Economic Transformations: Saudi Arabia’s Vision 2030
On April 25, 2016, H.R.H. Deputy Crown Prince Mohamed Bin Salman announced the Kingdom of Saudi Arabia “Vision 2030”, a plan to radically transform the Kingdom’s economy in, what many commentators saw as, a response to budgetary pressures arising from the slump in crude oil prices.
Vision 2030 sets out a comprehensive road map to promote more efficient government services and to diversify the Kingdom’s economy by boosting private sector job creation and developing the non-oil economy.
“We have an addiction to oil. . . this is dangerous,” Prince Mohammed has recently stated in interview. “It has delayed development of other sectors.” To that end, a flotation of a 5 per cent stake in state-owned Saudi Aramco is planned which would value the oil giant at more than $2tn and mark a historic transformation of the Kingdom’s primary economic engine, boosting transparency around the state-owned company’s finances, as well as granting Saudi Aramco more independence from government oil policy. According to the plan, the ownership of Saudi Aramco will then be transferred to the state’s Public Investment Fund, which will help bolster it into a sovereign wealth fund valued at up to $3tn, the world’s largest, with a mandate to kick-start domestic investment.
Privatizing government assets, from Saudi Aramco to other assets in healthcare and education, will help meet ambitious diversification targets of raising non-oil government revenue from SR163bn ($43bn) to SR1tn by 2030, and to boost the role of the private sector from 40 per cent to 65 per cent of gross domestic product by 2030 and that of small and medium-sized enterprises from 20 per cent to 35 per cent.
But the Vision is about so much more. The plan also aims to reduce unemployment from 11.6 per cent to 7 per cent by 2030. To that end, it is seen as essential to end the Kingdom’s reliance on lower-paid foreign labor. This means a renewed focus on education, as well as a higher female participation in the workforce (from 22 per cent to 30 per cent).
In a country where more than half of the population is under 25, many younger Saudis hope that economic transformation will lead to a less stifling and a more equitable society. And job creation is rightly seen as a progressive tool in averting disaffection.
The plan is certainly ambitious, not least in its timelines for implementation but it is admirably conceived. After all, in a region where societal development can take time, it does no harm to catalyze the process.
Vision 2030 should be seen for what it is: a plan that will inspire and mobilize action to change the country. The plan, together with other recent developments, should not be viewed as evidence of a state losing its way but rather as signs of a country on the cusp of transformation.
Prince Mohammed has stated that the plans for 2030 are premised on a $30 oil price — and are to be implemented at any price. This transformation has as much, if not more, of a sociological as an economic imperative. Vision 2030 has been seen by many commentators as a reaction to relieve budgetary pressures but perhaps, rather than being the mere motive for change, the drop in global oil prices has presented to the opportunity to drive through changes which were, in any event, sorely needed.
As a Firm, we have been fortunate enough to be instructed on a number of initiatives connected with the plan. In meetings on those projects the buzz is palpable. The mood on the streets is energized. It is a privilege to be present in the Kingdom in such monumental times and to participate in a project so profound both in nature and scale. And it goes (almost) without saying that Vision 2030 offers enormous opportunities for foreign investment.
Exciting times . . .