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### Annex I — Vision 2030 and National Investment Strategy
- Vision 2030 (launched 2016): framework for economic, structural, and institutional transformation supported by eleven Vision Realization Programs.
- National Transformation Program (2016) priorities: empowering private sector and SMEs; enhancing ease of doing business; attracting FDI; accelerating digital transformation; improving government transparency and efficiency.
- Complementary programs: Privatization Program; Financial Sector Development Program; Human Capability Program.
- National Investment Strategy (NIS) launched 2021 objectives:
  - increase public and private investment in strategic sectors;
  - attract FDI for economic diversification;
  - increase private sector contribution.
- NIS targets and composition (2021–2030, cumulative):
  - Total investment target: SAR 12.4 trillion or USD 3.3 trillion.
  - Planned composition:
    - SAR 5 trillion (USD 1.3 trillion) through the Shareek program;
    - SAR 3 trillion from the PIF;
    - SAR 2.6 trillion from other domestic investment;
    - SAR 1.8 trillion from FDI.
- Institutional support: Investment Promotion Authority (SIPA) established August 2022.
- Expected macro implications: IMF (2022) and Moreau and Aligishiev (2024) estimate NIS-linked investment, combined with fiscal, labor supply, and efficiency reforms, would raise medium-term non-oil real GDP growth significantly.

### Labor market outcomes and skills (key statistics and developments)
- Unemployment and participation:
  - Unemployment rate of Saudi nationals: 7 percent in Q4/2024 and 6.3 percent in Q1/2025.
  - Vision 2030 unemployment targets: original 7 percent; new target 5 percent.
  - Female labor force participation among Saudi nationals rose by nearly 18 percentage points between 2017 and 2024.
  - Unemployment for Saudi women: 32.4 percent (pre-2017) to 13.1 percent (2024 average) and 11.9 percent (Q4/2024).
  - Unemployment for highly educated women: 15 percent in 2024; for highly educated men: 4 percent in 2024.
- Recent employment composition:
  - Since 2020, nearly 700,000 Saudis joined the private sector workforce, accounting for nearly all recent employment gains.
  - Expatriates still make up four out of five private sector employees.
- Female labor force and wages (Q3/2024 and trends):
  - Female participation nearly doubled: from 18 percent in 2017 to almost 36 percent in 2024.
  - Unadjusted monthly wages (Q3/2024):
    - Saudi women without tertiary education: 5,366 Riyals.
    - Saudi men without tertiary education: 8,081 Riyals.
    - Saudi men with tertiary education: 14,125 Riyals.
    - Highly educated women: 9,413 Riyals.
  - Average monthly earnings of highly educated women with bachelor’s degree fell from 10,409 Riyals in 2019 to 8,941 Riyals in 2024.
- Education enrollment (2011–2022):
  - Gross tertiary enrollment ratio:
    - Women: from 41 percent to 78 percent.
    - Men: from 22 percent to 70 percent.
- Labor law and policy measures:
  - Labor Law amendments (February 2025): mandate equal treatment regardless of personal characteristics; explicitly prohibit discrimination.
  - 2025 Labor Law amendments include provisions for employee accommodation and transportation.
  - Flexible work regulation amended May 2024; Remote work program December 2024.
  - Programs: Human Capability Development Program; Gender Balance Center (2021); Gender Budgeting Program; National Policy to Encourage Equal Opportunity and Equal Treatment (January 2023).
  - Transport investments (e.g., Riyadh metro) and 2018 decision allowing women to drive increase mobility.
- Commuting and job acceptance (2024):
  - 13 percent of unemployed women unwilling to accept a job outside area of residence versus about 6 percent of men.
  - 26 percent of unemployed women—and 49 percent of men—willing to commute more than one hour.
  - Willingness to commute rose for both genders between 2022 and 2024, narrowing the gender gap.

### Structural reforms implemented since 2016 (areas and examples)
- Governance:
  - Establishment of Mashroat (later EXPRO), Adaa performance monitoring, Etimad online platform.
  - Fiscal management: medium-term fiscal framework, digitalized tax administration, improved budget planning and execution, Treasury Single Account.
  - Anti-corruption and AML/CFT: New Nazaha Law in 2024; updated AML/CFT legislation; new Ultimate Beneficial Ownership Rules; National Anti-Corruption Strategy developed but not finalized.
- Business regulation:
  - New Saudi Center for Commercial Arbitration (SCCA) rules and SCCA Court; new Law on Civil Transactions; updated Companies Law; new Commercial Registration Law; new Competition Law; privatization and PPP initiatives; reforms in real estate registration and property brokerage; strengthened intellectual property and personal data protection.
- External sector:
  - Measures to enhance foreign investor access to domestic capital markets; Updated Investment Law of 2025 ensuring equal treatment of local and foreign investors; introduction of various visa types; establishment of GCC Customs Union.
- Capital markets and credit:
  - Reforms to develop domestic equity markets (including Nomu), domestic debt and credit markets, government securities market; SME access to finance measures.
  - Net inward FDI inflows remained between $20-30 billion between 2021 and 2024.
  - Despite progress, access to finance still has room to improve.

### Indicators, benchmarking, and measured progress
- Data sources: World Bank’s Worldwide Governance Indicators; Fraser Institute indicators; Economist Intelligence Unit (EIU) business environment indicators.
- Coverage limits:
  - Fraser Institute capital markets indicators limited to credit market, not equity reforms.
  - Fraser Institute labor market indicator limited by exclusion of several Doing Business sub-indicators.
- Evolution of structural gaps (gap to frontier 0–1 scale):
  - Substantial narrowing in governance, business regulation, and credit markets since 2016.
  - Gaps roughly unchanged for external sector and labor market (with caveats).
- EIU Business Environment indicators (0–10 scale, 2015–2024) show improvements in political environment, policy toward private enterprise and competition, policy toward foreign investment, and financing; foreign trade and exchange controls score remained high.
- Fraser Institute labor sub-indicators supporting EIU labor improvements include availability of skilled labor, quality of workforce, technical skills, and health of the workforce.

