Saudi Deputy Crown Prince Mohammad Ben Salman laid out his economic plan for Saudi Arabia 2030. The vision, if applied, means the Kingdom of Saudi Arabia will be transformed profoundly in all aspects. While the plan may lead to positioning the Kingdom in the twenty first century and making it a considerable economic power on the global theatre, it also brings challenges and tests the will of the Saudi people and the wisdom of the Saudi elite.
Lower oil prices, budget deficit, regional turmoil, and social and economic stagnation encouraged the visionary young Prince to come out with this transformative plan which will both restructure the Kingdom’s economy and rewrite its social contract.
The plan was preceded with a long and through search for ways forward. Some of the best economic and financial brains in the world were invited to contribute their ideas, and some of the biggest financial and economic institutions globally participated in the debate. The young Prince entered the challenge without any prior ideological inclination. He was focused only on facts and on finding a way forward for his country.
The plan is in many ways a masterful piece of work of history. The young Prince reflects a younger mentality shaped by the information technology age and the free access to knowledge. He is supported by his father, King Salman, and he comes in a time when Saudi Arabia is hearing a wakeup call coming from its overdependence of natural resources and the narrowing of the welfare state circle.
Ben Salman wants to establish the World’s largest sovereign wealth fund at over $2 trillion. He is considering a new set of arbitration rules and business regulations which would certainly improve substantially the foreign investment environment in the Kingdom, and he is pushing forward strategically targeted Saudi investment in the Middle East and the world. The Prince’s plan aims at opening a wider door to foreign investment in order to energize the national economy, Saudi investments, youth employment and the Kingdom’s ability to generate wealth through a diversified economy.
The mission of modernizing the Kingdom will not be easy. Stagnation creates its own mentality and institutions. Habits, fear of change and versed interests in the status quo make a mighty alliance defending the traditional way of dealing with the Kingdom’s future. This way is summed up in kicking the issue of the future down the road to the future and hoping it will take care of itself by then. The traditional way was, and still is, threatening not only the future of Saudi Arabia, but its present as well.
The young Prince will soon come under criticism, either whispered or loudly expressed. No one can challenge the status quo, not exclusively in Saudi Arabia but in any place else, without provoking those who benefit from stagnation. The tide of criticism to Ben Salman would not be modest. The status quo defenders are not easy adversaries. The young Prince would need to be very cautious and gradual in implementing his vision. It is not only that he is confronted with deeply rooted interests and views that belong to the past, but it is also that Saudis are not used to changing their course or to hearing visionary ideas that cross the limits of the established norms.
Old ways are present in all domains of daily life in Saudi Arabia. It is even considered a source of pride. People are used to evaluating their present in terms of their past, not on future. The young Prince has a considerable enemy in the general culture and the understandable fear of change. He got the courage and the support to think forward and it is expected that the young generation of Saudis will back him all the way.
Ben Salman demonstrated that he deeply understands the challenges facing his country and the courage to plan a way forward. The Prince’s plan, based on common sense economics, targets enhancing domestic and foreign investment throw opening avenues to the private sector and reducing the role of government in areas where the government is not the best player, all the while pushing all the elements of the plan to provide the Saudi youth with larger opportunities of work and participation in the economy of their country. Currently, almost two third of employed Saudis work for the government. Half of Saudis are under 25 years old. This is obviously unsustainable in the medium term and it was placing Saudi Arabia in an increasingly narrower place as its budget is coming under extreme pressure while the future of oil prices is far from certain.
The plan will move Saudi economy towards a new age of information technology, high tech, innovation and dynamism. It will create its own needs that has to be fulfilled in education, health and infrastructure. In the health sector, for examples, the plan aims at privatizing all hospitals while keeping their services affordable.
Furthermore, the plans aim at a gradual reduction in the relative weight of oil in the Saudi economy, a bolder move towards diversification, keeping the social balance and enhancing social stability and opening avenues for economic growth. Ben Salman said recently that the Investment Fund he is planning to create would work as a spring board to take the Kingdom to an economy free of dependence on oil. He realizes that this will require a reshaping of the social contract in order to place a wider economic imitative, and responsibilities, in the hands of the economically empowered citizens.
Yet, oil will remain the locomotive of Saudi economy for some time to come and until Ben Salman’s plan bring its fruits. The Kingdom will privatize a small portion of its giant ARAMCO. ARAMCO is at least double the size of any other oil company. It produces almost 10 million barrels per day and has the potential to add some 2.5 million barrels more. It has never stopped exploration and drilling despite the huge capacity it already has. The privatized portion of ARAMCO’s operations will be mostly in the downstream assets.
There is confidence that the young Prince would be able to navigate through the current financial squeeze the Kingdom is going through due to lower oil prices. A couple of years ago the Kingdom needed a $95 per barrel price level to achieve fiscal balance, currently and after an intensive effort by Mohammad Ben Salman, the level of fiscal balance has been reduced to 66.70. The young Prince based his new economic plan on a $30 per barrel.
The young Prince is trying to open a new path to the future for Saudi Arabia. A path which is not hostage to oil production and market prices. The impact of such a transformation would be indeed very profound either on the Saudi society or in the Middle East. It is a courageous effort to remake Saudi Arabia. Would those who dwell lazily in the past have the courage to dream of a bright future with him?