SERVICES ECONOMY

SERVICES SECTOR DRIVES SAUDI’S DIGITAL ECONOMIC GROWTH

The services sector is emerging as the cornerstone of Saudi Arabia’s new diversified economy. Industries such as retail, tourism, leisure, digital, and real estate, which are some of the key pillars of a service economy, are in expansion mode, generating jobs, facilitating economic growth, and buttressing the industrial sectors.

These developments not only drive diversification, but also fuel entrepreneurship, job creation, and technological innovation, positioning Saudi Arabia as a regional leader in service-driven economic growth.

Franchising has become one of the most dynamic drivers of the services economy. Over the past three years, franchise registrations in the kingdom jumped 866%, reaching 1,788 by the end of the third quarter in 2024, according to the Saudi Press Agency.

This reflects a massive leap compared with the 185 registrations recorded in 2021. Such growth stems largely from the implementation of the Franchise Law in 2019 and its accompanying regulations introduced in 2020, which established a transparent and well-regulated framework for franchise agreements, driving remarkable growth in the sector.

Leading this franchising boom is the accommodation and food services sector, with over 1,200 franchise registrations, reflecting the kingdom’s strong focus on tourism and hospitality. Other sectors, such aswholesale and retail, and transportation and logistics, have also seen significant growth.

Regionally, Riyadh has the lead with 647 franchise registrations, followed by the Makkah region and the Eastern Province. This regional concentration highlights the emergence of Saudi Arabia’s major cities as hubs for franchising activity, drawing in international brands and creating opportunities for local entrepreneurs to establish successful ventures. 

The franchising sector is boosting entrepreneurship and enhancing private-sector participation, and serves as a platform for local businesses to expand and thrive while attracting foreign investment and expertise. 

DIGITAL ECONOMY

The growth of Saudi Arabia’s services economy is further bolstered by the government’s investments in the creative and media industries. Recent events, such as the Impact Makers Forum hosted by the Ministry of Media in December, underscored the kingdom’s commitment to positioning itself as a centre for regional innovation and content creation.  

The forum saw several projects unveiled, including a SAR 500 million investment by FOAJ Group to expand communication enterprises, and a SAR 100 million initiative by Jaco to empower content creators in the Arab region. 

Meanwhile, One1 Group Marketing & Communication Solutions introduced the Tasharuk (Arabic for partnership) platform, to support supplier services in the communication and marketing sectors. With a projected turnover of SAR 250 million over the next five years, the platform is dedicated to empowering small and medium enterprises (SMEs) and independent professionals across Saudi Arabia. It aims to enhance local content and create widespread opportunities in the media and marketing fields throughout the kingdom. 

These project reflect Saudi Arabia's efforts to amplify its creative  economy by fostering local talent and supporting small businesses, all while enhancing the kingdom’s cultural representation on a global scale.

SUPERCHARGING AI

Saudi Arabia is also advancing in artificial intelligence (AI), an area of strategic importance for the services economy. A recent UNESCO report highlighted the kingdom’s progress, particularly in establishing arobust regulatory and ethical framework for AI.  

Since the launch of the Saudi Data and AI Authority (SDAIA) in 2019 and the introduction of the National Strategy for Data and AI in 2020, the country has made significant strides. It now ranks first globally for its government AI strategy, according to the 2024 Global AI Index. Additionally, Saudi Arabia has doubled its AI-related scientific research output since 2019 and increased its technical infrastructure, including the launch of the supercomputer "Shaheen III" and an expansion of data centre capacity to 204 megawatts.

These advancements in AI are more than just technological achievements – they also reflect Saudi Arabia’s commitment to inclusivity and social progress. For instance, women’s participation in the technology workforce has grown from 20% in 2017 to 34% in 2024, showcasing the kingdom's efforts to empower women in emerging fields, with over USD 3.9 billion invested in AI in 2023 alone, Saudi Arabia is establishing itself as a global leader in this transformative sector as it integrates advanced technologies into the broader services economy.

SDAIA is also pioneering digital projects, such as the "ALLaM" model, which was featured on IBM's Watsonx platform as one of the world's best generative models in the Arabic language. The total Arabic words collected to train the model exceeded 385 billion, including 55 billion words gathered last year alone. "ALLaM" has contributed to enhancing national security by localising significant language model technologies, building the enablers required to operate technical infrastructure, supporting Arabic content, and refining nationa capabilities