### Empirical estimation of output impacts from reforms (framework and key estimates)
- Empirical framework:
  - Cross-country database of structural reform indicators covering 108 emerging markets and developing countries from 2000 to 2022.
  - Five reform areas: governance, business regulation, external sector (first-generation reforms); credit market, labor market (second-generation reforms).
  - Local projection method in panel setting; regressions include country and year fixed effects and time-varying controls.
  - Multipliers estimated separately for countries above and below median first-generation reform score; Saudi Arabia is in the above-median sample.
- Key quantitative empirical findings:
  - A reduction in the governance structural gap by one percentage point is estimated to increase GDP by 0.3 percent after five years.
  - Structural reforms yield significant and persistent impacts on real output across reform areas; size and persistence differ by area.
  - Cumulative output dividend of previous credit market reforms is estimated to be slightly above (text break in source).
- Estimation steps applied to Saudi Arabia:
  - Step 1: determine cumulative change in each indicator for Saudi Arabia based on structural gaps.
  - Step 2: multiply cumulative changes by estimated elasticities (reform multipliers) to derive multi-year impacts on real output.
- Notes on interpretation:
  - Digitalization interacts with several reform areas by enhancing public administration efficiency and modernizing regulatory frameworks.
  - Labor market reforms require deeper analysis using alternative data due to indicator coverage limitations.

### Output dividends from recent reforms (quantified impacts)
- Credit market reforms since 2015 associated with a cumulative real GDP response (impulse responses presented as cumulative percent change; Figure 9 in source).
- Business regulation reforms estimated to have contributed a cumulative increase in output of approximately one percentage point (Figure 10).
- Governance reforms estimated to have yielded a cumulative increase in output of nearly 4.5 percent (Figure 11).
- Impact on external sector limited due to persistent structural gaps.
- Fraser Institute labor market indicators showed minimal improvement and limited output impact; alternative labor market analyses are provided elsewhere.

### Remaining structural gaps and projected gains from closing them
- Business regulation:
  - EIU indicators on “state control and ownership” and “price controls” indicate room for improvement.
  - Ongoing initiatives: Private Sector Participation Law of 2021, privatizations, PPPs, energy pricing reforms since 2018.
- Labor market:
  - Fraser Institute shows large gap on “hiring and firing regulations.”
  - EIU suggests more effort on “availability of skilled labor,” “technical skills,” and “quality of workforce.”
- Credit market:
  - EIU “financing” indicator suggests room to improve foreign investors’ access to domestic capital markets.
- External sector:
  - Fraser Institute “migration” sub-indicator captures remaining room to improve foreigners’ access to Saudi Arabia.
  - Further scope to reduce restrictions on foreign investors (e.g., relax restrictions on qualified foreign financial institutions).
- Governance:
  - Worldwide Governance Indicators show narrowed gaps for government effectiveness, rule of law, and regulatory quality; gap remains in control of corruption.
  - EIU indicates need to improve efficacy of the legal system; recent legal reforms may take time to show in indicators.
- Projected gains from closing gaps (five-year horizon):
  - Package focused on business regulation and expanded credit access: estimated to raise real output growth by over 1 percentage point annually over five years (full convergence to emerging market frontier), corresponding to a 5 percent increase in output over five years relative to a non-reform scenario.
  - Closing governance gaps with frontier emerging market economies could increase real GDP growth by an estimated 0.5 percentage points annually over five years.
- Methodology note:
  - Figure 13 in source shows average additional annual growth (pp.) from reforms that close the gap to Emerging Market frontier by 100%; coefficients converted to annual contributions using CAGR and aggregated to show joint package effects.

### Labor markets and skills mismatch — scenario analysis (methodology and results)
- Purpose: assess labor market reform impacts, summarize trends and initiatives, evaluate Vision 2030 effects on labor demand and skills, and identify potential skill mismatches via scenarios.
- Supply measure:
  - Share of currently enrolled students in college and share enrolled in STEM subjects; college graduates defined as ISCED 5 or above; STEM defined by ISCED-F 2013 categories.
- Skill requirements by industry:
  - Assumed equal to U.S. industry demand for college-educated workers and STEM workers (U.S. Bureau of Labor Statistics 2023 industry shares used).
- Job posting patterns (Q3/2024 averages across four sample dates: 7/1/2024, 7/29/2024, 8/26/2024, 9/23/2024):
  - Professional & scientific & technical services: 26 percent.
  - Accommodation and food services: 20 percent.
  - Manufacturing: 14 percent.
  - Information technologies: 11 percent.
  - Observation: current Saudi national employment does not mirror job posting demand, suggesting faster sectoral shift than workforce adaptation or skill mismatch (except transportation & warehousing).
- Two job-growth scenarios (sectoral job posting shares in percentages):
  - Main Scenario 1 (conditional job posting share in Q3/2024):
    - Manufacturing 16.9
    - Transportation and Warehousing 2.8
    - Information Technologies 18.3
    - Professional, Scientific, and Technical Services 37.1
    - Accommodation and Food Services 18.3
    - Mining 6.5
  - Alternative Scenario 2 (conditional job posting share in Q3/2024):
    - Manufacturing 8.0
    - Transportation and Warehousing 1.3
    - Information Technologies 26.1
    - Professional, Scientific, and Technical Services 52.8
    - Accommodation and Food Services 8.7
    - Mining 3.1
- Industry-level U.S. 2023 college and STEM shares used as skill requirements:
  - Manufacturing: college 22.3 percent; STEM 11.0 percent.
  - Transportation and Warehousing: college 7.4 percent; STEM 1.1 percent.
  - Information Technologies: college 61.8 percent; STEM 30.6 percent.
  - Professional, Scientific, and Technical Services: college 71.1 percent; STEM 32.8 percent.
  - Accommodation and Food Services: college 2.7 percent; STEM 0.1 percent.
  - Mining: college 14.8 percent; STEM 5.9 percent.
- Key scenario findings (demand vs supply):
  - College-educated demand vs supply:
    - Main scenario: 43 percent of additional new jobs expected to require a college degree; Saudi Arabia’s current college enrollment rate approaches 75 percent.
    - Alternative (tech-focused) scenario: share of new jobs requiring a college education rises to 57 percent—still below projected supply of university graduates.
    - More than 75 percent of job postings in Q3/2024 occurred in the six considered industries.
  - STEM graduates demand vs supply:
    - Main scenario: anticipated share of STEM graduates falls short of anticipated labor demand (exact values in source figures).
    - Alternative scenario: labor demand for STEM graduates reaches 26 percent, while projected supply remains at just 17 percent.
- Additional youth indicators:
  - 17 percent of 18–30 year old respondents to a 2022 labor force survey reported being self-employed.
  - Among 18–30 year olds not enrolled in education or training, 26 percent expressed interest in studying a STEM subject at university.
  - Only 35 percent of youth expressed interest in working in Vision 2030-targeted sectors, though these sectors accounted for 55 percent of job postings in Q3/2024.
- Interpretation:
  - Potential mismatch: future demand for college-educated workers may fall short of projected supply, while demand for STEM-qualified workers may exceed projected supply—especially in tech-heavy scenario.
  - Eliminating educational mismatch expected to raise output; literature examples cited in source show wide-ranging output effects (examples: average 3 percent across OECD in Garibaldi et al. (2025); 1 to 6 percent in Cervantes and Cooper (2022); Hsieh et al. (2019) link occupational allocation to 20 to 40 percent of output per person growth in the U.S. 1960–2010).

