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Assessing Saudi Arabian Leadership in 2020 G20 Sustainable Tourism and Energy

Matthew McIntosh, G20 Research Group
May 17, 2020

As Saudi Arabia chairs the 2020 G20, its Presidency Agenda includes notable sustainable development objectives — some of which are aligned with Saudi Arabia's own domestic sustainable development desires, particularly in tourism-led economic progress and the pursuit of clean energy. However, COVID-19 has negatively affected these two areas, by damaging the global economy and world tourism and throwing the global energy sector — especially that of oil — into additional disarray. Saudi Arabia's G20 leadership in response to COVID-19's effects on G20 sustainable development objectives in tourism and energy should thus be examined.

Tourism-Led Economic Progress

The 2020 G20 Presidency Agenda identifies "Tourism as a Force for Human Centred Economic Growth." The travel and tourism sector accounts for 10.3% of global gross domestic product (GDP), and transport-related emissions from tourism contributed to 5% of all human-made emissions in 2016. The Saudi G20 presidency's focus on the social, economic and environmental impacts of this industry builds on the 2019 G20 Osaka Summit's commitment to maximize the sector's contribution to achieving inclusive and sustainable development.

The 2020 presidency agenda's focus on tourism runs parallel to Saudi Arabia's prioritization of tourism as part of its economic diversification scheme. Indeed, pegging the success of the Saudi economy on oil revenue is unsustainable given the volatility of global oil prices and the finite nature of oil. The Kingdom launched its Vision 2030 action plan in 2016 after Saudi oil rents as a percentage of annual GDP fell from 40.01% in 2014 to 19.43% in 2016. This resulted from the average monthly price of the OPEC Basket declining by 75.44% from June 2014 ($107.89 per barrel [bbl]) to January 2016 ($26.50/bbl).

With the intention of growing other economic sectors, Riyadh aims to expand its tourism industry from its traditional focus on religious pilgrimages. A new visa regime, launched on September 27, 2019, is more favourable to leisure tourism. The Kingdom welcomed over 24,000 visitors within 10 days of implementing this new visa regime. Aligning with the G20's human-centred approach, Saudi officials anticipated this sector would create 1 million new jobs and increase its GDP contribution from 3% in 2019 to 10% by 2030.

However, state lockdowns to prevent the spread of COVID-19 have caused economies to decline. The International Monetary Fund's April 2020 World Economic Outlook indicated that the G20 will average a 4.735% decline in real GDP in 2020. Likewise, given the reduced number of people travelling as a result of the virus, the Organisation for Economic Co-operation and Development anticipates a 45% decline in international tourism in 2020. This could rise to 70% should recovery be delayed until September 2020. Moreover, the World Travel & Tourism Council (WTTC) has estimated that up to 75 million tourism jobs are at risk, with a travel and tourism GDP loss of up to $2.1 trillion in 2020.

The G20 is now tasked with supporting the international economy and strengthening the global tourism industry in anticipation of COVID-19's eventual decline. Saudi Arabia chaired the first ever Extraordinary G20 Virtual Leaders' Summit on March 26, 2020, where commitments were made to safeguard the global economy through minimizing economic damage and maintaining market stability. The G20 did not forget its sustainable economic outlook, agreeing to lay down foundations for strong and sustainable economic growth.

Following this, G20 tourism ministers convened virtually on April 24, 2020, and agreed to work together to support an inclusive and sustainable recovery in the global tourism sector. In particular, they abided by the G20 presidency agenda's focus on sustainable tourism, committing to "accelerating the transition of the travel and the tourism sector onto a more sustainable path — economically, socially and environmentally."

The Saudi G20 presidency's commitment to tourism as a form of economic growth must be applauded. Ahmed Al-Khatib, the Saudi tourism minister, articulated on March 20, 2020, the necessity of joint international action to support the global tourism industry due to COVID-19-reduced global travel. Al-Khatib explained that Saudi officials were consulting with their major global partners, namely the WTTC and the United Nations World Tourism Organization, so that appropriate measures can be made to support Saudi tourism. Thus, with Saudi Arabia's domestic tourism ambitions mirroring the country's international outlook, this was an important case of Saudi leadership, especially since G20 tourism ministers made key commitments on sustainable tourism on April 24.

Yet the omission of tourism from the G20 leaders' statement on March 26 was surprising, given that the slowdown of global travel and tourism has been the fastest and one of the primary repercussions of COVID-19. Although Saudi Arabia has shown strong leadership, the presidency can still improve the G20's focus on tourism commitments at any possible future extraordinary G20 leaders' summit — should one be deemed necessary — prior to the Riyadh Summit on November 21-22, 2020.

