Key takeaways
- The Kingdom's GDP is predicted to surpass $1.14 trillion in 2025 and the new R&D strategy will play its part with an added value contributing up to $16 billion;
- Saudi Arabia has significantly strengthened its GII positions, entering Top 50 high-income group economies and ranking 36th in innovation inputs;
- Despite the steadily increasing private sector role, areas for improvement are numerous, ranging from human capital development to building a robust innovation ecosystem and promoting collaboration between domestic and international entities;
- With new priorities being established, it may be high time for companies to reconsider their approach rather than be left behind.
Economic diversification: ambitious plans
As of now, Saudi Arabia is the 19th largest economy in the world with nominal GDP surpassing $1.1 trillion in 2024 and the number will continue to grow rapidly so as to reach $1.14 trillion in 2025, according to IMF estimates.
Accounting for more than 30% of the Arab world’s Gross Domestic Product, the Kingdom of Saudi Arabia (KSA) intends to further diversify the economy endeavouring to reduce its reliance on fossil fuels. The goal set is linked tightly to the new ambition for the country to become a global leader in Research, Development and Innovation (RDI) with an annual investment equivalent to 2.5% of GDP in 2040.
KSA’s Research and Development Expenditure, 2008-2040 (% of GDP)

Source: The World Bank
The question is, what will the growth be fuelled by and how far will the government go to ensure transition from an export-oriented to a more diversified economy committed to RDI.
Has everything already been done?
Once Saudi Vision 2030 (SV 2030) was adopted, the knowledge-based economy topped the agenda with the RDI Strategy at the heart of the transformation. By 2040, under the National Aspirations and Priorities initiative, one of the leading programs for the RDI sector, the generation of added value up to SAR60 billion ($16 billion) as well as massive job creation in science and technology are expected. By 2024 the results are the following:
- Investments in non-oil sectors like technology, tourism and renewable energy and support for SMEs boosted the non-oil GDP share to 50%;
- Saudi Arabia significantly strengthened its GII positions, ranking 47th among the 51 high-income group economies and 5th among the 18 economies in Northern Africa and Western Asia in 2024;
- KSA ranks 36th in innovation inputs and 66th in innovation outputs in 2024, remaining one of the regional leaders and improving its positions year on year;
- Patent applications and grants have surged dramatically in the last three years (7 084 and 2 718 respectively in 2023), reflecting a strong improvement in the efficiency of the patent approval process;
KSA’s Intellectual Property Landscape (2016-2023)

Source: WIPO
- The Kingdom of Saudi Arabia ranks 28th in the world in research output, indicating a significant rise in global scientific contributions.
The private sector’s role in promoting innovation could hardly be overestimated as well.
- Active investors and entrepreneurs provide support for startups and SMEs pushing emerging venture markets;
- Hackathons are launched to concentrate on developing technology in the service of people, exploring water innovation, green hydrogen and leveraging e-fuel solutions, using AI to foster public-private partnership and effectiveness, adopting biotechnology to harness innovation in healthcare, etc.;
- Large corporations invest heavily in R&D through new collaborations. For example, National energy company Aramco entered into a memorandum of understanding with King Abdullah University of Science and Technology (KAUST), which included a $100m funding commitment from Aramco over 10 years for RDI projects focused on energy transition, sustainability, materials innovation, upstream technologies and digital solutions, aiming for both environmental and commercial benefits.
Rest assured that the number of promising joint projects will skyrocket in addition to already existing ones.
- ACWA Power and King Abdulaziz City for Science and Technology (KACST) signed an agreement to establish a joint clean energy and water desalination technologies development centre;
- Plans for a new mineral innovation acceleration park were announced. The development will entail collaboration between the Ministry of Industry and Mineral Resources, the National Industrial Development and Logistics Programme, and the Saudi Geological Survey;
- City-level cooperation between the Royal Commission for Riyadh City (RCRC), responsible for the strategic and comprehensive development of the city, and Alfaisal University focuses on developing the Riyadh Biotech City adjacent to the university campus.
Saudi Arabia’s Regional Headquarters Programme (RHQP) contributes to the trend significantly seeking to position the Kingdom as a major business centre and encouraging multinational companies to establish operations within its borders.
Yet, according to the World Intellectual Property Organisation (WIPO), there are some challenges KSA meets concerning innovation outputs. To secure the country’s long-term availability of local talent and capabilities to reach ambitious targets, measures should be undertaken to develop local R&D initiatives in proportion to non-oil economic growth, reduce bureaucratic red tape which may hinder innovation and increase secondary education outputs, knowledge absorption and productivity growth.
RDI Policy: areas of priority
The Kingdom’s long-term RDI strategy is set by the Supreme Committee for Research, Development and Innovation, which brings together key ministers and stakeholders to help guide the innovation agenda through strategic investment and collaboration.