### Policy recommendations and reform priorities (selected actionable items)
- Labor market and education alignment:
  - Improve STEM education and vocational training.
  - Implement Labor Market Strategy 2025–2030 and National Skills Strategy.
  - Track demand-supply mismatches through the “15 Skill Council” (private sector and government).
  - Establish taxonomy and framework on skills and occupational standards.
  - Strengthen links between educational/vocational institutions and industry.
  - Advance flexible work arrangements, lifelong learning, and increase female labor force participation.
  - Encourage dual higher education programs combining academics with work experience.
  - Provide better information on future job growth and returns to education to guide youth.
- Business regulation and investment climate:
  - Accelerate business-friendly reforms via simplification and digitalization; reduce bureaucracy costs (municipal, legal, notarization fees).
  - Leverage digital platforms (Fatoora, Etimad) and 2025 Commercial Registration Law to simplify tax filing, compliance, and registration via unified one-stop-shop.
  - Consider clear, time-bound approval processes and “silence-is-consent” provisions.
  - Promote investment discipline and market liberalization through systematic public investment evaluations; promote privatization and PPPs.
  - Consider advancing fuel subsidy reforms.
- Investor confidence and legal certainty:
  - Enforce new Law on Civil Transactions and 2023 SCCA rules.
  - Promote private sector participation and fair competition; ensure industrial policies complement private investment.
- Capital markets and SME finance:
  - Improve SME access to finance by improving data availability and reviewing lending and loan guarantee frameworks while considering financial stability.
  - Consider broader financial deepening: securitization, fintech support, market structure improvements, expanded credit guarantee schemes, promoting national savings, boosting financial literacy.
  - Evaluate institutions established recently (e.g., Monsha’at 2016; Nomu 2017) to identify improvement areas.
- Governance and external sector:
  - Strengthen rule of law and government effectiveness by enforcing new public procurement and anti-corruption laws; finalize National Anti-Corruption strategy; improve coordination between Nazaha and government entities.
  - Enforce Updated Investment Law to ensure equal treatment for domestic and foreign investors; strengthen trade integration within the GCC and beyond.

### Annex I. Vision 2030 and National Investment Strategy ..................................................................

### Annex I. Vision 2030 and National Investment Strategy

### A. Vision 2030
- Section title: "Vision 2030"
- Location in source: page 30

### B. National Investment Strategy
- Section title: "National Investment Strategy"
- Location in source: page 31

*Source: wpiea2026014-source-pdf - Annex I. Vision 2030 and National Investment Strategy (pages 30–31) — IMF working paper PDF.*

### 3. Share of College Graduates and STEM Workers by Industry in the United States ........................................

### 3. Share of College Graduates and STEM Workers by Industry in the United States

### Introduction and context
- Vision 2030 launched in 2016 provides a broad framework for economic, structural, and institutional transformation in Saudi Arabia and is supported by eleven Vision Realization Programs.
- The National Transformation Program focuses on: empowering the private sector and SMEs; enhancing the ease of doing business; attracting Foreign Direct Investment (FDI); accelerating digital transformation; and improving government transparency and efficiency.
- Complementary initiatives include: the Privatization Program; the Financial Sector Development Program; the Human Capability Program; and the National Investment Strategy launched in 2021 to scale up public and private investment in strategic sectors and attract FDI.

### Labor market outcomes and skills
- Unemployment and labor force participation:
  - Unemployment rate of Saudi nationals: 7 percent in Q4/2024 and 6.3 percent in Q1/2025.
  - Vision 2030 original unemployment target: 7 percent; new target: 5 percent.
  - Female labor force participation among Saudi nationals rose by nearly 18 percentage points between 2017 and 2024.
  - Unemployment for Saudi women: 32.4 percent (pre-2017) fell to 13.1 percent (2024 average) and 11.9 percent (Q4/2024).
  - Unemployment for highly educated women: 15 percent in 2024; for highly educated men: 4 percent in 2024.
- Policy focus: aligning educational outcomes with labor market needs and promoting lifelong learning through the Human Capability Program; increasing female labor force participation via national programs, childcare and commuting support, flexible work arrangements, and training programs.
- Labor law reform: 2025 amendments to the Labor Law include provisions for employee accommodation and transportation and aim to improve labor market flexibility and promote equal opportunity.

### Structural reforms implemented since 2016 (major areas and examples)
- Governance:
  - Initiatives: establishment of Mashroat (later EXPRO), Adaa performance monitoring, Etimad online platform for government contracts and transactions.
  - Fiscal management: medium-term fiscal framework, digitalized tax administration, improved budget planning and execution, establishment of a Treasury Single Account.
  - Anti-corruption and AML/CFT: New Nazaha Law in 2024; updated AML/CFT legislation; new Ultimate Beneficial Ownership Rules; National Anti-Corruption Strategy developed but not finalized.
- Business regulation:
  - Reforms include new Saudi Center for Commercial Arbitration (SCCA) rules and SCCA Court, new Law on Civil Transactions (civil code), updated Companies Law, new Commercial Registration Law (digitalization), new Competition Law, privatization and PPP initiatives, reforms in real estate registration and property brokerage, strengthened intellectual property and personal data protection.
- External sector:
  - Measures to enhance foreign investor access to domestic capital markets; Updated Investment Law of 2025 ensuring equal treatment of local and foreign investors and enhancing investor protections; introduction of various visa types to ease foreign visitors’ access; establishment of the GCC Customs Union.
- Capital markets:
  - Reforms to develop domestic equity markets (including a parallel market “Nomu”), domestic debt and credit markets, and the government securities market; measures to improve SME access to finance and foreign investors’ access to domestic capital markets.
- Credit market and access to finance:
  - Despite progress, access to finance still has room to improve.
  - Net inward FDI inflows remained between $20-30 billion between 2021 and 2024.

