Saudi Arabia’s National Transformation Plan, which outlines the key elements to shift the kingdom’s economy away from its dependence on oil, was expected to be approved by the cabinet in a late-night session in Riyadh yesterday.
The plan is the centrepiece of the “Vision 2030” reforms set out earlier this year by Saudi deputy crown prince Mohammed bin Salman, who is looking to change the country’s public sector-dependant ethos into one that promotes and fosters private sector entrepreneurial spirit.
The cabinet’s plan received the seal of approval from the powerful Council of Economic and Development Affairs, chaired by Prince Mohammed, on Sunday as it winds its way through the government process.
The broad vision has been blessed by a wide array of independent commentators, including the International Monetary Fund last month, but it still lacks key details that are now to be fleshed out by the heads of the relevant government departments over the summer.
Much of the focus so far has been on the steps to partly privatise the state oil company, Aramco, which dominates the Saudi economy. That would be to serve the twin objectives of making Aramco more transparent and dynamic, as well as providing a catalyst to shift Saudi’s Public Investment Fund toward becoming a more fully-fledged, diversified sovereign wealth fund.
The breathless talk of a “US$2 trillion initial public offering” of Aramco at the start of the year has given way to a more detailed assessment of the difficulties involved in privatising a company whose main wealth – its oil reserves – is ring-fenced as public property by the Saudi constitution.
Last week, at the Opec meeting in Vienna, Saudi minister for energy, industry and mineral resources, Khalid Al Falih, said Aramco would require “extensive rewiring” before a small portion – less than 5 per cent – of the commercially “delineated” part of the company would be listed, probably in 2018.
It is an indication of the work still ahead for the NTP just on its basic logistics, not to mention the long-term, fundamental change that many commentators have pointed out must be addressed in order to foster real change.
This includes the labour market. The Saudi government’s labour report last October showed that “saudisation” of the private sector is slow going, with only about 15 per cent or 22 per cent of private-sector jobs held by Saudis (the labour and statistics department report widely differing numbers). Public sector employees account for at least three times as many jobs as the private sector and the labour market report forecast that Saudis will need 2.2 million private sector jobs by 2025 to reach full employment, even assuming a further 1 million public sector jobs are available.
“With a population of 20 million people it is very difficult for people to all attain highly-paid jobs in the private sector to match what has been available in the public sector,” said Jason Tuvey, Middle East economist at Capital Economics.
“Equally, the government no longer is in a position to hand out well-paid public sector jobs; there has to be a shift,” he added.
Another key step for reform, the Saudi government accept, is a fundamental shift in the Saudi educational system that will focus more on the skills needed for a modern economy. That would take at least a generation to bear fruit.
amcauley@thenational.ae
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