While economists had pointed to the unsustainability of Saudi Arabia’s fiscal policy and economic structure much before the oil price plunge in 2014, the halving of income from energy sales has exacerbated the need for reform. Petroleum accounts for roughly 80 percent of the kingdom’s annual budget.
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Although it comes against a steep fall in oil prices, the plan “was not created only” to face that challenge, the sandal-wearing prince said, answering questions for 50 minutes at a royal palace in a rare government press conference.
On April 25, the Prince unveiled his “Vision for the Kingdom of Saudi Arabia”, a historic plan encompassing broad economic and social changes.
The plan is seen by analysts as “the biggest economic shakeup since the founding of Saudi Arabia”, and also a clear indication of Mohammed bin Salman’s growing influence, remarkable for a man in his 30s.
While Aramco’s valuation hasn’t been completed, the company is expected to be worth more than $2 trillion, the prince said, making the planned initial public offering the world’s biggest.
Another way to drive up non-oil revenue, the prince said, is by investing more in mineral mining and boosting the Kingdom’s own military production capacity. The kingdom will also restructure several contracts and tackle wasteful spending in the defense industry.
But, Prince Mohammad, it is said, is of a notion that Saudi Arabia must fundamentally change, or else face ruin in a world that is trying to leave oil behind.
Last year there was near-panic among the prince’s advisers as they discovered Saudi Arabia was burning through its foreign reserves faster than anyone knew, with insolvency only two years away.
Briefing the media, Prince Mohammed stressed the positive goals of the plan, including job creation and an effort to provide more recreational opportunities for Saudis.
Saudi Arabia did not sign the landmark Paris agreement on climate change in NY last week, which saw more than 165 countries commit to reducing emissions.
“So far the society is not persuaded – and it has negative influence – but we stress that it is up to the Saudi society”, he said, adding that change can not be forced.
The kingdom plans to continue restructuring the government “comprehensively and gradually, based on our clear priorities”.
“For me as a Saudi, I am concerned by the education transformation plan”, a Saudi entrepreneur told Reuters. “If it is not at the top of the list, why not?”
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The plan did call for boosting women’s participation in the labor force to 30 percent from 22 percent over the next decade and a half. Beyond selling state assets, it includes trimming government perks, like the estimated $61 billion spent annually on energy subsidies that Saudi citizens have become accustomed to and which have helped secure political patronage for the Al Saud ruling family.
