Saudi State Capitalism

Abstract

Abstract Diversification efforts in Saudi Arabia tend to repeat old patterns of state-led interventions in the economy, despite some real efforts at liberalization in financial markets and expansion of investment and ownership opportunity. This chapter argues that there may be an opportunity for significant foreign investment in tourism within the Kingdom, but it will most certainly be in partnership with state entities. Where other state-led development agendas have tried to create ecosystems guided by state industrial policy, those ecosystems usually deployed investments in human capital and an array of supporting institutions from universities to business groups to multiple supporting ministries, while the Saudi case seems to rely on the Public Investment Fund (PIF) for its diversification and revenue generation plans, as the PIF dominates the new Saudi state capitalism. The author demonstrates how the state intervenes in the economy—through the stock market and the PIF—and argues that its appetite for risk may have distinct social and political effects in the future. Competing in areas where the state is also in business, or acting as an investor competitor to the state when it has the PIF and its mandate to acquire domestic opportunities aggressively, is a significant challenge.