Saudi’s push to non-oil sectors commendable

Saudi Arabia’s ambitious strategy to restructure the Kingdom’s economy is seen as an unprecedented departure from oil dependency to diversification. In recent years, Riyadh has relied on oil revenues for about 90% of its budget. The new economic paradigm shift involves diversification, privatisation of massive state assets — including the energy giant Aramco — tax increases and subsidy cuts.
Prince Mohammed bin Salman Al Saud, the king’s son and deputy crown prince, unveiled the economic reform package on Monday to wean the oil from the Saudi economy — apparently affected by the acute drop of oil prices, which fell from more than $100 a barrel in early 2014 to about $40 this month.
“The vision is a roadmap of our development and economic goals. Without a doubt, Aramco is one of the main keys of this vision and the Kingdom’s
economic renaissance,” he said.
Elements of the long-heralded 15-year blueprint include the creation of a $2 trillion Saudi sovereign wealth fund, as well as strategic economic reforms called the National Transformation Programme. To accrue such a huge amount, the Kingdom would sell off about 5% of Aramco through an initial public offering. Proceeds from the sale will go into creating the world’s biggest government investment fund, with a value of $2 trillion, whose profits can provide an alternative to oil revenues that have been hit by the dramatic fall in crude prices since 2014.
The proposed giant sovereign wealth fund will enable Saudi to diversify sources of income, while the privatisation of state-owned companies will initiate accountability. The reform plan got a huge a boost from King Salman bin Abdulaziz who announced the cabinet backing for the Saudi Vision 2030,
sending shares on the Riyadh stock market to rise sharply.
Saudi economist Abdulwahab Abu-Dahesh called the plan highly ambitious and said it aims to turn a “welfare oil economy” — where the Kingdom’s oil revenues supported generous social benefits — into one based on managed investments. Only last year, foreign institutions were allowed to invest directly on the Tadawul All-Shares Index.
Alongside the economic reforms, there would be changes to social structure of the conservative society, as more women would be allowed to work to play a greater economic role.
Saudi Arabia will also overhaul its sponsorship system. A green card system will be launched within five years to allow expatriate Arabs and Muslims to live and work long-term in the country.
In line with the economic diversification plans, tourism – apart from the annual hajj pilgrimage –would be used to generate new revenues. On Sunday, the Kingdom launched a post-Umrah programme to allow pilgrims to visit tourism sites in the country by converting an Umrah visa into a tourist one.
The Saudi Vision 2030 has, among other sectors, identified tourism as a key to its diversification. Plots of land will be allocated to develop tourism projects and cultural venues besides improving pilgrim experiences.
To slash huge defence bill, create jobs opportunities and investments, Saudi Arabia would produce or assemble half of its defence equipment internally.
As part of the reform plans, the country would transform its educational curriculum to prepare students to take a central role in emerging modern economy.
Mohammed Al-Shumaimri, who leads a financial consultancy group in the Red Sea city of Jeddah, wondered why Saudi Arabia can’t emulate the economic diversification policies of the sisterly states of the UAE and Qatar. Indeed, Saudi Arabia has what it takes to diversify its economy away from oil.
Mohammed bin Salman’s age, pace and sense of accountability, have given the momentum to the reform issue, which has received wide support in the Saudi society. Years ago, social or economic reforms were mere dreams, but with younger and educated Saudi generation the reforms are possible.
Imbued with the shrewd strategic reform plans, the Saudi young crown prince pledged to create a new Saudi Arabia whose economy does not depend on a single commodity — oil. And that will pave the way for a bright future!