The insular desert Kingdom of Saudi Arabia lacks many things. An adequate supply of fresh water. Alcohol. Cinemas. Women drivers. Bikinis. Democracy.
But there are a few things that aren’t in short supply in this country of 28 million: glitzy malls, money, and of course, oil.
Saudi Arabia discovered oil in 1938, only six years after becoming a unified country. It has since become the world’s leading exporter and producer. Petroleum accounts for over 90% of the country's exports, and over half its GDP. In 2012, the Kingdom raked in a staggering $311bn in oil revenues – as much as Iraq, Kuwait, UAE, and Qatar combined.
Yet at some point, their “black gold” will run out. As early as 2030, according to a Citigroup report. And without it, the current Saudi economy could grind to a halt. To prevent this, it has recently undertaken a remarkably ambitious and expensive plan – to become a world leader in technology and innovation by kicking its oil habit, shifting away from decades of single-commodity dependency and moving towards a knowledge-based economy by 2025.
Saudi Arabia’s robust oil endowment is being pumped into special economic cities, universities and entrepreneurship centres in every corner of the country – like the King Abdulla City for Atomic and Renewable Energy, near the capital Riyadh, or the Saudi Aramco Entrepreneurship Center (Wa’ed), based in Dhahran.
Part of the plan to diversify the economy has resulted in an international scholarship programme that sees more than 130,000 Saudi students studying abroad at the world’s leading universities.
With 70% of the population under 34, and unemployment for Saudi nationals lingering around 12% – and over 30% for women – it’s no surprise the nation is pushing its youth to innovate. But can a large endowment alone kick-start a culture of innovation?
Few have seriously tried. Norway, the world’s eighth-largest oil exporter, established a sovereign wealth fund (Government Pension Fund Global) in 1990 to diversify oil investments and promote other industries, in preparation for a future without oil. It’s been regarded as a success – but aside from oil, Saudi and Norway have very little in common.
“It’s a big challenge,” admits Mr Nawaf Al-Sahaf, chief executive of Badir, a new government-funded business incubator that is one of many promoting entrepreneurship as a means to new economic growth. “If we focus on creating a culture based on entrepreneurs, maybe we will succeed,” he says.
Based in the capital Riyadh, Badir was established in 2008 to launch incubators in five major sectors – starting with ICT, advance manufacturing and biotechnology. “We started with ICT because it’s the easiest thing to start. You don’t need labs, equipment. All you need is servers and business development managers.”
So far, Badir has supported over 70 companies, including Enwani, which links users’ addresses with their mobile phone number to make deliveries easier; physical residence addresses don’t exist in much of Saudi.
Another Badir startup, Yatooq, has developed an automatic Arabic coffee machine (it needs a more complicated process than ordinary coffee). Two days after launching their product, Yatooq sold 2,000 machines.
Coffee, however, probably won’t turn the economy around on its own. While Badir focuses on lighter tech industries, there are similar incubators for the deeper sciences.
The King Abdullah University for Science and Technology (Kaust) campus is a public research institution near the coastal village of Thuwal. It cost $20bn to build in 2008 (they reportedly imported sand from Spain for its private beaches) and was bestowed with a $10bn endowment, allowing it to attract top talent like Jean-Lou Chameau, former president of CalTech in the US.