Another key actor is the RDI Authority (RDIA), national RDI enabler, legislator and regulator, which plays a pivotal role in concentrating efforts to reach RDI targets set for 4 national priorities: Health and Wellness, Sustainable Environment and Supply of Essential Needs, Energy and Industrial Leadership, Economies of the Future.
Under the upcoming national RDI strategy, pending Cabinet approval as of November 2024, a more detailed approach is expected to be applied. New pillars are established to address the most pressing challenges in several ways:
- Improving human capital development: to increase the number of professionals engaged in RDI activities Saudi Arabia’s to simplify the lengthy procurement process for essential research materials and to tackle multiple bottlenecks in expertise. The former can delay projects by up to six months, the latter prevents established RDI assets from being leveraged to their full capacity;
- Boosting funding for innovation: with the Open access policy for research infrastructure, approved by the government in 2023, the Kingdom is willing to improve access to the government-funded research ecosystem. On top of that, such problems as suboptimal use of currently existing infrastructure, limited accessibility for new research and insufficient collaboration between industry and RDI players will be faced;
- Building a robust innovation ecosystem: large local businesses, government-related entities and city authorities will take the lead in creating supportive environment for RDI actively promoting new spaces;
- Supporting collaboration and open innovation: together with the continuation of close work with leading foreign institutions in RDI – particularly universities – in key sectors such as artificial intelligence, energy and health care, efforts will be expanded to sustainably populate research infrastructure with local and international talent;
- Positioning the private sector as the major driver of innovation in the medium-to-long term: increasing private sector involvement will be achieved through a number of incentives such as tax breaks and matching funds designed to stimulate corporate investment in innovation.
Companies: too late to stand out?
KSA actively pursues economic diversification by attracting foreign companies and investing in non-oil sectors. Although key players have been taking advantage of the current policies for some time already, there are still multiple milestones left for Saudi Arabia to reach global leadership, hence numerous opportunities for companies to benefit from the launch of funding grants and guidelines to enhance research infrastructure and technology transfer.
Data-driven decision making in R&D processes, optimizing existing talent pool, in-house development to foster innovation alongside external collaborations with academic institutions, industry partners and foreign companies to leverage collective expertise and resources will definitely make a difference.
References:
- UK Science & Innovation Network https://assets.publishing.service.gov.uk/media/6391ae8fd3bf7f1bd42de7be/KSA_Snapshot-2022.pdf
- AGBI https://www.agbi.com/economy/2024/11/saudi-arabia-economy/
- World Bank Group | Data https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2023&locations=SA-1A&name_desc=false&start=2000&view=chart
- https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?locations=SA
- SovereignGroup https://www.sovereigngroup.com/news/news-and-views/saudi-arabias-non-oil-activities-reach-50-of-gdp/
- WIPO https://www.wipo.int/gii-ranking/en/saudi-arabia/
- https://www.wipo.int/edocs/statistics-country-profile/en/sa.pdf
- Nature Index https://www.nature.com/nature-index/country-outputs/Saudi%20Arabia?code=e35f5e1b-f774-4cb8-9a36-e250d64dcc96&error=cookies_not_supported
- Partnerships support Saudi Arabia's RDI strategy https://oxfordbusinessgroup.com/reports/saudi-arabia/2024-report/industry-mining/innovative-model-increased-collaboration-between-local-and-international-entities-is-expected-to-bolster-the-foundation-for-sustainable-progress-analysis/
- SPA https://www.spa.gov.sa/en/N2232869
- https://www.spa.gov.sa/en/N2037240
- TradingEconomics https://tradingeconomics.com/saudi-arabia/research-and-development-expenditure-percent-of-gdp-wb-data.html
- Iaqaba https://iaqaba.com/saudi-arabia-rd-expenditure-2023/
- The National https://www.thenationalnews.com/gulf-news/2022/07/21/how-saudi-arabia-is-investing-in-research-and-development-to-diversify-its-economy/
- https://www.thenationalnews.com/business/economy/2022/07/01/saudi-arabia-outlines-new-plan-for-research-development-and-innovation/
- Saudi Arabia’s Regional Headquarters Program: Complete Guide https://www.businesslink.sa/en/regional-headquarters-program/
- RDIA https://marifa.kaust.edu.sa/vision-2023/
- Maaal https://en.maaal.com/archives/202204/saudi-aramco-signs-memorandum-of-understanding-with-kaust-to-establish-ai-excellence-center/
- Arab News https://www.arabnews.com/node/2438446/business-economy
- Alfaisal News https://news.alfaisal.edu/times-higher-education-featured-article-biotechnology-incubator-boosts-saudi-health-innovation/