### Indicators, benchmarking, and measured progress
- Data sources used for benchmarking: World Bank’s Worldwide Governance Indicators, Fraser Institute indicators (business regulation, external sector, credit markets, labor market), Economist Intelligence Unit (EIU) business environment indicators.
- Coverage and limits:
  - Fraser Institute’s capital markets indicators limited to the credit market and do not reflect equity market reforms.
  - Fraser Institute’s labor market indicator limited by exclusion of several sub-indicators formerly from the World Bank’s Doing Business Report.
- Evolution of structural gaps (0-1 scale, gap to frontier):
  - Saudi Arabia has substantially narrowed structural gaps in governance, business regulation, and credit markets since 2016.
  - Gaps remained about the same for the external sector and the labor market (noting caveats on indicator coverage).
- EIU Business Environment indicators (0-10 scale, 2015–2024) show improvements in:
  - Political environment, policy towards private enterprise and competition, policy towards foreign investment, and financing.
  - Foreign trade and exchange controls score remained high.
  - Labor market indicator improved, supported by sub-indicators on “availability of skilled labor,” “quality of workforce,” “technical skills,” and “health of the workforce.”

### Empirical estimation of output impacts from reforms
- Empirical framework:
  - Cross-country database of structural reform indicators covering a sample of 108 emerging markets and developing countries from 2000 to 2022.
  - Five reform areas: governance, business regulation, external sector, credit market, labor market. First-generation reforms: governance, business regulation, external sector. Second-generation reforms: credit market, labor market.
  - Local projection method in a panel data setting used to estimate reform multipliers. Regression includes country and year fixed effects and time-varying controls.
  - Estimated multipliers obtained separately for countries above and below the median first-generation reform score; Saudi Arabia belongs to the above-median sample.
- Key quantitative findings from the empirical analysis:
  - A reduction in the governance structural gap by one percentage point is estimated to increase GDP by 0.3 percent after five years.
  - Structural reforms have a significant and persistent impact on real output across reform areas, though size and persistence differ by area.
  - The cumulative output dividend of previous credit market reforms is estimated to be slightly above (text break in source).
- Estimation steps applied to Saudi Arabia:
  - Step 1: determine cumulative change in each indicator for Saudi Arabia based on structural gaps shown in comparative figures.
  - Step 2: multiply cumulative changes by estimated elasticities (reform multipliers) from cross-country regression to derive multi-year impacts on the level of real output.
- Notes on interpretation:
  - Digitalization interacts with several reform areas by enhancing public administration efficiency and modernizing regulatory frameworks.
  - Labor market reforms are discussed in greater depth in subsequent sections due to indicator coverage limitations.

### Policy implications and priorities for the next five years
- Take stock, recalibrate, and prioritize:
  - The midpoint of Vision 2030 is an opportune moment to assess reforms implemented since 2016 and identify priorities for the next five years to sustain momentum.
- Areas needing further progress:
  - Access to finance: additional reforms to improve access to finance for private firms and SMEs.
  - Foreign investment: further reforms in business regulation and governance to increase willingness of foreign firms to invest and operate in the Kingdom.
  - Labor market: continued emphasis on aligning education and skills development with evolving labor market needs, addressing higher unemployment among highly educated women, and broadening measurement and monitoring of labor market reforms beyond limited indicator coverage.
- Continue to monitor and quantify benefits:
  - Use structural-gap narrowing and reform multipliers to estimate output dividends of continued reforms and prioritize reforms with persistent output impacts.

*International Monetary Fund. wpiea2026014-source-pdf.*

### 3.5 percent, with reform gains accruing linearly

### 3.5 percent, with reform gains accruing linearly

### Output dividends from recent reforms
- Credit market reforms since 2015 are associated with a cumulative real GDP response; the analysis presents impulse responses as cumulative percent change in real GDP with grey bands representing 90% confidence intervals (Figure 9).
- Business regulation reforms are estimated to have contributed a cumulative increase in output of approximately one percentage point (Figure 10).
- Governance reforms are estimated to have yielded a cumulative increase in output of nearly 4.5 percent (Figure 11).
- The impact of reforms on the external sector remains limited due to persistent structural gaps.
- Labor market indicators from the Fraser Institute's database showed minimal improvement and limited output impact, attributed to the narrow scope of the indicators used; subsequent sections analyze labor market reforms with alternative data sources and surveys.

### Remaining structural gaps (areas identified)
- Business regulation
  - EIU indicators on “state control and ownership” and “price controls” indicate room for improvement.
  - Ongoing initiatives cited include implementation of the Private Sector Participation Law of 2021, privatizations, PPPs, and “energy pricing” reforms introduced since 2018.
- Labor market
  - Fraser Institute indicators show a relatively large gap to the frontier for “hiring and firing regulations.”
  - EIU indicators suggest further efforts desirable for “the availability of skilled labor,” “technical skills,” and “the quality of workforce.”
- Credit market
  - EIU’s indicator on “financing” suggests more room to improve foreign investors’ access to domestic capital markets.
- External sector
  - Fraser Institute sub-indicator on “migration” captures remaining room to improve foreigners’ access to Saudi Arabia.
  - Indicators point to further scope to reduce restrictions on foreign investors’ investment to Saudi Arabia (e.g., relaxing restrictions on qualified foreign financial institutions).
- Governance
  - Worldwide Governance Indicators show gaps have significantly narrowed since 2016 for “government effectiveness,” “rule of law,” and “regulatory quality,” while a gap remains in “control of corruption.”
  - EIU indicates continued need to improve “efficacy of the legal system”; recent legal reforms may take time to be reflected in indicators.
- EIU projects Saudi Arabia is expected to narrow structural gaps in various areas through 2027 (Figure 12).

