Institutional transformation as an economic development factor of the Kingdom of Saudi Arabia

Aim. The work aimed to analyze institutional transformation processes within the “Vision 2030” reformatory program and to assess their impact on the economic development of the Kingdom of Saudi Arabia.

Objectives. The work seeks to conduct an interdisciplinary literature review; to explore the problems of the formation and development of institutions in society; to systematize theoretical and empirical research in the context of the chosen topic; to examine current statistical data indicating the dynamics of institutional development in Saudi Arabia; as well as to analyze and evaluate the impact of institutional changes on the implementation of the “Vision 2030” concept and its economic outcomes.

Methods. The author applied literature analysis in the field of institutional economics, a synthesis of empirical and theoretical experience, and a comparative analysis of statistical data.

Results. The Kingdom of Saudi Arabia demonstrates a unique example of its reformatory pathway. The “Vision 2030” program is primarily aimed to achieve sustainable economic development through economic diversification and scientific and technological progress, which principally requires a comprehensive institutional transformation of the country. A key area of institutional change has been the modernization of government institutions. The creation of specialized agencies, the administrative system optimization, as well as openness and transparency became incentives of the development of small and medium-sized businesses, including those with foreign capital. Reformatory efforts found its way into the religious sphere, while accelerating significantly the scientific and technological progress and the development of promising non-oil sectors. Considerable attention has been paid to the establishment of social institutions and the development of human capital as the main driver of the country’s sustainable economic development. Integration into the international community and the gradual “depreservation” of the Kingdom of Saudi Arabia are initiating information and cultural exchange. The country’s reformatory policy is resulting in significant changes in institutional norms and the structure of social relations in a relatively short period, which is positively embodied in the creation of an active “dynamic society” and a sustainable economy.

Conclusions. Despite significant progress in institutional transformations towards implementing the “Vision 2030” reforms, Saudi Arabia faces a number of challenges. Contrary to expectations, foreign direct investment has declined, jeopardizing a number of infrastructure and ambitious innovation projects. This is due to external factors, such as changes in the global market and inconsistent government actions. Traditionally conservative attitudes have become a challenge in social transformations, hindering the creation of a “dynamic society”. Rapid social changes are causing difficulties for a certain segment of the adult population in adapting to new standards and values. Despite the active development of educational programs and efforts to combat unemployment, the employment scheme remains somewhat hampered by the industry diversity imperfection. Nevertheless, the authorities are continuing their chosen reformatory course. Institutional and structural socioeconomic changes in society cannot be fully implemented in a short period of time. However, significant preconditions have been created for constructive transformations aimed at the country’s sustainable economic development.

1. Rosenstein-Rodan P.N. Problems of industrialisation of Eastern and South-Eastern Europe. The Economic Journal. 1943;53(210-211):202-211. https://doi.org/10.2307/2226317

2. North D.C. Understanding the process of economic change. Princeton, NJ: Princeton University Press; 2010. 200 p. (Russ. ed.: North D. Ponimanie protsessa ekonomicheskikh izmenenii. Moscow: HSE Publ.; 2010. 256 p.).

3. Mokyr J. The gifts of Athena: Historical origins of the knowledge economy. Princeton, NJ: Princeton University Press; 2004. 384 p. (Russ. ed.: Mokyr J. Dary Afiny. Istoricheskie istoki ekonomiki znanii. Moscow: Gaydar Institute Publ.; 2012. 408 p.).

4. North D.C. Institutions, institutional change and economic performance. Cambridge: Cambridge University Press; 1990. 159 p. (Russ. ed.: North D. Instituty, institutsional’nye izmeneniya i funktsionirovanie ekonomiki. Moscow: Nachala; 1997. 188 p.).

5. Solow R.M. Technical change and the aggregate production function. The Review of Economics and Statistics. 1957;39(3):312-320. https://doi.org/10.2307/1926047

6. Acemoglu D., Robinson J.A. Why nations fail: The origins of power, prosperity, and poverty. New York, NY: Crown Business; 2013. 544 p. (Russ. ed.: Acemoglu D., Robinson J.A. Pochemu odni strany bogatye, a drugie bednye: proiskhozhdenie vlasti, protsvetaniya i nishchety. Moscow: AST; 2015. 692 p.).

7. Schumpeter J.A. Capitalism, socialism and democracy. London: Routledge; 1976. 437 p. (Russ. ed.: Schumpeter J. Kapitalizm, sotsializm i demokratiya. Moscow: Ekonomika; 1995. 540 p.).

8. Aghion P., Howitt P. A model of growth through creative destruction. Econometrica. 1992;60(2): 323-351. https://doi.org/10.2307/2951599

9. Моkуr J. The lever of riches: Technological creativity and economic progress. Oxford: Oxford University Press; 1990. 496 p.

10. Fedorchenko A.V. Reforming Saudi economy on a new stage of globalization. Mirovoe i natsional’noe khozyaystvo = World and National Economy. 2023;(1):106-131. URL: https://mirec.mgimo.ru/2023/2023-01/reforming-saudi-economy (accessed on 04.11.2025). (In Russ.).

11. Dudarev K.P. Saudi Arabia in the 21st century: A revolution of the 30s or a tsunami of modernization. Moscow: Middle East Institute; 2022. 238 p. (In Russ.).

12. Inglehart R., Welzel C. Modernization, cultural change, and democracy: The human development sequence. New York, NY: Cambridge University Press; 2005. 464 p.

13. Burova A.N. Human and social capital assets as a factor of economic growth in Saudi Arabia. Ekonomika i upravlenie = Economics and Management. 2024;30(11):1334-1343. (In Russ.). https://doi.org/10.35854/1998-1627-2024-11-1334-1343

14. Veblen T. The theory of the leisure class: An economic study of institutions. London: Macmillan Co.; 1912. 256 p. (Russ. ed.: Veblen T. Teoriya prazdnogo klassa. Moscow: Progress; 1984. 367 p.).

15. Akhmadullin V.V. Higher education system in Kingdom of Saudi Arabia in second half of 20th century and 21st century. Nauchnyi dialog = Scientific Dialogue. 2024;13(10):311-336. (In Russ.). https://doi.org/10.24224/2227-1295-2024-13-10-311-336