There are good reasons for the international financial experts to have subtle doubts about the efficacy of the ‘Vision 2030’. Indeed, the grandiose plan has taken the Saudi people by surprise since its inception. The ruling elite in the country has embarked on a path of unprecedented transformation of the economy without disturbing the stability of the nation. However, the mega plan will definitely shake the kingdom’s political and economic infrastructure
Saudi Arabia’s “Vision 2030” is slated to be a monumental experiment for the oil rich kingdom. Its main purpose is to revolutionise the economy of the country in the next one-and-a-half decade. This noble vision was announced by the Deputy Crown Prince Muhammad bin Salman on April 25, 2016. The underlying idea behind the grand vision was to lessen the dependence on its oil revenue. Beyond this, the Vision 2030 is not a simple checklist to provide an alternative, but may take the nation to a new frontier. It seeks to reinvigorate an economy that recorded an annual gross domestic product (GDP) growth of only 0.8 per cent between 2003 and 2013.
This was more than sufficient to send an alarming signal to the ruling elite. And this has gradually brought home an entire gamut of ideas, but of all, the Vision 2030, has finally shown a new road to the country for now. What is new in the planIJ Will it really provide a fresh breath of air to the dwindling oil economyIJ Where will it head, in case the vision failsIJ let’s have a look at how this will unfold and what it means for the oil nationIJ
First of all, the plan tries to reduce the role of the country’s massive public sector and expand the engagement of the private players in the economy. The idea mooted by the Crown Prince was to empower the private enterprises so that they can play a major role in offering employment to the emerging young generation.
Thus the vision calls for the setting up of a huge sovereign wealth fund to be supported by an unprecedented initial public offering (IPO) of a five per cent stake in Aramco, the country’s largest public sector oil giant. The sovereign wealth fund —Public Investment Fund (PIF) — is supposed to lead this gargantuan move. But many experts say that the proposed transfer of Aramco shares to the PIF will probably convert it to the biggest sovereign wealth fund across the world.
In the same vein, the Crown Prince stated that this could generate worth $2 trillion. If it all happens, then certainly the Saudi economy will see a new age.
Second, it has the aim to focus on creating massive jobs for the youth. Today around 19 million out of a total population of 29 million of the country are young, under the age group of 30. It is better to address the great youth bulge of the country. This further demands the creation of around two million jobs each for these people. Therefore, the vision has in it a grand plan to bring jobs for the Saudis, particularly for all these youngsters, in a productivity-led economy. Based on a report prepared by the global consulting firm McKinsey, it identifies 8 sectors which will generate nearly 60 per cent of the economic growth. These sectors are: ‘Mining and metals, petrochemicals, manufacturing, retail and wholesale trade, tourism and hospitality, healthcare, finance and construction”.
Third, the mega role played by the private sectors will increase the growth of the GDP from 40 per cent to 60 per cent. This in turn will reduce the rate of unemployment from 11 per cent to 7.6 per cent. This will help the Saudi economy rise from its current position as the 19th largest economy in the world into the top 15 and indeed a remarkable achievement for the country, but the policy planners will have to work in and around hundreds of ifs and buts. It is going to be a huge challenge for more to the political class than to the economic experts of the nation.
Fourth, the vision wants to place at least five national universities among the world’s top two hundred. And this will offer a significant gateway to the Saudi students to excel in their studies and finally that will benefit the economy which largely depends on expatriate skilled workers in many top industries of the nation.
However, the sceptics say it is nothing but a neoliberal document for privatising many crucial areas of the economy. Though the International Monetary Fund quietly endorsed the Saudi plan, it voiced concerns for the long period set by the vision diversifying the economy. Others like John Edwards, a member of the Board of the Reserve Bank of Australia, strongly warns the country’s elite that for making the plan successful, it should “profoundly change Saudi society and politics”. Again the efforts to raise an amount of $2 trillion would be an uphill task. Many say that this target can never be achieved and the vision will be a total disaster for the country.
The Crown Prince aims to do away with the entrenched notion that “oil has become our constitution”. But his vision is mostly a flawed one as it directly poses threat to the three pillars of the modern Saudi State: Religion, tribalism and oil. Again the Wahabi doctrine of the Saudi ruling elite is almost synonymous with radicalism and it does not help in welcoming modernity to the kingdom. If all is well, then a productivity driven economy will herald a class society against the existing tribal values of the country. This might pose a challenge to the age-old tribalism of the kingdom which, in fact, is one of the most important foundations used by King Abdulaziz ibn Saud for establishing the modern Saudi State.
Again, if the Crown Prince wants to draw a parallel with the energetic and avant-garde next door Dubai, then Riyadh needs to add some more to its Vision 2030. Saudi Arabia’s business elite comes from the background of the Yemeni Hadramaut region, whereas Dubai has a dynamic modern trading class. Further the Dubai business community is directly influenced by the Maliki sect of the Sunni Islam, which is supposed to be leaning more towards modernity than the radical Wahabi sect, followed by the Saudi elite. Therefore, to emulate the Dubai-style capitalistic development, Riyadh has to bring home a culture of modern entrepreneurial spirit for sure.
On record, there is very little in this vision, which the Saudi Government did not plan before. It has been observed that the country’s governing elite has already wasted more than four decades from 1970-2014 in nine five-year development plans without yielding much to the nation. And many global experts opine that the current Vision 2030 unleashed by the Crown Prince is very much similar to that of the ninth development plan which just came to an end in 2015. So what new development it will bring is highly doubtful; and it may end up creating chaos in the country.
Whatsoever it may be, this will be an acid test for the young Crown Prince. The success or failure of the project will largely decide the long-drawn fate of the Prince though he will own most of his political and economic clout by hereditary rules. Needless to say that this will have a profound impact on the legacy of the Saudi family, another hurdle that may come on the way to realise this vision, as history shows that the Saudis cannot adjust or rather willing to work for low wages because they are traditionally used to highly paid public sector jobs mostly created by the dominant oil sector.
But the problem is that the petrochemical sector is already full and it cannot provide any more employment opportunities. And the same applies to its mining industries which can’t take any more load. In case it develops its healthcare sector, there is hardly any chance that it will create an alternative to the already well established industries in lebanon and Jordan.
Prince Salman rightly emphasised the core of the vision in its very foreword to allay fears of the common people, “We will not allow our country ever to be at the mercy of commodity price volatility or external markets.” But this may not be sufficient to convince the Saudi people for long. But for now, we can say that there may not be a situation like that of the Arab Spring in the kingdom even if the vision fails.
There are good reasons for the international financial experts to have subtle doubts about the efficacy of the “Vision 2030”. Indeed, the grandiose plan has taken the Saudi people by surprise since its inception. The ruling elite in the country has embarked on a path of unprecedented transformation of the economy without disturbing the stability of the nation. However, the mega plan will definitely shake the kingdom’s political and economic infrastructure.
(The writer is Senior Editor, The Pioneer)