### Output impact of narrowing the remaining structural gaps
- Package focused on business regulation and expanded credit access:
  - Estimated to raise Saudi Arabia’s real output growth by over 1 percentage point annually over a five-year horizon, assuming full convergence to the emerging market frontier.
  - Corresponds to a 5 percent increase in output over five years compared to a non-reform scenario.
  - Closing these gaps would align business regulatory performance with countries like Malaysia and Latvia.
  - Credit market alignment with top reformers (Singapore, Canada, Georgia) would involve expanding SME credit access, reducing collateral requirements, and promoting banking competition.
- Governance reforms (government effectiveness, regulatory quality, rule of law):
  - Closing remaining governance gaps with frontier emerging market economies could increase real GDP growth by an estimated 0.5 percentage points annually over the five-year horizon.
  - Such progress would bring regulatory quality in line with Chile and Georgia and closer to the global frontier represented by Singapore.
  - Government effectiveness and rule of law improvements could reach levels of Korea and Estonia (government effectiveness) and Latvia and Lithuania (rule of law).
- Methodology note:
  - Figure 13 shows average additional annual growth (in pp.) from reforms that close the gap to the Emerging Market frontier by 100%.
  - Coefficients at the end of the projection horizon represent cumulative percent change in output over five years and are converted to an annual contribution using CAGR formula; results are aggregated to show joint reform package effects.

### Special focus: labor markets and skills mismatch
- Purpose
  - Assess impact of labor market reforms, summarize recent trends and government initiatives, evaluate projected effects of Vision 2030 on labor demand and skill requirements, and use scenario analysis to identify potential skill mismatches.
- Recent developments and key statistics
  - Female labor force participation nearly doubled between 2017 and 2024: from 18 percent to almost 36 percent (Figure 14).
  - Unemployment rate for Saudi women fell from 32 percent to 13 percent (2024 average) and 11.9 percent (Q4/2024); for Saudi men, it declined from 7 percent to 4 percent (Figure 15).
  - Since 2020, nearly 700,000 Saudis have joined the private sector workforce, accounting for nearly all recent employment gains (Figure 18).
  - Expatriates still make up four out of five private sector employees (Figure 19).
- Gender wage and employment composition findings
  - Unadjusted gender wage gaps (Q3/2024):
    - Saudi women without tertiary education: 5,366 Riyals.
    - Saudi men without tertiary education: 8,081 Riyals.
    - Saudi men with tertiary education: 14,125 Riyals.
    - Highly educated women: 9,413 Riyals (Figure 16).
  - Wage dynamics for bachelor’s degree holders:
    - Average monthly earnings of highly educated women with bachelor’s degree fell from 10,409 Riyals in 2019 to 8,941 Riyals in 2024 (Figure 17).
  - Decline in average monthly wages for highly educated Saudi women may reflect shift from public to private sector employment, where wages tend to be lower (Figure 20).
- Policy measures and labor market design
  - Government initiatives:
    - Human Capability Development Program, National Transformation Program.
    - Gender Balance Center (2021); Gender Budgeting Program and National Policy to Encourage Equal Opportunity and Equal Treatment (January 2023).
    - Amendments to the Labor Law enacted in February 2025 mandating equal treatment regardless of personal characteristics and explicitly prohibiting discrimination.
  - Measures to increase private sector appeal and mobility:
    - Amending flexible work regulation (May 2024) and Remote work program (December 2024).
    - Major public transport investments (e.g., Riyadh metro) to reduce commuting times.
    - 2018 decision to allow women to drive expanded mobility.
    - February 2025 Labor Law Amendments require employers to provide either suitable accommodation or transportation.
- Commuting and job acceptance willingness (2024)
  - Only 13 percent of unemployed women reported unwillingness to accept a job outside their area of residence, compared to about 6 percent of men.
  - 26 percent of unemployed women—and 49 percent of men—are willing to commute more than one hour (Figure 21).
  - Between 2022 and 2024, willingness to commute rose considerably for both groups, with a notable increase among women, reducing the gender gap (Figure 22).
- Education and skills
  - Gross enrollment ratio for tertiary education increased between 2011 and 2022:
    - Women: from 41 percent to 78 percent.
    - Men: from 22 percent to 70 percent.
  - Both figures are comparable to the 2022 OECD average (Figure 23).
- Summary assessment
  - Recent reforms produced a strong increase in female labor force participation and a decline in unemployment, driven by private sector employment gains.
  - Continued implementation and monitoring of the new legal framework (e.g., Labor Law Amendments, Human Capability Development Program) are warranted to consolidate gains.
- Future mismatch risks under Vision 2030
  - Vision 2030 is expected to stimulate new industries: manufacturing, mining, information & communications, transport & logistics, professional & scientific & technical services, and tourism (with accommodation & food services used as a proxy for tourism-related employment effects).
  - Scenario analysis in subsequent sections will identify potential skill mismatches that could hinder structural transformation and realization of Vision 2030 objectives.

*Source: Excerpt from IMF staff analysis (figures and notes referenced in text).*

### Annex I provides a list of the specific sub-industries mentioned in the National Investment Strategy.

### Annex I provides a list of the specific sub-industries mentioned in the National Investment Strategy

### Current labor market patterns and structural change
- Job postings concentration in Q3/2024 by sector (job postings data): professional & scientific & technical services 26 percent; accommodation and food services 20 percent; manufacturing 14 percent; information technologies 11 percent.
- Observation: current employment of Saudi nationals does not mirror this demand, indicating either (i) the economy is shifting faster than workforce adaptation (except transportation & warehousing), or (ii) a skill mismatch between the workforce and contemporaneous labor demand.
- Note on job posting measurement: job postings distribution calculated by averaging active job postings in Q3/2024 taken four weeks apart: 7/1/2024, 7/29/2024, 8/26/2024, and 9/23/2024.

### Scenario analysis: methodology and scenarios
- Purpose: examine alignment of future labor demand in targeted Vision 2030 sectors with available labor supply characterized by education and skill profiles of Saudi youth.
- Supply measure: share of currently enrolled students in college and share enrolled in STEM subjects; college graduates defined as ISCED 5 or above; STEM graduates defined by ISCED-F 2013 categories listed in the source.
- Skill requirement by industry: assumed equal to industry demand for college-educated workers and STEM workers in the United States (U.S. Bureau of Labor Statistics 2023 industry shares used; Saudi data not available).
- Two scenarios for relative job growth (Table 2):
  - Main Scenario 1 (conditional job posting share in Q3/2024):
    - Manufacturing 16.9
    - Transportation and Warehousing 2.8
    - Information Technologies 18.3
    - Professional, Scientific, and Technical Services 37.1
    - Accommodation and Food Services 18.3
    - Mining 6.5
  - Alternative Scenario 2 (conditional job postings share in Q3/2024):
    - Manufacturing 8.0
    - Transportation and Warehousing 1.3
    - Information Technologies 26.1
    - Professional, Scientific, and Technical Services 52.8
    - Accommodation and Food Services 8.7
    - Mining 3.1
- Assumption in both scenarios: share of expatriate workers in each sector stays constant; share of nationals and expatriates at the sector level assumed constant.

