Saudi Arabia is set to reap an economic windfall as millions of women are allowed to drive in the Kingdom for the first time, in a move that is expected to spur spending across a range of sectors.
Retailers, insurers and car hire companies are among the potential winners from the decision, while employers will be able to overcome one of the main barriers to boosting female participation in the workplace.
Investors inside and outside the Kingdom are today assessing the likely impact of the momentous move on the Kingdom’s $650 billion economy.
John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh, said women driving would give a significant boost to the Saudi economy.
Although difficult to quantify at this stage, the benefits could surpass $150 billion in terms of output gains per year over the medium to long term, Sfakianakis said.
“Just look at how many women will be able to be gainfully employed over time and the multiplier effects of employment on consumption. It’s a new era for Saudi Arabia.”
The move to allow women to drive, announced on Tuesday and set to be implemented by June, is the latest of a string of social and economic reforms in Saudi Arabia.
Analysts expect the move will produce a major economic dividend as more women are able to enter the workplace with the trickle-down impact providing a boost for everything from the insurance sector to banks. There are about 10 million women in the Kingdom over the age of 20.
“We see long-term support for growth in retailers and sellers of discretionary items, due to increased mobility and employment among women in Saudi Arabia,” said Mohammad Kamal, a director at Arqaam Capital.
Increasing female participation in the labor force is a central plank of the country’s Vision 2030 economic diversification blueprint.
“The decision to allow women to drive indicates that the authorities remain committed to implementing their ambitious reform agenda, despite an apparent slowing of economic reform momentum in recent months,” said Dubai-based Emirates NBD in a research paper.
Among the companies picked by Arqaam as potential beneficiaries is Fawaz Alhokair, one of the leading retail conglomerates in the country.
Tawuniya, the insurance group, is also set to cash in as the potential pool of insurable drivers doubles.
Other publicly traded companies picked by Arqaam include Budget Saudi Arabia, Saudi Marketing Co., Abdullah Al Othaim Markets, Al Rajhi Company for Cooperative Insurance and Axa.
Abu Dhabi-based NBAD Securities also sees Fawaz Alhokair as a potential winner as well as retailer Jarir.
“Other industry sectors that could benefit include banks, in the event that the demand for auto loans increase,” said Sanyalaksna Manibhandu, head of research at NBAD Securities in Abu Dhabi.
It is not all upside for the economy however as attention turns to the livelihoods of the hundreds of thousands of men employed as domestic drivers.
“Male chauffeurs may need to find new jobs as female passengers become drivers. If the decree merely leads to the replacement of a chauffeur by the passenger, auto dealers may not see demand increase as much as they would like,” added Manibhandu.
He expects demand for auto insurance to increase and that was reflected in the sharp rise among some publicly traded insurance companies on the Tadawul stock exchange on Wednesday.
Al Rajhi rose almost 7 percent on heavy volumes while car hire firm United International Transportation, also known as Budget Saudi Arabia, jumped 4 percent.
However the overall market retreated by about 0.1 percent as positive investor sentiment over women being allowed to drive was countered by concerns that Saudi Arabia may not be given emerging market status by index provider MSCI this month.
The economic empowerment of women in the Kingdom is a key part of that process.