The innovation ecosystem was restructured in 2022 to enable the Kingdom to harness the capabilities and experience of its top scientists, researchers and inventors, increase marketable intellectual property, and stimulate inflows of private investment and venture capital to innovation-related entities. Funding is being channelled into research, development and innovation (RDI), financing a diverse range of projects and partnerships. Synergising the three constituent components of RDI will be key to achieving these goals. There have been early signs of progress in this regard, with the Kingdom rising through global innovation-related rankings in recent years.
Sector-specific strategies are also being explored to build a more productive innovation ecosystem that can support broad-based economic growth, akin to those underpinning the economies of China, Germany and the US, among other countries. Areas of the economy that require strong RDI components, such as manufacturing, energy and financial services, provide fertile ground for the government to pursue its goal of strengthening the ecosystem for start-ups and small and medium-sized enterprises (SMEs).
At the same time, major industrial and commercial companies and conglomerates have assumed leading roles in devising viable and profitable solutions to national and international challenges. Furthermore, an increasing number of partnerships between Saudi entities and international innovation-related institutions and multinationals are fostering greater levels of knowledge-sharing and technology transfer.
Structure & Oversight
Policy formation and the establishment of funding ceilings for RDI activities are carried out by the Supreme Committee for RDI. Working under the committee’s purview, the RDI Authority (RDIA), founded in 2021, is in charge of sector management and funding distribution. King Abdulaziz City for Science and Technology (KACST) acts as a national lab and scientific council, and plays a leading role in advancing scientific research to serve development and innovation objectives. Another influential operator in the RDI space is King Abdullah University of Science and Technology (KAUST). These and other entities are working to strengthen international partnerships and knowledge transfer to stimulate growth in the innovation sector (see analysis).
The education system is a vital influencer of RDI capacity (see Education & Training chapter). In addition to the important role played by university RDI departments, it is crucial that the national talent pool is given the opportunity to think and work creatively, solve problems and share ideas from an early age. In recognition of that, the Saudi government has embarked on a comprehensive restructuring of its education system to more broadly instil those qualities in the workforce. As a result, that places the Ministry of Education (MoE) and other education-related government authorities at the centre of efforts to develop the innovation ecosystem.
Among the various initiatives being carried out by the MoE are an overhaul of the private education system and related regulatory framework, which is designed to attract greater investment at each level of the education system – including from respected international institutions. In doing so, the MoE aims to introduce new and improved teaching, learning and RDI methods to the country. Universities are similarly being encouraged to forge ties with technology and RDI-related private companies.
Strategy
Vision 2030, launched in 2016, is the Kingdom’s primary development strategy and is designed to stimulate economic diversification. Through increased public expenditure, broad-based privatisation and a focus on multiple high-priority sectors, the Kingdom aims to reduce its dependence on hydrocarbons revenue – a policy priority that aligns with the global drive to achieve net-zero carbon emissions. Vision 2030’s overarching aim is to transform the economy into one driven by knowledge, innovation and technology, with enhanced quality of life and job opportunities.
In July 2022 Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud, in his role as chairman of the Supreme Committee for RDI, launched the National Aspirations and Priorities for RDI initiative. He underlined the important role that innovation will play in facilitating the attainment of Vision 2030 objectives and beyond. As is the case in other areas of the economy, the Kingdom is targeting regional and global prominence in the innovation sector.
Four key areas of focus were identified as RDI priorities for shaping the Saudi economy of the future and deepening the Kingdom’s global economic involvement and influence – namely, environmental sustainability and supply of essential resources; health and wellness; future economies; and energy and industry leadership. By 2040 the aim is for annual spending on RDI activities to be equal to 2.5% of GDP, with the revenue generated from that expenditure to amount to SR60bn ($16bn), stimulating job growth in related fields.
Following the crown prince’s announcement, the RDIA collaborated with Forbes Middle East in 2022 to review and identify the 40 most innovative Saudi organisations. This effort aligned with the National Aspirations and Priorities for RDI. The top-10 list comprised Aramco, SABIC, NEOM, stc, Ma’aden, Almarai, Al Rajhi Bank, Dr Sulaiman Al Habib Medical Group, ACWA Power and Saudi National Bank.
To accelerate progress towards its RDI goals, the Kingdom launched the new National Intellectual Property Strategy (NIPST) in December 2022, with the government pledging to spend $267m on its implementation over a five-year period. The strategy is built upon four pillars: intellectual property creation, administration, commercialisation and protection. Broadly speaking, the NIPST is designed to bring intellectual property procedures in the country in line with the highest international standards.
At the time of the announcement of the NIPST, the Kingdom was home to around 1000 inventors – a number that the government aims to raise to 13,000 by 2028 to foster a larger pipeline of innovation and inventions. In 2022 the Saudi Authority for Intellectual Property granted 5837 patent applications, up 46.7% from the 3979 approved in 2021.
