The Saudi GE Technology and Innovation Center aims to help modernize the nation's electric grid and make inroads in industrial applications and health care. The U.S. conglomerate wants to double its Saudi Arabia workforce in four years, getting a strong foothold as Saudi Arabia moves aggressively to diversify its economy and government revenues away from oil exports.
The aim is to free Saudi Arabia from the pitfalls of oil's boom-bust cycles by as early as 2020.
To GE CEO Jeffrey Immelt's ears, the Saudis' rapid realization that oil revenue alone cannot guarantee a stable economy is a signal for GE to invest big in the kingdom.
"Our initiatives are aligned with the strategic development priorities of the kingdom," Immelt said.
Information has been trickling out about Saudi Arabia's economic plans. And according to The Wall Street Journal, the government is expected to provide more detail about reforms in the coming weeks. What we do know is this: Saudi Aramco, the largest oil exporter in the world, will sell off a 5 percent stake to investors, and the revenue will seed a $2 trillion sovereign wealth fund designed to stabilize government revenues.
What's being called the Vision 2030 plan is also meant to attract foreign direct investment, like the kind from GE. There's even talk of expanding tourism beyond the religious pilgrimages to Islamic holy sites.
Saudi officials have said that as early as 2020, the country could rid itself of dramatic budget shortfalls and economic pain whenever the price of oil falls. Saudi Arabia ran a nearly $100 billion budget deficit last year, and the plunge in oil prices has forced the government to draw down on reserves and tap global credit markets for the first time in decades.
Oil prices have fallen nearly 70 percent since the summer of 2014, partly as a result of a Saudi strategy to keep pumping oil and drive out high-cost U.S. shale oil producers. Crude has rebounded, but prices struggle to stay above $40 per barrel, after selling at around $100 a barrel a couple of years ago.
Economic diversification could be a tall order for Saudi Arabia, according to economists.
In its World Factbook, the Central Intelligence Agency estimates that Saudi Arabia's central government relies on oil exports for more than 80 percent of its revenues. Oil and petroleum products constitute 90 percent of exports, and the oil business generates 45 percent of Saudi Arabia's gross domestic product.
The CIA notes that Saudi Arabia has made inroads into greater economic diversification but says much of it revolves around the energy industry: power generation, telecommunications, natural gas exploration and petrochemicals. Putting citizens to work is also a high priority. The CIA estimates that up to 80 percent of Saudi Arabia's workforce is "non-national."
That is where GE's plan to hire locals caught the kingdom's attention. GE says it wants to boost "training in energy, health care and localized research for over 10,000 Saudi professionals through local and global programs."
Read more at How a Deal with GE Sheds Light on Saudi Arabia's Life After Oil
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