2023 POLICY ROADMAP

Saudi Arabia is continuing to transform its economy, diversifying income sources to reduce reliance on oil, and improving competitiveness. Non-oil GDP growth in 2023 was expected to reach 5%, with inflation at 3%.

Recent legislation has sought to encourage entrepreneurship, safeguard private investment and lower the expense of doing business. Private investment was boosted by the Saudi Public Investment Fund (PIF).

2023 Framework Conditions Review1

Saudi Arabia has invested heavily in its entrepreneurial environment as an important component in its diversification strategy. This investment has borne fruit, with the overall quality of its entrepreneurial environment, as assessed by its own national experts and measured by the National Entrepreneurial Context Index (NECI), increasing steadily from 5.0 in 2019 to 6.3 in 2022 and the same in 2023, pushing Saudi Arabia up the NECI league table from 17th in 2019 to second in 2022 but down to third in 2023 (because
of improvements in India’s NECI score). Saudi Arabia clearly has a high-quality entrepreneurial environment, with all individual Entrepreneurial Framework Conditions (EFCs) assessed as more than sufficient in 2023, with the exception of Entrepreneurial Education at School, which, as in so many economies, continues to have by far the lowest EFC score. Individual EFC scores were little changed in 2023 compared to 2022.

National experts assessed social support for women entrepreneurs and those women entrepreneurs’ access to resources compared to their male counterparts (new 2023 questions). Results for Saudi Arabia were quite surprising. The social support for women starting their own business had an excellent score of 6.4, much better than sufficient and ranked third of the 49 GEM economies in the National Expert Survey (NES) in 2023. However, women entrepreneurs’ comparative access to resources, which ought not to be an issue in such a rich country, scored just 4.4, ranked 40th of those 49 economies. Urgent action is required here if Saudi Arabia is to maintain its new reputation as an excellent place to start a business.

2023 Entrepreneurial Activity Review

2023 was an excellent year for entrepreneurial activity in Saudi Arabia, though with some concerns. Just one in five adults reported that their household income reduced in 2023, down from one in two a year earlier. Entrepreneurship has a very high profile in Saudi Arabia, with around nine in 10 adults each knowing someone who had recently started a business, or seeing good opportunities to do so locally, or considering themselves to have the skills and experience to start their own. Each of these proportions was the highest in GEM 2023. However, three out of five of those seeing good opportunities would not start a business for fear it might fail (third highest in GEM). Despite this, nearly two in five adults not already doing so intended to start their own business in the next three years.

In 2023, almost one in four adults in Saudi Arabia were starting or running a new business, by far the highest in Level A, and sixth highest in GEM. This level was around twice that of pre-pandemic 2019. However, one concern is that more than four out of five of these new businesses was in consumer services. Reflecting several years of high levels of new startups, the level of Established Business Ownership continues to
grow: 5% in 2021, 10% in 2022 and reaching 14% in 2023. So many new businesses are transitioning into established ones.

Building great wealth and earning a living because jobs are scarce share dominance as agreed motivations for new entrepreneurs. However, and perhaps because of the large and growing internal market, very few
new Saudi entrepreneurs have customers beyond the country (less than one in 20). Nevertheless, more than three in four of those new entrepreneurs expect to use more digital technology in the next six months, while three in 10 expect to employ another six or more people over the next five years.

Overall, this is a very positive set of entrepreneurial outcomes for Saudi Arabia, with very high awareness of entrepreneurship, high levels of new and increasing levels of established businesses, all within a supportive and high-quality entrepreneurial environment. Concerns include the relative access of women entrepreneurs to resources, high levels of potential entrepreneurs deterred by fear of failure and the overwhelming dominance of consumer services.

1 A brief description of the GEM approach is given in the footnote on p. 107 of the GEM Global Report.