The launch of the NIPST is a pivotal step towards Saudi Arabia’s aim to rank among the top-10 countries in the International Institute for Management Development’s “World Competitiveness Yearbook”. As of 2022 it placed 24th, up from 32nd in 2021. The Kingdom has also risen in the Global Innovation Index, published by the World Intellectual Property Organisation (WIPO), climbing 15 places to number 51 in 2022.
Health & Wellness
One of the country’s flagship scientific projects in recent years is the Genome Project, devised and executed by KACST, through which the institution’s top scientists have mapped the Kingdom’s genome in order to better identify, understand and treat genetic disorders. Saudi Arabia’s focus on its health industry is multifaceted, and it is pursuing a leadership position across the MENA region in areas including, but not limited to biotechnology, pharmaceuticals and biopharmaceuticals.
The Riyadh Global Medical Biotechnology Summit, launched to bring together global industry leaders to promote investment and knowledge exchange, ran for its second year in January 2023. During the two-day event, Saudi officials revealed that the Kingdom’s pharmaceutical industry accounts for around 30% of the Middle East’s total market, supported by advances in RDI and increased private investment and knowledge exchange. In total, 11 deals were struck between Saudi entities and domestic or international companies or authorities at the summit.
One of the deals was signed by the Ministry of Investment (MISA) and German pharmaceutical company Boehringer Ingelheim, which agreed to develop and manufacture its Tradjenta drug for the treatment of Type 2 diabetes in the Kingdom, and to implement its artificial intelligence-powered stroke detection and prevention technologies in specialist facilities throughout the Saudi health care system. Under another agreement, MISA will facilitate a partnership between Novo Nordisk Saudi Arabia and KAUST to research and develop solutions for metabolic disorders such as obesity and diabetes.
Sustainability & Resources
In relation to the environmental sustainability and essential resources research priority, the country is working to harness innovation to provide solutions and technologies for pressing national and global needs, such as access to a clean water supply and desalination techniques; food production; carbon capture, utilisation and storage; as well as the creation of green spaces. The government has pledged to spend $186bn on the Kingdom’s green economy by 2030. Notably, in 2021 the publicly owned Saline Water Conversion Corporation set a new world record for the lowest energy consumption for a water desalination plant, at a rate of 2.27 KWh per cu metre.
Saudi Arabia’s environmental sustainability goals and initiatives include the Saudi Green Initiative (SGI), which apart from fostering the proliferation of energy-efficient and low-carbon solutions, involves planting trees and vegetation throughout the Kingdom and implementing innovative environmental solutions. The strategic greening of urban areas can have pronounced positive effects on human health, quality of life and power consumption.
Indeed, green buildings have been shown to reduce operational costs by up to 19% and lower carbon emissions by around 34%. The implementation of green building features such as green walls and ceilings – spaces covered in foliage – has been proven to help keep building interiors cool in hot temperatures and vice-versa, resulting in significant financial savings given the energy-intensive nature of interior cooling and heating systems. Since the launch of the SGI in 2021 some of the country’s leading environmental scientists have helped to oversee the planting of over 18m trees, with an overall target of 650m by 2030. In addition, 60,000 ha of degraded land – out of a planned 40m – has been revitalised.
At the municipal level, around 7.5m trees are to be planted under the banner of the Green Riyadh project. It is expected that by 2030 execution of the project will generate SR71bn ($18.9bn) in return on investment via reductions in health care costs, lower electricity consumption, higher real estate value and the use of treated wastewater for irrigation, in addition to opening up new avenues for private investment in areas such as horticultural works and nurseries, afforestation, landscaping and irrigation.
Indeed, in June 2023 a deal was signed between US-based renewable energy and waste management company Strategic Environmental & Energy Resources and Saudi environmental management entity ECO Tadweer. The agreement will leverage the entities’ combined RDI and project execution capacities utilised to drive progress towards the goals of the aforementioned initiatives by broadening the scope for, and viability, of private investment.
Future Economies
A number of major projects are designed to create a blueprint for the future of urban living. NEOM, a 26,500-sq-km development in the north-eastern region of Saudi Arabia, is being built using innovations in areas such as cognitive city technologies, wastewater management, renewable energy and various other advanced technologies that will shape its industrial and commercial activities. NEOM’s constituent projects include The Line, a 170-km linear integrated development, characterised by the absence of roads and cars, and powered entirely by renewable energy. It is designed to eventually house 9m inhabitants on a footprint of just 34 sq km.
The scope and ambition of the NEOM development have helped to attract substantial funding from both international and local development banks, as well as from private investors in areas such as green hydrogen production, residential and urban planning, and innovations in power transmission.
