At the September 2022 Global AI Summit in Riyadh, put on by the Saudi Authority for Data and Artificial Intelligence, Saudi ministries and authorities and mostly Western private sector companies announced around 40 partnerships and agreements. Saudi government bodies signed partnerships with Intel, IBM, and international information technology association ISACA.

In support of Vision 2030 – a multibillion-dollar social, economic, and fiscal reform plan – Saudi Arabia has been rapidly announcing new public-private partnerships. PPPs are generally long-term collaborative partnerships between a government and private sector institution. Typically, these partnerships involve private capital financing government projects and services up front. Private sector companies, for their part, benefit by sharing risk and garnering expanded access to capital, and thus often return on investment, by partnering with oil rich government agencies and ministries. Looking to finance and build a series of futuristic and innovative megaprojects as part of an ambitious plan to diversify its economy away from hydrocarbon revenue, Saudi Arabia, particularly, is turning to PPPs.

PPPs in Saudi Arabia

Throughout the Gulf, PPPs have become key pillars of economic reform plans and a means of helping governments attract substantial and diversified foreign investment. For Saudi Arabia, particularly, PPPs represent a critical means to accelerate major Vision 2030 aligned projects. Additionally, Saudi leaders seem interested in using PPPs to help privatize certain industries, such as artificial intelligence. Saudi Arabia is likely to continue fostering PPPs, but the success of these efforts will depend on a number of factors, including the development of more equitable contracts for investors and the overall economic outlook of the country. With much of the world grappling with a potential recession, international investors may increasingly look to the Gulf as a beacon of economic security, which in turn may encourage further partnerships, assuming investors can identify collaborative opportunities that offer the promise of good return on investment, in the intermediate or longer term. However, while PPPs can be strategic, they may highlight some weaknesses for Saudi Arabia related, for example, to workforce limitations and the lack of expertise to execute certain goals.

Artificial Intelligence

Based on the multitude of PPP announcements, these partnerships seem particularly relevant in the AI sector – an industry the kingdom is particularly focused on developing as it aims to become a tech powerhouse. PPPs are seen by the government, particularly the Saudi Authority for Data and Artificial Intelligence, as a means of advancing its AI and tech goals given a lack of domestic expertise. The Saudi Authority for Data and Artificial Intelligence was created in 2019 with a mandate to support and drive the data and AI agenda within the kingdom, aiming to position Saudi Arabia as a global leader in data-driven economics. In 2020 the authority announced the National Strategy for Data and AI with a vision for Saudi Arabia to become the country “where the best of data and AI is made reality.” However, much of the kingdom’s advanced AI work is outsourced, highlighting a gap between these ambitions and a sufficiently equipped domestic workforce to support them. Only 17% of science, technology, engineering, and math graduates in Saudi Arabia go on to work in the STEM field. Furthermore, a large number of young, well-educated Saudis cannot find jobs: According to the World Bank, youth unemployment hovers around 29% and only 74% of adults with college or vocational education are employed.

In the spring of 2022, Saudi Arabia, in conjunction with the consulting firm PwC, announced its goal to have AI contribute over $135.2 billion to its economy (12.4% of its gross domestic product) and attract $20 billion of foreign investment in data and AI by 2030. Saudi Arabia also aims to train more than 20,000 AI and data specialists. Since the announcement, however, the kingdom has not provided an update on plans to meet these goals nor started any public upskilling programs. The authority has done little since to implement the strategy, beyond hosting high-profile summits and signing partnerships, and AI still only plays a minor role in the kingdom. With so much investment and public relations campaigning around AI, the challenge will be to deliver tangible results.

PPPs serve as a simple answer to the kingdom’s problem, as private companies have the expertise needed to execute and develop key AI technologies. Intel and IBM have implemented AI systems, and now Saudi Arabia wants to reap the benefits.

However, as the Saudi government and its citizens increasingly turn to the foreign private sector to fill knowledge and workforce gaps, it stands to weaken commitments to Saudi education and capacity building and diminish efforts to nationalize the workforce. On October 11, the Ministry of Human Resources and Social Development announced that the consulting sector must adhere to Saudization requirements of 35% by April 2023; however, given the kingdom’s reliance on consulting firms, it is likely that rules and enforcement will be lenient and, if past is precedent, that enforcement of Saudization requirements for the consulting industry will be symbolic in nature.

While it is not yet clear what IBM, Intel, ISACA, and other private sector organizations will be able to accomplish in Saudi Arabia, in the data and AI fields, these organizations will likely take over the AI efforts of each partner ministry or authority, instead of aiding in domestic efforts of workforce development and fostering local knowledge, as has been the case with foreign companies in the past. For example, Amazon is leading various green-energy initiatives, and Huawei is on point to set up countrywide 5G technology – though the administration of President Joseph R. Biden Jr. has touted efforts to involve itself in the deal, Huawei still dominates the 5G market in the kingdom. The government might be overseeing these projects to an extent, but it will likely continue to defer to the international private sector to drive these initiatives. This is further evidenced by the Saudi Privatization Law announced in April 2021 that seemingly formalized the reliance on PPPs. It established a regulatory framework for PPPs in the kingdom to increase private sector participation in public services and reduce the kingdom’s risk in these ventures (though measures for risk mitigation remain unclear).

PPPs are on the rise and are ostensibly seen by the Saudi government as a means of effectively implementing its Vision 2030 goals, but it remains to be seen whether these PPPs actually move the needle on Vision 2030.