The powerful young Prince Mohammed bin Salman overseeing Saudi Arabia’s economy unveiled ambitious plans on Monday aimed at ending the kingdom’s “addiction” to oil and transforming it into a global investment power.
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Other initiatives of the Vision 2030 include a revised “green card” program, increasing female participation in the workforce, building a domestic arms industry and investing in tourism related projects. The agenda calls for selling a stake in the state-owned oil company Saudi Aramco, which the deputy prince said could be valued at more than trillion. The bourse, which jumped more than two percent after the plan’s announcement on Monday, was down 1.3 percent in afternoon trade on Tuesday. Aramco would have a holding company with an elected board, with subsidiaries also sold through IPOs.
Aramco is the world’s leading oil company, producing about 10 million barrels a day, or about 10 percent of global production.
Saudi Arabia has announced plans to debut the world’s largest IPO.
The bulk of this is expected to come from restructuring subsidy regimes, the introduction of Value-Added Tax and a “green card” system to give expatriates long-term residence and the ability to invest in Saudi Arabia. “We can live without oil in 2020”.
Under Salman, who came to the throne in early 2015, economic strains have been the backdrop to rising tensions with regional rival Iran, the threat from Islamic State, the wars in Syria and Yemen, and a sense that the kingdom’s decades-long relationship with the USA is fraying. It is only for the benefit of Aramco, he added.
“People used to be unhappy that files and data of Aramco are undeclared, unclear and not transparent”.
Jason Turvey, Middle East economist for Capital Economics, said that because plans for the fund reflect a shift of balance sheets rather than any new assets, it will not reduce the government’s dependence on oil revenues.
His removal comes after the government reduced subsidies on electricity, water and other services.
As part of his role as defense minister, he quickly has launched the Saudi intervention against Iranian-backed militants that had overthrown the government in Yemen. “This is a promise”.
Prince Mohammed bin Salman also explained that a number of programmes will be announced in the coming months. There were plans underway to set up factories for this objective by 2017, initially wholly owned by the government but later listed on the Saudi bourse.
Initial reaction, I appreciated the transparency and addressing issues that have previously not been addressed, such as military spending, the housing issue and unemployment.I believe this vision has a lot to offer and I am optimistic, but the biggest challenge will be the execution. Despite previous reform attempts, the kingdom’s schools have always been seen as focused on religious teachings rather than preparing students for a role in a modern economy.
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Though Iran’s growth was at zero in 2015, its economy is expected to grow 4 percent in 2016 and 3.7 percent in 2017 as it ramps up oil production and looks to increase trade and investment with the easing of worldwide sanctions.
