An investor monitors a screen displaying stock information at the Saudi Stock Exchange in Riyadh, January 18. REUTERS/Faisal Al Nasser
The world, not only the Saudis, monitored the announcement of the kingdom’s Vision 2030 last week. A well rounded plan, which primarily aims at achieving a gradual but steady diversification of the country’s revenues, away from its current total dependence on oil as a main source of revenue.
Though many were optimistic about the start of a new and bold economic era—a first for the kingdom— yet it was cautious optimism for some, given previous unsuccessful experiences.
There is, in fact, no other alternative for the Saudi economy but to implement this vision, otherwise, it will continue to suffer from any oil prices fluctuation that is currently out of Saudi Arabia’s control.
The new roadmap covers all economic sectors. One example to that would be the mining sector, which, despite its ample raw resources such as phosphate, copper, uranium, and aluminum, has had a low contribution to the gross domestic product (GDP).
As such, the roadmap clearly sets a goal towards having the sector contribute “SR97 billion ($25.8 billion), by 2020,” to the economy and create some “90,000 job opportunities in the process.”
What differentiates Vision 2030 from other roadmaps is that it will not start from scratch. The primary production elements, needed for its implementation, have been developed over the past few decades. Add to that the accumulating capitals throughout the heydays of hydrocarbon revenues, and you have a good start.
There are hopes that this new vision will also eliminate the various corruption aspects which have plagued most of the kingdom’s sectors. The result was unfinished projects, ones that have cost the state exaggerated figures and others that were plain useless to Saudi Arabia’s economy and its development.
As Saudis, we hope that there is a silver lining behind the fast changing events. We were jolted awake by the deterioration in crude oil prices, which exposed the vulnerability of our economy and its lack of endurance.
I truly believe that there is much needed reform, which includes taxes on unutilized real estate and correcting the distribution of subsidies, especially fuel subsidies, resulting in quick wins.
The new economic plan will transform Saudi Arabia from an economy that is reliant on oil, into a knowledge-based economy, which is both diversified and productive.
The vision also paves the way for the private sector to take over the reins and assume a leading role in all the stages set for investing internally.
That is why opening up the kingdom’s economy and granting more freedom to foreign investors across the board and in all sectors will create a challenge to Saudi businessmen and increase their productivity.
Focusing on The Youth
Our mightiest weapon, is our youth. Young Saudi citizens constitute a large section of society, with more than 60 percent under the age of 30. If the country’s youth receive proper education, and top-quality training, to transform our economy into a knowledge-based one..
A Permanent Residency, For Some
The kingdom also aims to attract creative minds and foreign talent to live and work in Saudi Arabia, by granting them permanent residency permits, known in Vision 2030 as the Green Card. The new system, however, will cover Arabs and Muslims exclusively as a start.
As for transforming the public investment fund into a sovereign wealth fund (SWF), well that is the most notable step in the roadmap. Local and foreign investments within the fund will be divided equally and this will harness local and international investment opportunities in line with the international economy.
I do believe that when we start having full transparency, and the SWF is run by a competent board, vital international investment opportunities can be attracted.
Saudi Arabia should also invest in foreign companies, be part of their boards, and work with them towards bringing such foreign direct investments to start factories and help create job opportunities.
Privatizing Public Sector Services
Meanwhile, the vision had mentioned the partial privatization of Saudi Arabia’s oil giant Aramco, which is a much needed step for two main reasons:
1-Aramco’s lack of transparency.
2-The need to pump more money into the SWF to be able to compete on an international level with other SWFs.
This privatization process will not impact Aramco’s net assets, which are expected to grow going forward. But, one must note that any partial or total privatization of public companies will not be limited to Aramco.
The trend will be towards privatizing various government entities that provide public services such as health, education, amongst others. If successfully implemented in accordance with international standards, privatization would lead to higher productivity and competence, in addition to easing pressure from the government to employ Saudi citizens.
Saudi Arabia enjoys the fact that it is the birthplace of Islam, and it has a strategic geographical position as a midway between world markets. Those cardinal characteristics, which were not utilized properly in the past, are now an integral part of Saudi Vision 2030.
With that, religious tourism, as well as cultural tourism, both constitute an integral part in increasing the sector’s revenues. Supporting this step would also lead to establishing museums, especially Islamic museums, which the kingdom currently lacks; in addition to establishing a permanent symposium for trade between Muslim nations.
Saudi Vision 2030 builds its ambitious plans to increase its capacity to welcome Umrah (minor pilgrimage) visitors from 8 million pilgrims to 30 million per year, and more than double the number of heritage sites registered with UNESCO in the next 15 years.
“At the heart of our vision is a society in which all enjoy a good quality of life, a healthy lifestyle and an attractive living environment. It is expected that there will be multiple changes on the social level within the kingdom as the vision gets implemented.” Those were the words by which Saudi Deputy Crown Prince Mohammed bin Salman explained Vision 2030. Social reform starts by providing citizens with the elements to be productive.
Women will have further opportunities under the new ambitious reforms. The vision clearly states that the kingdom will continue to invest “in education and training so that our young men and women are equipped for the jobs of the future.”
Despite my expectation that there will be a fierce resistance by some sections of society, mostly those who are ultraconservative, when it comes to further integrating women into the economic sphere, yet, I believe that it would be a natural reaction to Saudi Arabia’s economic openness. By that, our society will discard its self-inflicted isolation towards a symbiotic relation with the rest of the world’s societies, just as Malaysia did.
Last but not least, I find us Saudis standing at the helm of a new phase that is full of challenges and hope. At this time, and after the launch of Saudi Vision 2030, the kingdom has reached the point of no return. It wouldn’t be an easy path, but with determination and hard work, we can overcome the challenges.
Mohammed Al Sabban is an economic and energy consultant, and former Senior Advisor to the Minister of Petroleum of Saudi Arabia.