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KAUST Contribution to the Saudi Arabia Economy Essay

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Updated: Jun 17th, 2022


Saudi Arabia has been an epitome of an oil-dependent state for decades. While the governments’ first attempts to diversify the economy date back to the 1970s, these plans were never realized. Only the economic challenges and development of new technologies in the early 21st century forced a major shift in Saudi economy priorities. Since King Abdullah’s ascension to the throne, the new government has been consistently working towards developing a modern knowledge-based economy, which would reduce the country’s dependency on the oil industry. The drop in oil prices in the last decade reinforced the commitment of the government to the reforms. The recently proposed Saudi Vision 2030 framework is dedicated to the development of a diversified, sustainable economy.

The knowledge economy concept stems from the widely accepted idea that knowledge is crucial to increasing productivity. Hence, investment in education should be considered the main driving force behind economic progress. The foundation of King Abdullah University of Science and Technology (KAUST) has marked the beginning of a new era in Saudi education. KAUST offered unprecedented opportunities for studying and research, aiming to compete with the best universities in the world. Moreover, the Saudi government recognized that current civil law could limit the development of the project, and de facto made the university a liberal enclave within Saudi territory, guided by its own set of rules. The sole purpose of massive investments in KAUST and the relaxation of the law was to ensure the success of the Saudi economy in the future. However, more than ten years later, scholars still argue whether KAUST can be considered a successful investment. The purpose of this paper is to analyze the contribution of KAUST to the Saudi economy in light of Saudi Vision 2030 and suggest ideas to help fully utilize its potential.

The Knowledge-Economy

Knowledge has always been an essential element of a healthy economy. Rapid technological progress reinforced the importance of knowledge and innovation in the late 20th – early 21st century and marked the beginning of the era of the knowledge-based economy. Research shows that between 1995 and 2005, high-knowledge industries generated significantly more jobs than low-knowledge areas in the EU and the US (Parcero & Ryan, 2016). While scholars offer slightly different definitions of the knowledge economy, most agree that education, innovation, and information and communication systems determine its efficiency (Parcero & Ryan, 2016). The quality of education and research facilities at KAUST is second to none in Saudi Arabia. Hence, it is safe to assume that KAUST should play a pivotal role in developing a knowledge-based economy in the country.


Innovation factor is crucial to knowledge economies, and over the past decade, KAUST has gained recognition as a leading research institution in the Middle East. Some of the innovation indicators are scholarly articles and research collaborations with businesses (Parcero & Ryan, 2016). In less than ten years, KAUST has produced more than 4000 publications and partnered with numerous major international corporations, including Boeing and IBM (Alhoian, 2018). Research on solar energy use, in particular, can be considered an essential contribution toward Saudi Vision 2030. According to AlYahya and Irfan (2016), researchers have established that “the solar industry has the potential to become a major industrial pillar of Saudi Arabia, creating 50,000 jobs and $10 billion in sales” (p. 700). Moreover, the solar plant built at KAUST in 2010 was the only project of its kind to receive a platinum LEED rating at that time (AlYahya and Irfan, 2016). The research and promotion of solar energy are congruent with Saudi Vision 2030, as the development of the solar industry represents an economic opportunity and a shift towards sustainable energy.

While the Saudi government prioritizes the development of renewable energy sources on paper, the solutions for the solar industry suggested at KAUST have not been implemented so far. The report issued in 2009 recommended building at least two industrial solar PV projects within two years (Ramli et al., 2017). However, so far, only a few pilot plants have been built at universities, which is hardly an achievement considering Saudi Arabia’s plan to reach 16 GW solar PV capacity by 2040 (Ramli et al., 2017). So far, the government has failed to achieve the mid-term goal of 24 GW generated by renewables by 2020 (AlYahya and Irfan, 2016). DiPaola (2020) estimates the current capacity of renewable energy sources in Saudi Arabia to be around 500 MW, while Saudi Vision states that by 2030 renewables should produce 60 GW in total. Therefore, the Saudi government should seek opportunities to accelerate the process of diversifying energy sources, following KAUST recommendations, if they are to reach the goals of the framework.

KAUST attracts many international researchers with its generous financial support and simplified approval procedures. Insufficient public funding for research in the US and Europe can make Saudi Arabia a dream destination for many scientists (Al-Shobakky, 2018). According to Al-Shobakky (2018), “KAUST has the highest per capita funds in the world” (p. 57). However, while the university’s strategy has resulted in a surge in the number of KAUST-backed publications in scientific journals, scholars note that specific policies can limit the long-term perspectives of the project. The academic tenure option is limited to local professors, meaning that international researchers at KAUST are mostly focused on short-term projects (Al-Shobakky, 2018). Al-Shobakky (2018) states that the low retention rate is a serious problem at KAUST and notes that as of 2017, the university falls significantly short of its goal to have 250 faculty members. Extending tenure options to international researchers is arguably the best course of action, as it would help form a healthy scientific community, benefiting the country in the long term.


