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Environment
Many ‘doubted the vision’: Saudi investment minister touts ‘green shoring’ on path to diversification
Khalid Al-Falih, Saudi Arabia’s investment minister, during the Bloomberg New Economy Forum in Singapore, on Wednesday, Nov. 8, 2023.
Bloomberg | Bloomberg | Getty Images
Saudi Minister of Investment Khalid al-Falih pushed back against skepticism over the country’s economic diversification plan, as Riyadh touts “green shoring” investment opportunities to woo foreign financing.
“There was many people who doubted the vision, the ambition, how broad and deep and comprehensive it is, and whether the development of a country like KSA who is so dependent for so many decades on a commodity business like oil would be able to do what we are aspiring to do with Vision 2030,” al-Falih told CNBC’s Steve Sedgwick on Saturday at the Ambrosetti Forum in Cernobbio, Italy.
One of the largest economies in the Middle East and a key U.S. ally in the region, Saudi Arabia has been shoring up investments in a bid to materialize Crown Prince Mohammed bin Salman’s Vision 2030 economic diversification program, which spans 14 giga-projects, including the Neom industrial complex.
Under this initiative, Riyadh seeks to pivot away from its historical dependence on oil revenues — which the International Monetary Fund now sees rising until 2026, before starting to descend — and hopes to draw financial flows in the domestic economy exceeding $3 trillion, as well as push foreign domestic investment to $100 billion a year by 2030.
The Saudi minister on Saturday said that, eight years into manifesting Vision 2030, the kingdom is now “more committed, more determined” to the program and has already implemented or is about to complete 87% of its targets. Critics of the plan have previously questioned whether Riyadh will successfully deliver on its goals by its stated deadline.
In recent years, the kingdom has been attempting to liberalize its market and improve its business environment with reforms to its investment and labor laws — but has also formulated less popular requirements for companies to set up their regional headquarters in Saudi Arabia to access government contracts.
The number of foreign investment licenses issued in Saudi Arabia nearly doubled in 2023, the IMF noted, with government data pointing to a 5.6% annual increase in net flows of foreign direct investment in the first quarter.
Concerns have nevertheless lingered over the potential uncertainty and unpredictability of the kingdom’s legal framework and its dispute resolution system for foreign investment. Al-Falih insisted that Saudi Arabia boasts predictability, as well as domestic political and economic stability.
‘Green shoring’
The Saudi investment minister said that part of Riyadh’s offering to foreign investors is the Saudi-coined initiative of “green shoring,” which seeks to decarbonize supply chains in areas with renewable energy resources.
“Green shoring is basically saying you need to do more of the high energy processing [and] manufacturing value add in areas where the materials, as well as the energy, are [located],” al-Falih said, adding that Saudi Arabia has the logistics, capital and infrastructure to achieve this.
Under Vision 2030, the world’s largest oil exporter aims to achieve net-zero emissions by 2060. Along with its neighbor, the United Arab Emirates — which hosted the 2023 gathering of the annual U.N. Conference of the Parties — Riyadh has been a high-profile presence at climate summits, but has still drawn questions over its commitment to decarbonization.
Riyadh — along with other members of the Organization of the Petroleum Exporting Countries oil alliance — has repeatedly called for the simultaneous use of hydrocarbons and green resources in order to avoid energy shortages throughout the global transition to net-zero emissions.
Some climate activists have also criticized Saudi Arabia’s promotion of solutions like carbon capture and storage (CCS) technologies as a smokescreen to push ahead with its lucrative oil business.
As part of “green shoring,” Saudi Arabia sets out to “address global supply chain resilience issues” and “build a new global economy that is certainly moving more electric, as we bring the copper, as we bring the lithium, the cobalt, the other critical materials, rare earth metals, as we address semiconductor shortages, green fertilizers, green chemicals,” al-Falih stressed.
The construction industry’s shift takes another step forward as Volvo CE inaugurates a new, state-of-the-art manufacturing facility to support the production of electric wheel loaders at its plant in Arvika, Sweden.
The new facility is the latest expansion for the Arvika site, which already manufactures medium and large wheel loaders. The new facility measuring approx. 1,500 sq. m (over 16,000 sq. ft.), and was built in less than a year, following an investment of SEK 65 million ($6.3 million) in 2023.
The expansion is technically an after flow facility, where nearly finished loaders comes off the regular assembly line for completion and testing. This allows Volvo to free up areas inside its existing factory and more readily enable the production of electric wheel loaders alongside more conventional, ICE-powered units.
“This new facility is an inspiration for a future built on sustainable solutions,” explains Melker Jernberg, Head of Volvo CE. “We are proud to be at the forefront of industry change with large-scale investments, not just here in Arvika but around the globe, that support a transformation towards electrification. Together, we are moving closer towards fossil-free machines.”
Volvo is calling the new expansion a first step in electrification for the site, but notes that it’s part of a wider transformation strategy to reduce the company’s internal climate footprint by 350 tons of CO2 through a variety of emission reduction efforts already in progress.
“Action on climate change is nothing new to us here in Arvika, but it is incredibly exciting to see our vision come to life with these new facilities,” says Mikael Liljestrand, General Manager at Arvika. “We now have the framework in place to drive electrification and expand our growing global portfolio of electric wheel loaders. This will have a positive impact on our industry and society as a whole, but it is also a personal journey for each of us here in Arvika who are playing a significant role in building a more sustainable future.”
Electrek’s Take
The improved Volvo production site was given the royal welcome with a visit by Prince Carl Philip, a member of the Swedish royal family, and Duke of Värmland, where the site is located – and remembering that Sweden still has a royal family always trips me out a bit.
That said, one of the biggest obstacles to broader fleet electrification remains availability of electrified assets. A fleet like PITT Ohio that wants to order 100 electric Volvo Trucks might have to wait eighteen months or more, when a comparable diesel order may take six months to fill. The same is true on the equipment side.
More production, and more availability, will mean more fleets giving electric solutions a shot – and that’s what we need.
SOURCE | IMAGES: Volvo CE, via Construction Equipment.
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