Advertisements
Herald Economist

Saudi Arabia On A Diversification Course: MBS’s Flagship Project

Crown Prince Mohammed bin Salman has always made it known from the get-go that his vision of a Saudi Arabia is not one that hugely relies on crude oil as it is currently. The road to change is never easy.

Though Saudi Arabia has hard work ahead, it has embarked on new initiatives and continues to widen the scope of existing plans to transform the kingdom’s economy away from its energy reliance towards a more diversified economy that includes a mix of industries, a manufacturing base, an ecosystem that encourages entrepreneurship and innovation among its emerging youth.

The kingdom may net 80 billion Saudi riyals (Dh68.36bn)next year from various forms of taxation that it plans to levy, including a GCC-wide 5 percent value-added tax, an excise levy on tobacco and energy drinks, and a tax on luxury goods, according to Bank of America Merrill Lynch.

Saudi Aramco has earned more than triple the value of all the state-owned revenue generating institutions in the Kingdom in the past but all that is about to change if MBS’s Saudi vision 2030 is anything to go by and achieves the credibility and success it has been attributed to ever since it was launched. Early indicators by MBS point to the affirmative, some of such include the deal with Google to create a “Silicon Valley” in Saudi Arabia.

At the same time, Saudi Arabia announced that it plans to privatize its airports in order to lessen the government’s exposure to activities that can be more efficiently run by the private sector. It will also help shift jobs from the public sector to the more competitive free market.

Saudi Arabian airports are key to receiving millions of pilgrims that visit Islam’s holiest sites. The kingdom would like to position itself as a transport hub and expanding its facilities is a welcome move.

Saudi Arabia’s ambitious plan to sell off a 5 percent stake in Saudi Aramco, the world’s largest oil producing company, will be a litmus test for the implementation of other reform and privatization initiatives.

The stakes are high for the country, given the oil supply glut and collapse of crude prices over the past three years. The government will need to be resolute in the implementation of Crown Prince Mohammad bin Salman’s vision. That commitment should not waver even though oil prices have rebounded recently and look to stay that way for some time.

The Institute of International Finance said last year that the country’s economy was forecast to contract 0.4 percent in 2017, before advancing 2 percent in 2018. It also pointed to an increasing unemployment rate that can benefit from a strong recovery in non-oil growth.

The challenge for Saudi Arabia is to ensure that the non-oil economy expands at sustainable levels to help create jobs for graduates and keep up with the pace of a fast-growing population.

Saudi Arabia as a nation is in for the greater good with the visionary leadership of King Salman bin Abdulaziz but even more good fortunes are set to befall the Kingdom’s economy as the visionary and enthusiastic Prince Mohammed bin Salman sets to take the robes as soon as his father steps aside. Saudi Vision 2030 is definitely going to diversify this desert country into a trillion dollar mega and modern city.

Advertisements

About the author

Anita Gooding

Anita Gooding

My name is Anita, and I'm a UC Berkeley alumna and currently based in Minnesota but from the United Kingdom.
I have been actively involved in political reportage since the days of Bill Clinton in the White House and have always kept tabs on political events in the United Kingdom and the European Union at large. I take special delight in covering the activities of frontline politicians in the US and EU
I joined the Herald Reporter’s team of correspondents in October 2017 out of my passion for journalism to cover US and EU evolving and trending political news.

Follow us on Twitter

Advertisements
Advertisements