Unlocking an innovation-based economy in Saudi Arabia

As the global knowledge economy becomes more interdependent, the troika of research, development and innovation has emerged as the essential catalyst for value creation and economic progress in society.

Most countries and communities today not only appreciate the vital role of RDI in securing their future, but also acknowledge that investment in innovation goes beyond its intended scope, with major spillover benefits that often far exceed the original purpose.

With RDI initiatives serving as the cornerstone for the development of national strategies as well as the pivot to a progressive future, it is therefore vital for nations and governments to devise and follow RDI best practices and create effective frameworks to fulfil such projects. This includes assessing the impact of RDI initiatives across economic and social levels.

While it is a proven outcome that investing in RDI drives economic growth and prosperity, the true benefit of such projects can only be realized after a lag of five to 10 years. This is driven by multiple factors including the time span for development and testing, regulatory approvals, market adoption and scaling-up of production.

But the impact of RDI activities traverses beyond mere economic benefits — as demonstrated by the contours of the national aspirations and priorities for RDI initiatives. They work to address some of society’s most pressing challenges, including healthcare, the environment and education.

With the Global Soft Power Index as a barometer, governments that invest in pioneering RDI approaches are typically found to dominate the upper ranks of the index. And reduce their reliance on external entities, particularly in the realm of vital resources such as water, renewable energy and defense technology.

According to the Organisation for Economic Co-operation and Development — which provides a reliable indicator of such progress — spending on RDI has grown steadily over the years.

This happens especially in G20 countries, where it reaches an average of about 2 percent of gross domestic product and goes as high as 5 percent of GDP in South Korea. This trend underscores the increasing recognition of the critical role that RDI plays in driving economic growth and competitiveness

That is one of the reasons why the Kingdom of Saudi Arabia has been a pioneer in placing a strategic emphasis on research, development and innovation — in close alignment with its transformative Vision 2030.

The Kingdom’s RDI National Aspirations and Priorities initiative, unveiled in 2022 by Crown Prince Mohammed bin Salman, aims to add SR60 billion ($16 billion) to Saudi Arabia’s GDP by 2040.

Entailing an annual investment that equates to 2.5 percent of the country’s GDP in 2040, the initiative fosters the creation of high-value jobs in science and technology, and further strengthens the Kingdom’s position as the Arab world’s biggest economy.

Among the key focus areas of this bold RDI initiative are Health and Wellness, Sustainability and Essential Needs, Energy and Industrials, and Economies of the Future. These are all designed to enhance the Kingdom’s global competitiveness and economy, as well as help advance the Vision 2030 strategic framework focusing on a vibrant society, and an ambitious nation.

Indeed, the Kingdom’s transformative journey in RDI is a testament that such ambitious pathways are essential to avoid increasing the innovation gap vis-a-vis other leading economies. And to build on the existing innovation momentum driven by megaprojects and ongoing transformations across different sectors.

The four research focus areas of the Kingdom’s RDI initiative are in line with the country’s Vision 2030 priority areas and its resources and capabilities. And have also led to institutional changes that will drive the maturity of the RDI ecosystem and the level of focus it receives among national priorities.

The establishment of the standalone Research, Development and Innovation Authority to orchestrate RDI efforts with the oversight of a committee, bear testimony to such developments.

Funding for RDI in many GCC countries has been historically low, highly reliant on government support, basic research-focused with limited commercialization, and unaligned with national priorities.

The Kingdom can become an exemplar by following best-in-class funding models developed by innovation leaders, and tapping into global and local talent needed to boost its RDI credentials.

On top of the funding model, the Kingdom can deploy effective data-management systems to monitor the impact of the RDI sector transformation on the advancement of the ecosystem.

In today’s fast-paced world, it is imperative that nations integrate excellence in innovation into their development agendas — and the Kingdom has shown the way on how to accelerate the innovation ecosystems and lay the ground for future socio-economic growth.

The Kingdom is on the proper track by creating an agile RDI governance model and ecosystem in which innovation can be fostered through bold strategies and regulations, private sector involvement, innovation promotion and international cooperation.

It will ensure that today’s RDI moonshot becomes tomorrow’s path-breaking reality.

• Antoine Nasr is the senior managing director & EMEA public sector practice lead at FTI Consulting. Nasr has more than two decades of management consulting experience, with a focus on public sector work. He has supported governments in the Middle East and across the globe in shaping national visions and policies and defining socio-economic development agendas. And has led large-scale transformation and restructuring efforts for public and private sector entities.
• Georges Assy is the senior managing director at FTI Consulting. Assy advises government entities in the Middle East on their most prominent policy, strategy and transformation projects. Assy has more than 15 years of experience focusing on center of government, innovation, and other key areas.
• Raif Abla is the senior engagement manager at FTI Consulting. Abla has extensive management consulting and industry experience in the GCC helping government entities in addressing their most pressing challenges and realizing their full potential.