The economic reform plan known as “Saudi Vision 2030” was approved by the Saudi Arabian Council of Ministers in a session during which the Custodian of the Two Holy Mosques King Salman bin Abdulaziz called on male and female citizens to work together to realise the plan which he described as “ambitious”.
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Saudi Arabia’s new powerful man, deputy crown Prince Mohammad bin Salman, unveiled plans on Monday to diversify the country’s revenue source and reduce dependency on oil. The fall in oil prices is largely due to OPEC kingpin Saudi Arabia’s own refusal to cut output as it seeks to drive less competitive players out of the market, in particular US shale producers.
With Aramco, Saudi Arabia’s Public Investment Fund would dwarf what is now the world’s largest sovereign-wealth fund, Norway’s pension fund, which has assets worth around $825 billion, according to the Sovereign Wealth Fund Institute.
When Saudi Arabia agreed back in the 1970s to price all of its future oil sales in USA dollars in return for military protection, that meant that any country who wanted to buy oil from the kingdom would have to buy dollars to make the transaction, Jody Chudley wrote in a recent article for The Daily Reckoning.
The plan to accelerate away from petrodollars but keep the country’s economic engine running smoothly includes cutting unemployment to 7.0 percent from the current 11.6 percent and increasing women’s participation in the workforce to 30 percent from 22 percent.
Saudi Deputy Crown Prince Mohammed answers questions during a press conference in Riyadh on April 25.
Here’s a guide to the main elements of the plan, announced on Monday in Riyadh and during Prince Mohammed’s interview with Saudi-owned Arabiya television.
“Since I was honored to ascend the throne I have been seeking comprehensive development based on our religious fundamentals”, the King said.
The Saudi 2030 vision will probably be viewed positively by market participants. A new residency visa programme could generate additional revenue and would allow Muslims and Arabs to live for extended periods in the country, he said.
Oil prices are still less than half the peak of $115 a barrel seen in June 2014.
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The partial privatisation of Aramco was also central to the plans, and Prince Mohammed said it would be transformed into an energy company that he expected to be valued at $2 trillion to $3 trillion, and that less than 5 per cent of it would be listed on the stock market. But, for Saudi Arabia, which is being squeezed by the largest oil price slump, a structural transformation is more of a necessity. “That gives us encouragement and comfort”.
