The fact that prince Mohammed-who is second-in-line for the throne now held by his father, King Salman-detailed the economic overhaul underscores his unusually powerful position. The Internet is one of the few spaces where people can discuss sensitive issues since there are no political parties and protests are banned. The International Monetary Fund, which expressed concern about Saudi economic policy in the past, praised the plan hours before its public release. Women are subject to male “guardians”, family members who must authorise a woman’s travel, work or marriage.
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Low oil prices previous year meant the kingdom ran a budget deficit of 15 percent of GDP.
Historically, oil has accounted for 90% of national revenue. “We need it, we need it, but I think in 2020 we can live without oil”.
“There was very little that was new in the Saudi government’s “Vision 2030″ and there are still several key areas that policymakers have yet to address”, Capital Economics’ Middle East economist Jason Tuvey said in a note to clients.
The announcement of the long-term reform programme, dubbed “Vision 2030”, marks the beginning of a hugely ambitious attempt to move Saudi Arabia beyond oil, the backbone of its economy for decades.
He said in a television interview he expected Aramco, the world’s biggest energy company, to be valued at more than $2 trillion and that he wanted it to be transformed into a holding company with an elected board.
Saudi Aramco will sell approximately 5% of its stake paired with other subsidiaries that will be publicly listed in the local stock exchange and in other stock exchanges, possibly in United States.
Part of the Aramco share sales would go directly towards creating the world’s largest sovereign wealth fund, according to bin Salman. The Saudi government took full control of the company in a series of buyouts that ended in 1980.
The plan would also see the country boost its public investment fund to about 7 trillion riyals ($2 trillion US) from about 600 billion riyals ($160 billion US). “It is estimated at between $2 trillion and $2.5 trillion”, Mohammed bin Salman said. He previewed his overhaul last week in Businessweek, indicating plans to shift Saudi income away from oil revenues and toward investment income earned by a massive sovereign wealth fund.
“We need it, we need it, but I think in 2020 we can live without oil”.
But Saudi citizens are also said to be hoping that the plan will include “carefully thought-out programs of privatization of the health, education sectors and other government facilities…[requiring] the private sector to assume greater responsibilities and provide better services to citizens and investors”.
The majority of Saudi nationals – about 70 percent – are now employed by the government.
The prince further emphasized that another way to drive up non-oil revenue is by investing more in mineral mining and boosting the kingdom’s own military production capacity.
Despite the country’s large energy industry, the Saudi Arabia ETF includes a small 1.4% tilt toward the energy sector.
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– Saudi Arabia plans to set up a holding company by the end of next year for defense industries as it seeks to meet more of its military needs domestically.
