Until the first half of 2014, the Saudi economy was one of the fastest growing economies in the Group of Twenty (G20) with growth average of 5% in 2011-2014, according to the International Monetary Fund (IMF).
This growth was basically driven by continuous rise of crude oil prices which resulted in huge surpluses in budget and balance of payments. These surpluses led to a vital movement in the private sector. However, during the past two years, conditions in the international oil markets changed.
For more than 80 years, oil represented 90% of Saudi Arabia’s budget, almost total exports revenues and half the Gross Domestic Product. This made Saudi economy tied to international oil markets fluctuations and delayed moving to an emerging developed economy. Hence, alarms rang to carry out extensive structural reforms to divert economy from public to private sector.
In response to Custodian of the Two Holy Mosques King Salman bin Abdulaziz order to draw a future vision for the kingdom, the Saudi cabinet issued on 25 April 2016 Saudi Vision 2030, prepared by Council of Economic and Development Affairs headed by Deputy Crown Prince Mohammed bin Salman bin Abdulaziz.
Saudi 2030, Vision and Content
The document consists of 41 pages on the vision headlines. It suggests a comprehensive vision to diverse Saudi economy and deepen balanced and sustainable development through rebuilding productivity foundations, diversifying income sources and modifying the state-society relation.
The vision includes achieving strategic goals by 2030, below are some of them:
1. Diversity of economy and sustainability of growth.
2. Increase of non-oil revenues from SAR163 billion to one trillion per year.
3. Rise of households’ savings of incomes from 6% to 10%.
4. Push of non-profit sector contribution in GDP from less than 1% to 5%.
5. Boost of direct foreign investment share of GDP from 3.8% to international level 5.7%.
6. Enhancement of private sector contribution in GDP from 40% to 65%.
7. Expansion of capacity to host 30 million (previously eight million) umrah performers.
8. Decrease of unemployment average from 11.6% to 7%.
9. Increase of SMEs contribution in GDP from 20% to 35%.
10. Rise of non-oil exports share of GDP from 16% to 50%.
11. Building strategic agricultural partnerships with countries of rich soil and plenty of water.
12. Organizing more cultural and entertainment activities.
Paths In order to achieve these goals, five paths will be followed: adopting transparency, maintaining vital resources in food resources sector, strengthening links between government, citizens and private sector, abiding by financial balance and efficient spending and finally continuing to raise government efficiency in taking flexible decisions.
Launch of New Vision
King Salman issued on 7 May 2016 (ten days after announcing the new vision) 42 royal orders that include: restructuring the cabinet and establishing an authority for entertainment and another for culture.
However there are still some challenges to be taken into consideration such as: transforming the vision into practical programs, difficulty of evaluating the vision due to absence of basic economic indicators, incomplete confidence in the vision as a result of regional conflicts and necessity of structural reforms especially in the business sector.
The vision faces also certain risks including: increase of fluctuation in capital market, difficulty of setting up anti-corruption reforms, necessity of investments in various sectors for Saudi Arabia to survive the post-oil period.
Saudi Vision 2030 is an ambitious plan, as described by King Salman. Announcing this vision reflects the country’s genuine will to transform the economy into an emerging one through making it of diverse productivity foundation and less vulnerable to external clashes.