In a press conference in the capital Riyadh, Deputy Crown Prince, Mohammed bin Salman laid out one of the most far-reaching programs in the history of Saudi Arabia under the Vision 2030 plan which pledges to wean off the Kingdom’s heavy reliance on oil. Spurred by plummeting oil prices, an eighty-four-page program brought about the vision for 2030 with a priority for developing a non-oil economy. The Saudi deputy crown prince has openly said in an interview on the Al Arabiya channel, “We have an addiction to oil. This is dangerous…it has delayed the development of other sectors.�
In a county where three quarters of the government’s budget originates from hydrocarbon revenues, the protracted slump in oil prices has put a further strain on the Kingdom’s finances, while increasing the budget deficit to 19 percent of the gross domestic product. Contradictory fiscal policy measures combined with substantial energy subsidies have contributed to a major slash in the Kingdom’s budget and have revealed that public finances in the Kingdom are unsustainable in the long run since cash reserves have melted away twice as fast as was anticipated.
Determined to become a global investment powerhouse and turn its distinctive location into a global hub with a strong foundation of economic prosperity and environmental sustainability, Saudi Arabia has set ambitious goals. A vision for a post oil economy consists of three main pillars; a vibrant society, a thriving economy and lastly, an ambitious nation.
The most prominent part of the program is the creation of the world’s largest sovereign wealth fund. This is planned through the part privatization of the state-owned enterprise, Aramco. The planned floatation of a five percent stake in the company is thought to boost the economic engine in Saudi Arabia by around US$2 trillion. Through the ‘Vision 2030� plan, ownership of Aramco is set to eventually be transferred to the Public Investment Fund, which could reach at an estimated worth of $3 trillion to maximize the Kingdom’s investment capacity.
A number of structural reforms have been set out in the mining and renewables sector with a target of generating 9.5 gigawatts of energy from solar and wind power. To bolster the renewable energy market, a considerable portion of the value chain, which will include research and development and manufacturing, is planned to be localized with the help of public-private partnership. Additionally, with the aim of stimulating the private sector’s participation in the mining sector, the Kingdom is planning to invest in infrastructure, review licensing procedures, create a variety of funding opportunities as well as map out a comprehensive database of resources.
Other prominent targets in the vision include the ambition to increase women’s participation in the workforce from 22 per cent to 30 per cent, move the nineteenth largest economy of the world to fifteenth position as well as raise one trillion Saudi Riyals for non-oil government revenue. The Kingdom also hopes to raise non-oil exports in GDP from 16 percent to 50 per cent, increase foreign direct investment from 3.8 per cent to 5.7 percent and cut unemployment from 11.6 percent to 7 percent by the year 2030.Â
Previously in attempts to overhaul the oil-dependent economy in the Kingdom, such undertakings fizzled out when oil prices recovered. However, whether the 2030 vision set by the Kingdom will be successful can only be discovered in the years to come, but one fact worth contemplating is that, “many economists think this time could be different, because this oil price collapse is not cyclical but structural, brought on by the shale revolution, growth in renewable energy and international climate change commitments,� notes international affairs editor, David Gardner of the Financial Times.
All these concrete measures in line with the Vision 2030 plan would diversify the Kingdom’s economy, foster economic growth and create new jobs, which would contribute to the resilience of the Saudi economy while allowing it to reach its full potential.