### Industry-level college and STEM shares used in skill-requirement estimation (U.S. 2023)
- Manufacturing: Share with college degree (≥ ISCED 5) 22.3 percent; Share of STEM jobs 11.0 percent
- Transportation and Warehousing: Share with college degree 7.4 percent; Share of STEM jobs 1.1 percent
- Information Technologies: Share with college degree 61.8 percent; Share of STEM jobs 30.6 percent
- Professional, Scientific, and Technical Services: Share with college degree 71.1 percent; Share of STEM jobs 32.8 percent
- Accommodation and Food Services: Share with college degree 2.7 percent; Share of STEM jobs 0.1 percent
- Mining: Share with college degree 14.8 percent; Share of STEM jobs 5.9 percent

### Key quantitative findings from scenario analysis
- College-educated labor demand vs supply:
  - Under the main scenario, only 43 percent of additional new jobs are expected to require a college degree, while Saudi Arabia’s current college enrollment rate approaches 75 percent.
  - Under the alternative (tech-focused) scenario, share of new jobs requiring a college education rises to 57 percent—still below the projected supply of university graduates.
  - More than 75 percent of job postings in Q3 2024 occurred in the six considered industries.
- STEM graduates demand vs supply:
  - Main scenario: anticipated share of STEM graduates falls short of anticipated labor demand (exact scenario chart values shown in source figures).
  - Alternative scenario: labor demand for STEM graduates reaches 26 percent, while projected supply remains at just 17 percent.
- Additional labor market indicators:
  - 17 percent of 18–30 year old respondents to a 2022 labor force survey reported being self-employed.
  - Among respondents aged 18–30 not currently enrolled in education or training, 26 percent expressed interest in studying a STEM subject at university.
  - Only 35 percent of youth expressed interest in working in Vision 2030-targeted sectors, even though these sectors accounted for 55 percent of job postings in Q3 2024.

### Interpretation and economic implications
- Conclusion: a significant potential mismatch exists where future demand for college-educated workers may fall short of projected supply, while demand for STEM-qualified workers may exceed projected supply—especially under a technology-heavy growth scenario.
- Implication: eliminating educational mismatch is expected to raise output; literature cited in the source suggests output effects from eliminating mismatch range widely (examples given: average 3 percent across OECD in Garibaldi et al. (2025); 1 to 6 percent in Cervantes and Cooper (2022); Hsieh et al. (2019) link occupational allocation to 20 to 40 percent of output per person growth in the U.S. between 1960 and 2010).

### Policy recommendations and reform priorities (areas for future reform)
- Labor market and education alignment:
  - Improve STEM education and vocational training.
  - Implement the Labor Market Strategy 2025–2030 and National Skills Strategy.
  - Track demand-supply mismatches through the “15 Skill Council” (private sector and government).
  - Establish a taxonomy and framework on skills and occupational standards.
  - Strengthen links between educational/vocational institutions and industry.
  - Advance flexible work arrangements, lifelong learning, and increase female labor force participation.
  - Encourage firms to offer dual higher education programs combining academics with work experience.
  - Provide better information on future job growth and returns to education to guide youth career decisions.
- Business regulation:
  - Accelerate business-friendly reforms through simplification and digitalization; further reduce bureaucracy costs (municipal, legal, notarization fees).
  - Leverage digital platforms such as Fatoora and Etimad and the 2025 Commercial Registration Law to simplify tax filing, compliance, and registration via a unified one-stop-shop.
  - Consider introducing clear, time-bound approval processes and “silence-is-consent” provisions.
  - Promote investment discipline and market liberalization via systematic evaluations of public investment and promote privatization and public-private partnerships.
  - Consider advancing fuel subsidy reforms.
- Fostering investor confidence and legal certainty:
  - Enforce the new Law on Civil Transactions and the 2023 Saudi Center for Commercial Arbitration (SCCA) rules.
  - Promote private sector participation and fair competition; ensure industrial policies complement rather than replace private investment.
- Capital markets and SME finance:
  - Improve SME access to finance by improving data availability, reviewing lending and loan guarantee frameworks while considering financial stability.
  - Consider broader financial deepening strategies: developing securitization, supporting fintech innovation, improving market structure, expanding credit guarantee schemes, promoting national savings, and boosting financial literacy.
  - Evaluate institutions established in recent years (e.g., Small and Medium Enterprises General Authority “Monsha’at” established in 2016; parallel equity market “Nomu” launched in 2017) to identify improvement areas.
- Governance and external sector:
  - Strengthen rule of law and government effectiveness by enforcing new laws on public procurement and anti-corruption; finalize the National Anti-Corruption strategy; improve coordination between Nazaha and government entities.
  - Enforce the Updated Investment Law to ensure equal treatment for domestic and foreign investors; strengthen trade integration within the GCC and beyond.

*Source: wpiea2026014-source-pdf - Annex I provides a list of the specific sub-industries mentioned in the National Investment Strategy (IMF staff analysis and referenced data as provided in the source).*

