
Labour Market Context
The Saudi labour market presents a distinctive structural challenge. At Vision 2030’s launch, unemployment among Saudi nationals stood at 11.6 percent — concentrated among youth and women — while the private sector relied heavily on lower-cost expatriate labour. The resulting paradox — high national unemployment alongside a labour force dominated by foreign workers — demanded a comprehensive reform approach.
Saudisation Framework
The Nitaqat programme, the primary Saudisation mechanism, classifies private-sector companies based on their Saudi employment ratios and applies graduated incentives and penalties. Companies achieving higher Saudisation levels receive preferential access to visa quotas and government services, while those falling below minimum thresholds face operational restrictions.
Vision 2030 has refined and expanded the Saudisation framework through sector-specific employment mandates, minimum wage requirements for Saudi employees in the private sector, and the introduction of labour mobility reforms that allow Saudi workers greater flexibility in changing employers.
Headline Achievement
The reduction of Saudi national unemployment to 7 percent — achieving the 2030 target ahead of schedule — represents one of Vision 2030’s most significant deliverables. This outcome reflects the combined effect of Saudisation mandates, private-sector expansion, public-sector employment discipline, and the entry of women into the workforce at unprecedented scale.
Female Labour Force Participation
The increase in female labour force participation from approximately 17 percent at baseline to 36 percent by 2025 surpasses the original 30 percent target by a significant margin. This transformation reflects legislative reforms (driving rights, guardianship relaxation), workplace regulation changes (including the opening of previously restricted sectors to women), social norm evolution, and dedicated employment programmes.
The economic significance extends beyond the headline participation rate. Women now occupy positions across the private sector — in retail, hospitality, healthcare, technology, finance, and professional services — that were entirely or largely unavailable to them prior to 2016. The entry of women into the labour force has expanded the productive capacity of the economy and reduced the per-capita welfare burden.
Wage and Productivity Dynamics
A persistent challenge is the private-public sector wage gap. Saudi nationals in the public sector historically earned significantly more than their private-sector counterparts, creating a preference for government employment that undermined diversification objectives. Vision 2030 has addressed this through a combination of private-sector minimum wage requirements, Human Resources Development Fund (HRDF) wage subsidies, and the gradual restraint of public-sector hiring.
Labour productivity improvements are essential for sustaining private-sector employment growth without relying indefinitely on Saudisation mandates. The Human Capital Development Program and the expansion of technical and vocational training aim to align Saudi workforce skills with private-sector demand, though the alignment between educational output and employer requirements remains a work in progress.
Small and Medium Enterprises
Strategic Role
Vision 2030 targets increasing SME contribution to GDP from approximately 20 percent at baseline to 35 percent by 2030. This objective reflects the understanding that a diversified economy requires a broad base of entrepreneurial activity, not merely the expansion of large corporates and government-related entities.
Enabling Infrastructure
The institutional infrastructure supporting SME development has expanded significantly. Monsha’at (the Small and Medium Enterprises General Authority), established in 2016, serves as the primary government body for SME policy, support, and promotion. Its mandate encompasses regulatory simplification, access to finance, capacity building, and ecosystem development.
The Saudi Venture Capital Company (SVC), a PIF subsidiary, provides growth-stage financing to Saudi startups and SMEs. The Kafalah guarantee programme provides credit guarantees that enable SMEs to access bank financing that would otherwise be unavailable due to collateral constraints.
Fintech platforms, including digital lending and payment solutions, have expanded access to financial services for smaller enterprises. The Financial Sector Development Program has deliberately promoted fintech as a complement to traditional banking, with the Saudi Central Bank (SAMA) operating a regulatory sandbox for innovative financial products.
Challenges
Despite significant institutional support, SME development faces persistent headwinds. Access to finance, while improving, remains constrained for early-stage and micro-enterprises. Regulatory compliance burdens, while reduced, still impose disproportionate costs on smaller firms. Competition with large, well-connected conglomerates for government contracts and market share creates structural disadvantages. And the cultural shift from employment-seeking to entrepreneurship, while underway, requires generational development.
Tourism
Sector Creation
Tourism represents the clearest example of Vision 2030 creating an entirely new economic sector. Prior to 2019, Saudi Arabia did not issue tourist visas, and the non-religious visitor economy was negligible. The introduction of tourist visas in September 2019, the establishment of the Saudi Tourism Authority, the creation of the Tourism Development Fund, and the investment of tens of billions of dollars in destination infrastructure have, in under seven years, established tourism as a measurable and growing contributor to GDP.