Education is another key factor in the knowledge-based economy. The Saudi government has been considerably increasing investments in the education sector since 2005 (Amirat & Zaidi, 2019). However, Khan et al. (2020) state that a lack of entrepreneurial attitudes among Saudi graduates was always one of the main factors that limited economic growth. Saudi Vision 2030 addresses this problem by offering incentives to those who want to open their own business (Khan et al., 2020). In particular, education at KAUST is largely focused on fostering entrepreneurial skills among the students (Khan et al., 2020). Alhoian (2018) notes that more than 30 spin-offs were created at KAUST during the first decade. Therefore, the educational goals of KAUST are closely related to Saudi Vision 2030 through promoting and supporting entrepreneurial education.

Saudi Arabia has been historically criticized for gender segregation in education and workforce policies. Bousrih et al. (2020) note that limited access to education for women has been one of the factors that negatively affected economic growth. DeBoer and Kranov (2017) note that increasing women’s participation in engineering is crucial to addressing the shortages in the technical expertise field. Notably, Saudi Vision 2030 lists women empowerment and entrepreneurship as high-priority goals (Khan & Iqbal, 2020). The Foundation of KAUST, the first co-educational university in the country, was an important step towards gender equality in education. As of 2018, over a third of students at KAUST were women (Alhoian, 2018). While the researchers unanimously agree that increasing women’s participation in education and research is beneficial to the economy, KAUST remains the only university of its kind in Saudi Arabia. Lifting the educational restrictions for women at all universities is critical to ensuring the success of Saudi Vision 2030 goals.

KAUST is deservedly considered a pioneering project in Saudi education. However, it does not represent the state education system as a whole. Rather than that, it serves as an exceptional example of what Saudi universities could become if the government implemented similar policies universally. Since KAUST remains an elite institution, its impact on the country’s education system, in general, is minimal. Increasing enrollment opportunities, specifically for home students, could prove highly beneficial for the economy (Alhoian, 2018). Even the royal family members admit that favoritism remains a serious problem at KAUST (Alhoian, 2018). This issue has to be resolved in the nearest future to ensure that the acceptance of the students is based purely on merit, and the graduates can provide a valuable contribution to Saudi science and the economy.


One of the main objectives of Saudi Vision 2030 is the development of local SMEs and start-ups. KAUST contributes toward this goal through investments in business and training programs. The university provides training and coaching services for scientists who want to open their businesses (Khan, 2013). Moreover, KAUST offers long-term partnerships with high-tech start-ups and supports those with generous investments reaching $2 million (Azim & Hariri, 2018). However, Khan (2013) notes that funding is limited to the companies working within the university’s incubation program. Considering the aforementioned favoritism issues, it is reasonable to suggest remodeling the start-up support programs to increase the pool of potential entrepreneurs who can benefit from the system.

Business incubation services are considered an essential element of entrepreneurial activity, and KAUST represents one of the few business incubators in the country. As of 2013, there were only three organizations offering incubation services in Saudi Arabia, compared to more than a thousand in the USA or 120 in Canada (Khan, 2013). While in developed countries, incubators normally offer a wide range of services to businesses, including research, planning, launch, and operational support, opportunities for Saudi entrepreneurs working with KAUST are limited (Khan, 2013). Moreover, the university focuses solely on supporting engineering and technology start-ups (Khan, 2013). According to Khan (2013), “Saudi Arabia is largely consumer society and it is impending to have the incubation services for other than engineering and technology incubators” (p. 48). Therefore, policymakers should consider diversifying the profile of KAUST as a business incubator, like offering services to entrepreneurs in different fields would significantly benefit the Saudi economy.


The changes in the global economy and oil price fluctuations in the 21st century forced the Saudi government to launch ambitious reforms. Developing a knowledge economy, in particular, is one of the main goals of the Saudi Vision 2030 framework. Universities like KAUST play a central role in the concept, as they significantly increase the country’s educational and innovative potential. In 10 years, KAUST has become one of the most respected institutions in the Middle East, offering high-quality education and world-class research facilities.

KAUST contributes to several missions enlisted in Saudi Vision 2030 by encouraging and supporting entrepreneurs, promoting and researching renewable energy, and offering equal educational opportunities for both genders. However, many scholars argue that the potential of KAUST has not been fully utilized so far. For instance, the solar industry research has gained recognition in the scientific community; however, the Saudi government has done very little to implement the propositions listed in the study. Having a world-class research facility can benefit the economy only when the research has a practical follow-up.

Apart from being an educational and research center, KAUST acts as a business incubator. Saudi Vision 2030 lists supporting SMEs as one of the main goals, as scholars consider entrepreneurship a key factor in developing a modern economy. KAUST offers entrepreneurial education and financial support for local start-ups. While several spin-offs were created at KAUST, and some projects have gained recognition at international events, scholars believe there is room for improvement. The incubation services offered at KAUST are limited compared to similar projects in developed countries. Moreover, these services are available only to the selected entrepreneurs in the engineering and technology fields. Overall, KAUST could benefit from American or European experience, implementing similar policies to diversify the incubation services and make them available to a greater variety of businesses.


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