### Annex I.  Vision 2030 and National Investment

### Annex I.  Vision 2030 and National Investment Strategy

### A. Vision 2030
- Launched in 2016 as a vision for economic, structural, and institutional reforms with three pillars:
  - (i) creating a vibrant society in which all citizens can thrive and pursue their passions;
  - (ii) creating a thriving economy where everyone has the opportunity to succeed; and
  - (iii) creating an ambitious nation committed to efficiency and accountability at all levels.
- Eleven Vision Realization Programs support Vision 2030:
  - National Transformation Program (launched in 2016): The first Vision Realization Program under Vision 2030, covering a wide range of areas including empowering the private sector and SMEs, enhancing ease of doing business, increasing FDI, accelerating digital transformation, developing e-government, having inclusive workplace, enhancing transparency of the government and improving the productivity of government employees, and improving the effectiveness and efficiency of the welfare system.
  - Public Investment Fund program (launched in 2017): Investment by the Public Investment Fund (PIF) for economic diversification and transformation, accelerating innovation, reinventing industries, and creating jobs. Include giga projects such as NEOM, ROSHN, Read Sea project, Qiddiya, and Diriyah.
  - National Industrial Development and Logistics Program (launched in 2019): Diversifying and transforming the economy by investing in renewable energy solutions, positioning to become a leading nation in mining, becoming a global logistics hub, and securing global supply chains and exporting high-tech products. Creating special economic zones (SEZs) and rehabilitating economic cities. Localizing manufacturing industries, the oil and gas sector, and the military industry.
  - Privatization program (launched in 2018): Identifying government assets and resources in a number of sectors for privatization. Strengthening the private sector, enhancing economic diversification, and increasing competitiveness.
  - Fiscal sustainability program (launched in 2016 and implemented): Introducing a medium-term fiscal planning for sustaining public finances and achieving a balanced budget. Strengthening financial discipline and developing public finances through the establishment of several entities, including the Government Expenditure and Projects Efficiency Authority, the National Debt Management Center, and the Non-Oil Revenue Development Center.
  - Financial Sector Development Program (launched in 2018): Strengthening financial institutions, advancing the financial market, encouraging savings, and fostering fintech startups.
  - Housing Program (launched in 2018): Increasing homeownership by supporting access to finance, streamlining processes, and digitizing documentation.
  - Quality of Life program (launched in 2018): Empowering sectors related to arts and culture, entertainment, sports, and tourism, creating new sectors, and promoting economic diversification. Transforming Saudi Arabia to a world-renowned sports and entertainment location and a global tourism destination.
  - Health Sector Transformation Program: Improving access to healthcare, modernizing facilities and equipment, and enhancing the role of the private sector. Transforming Saudi Arabia’s healthcare system to be more comprehensive, effective, and integrated.
  - Pilgrim experience program (launched in 2019): Providing pilgrims with world-class facilities, improved infrastructure and digitalized services.
  - Human capability development program (launched in 2021): Empower citizens by supporting learning, upgrading skills, and matching educational outcomes to the needs of the labor market.

### B. National Investment Strategy (NIS)
- Launched in 2021 to increase public and private investment in strategic sectors, attract FDI for economic diversification, and increase private sector contribution.
- Supported by four pillars:
  - (i) developing new investment opportunities in strategic sectors;
  - (ii) broadening the investment base;
  - (iii) removing financial barriers to private sector investment; and
  - (iv) improving the competitiveness of the business environment.
- NIS strategic sectors include:
  - aerospace and defense; automotive; transport and logistics; food and agriculture; construction; entertainment, leisure and sports; financial services; real estate, utilities and renewables; metals and mining; health care; consumer goods and retail; and telecom, media and technology.
- NIS total investment target for 2021-2030 (cumulative):
  - SAR 12.4 trillion or USD 3.3 trillion (IMF (2024)).
- Planned composition of SAR 12.4 trillion:
  - (i) SAR 5 trillion (USD 1.3 trillion) through the Shareek program (a program to encourage large Saudi companies including state-owned companies in partnership with the private sector to increase their investments in Saudi Arabia, through incentives including tax credits and access to low-cost financing; a large share of investments would be led by Saudi Aramco and Saudi Basic Industries Corporation (SABIC));
  - (ii) SAR 3 trillion from the PIF;
  - (iii) SAR 2.6 trillion from other domestic investment; and
  - (iv) SAR 1.8 trillion from FDI.
- Institutional support:
  - The Investment Promotion Authority (SIPA) was established in August 2022 to attract domestic and foreign investment as part of the NIS.
- Expected macroeconomic implications:
  - IMF (2022) and Moreau and Aligishiev (2024) estimated that investment related to the NIS, combined with fiscal reform, labor supply reform, and higher public sector efficiency, would raise the medium-term non-oil real GDP growth significantly.

*Source: Annex I. Vision 2030 and National Investment Strategy (from the provided content).*

### Annex II. Table 9. Saudi Arabia: Reforms and Initiatives to Improve Foreign Investors’ Access to

### Annex II. Table 9. Saudi Arabia: Reforms and Initiatives to Improve Foreign Investors’ Access to Domestic Capital Market

### Overview of major reform objectives
- Expand direct access of foreign investors to Tadawul-listed securities and broaden eligible investor types.
- Increase foreign ownership limits in selected sectors and permit strategic foreign ownership beyond QFI limits.
- Streamline and digitize licensing, qualification, and account-opening procedures for foreign investors.
- Broaden permissible instruments for foreign investment (equities, debt instruments, listed derivatives).
- Strengthen investor protections and liberalize entry for non-sensitive sectors under updated investment law.

