Saudi Arabia’s Vision 2030, which was approved by the country’s cabinet on Monday, is a step in the right direction. The kingdom is implementing a comprehensive plan to diversify the economy beyond dependence on oil exports. The policies include the rationalisation of subsidies and government spending, the privatisation of state-owned assets and the establishment of new sources of revenue.
Though a years-long plan is certainly ambitious, it will definitely help the kingdom kick-start the transformation process. Oil prices keep dropping, more than 60 per cent over the past two years, dipping persistently below Saudi’s revised break-even level of US$67 per barrel. That has severely affected the country’s revenues and has led to budget cuts. On the positive side, it has provided the necessary impetus will to act quickly and make radical changes.
Having a clear vision is only the beginning of a bigger challenge to turn it into reality. It’s good that the government is now making more effort to reach efficiency, by restructuring state assets and agencies and closely overseeing their financial strategies. This will not only save resources but also make government finances more sustainable in the long term.
Additionally, the privatisation of state-owned companies, including a small portion of the oil major Saudi Aramco, will foster the diversification process and open the door for more foreign investment.
Another critical step will be to encourage more Saudi women to join the workforce and to create an attractive economic environment for expatriates by introducing new residency and employment visa rules. This intention has gathered many headlines but has not yet been explained – but if implemented would make Saudi’s workforce more competitive.
It will be indeed difficult to pull the Gulf’s largest economy out from many decades of oil dependence, to transform an extraction state to a modern economy, within a few years. But what is important is that the first step has been taken.