Target Architecture
The tourism strategy operates across multiple segments: religious tourism (Hajj and Umrah), leisure tourism (beach, desert, cultural, and adventure), business tourism (conferences, exhibitions, and corporate events), and sports and entertainment tourism. The combined target of 100 million annual visits by 2030 encompasses both domestic and international travellers.
Infrastructure Investment
Tourism infrastructure investment is concentrated across several mega-destinations — The Red Sea Global, AMAALA, AlUla, Diriyah, NEOM (Sindalah and Trojena), and Qiddiya — while also encompassing the upgrading of urban tourism infrastructure in Riyadh, Jeddah, and other cities.
The airline sector is integral to tourism delivery. Saudia (the national carrier) is expanding its fleet and route network, while Riyadh Air — the new PIF-backed carrier — is designed to establish Riyadh as a global aviation hub and generate transit tourism traffic. King Salman International Airport, with its 120-million-passenger design capacity, is the infrastructure anchor for this ambition.
Hotel capacity is expanding rapidly through both international brand partnerships (Marriott, Hilton, Accor, Four Seasons, Aman, and others) and domestic development. The hospitality sector has attracted significant FDI and represents one of the fastest-growing segments of the Saudi economy.
Sustainability Framework
The tourism development strategy incorporates explicit sustainability commitments. The Red Sea Global project, in particular, has positioned environmental conservation as a core design principle, with commitments to regenerate marine ecosystems, achieve carbon neutrality, and limit development density. Whether these commitments are maintained as commercial pressures build will be an important test of the strategy’s integrity.
Financial Sector Development
Reform Agenda
The Financial Sector Development Program (FSDP) oversees the modernisation and deepening of Saudi Arabia’s financial markets. Key objectives include growing the share of digital payments, expanding capital market depth and liquidity, developing the insurance sector, promoting the asset management industry, and cultivating a fintech ecosystem.
Capital Markets
The Saudi Exchange (Tadawul) has grown to become the largest stock exchange in the Middle East and one of the largest among emerging markets. Key milestones include the listing of Saudi Aramco in December 2019 — the world’s largest IPO at the time — the inclusion of Saudi Arabia in MSCI and FTSE emerging market indices, and the development of a parallel market (Nomu) for SME listings.
Sukuk (Islamic bond) issuance has expanded significantly, with Saudi Arabia becoming one of the world’s largest sovereign sukuk issuers. The development of the domestic debt capital market provides an alternative financing channel for both government and corporate borrowers.
Regulatory Modernisation
The Saudi Central Bank (SAMA) and the Capital Market Authority (CMA) have pursued parallel regulatory modernisation agendas. SAMA’s open banking framework, its fintech sandbox, and its licensing of digital-only banks support financial innovation. The CMA’s reforms to listing rules, market-making regulations, and investor protection frameworks support capital market development.
Digital Payments
The growth of digital payments — from a low base of approximately 20 percent of transactions to a target of 70 percent — reflects both consumer behaviour change and infrastructure investment. The Mada debit card network, the STC Pay and other mobile payment platforms, and the introduction of an instant payments system provide the technical infrastructure for a less cash-dependent economy.
Outlook
Pillar 2’s economic targets are the most consequential and the most exposed to uncertainty. The achievement of the unemployment and female participation targets ahead of schedule demonstrates that structural labour market transformation is possible. The PIF’s growth, while below the ultimate target trajectory, represents a genuine institutional transformation. Tourism, entertainment, and digital economy sectors have been created or dramatically expanded.
The coming four years will test whether the momentum can be sustained. Non-oil GDP growth, private-sector expansion, FDI attraction, and SME development must all accelerate to reach their 2030 targets. The giga-projects must begin delivering operational revenues, not merely construction activity. And the Kingdom must navigate global economic uncertainty, energy transition dynamics, and competitive pressures from other reform-minded emerging economies.
The economic transformation of Saudi Arabia is neither complete nor guaranteed. But the scale of capital deployment, institutional reform, and structural change already achieved creates a foundation that, with continued execution discipline, positions the Kingdom credibly for its post-oil future.