### Chronological summary of key reforms and initiatives
- July 2014 — Allowing qualified foreign financial institutions (QFIs) to directly trade listed shares on Tadawul
  - Previously, foreigners could purchase shares in Saudi companies only indirectly, through channels such as equity swaps and exchange traded funds.
  - Related: May 2015, the Capital Market Authority (CMA) issued the Rules for Qualified Foreign Financial Institutions Investment in Listed Shares (QFI rules).
- June 2016 — Allowing full foreign ownership of retail and wholesale businesses
  - Increase investment from the previous 75% limit to 100% in the retail and wholesale sectors.
  - Investors can structure operations as joint ventures or seek 100% ownership.
- September 2016 — Relaxing restrictions for foreign investors’ investment in listed securities
  - QFI Rules amended to: (i) decrease required minimum asset value managed from SAR 18.75 billion to SAR 3.75 billion; (ii) expand QFI categories to include government entities, institutions affiliated with government entities, university endowments, and any other financial institutions the Capital Market Authority deems eligible; (iii) eliminate the approved QFI Client concept; and (iv) amend investment limitations to increase ownership of foreign investor limits.
- June 2017 — Improving foreign investor licensing system on Tadawul
  - Instant license and renewal system launched; services automated for license renewal, company activities amendment, and adding branches.
  - Time to issue new licenses reduced from average of 20 hours to less than 3 hours.
- August 2017 — Extending foreign investor licenses on Tadawul
  - Validity of foreign investment licenses extended from one year to five years.
- August 2017 — Allowing full foreign ownership of engineering firms
- January 2018 — Allowing nonresident foreign investors to invest directly in the parallel equity market (Nomu)
- January 2018 — Relaxing restrictions for QFIs
  - QFI Rules amended to: (i) lower required minimum AUM for the financial institution from $1 billion (SAR 3.75 billion) to $500 million (SAR 1.87 billion); (ii) eliminate the requirement for the CMA’s review and approval of the qualification application; (iii) eliminate the investor experience requirement; (iv) qualify affiliates of QFIs or foreign portfolio managers and their managed funds without separate applications; and (v) ease some continuous obligations requirements on QFIs.
- May 2018 — Allowing swap holders to open QFI account
  - CMA’s Board Resolution of August 17, 2008 amended to allow swap holders to open QFI accounts while retaining the swap account for grace period of one year.
- November 2018 — Relaxing restrictions for foreign investors
  - Investment Accounts Instructions of the CMA Board of April 3, 2016 amended to remove some requirements for opening investment accounts for foreign investors, such as copies of identification documents of the owner of the QFI.
- June 2019 — Allowing foreign strategic investors to own a controlling interest in Saudi companies listed on Tadawul
  - CMA approved “Instructions for the Foreign Strategic Investors’ Ownership in Listed Companies”.
  - Foreign strategic investors are excluded from all requirements of QFI rules, including the investment limits in Saudi listed firms to 49% of shares.
  - The 49% limit continues to apply to QFIs.
- August 2020 — Allowing foreign investors to invest in debt instruments and listed derivatives
- December 29, 2020 — New Mining Investment Law (allowing foreign companies to enter the Saudi mining sector)
  - Replaces the Mining Investment Law of 2005.
  - Aims to attract local and international investors to the mining sector by facilitating access to financing and supporting exploration and geological survey activities.
- May 2023 — Amending the Rule for Foreign Investment in Securities
  - Rules amended so that: (i) all foreign investor regulations merged into one regulation; (ii) requirements of financial institution type and qualification process removed, with foreign investor only required to be a legal person and open an investment account with one of the capital market institutions; (iii) AUM size requirement for some investor types (pension funds, endowment funds, a market maker’s client, government entities, and some international organizations) removed; (iv) a new channel for foreign investors (natural and legal persons) to invest in the main market through a discretionary portfolio management (DPM) introduced; and (v) ultimate beneficiary in swap agreement conditions improved by removing the duration of the swap agreement and the CMA notification requirements.
- Draft law in November 2024 (public consultation until December 20, 2024) — Expanding the scope of foreign investors that can directly invest in shares listed on Tadawul
  - Would allow individual foreign investors previously resided in Saudi Arabia or one of the GCC countries to directly trade shares listed on Tadawul.
  - Current participation of such individuals is limited to the debt market, the parallel market (Nomu), investment funds, and the derivatives market.
- January 2025 — Amending the Law of Real Estate Ownership and Investment by Non-Saudis
  - Allow foreign investors to directly buy shares and debt instruments in Tada-wul-listed real estate companies with assets in Makkah and Madinah.
  - Foreign ownership capped at 49% of a company’s shares or debt instruments.
  - Prior to change, non-Saudis could subscribe to real estate funds investing in Makkah and Madinah, but no direct investment in company shares or debt instruments was allowed.
- February 2025 — Updated Investment Law
  - Replaces the Foreign Investment Law of 2000.
  - Ensures equal treatment of domestic and foreign investors in terms of rights and obligations.
  - Abolishes entry screening, prior authorization, and licensing requirements for investment in non-sensitive sectors.
  - Provides stronger investor protection: protection of intellectual property and confidential business information, clear and transparent complaints handling mechanism, and freedom to transfer capital without delay.
  - Provides more options for means of dispute settlement to reduce cost and duration of disputes, allowing alternatives to dispute settlement through competent court, such as international arbitration by consent, mediation, and conciliation.
  - Related to improvements in regulatory environment for businesses.

### Key changes to QFI and investor qualification rules (high-fidelity numeric details)
- Asset thresholds and AUM requirements:
  - Minimum asset value managed for registration lowered from SAR 18.75 billion to SAR 3.75 billion (September 2016).
  - Later lowered from $1 billion (SAR 3.75 billion) to $500 million (SAR 1.87 billion) (January 2018).
- Licensing/administration:
  - New instant license and renewal system reduced license issuance time from average of 20 hours to less than 3 hours (June 2017).
  - Validity of foreign investment licenses extended from one year to five years (August 2017).
- Ownership limits:
  - QFIs remain subject to a 49% ownership limit in Saudi listed firms; foreign strategic investors are excluded from QFI requirements and the 49% limit applicable to QFIs (June 2019).
  - Real estate companies with assets in Makkah and Madinah: foreign ownership capped at 49% of a company’s shares or debt instruments (January 2025).

### Instruments and market segments opened to foreign investors
- Direct trading of listed shares on Tadawul by QFIs (July 2014 onward).
- Direct investment in parallel equity market (Nomu) by nonresident foreign investors (January 2018).
- Access to debt instruments and listed derivatives for foreign investors (August 2020).
- Introduction of discretionary portfolio management (DPM) channel for foreign investors in main market (May 2023).
- Proposal to allow individual foreign investors who previously resided in Saudi Arabia or GCC countries to directly trade Tadawul-listed shares (Draft law November 2024; public consultation until December 20, 2024).
- Permitting Saudi Depository Receipts (SDRs) for foreign issuers to list on Tadawul (noted elsewhere in equity market reforms; envisaged in 2025).

### Institutional and legal reforms enhancing investor access and protections
- Consolidation and simplification of foreign investor regulations into one set of Rules for Foreign Investment in Securities (May 2023).
- Updated Investment Law (February 2025) abolishing prior authorization for non-sensitive sectors, protecting intellectual property and confidential business information, guaranteeing freedom to transfer capital without delay, and expanding dispute settlement options (international arbitration by consent, mediation, conciliation).
- New Mining Investment Law replacing 2005 law to facilitate financing and exploration (December 29, 2020).

*Source: Annex II. Table 9. Saudi Arabia: Reforms and Initiatives to Improve Foreign Investors’ Access to Domestic Capital Market (from the supplied IMF content).*

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_Source: https://www.imf.org/-/media/files/publications/wp/2026/english/wpiea2026014-source-pdf.pdf_