Pursuit of Clean Energy

The 2020 G20 Presidency Agenda also prioritizes "Cleaner Energy Systems for a New Era," aiming to create cleaner, more sustainable and affordable energy systems. This is a critical objective, as carbon-emitting fossil fuels of oil, coal and natural gas accounted for 84.7% of global primary energy consumption and 64% of global electricity generation in 2018. Accordingly, the 2020 clean energy outlook continues traditional G20 energy ambitions of committing to phase out fossil fuels since the G20's 2009 Pittsburgh Summit and acknowledging the need for cleaner energy for many years.

The G20's clean energy priority reflects Saudi Arabia's domestic objective of expanding energy sources. According to British Petroleum plc, in 2018 Saudi Arabia used renewable energy as a percentage of energy mix for electricity generation the least of any G20 country, with renewable energy accounting for only 0.2 TWh (0.05%) of domestic electricity generation. Moreover, oil accounted for 150.6 TWh (39.24%) of Saudi domestic electricity generation in 2018, which was the highest amount that oil was used as a percentage of energy mix for electricity generation by any G20 country.

Nevertheless, Saudi Arabia has improved its own energy diversification ambitions as part of Vision 2030 through the long-term National Renewable Energy Program (NREP). The Renewable Energy Projects Development Office is now overseeing the third round of renewable projects that have been launched by the NREP since 2017. Riyadh intends to invest $50 billion in renewable energy projects by 2023, aiming to grow Saudi renewable energy capacity to 58.7 GW by 2030.

However, oil has been the major energy concern in 2020, with global oil benchmarks of West Texas Intermediate (WTI), Brent crude and the OPEC Basket averaging a 51.058% decline in their average monthly oil price from January ($62.09/bbl) to March ($31.71/bbl). This resulted from both COVID-19's impact on reduced oil demand — through state lockdowns and travel restrictions — and the Riyadh-Moscow oil price war.

Accordingly, on April 10, 2020, the G20 energy ministers discussed global energy concerns, aiming to secure an agreement to reduce oil production. However, consensus was not achieved on this matter, with the Organization of Petroleum Exporting Countries and producing allies agreeing two days later to a 9.7 million bbl/day cut from May 1 to June 30, 2020. Although G20 energy ministers were still able to make important commitments toward stabilizing the global energy sector and ensuring its contribution to the global economic recovery and the fight against COVID-19, there were none on clean energy.

The absence of any clean energy commitment from this G20 energy ministers' meeting is disappointing for both the G20's clean energy ambitions and also for Saudi G20 sustainable development leadership. This latter point is especially apparent considering that the G20 energy ministers' meeting did not match the strong displays of Saudi clean energy ambitions prior to the meeting.

Indeed, on March 31, 2020, the Saudi Council of Ministers agreed to the creation of a Supreme Committee for Energy to administer electricity production and strengthen the Saudi renewable energy sector. Then on April 3, the Saudi government shortlisted five bidders for photovoltaic Saudi solar projects as part of the second round of the NREP.

However, the G20 energy ministers' statement did emphasize that the broader G20 energy agenda — which concerns the transition to cleaner and sustainable energy systems — would be reviewed at their next meeting in September, or earlier if need be. Moreover, with the April 10 meeting establishing a short-term focus group to monitor ongoing G20 energy response measures, there is still room for G20 dialogue on clean energy, providing an opportunity for clean and sustainable energy commitments.

Overall, Saudi Arabia must prioritize clean energy as part of G20 energy discussions, thereby fulfilling the G20 presidency's desire for clean energy and simultaneously enhancing Saudi G20 sustainable development leadership.

Conclusion

Saudi Arabia's G20 presidency has displayed some leadership in pursuing key sustainable development ambitions in tourism and energy. However, there is room for improvement. First, although the G20 tourism ministers' meeting was successful thanks in part to strong Saudi initiative, the slowdown of the tourism industry caused by COVID-19 means that tourism must be better addressed at any future G20 summits for the remainder of the Saudi G20 Presidency. Moreover, the G20 is neglecting the clean energy ambitions outlined in its 2020 Presidency Agenda, leaving room for the presidency to prioritize clean energy reform at upcoming G20 meetings of both energy ministers and leaders alike.

If Saudi Arabia can support G20 sustainable development in tourism and energy, this would be an important win for Saudi Arabia's G20 presidency, and a major success for the G20 overall in responding to COVID-19.

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Matthew McIntoshMatthew McIntosh is a political research contributor to the G7 and G20 Research Groups. He graduated from the University of Edinburgh with an MSc in International relations in 2019, where he specialized in Arabian Gulf oil politics and relations. Matthew completed his BA in political science in 2018 from the University of Western Ontario, and was a political risk analyst for the Leadership and Democracy Lab. He currently conducts pro-bono political research for the Atlas Institute for International Affairs in the United Kingdom, he has also worked in communications for Scotiabank.


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