Saudi Arabia courted East Asian political leaders and signed investment deals throughout March in an
initiative to diversify its oil-dependent economy. Japanese Prime Minister Shinzo Abe met with Saudi King Salman bin Abdulazziz Al Saud at a summit in Japan on March 13 and agreed to a bilateral framework titled Saudi-Japan Vision 2030. Japan’s Ministry of Economy, Trade, and Industry describes the framework as a “compilation of the basic directions for bilateral cooperation and the specific projects therein.”
Following the summit, the Japanese and Saudi Arabian economy ministers agreed to a joint effort to accelerate investment projects in Saudi Arabia. The Saudi Press Agency announced a variety of new economic partnerships and licenses with Japanese investment firms on March 14.
King Salman followed up his Japanese summit by meeting with Chinese Premier Xi Jinping on March 17. The two leaders agreed to a memorandum of understanding for investment cooperation valued at $65 billion. The agreement includes joint efforts to boost spending in areas such as energy, investment, finance, culture, and aerospace.
Saudi Arabia’s hunt for investors is fueled mostly by efforts to diversify its economy away from oil. Falling oil prices and declining revenues inspired Saudi Arabia’s National Transformation Plan in June 2016, a document outlining plans to increase productivity by privatizing state-owned assets and spurring private sector growth in pharmaceuticals, information technology, and tourism, among others.
Analysts from McKinsey & Company estimate that Saudi Arabia could double its GDP and create up to six million new jobs by 2030 through productivity-led economic transformation and diversification. This lofty goal comes with a hefty price tag of $4 trillion in investment, but Saudi Arabia has few other options to manage the desperate state of its economy.
After OPEC production cuts were announced last December, the IMF cut its economic growth forecast for Saudi Arabia from two percent to just 0.4 percent for 2017. In an appearance on national television in October, Saudi deputy economic minister Mohamed Al Tuwaijri defended recent reform efforts, arguing, “If we didn’t take any reform measures, and if the global economy stays the same, then we’re doomed for bankruptcy in three to four years.”
Some commentators also see Saudi Arabia’s economic pivot to Asia as a part of a long-term geopolitical strategy. Global affairs analyst Ankit Panda, writing for Al Jazeera, argues that particularly in China, Saudi Arabia sees “an increasingly significant geopolitical counterweight to the United States, whose foreign policy has grown uncertain since the inauguration of Donald Trump as president.”
Japan and China are known competitors for investment opportunities abroad. Recently, economic competition between Japan and China has intensified in Africa. At Japan’s Sixth Tokyo International Conference on African Development held in Nairobi, Shinzo Abe pledged $30 billion in public and private support for African development over the next three years. After the conference, the Chinese Ministry of Foreign Affairs accused Japan of “attempting to impose its will on African countries to gain selfish interests and drive a wedge between China and African countries.”
Sino-Japanese investment efforts are still not openly competitive in Saudi Arabia, likely due to their infancy and the wide space of opportunity for both countries to participate. But if either country attempts to pursue exclusive deals to become the dominant partner in Saudi Arabia’s diversification effort, Saudi Arabian investment may become another battleground of Sino-Japanese economic competition.