In a strategic move to diversify the national economy and bolster non-oil revenue, Saudi Arabia’s Public Investment Fund (PIF) has recently launched Al Waha Company, a new entity aimed at managing and expanding the Kingdom’s presence in the global duty-free retail market. This initiative forms part of a broader economic strategy to elevate Saudi Arabia’s role in international trade and tourism.
According to Al-Iqtisadiah, the establishment of Al Waha is designed to take advantage of growing traveler spending, particularly in airports, and to redirect a larger share of that spending toward the Saudi economy. The move is in line with ongoing efforts to expand the non-oil private sector and position Saudi Arabia as a competitive hub for high-quality goods and luxury retail.
Historical Context: The Global Rise of Duty-Free Retail
The concept of duty-free shopping has evolved significantly since the mid-20th century. It first gained prominence in Ireland in the aftermath of World War II, when airport authorities sought innovative ways to boost economic activity. A landmark example was the opening of duty-free shops at Shannon Airport in Ireland, leading to a global trend in air travel retail. These outlets, exempt from local import taxes, quickly became an essential source of airport revenue and employment.
As detailed in the book The History and Concept of Duty-Free Markets by Italian author Alberto Mingardi, duty-free shops now exist in nearly every major airport worldwide. For instance, Ireland’s duty-free sector generated €15.4 billion in 2014, with over 10 billion euros coming from airport outlets. The sector supports hundreds of thousands of jobs and contributes to airport infrastructure development.
Dubai’s duty-free market, launched in 1983, has become a global leader, generating $7.9 billion in sales annually and ranking as one of the world’s top travel retail destinations, according to Statista.
The Launch of Al Waha: A National Gateway to Global Markets
The PIF’s creation of Al Waha represents a calculated response to these global trends. The new company, fully owned by the sovereign wealth fund, aims to specialize in duty-free retail across Saudi Arabia’s airports, border crossings, and seaports. It is tasked with developing high-end commercial outlets offering a curated selection of Saudi-made and international products.
The PIF’s roadmap is clear: Al Waha is envisioned as a national pioneer in managing and expanding duty-free facilities throughout the country. The company will also promote Saudi products globally and enhance the overall experience of travelers by providing premium shopping options.
The plan draws on earlier groundwork laid in 2007, when Saudi Arabia began developing free trade zones that enabled tax-free and customs-exempt commerce. This culminated in 2014 with the launch of the King Khalid International Airport duty-free project in Riyadh, which now spans 2,000 square meters and has expanded into 14 locations across the Kingdom.
Institutional Momentum and Regulatory Support
The Kingdom’s General Authority of Civil Aviation played a key role in facilitating the rollout of duty-free zones, signing a formal agreement in 2021 to support the commercial initiative. Subsequently, the Council of Ministers approved the expansion of duty-free markets to all land, sea, and air ports, underscoring the government’s commitment to streamlining trade and enhancing tourism infrastructure.
By late 2023, PIF had finalized agreements with several international companies to manage duty-free operations at key Saudi airports. In December 2023, Al Waha signed its first retail contracts with global firms, with commercial operations expected to commence in 2024.
Economic Implications: Supporting National Exports and Non-Oil Revenue
Al Waha’s objectives go beyond merely creating a local brand. The company also aims to expand the global reach of Saudi products through duty-free exports and partnerships with international distribution channels. This initiative is expected to amplify the role of non-oil sectors in the national economy, aligning with Saudi Arabia’s Vision 2030 goals.
Finance Minister Mohammed Al-Jadaan has emphasized the importance of increasing the private sector’s share in the economy. According to his statements, the non-oil sector now accounts for 37% of the Kingdom’s revenues, a figure expected to rise with new initiatives like Al Waha.
Tourism Growth as a Catalyst
Saudi Arabia’s tourism sector is also expected to benefit substantially from this move. The country recorded a 40% increase in tourist numbers in 2023 compared to the previous year, securing third place globally for international tourist arrivals. This influx brought an estimated $6 billion in spending in the first half of 2023 alone, a trend that aligns with the Kingdom’s ambitions to become a global travel destination.
The launch of Al Waha is thus poised to play a central role in enhancing the retail experience of tourists and travelers at Saudi airports, particularly at the King Salman International Airport in Riyadh. Once operational, this hub is expected to handle over 120 million passengers annually, providing a captive market for the duty-free sector.
Strategic Outlook
Al Waha’s establishment reflects the PIF’s broader strategy to create national champions in key economic sectors while attracting foreign investment and expertise. By tapping into the booming duty-free market, Saudi Arabia seeks not only to diversify its revenue streams but also to build a competitive retail offering that rivals leading global airports.
As duty-free spending continues to rise globally, Saudi Arabia is positioning itself to capture a significant share of that growth. Al Waha, backed by one of the world’s largest sovereign wealth funds, is likely to become a key player in the global travel retail ecosystem—serving as a commercial gateway for Saudi products and a new touchpoint for millions of international travelers.