Saudi real estate development and environmental regeneration company Red Sea Global has embarked on multiple research and conservation programmes with KAUST in recent years, and in 2022 it signed an agreement with Saudi electric vehicle manufacturer Electromin and US-based Energy International Corporation to develop Red Sea Global’s fleet of electric buses. It also runs a variety of human capital training and development programmes.
On the aerospace front, the creation of the Saudi Space Agency in 2023 has catalysed space-related research, driving innovation and exploration in this evolving field, including a successful May 2023 launch to the International Space Station, which carried the Arab world’s and the Kingdom’s first female astronaut.
Energy & Industry
Given Saudi Arabia’s international prominence in the energy and industry domains, significant resources are being channelled into the development of renewable power and technological solutions to reduce their environmental footprint.
Major industrial players – including Aramco and SABIC – are placing innovation at the centre of their future development models, with the former launching a new innovation arm, LAB7, which it intends to utilise in its bid to localise the production of hydrogen-powered vehicles. In 2022 Aramco was granted 963 patents by the US Patent and Trademark Office, up from 864 in 2021, placing the company in the top 50 of all entities in the list and first for a company of its nature (see regional analysis).
Technologically advanced, high-value production lines are also attracting private investment. In June 2023 France’s Schneider Electric opened an advanced technology-powered production line in the Kingdom that will utilise hardware designed to improve productivity, energy efficiency and the decarbonisation of operations for industrial companies. The same month saw the announcement of a partnership between KACST and China Electric Power Equipment and Technology to design and produce microchips for use in smart grid and smart city applications, as well as energy digitisation solutions.
Saudi Arabia is also developing the necessary infrastructure to support the growth of a domestic semiconductor industry. These components are expected to help advance the country’s digital, industrial and energy sectors. The ultimate goal is to position the country as a global leader in semiconductors.
Private Investment
The start-up ecosystem is integral to RDI given the agility and growth potential of its constituent companies. The Kingdom attracted $575m in venture capital funding for start-ups in 2021, representing an increase of 281%. This was followed by an investment of $987m in 2022, which equated to 72% growth and 23% of all venture capital funding in the MENA region that year. A total of 144 deals were made with 104 different investors in 2022. Financial technology (fintech) accounted for the highest amount of venture capital of any sector, recording $239m across 28 deals, equal to 24% of the total amount invested in the country. Furthermore, three Saudi start-ups – food and beverage company Foodics, fintech firm Tamara, and transport and logistics entity TruKKer – secured funding rounds in excess of $100m. Notably, five of the 10 most-funded start-ups in the Middle East in 2023 were of Saudi origin, representing significant progress from just one in 2017.
Foreign direct investment (FDI) in a variety of areas related to RDI has also been growing. In 2022 the number of FDI licences issued in the ICT sector was 1036, representing a 207% increase from 337 in 2021. The second quarter of 2023 saw 4229 licences issued in AI, 2229 in cybersecurity and 2344 in robotics. Meanwhile, licences issued to foreign investors entering the professional, scientific and technical fields rose from 82 in 2021 to 336 in 2022, an increase of 310%. FDI licences issued to investors entering the education system also climbed, jumping from 20 to 84.
The 2023 edition of the LEAP technology conference and convention in Riyadh yielded significant investment in RDI-related spaces. The four-day event in February opened with the news that major technology companies, including US-headquartered Oracle and Microsoft and China’s Huawei, had committed to a combined $9bn investment in emerging technology development in the Kingdom.
In February 2023 the Ministry of Communications and Information Technology announced that eight investment funds would be opened with a total value of $646m, aimed at boosting digital transformation and innovation within the country. IMPACT46, Merak Capital, Rakeza Al Hejaz, BIM Ventures, Shorooq Partners and Planetary Capital are among the bodies establishing the funds. Each fund has a different drive or purpose, such as space technologies, business development and acceleration, electronic gaming and strengthening bilateral partnerships.
Outlook
The priority areas of the Saudi RDI ecosystem are developing at pace. Change is being supported and driven by vast sovereign reserves and progressive improvements in private and foreign investment regulations. Also key is the Kingdom’s cohesive approach to governance, which is both attuned to the needs of the national economy and open to the benefits of international collaboration and cooperation.
While the current focus on revamping the education system will take a number of years to achieve full impact, a rising spirit of entrepreneurship is evident in the country, propelled by a youthful, motivated and increasingly diverse workforce that is keen to take advantage of the opportunities presented by recent socio-economic reforms (see Economy chapter).
The growing regional prominence of the Saudi start-up ecosystem is indicative of a strong foundation of creative minds and organisations that complements the experience and expertise of key RDI-related entities. This fertile combination has the potential to drive rapid advancements in the RDI space in the Kingdom and further afield, ultimately contributing to the broader economy’s prosperity in the years ahead.
