RIYADH – Saudi officials have announced an ambitious investment programmeaimed at modernisation and the diversification of the kingdom’s economy, aswell as boosting the role of private-sector enterprises and industrialproduction in its GDP.
Kristian Rouz — Saudi Energy Minister Khalid al-Falih says the oil-richkingdom is seeking to alleviate its reliance on the production and exportof energy over the coming ten years and boost domestic manufacturinginstead. His remarks come as the government in Riyadh is seeking almost$500 bln in investments to revamp the entire Saudi economy.
The industrial development plan, announced by the Saudis over this weekend,is aimed at diversifying the kingdom’s economy, boosting its fiscalsustainability, and easing its dependence on volatile global energy prices.
Al-Falih said new investments will be made through the National IndustrialDevelopment and Logistics Programme, which is part of Vision 2030,announced by the Saudi government earlier. The broader plan is drivenby Saudi Crown Prince Mohammed bin Salman — who recently found himselfin the centre of a major international controversy.
Bin Salman, or MBS, as he’s known in the West, has been a vocal proponentof the gradual modernisation of Saudi Arabia’s economy and — its sociallife as well, at least to some extent. His Vision 2030 plan and thenewly-announced investment programme are aimed at creating thousands of newjobs in the non-oil sector and boosting the disposable incomes of Saudicitizens.
“The programme targets 1.6 trillion Saudi riyals. It is quite ambitious,but it is over a 10-year period so we have got the time to do it,” al-Falihsaid.
Some say Saudi Arabia could become the ‘next big thing’ in the Middle Eastin terms of the production of consumer goods such as clothing. Thisas Turkey and Pakistan, among other regional economies, have markedlyimproved exports of consumer goods over the past two decades, successfullycompeting with the consumer goods heavyweight, Mainland China.
Al-Falih, for his part, said the new programme will be attractinginvestments from both domestic and international sources. He said partsof the plan are ‘ready for negotiations’, as first investments into Saudifactories, mining, energy, and transportation sectors are already accepted.
Meanwhile, a second stage of the plan, which will commence at anunspecified later date, is aimed at boosting the kingdom’smilitary-industrial complex, chemicals and petrochemicals, as well as smallbusinesses, al-Falih said.
For his part, Transport Minister Nabeel al-Amudi said Saudi Arabia expectsto build some 2,000 km (1,250 miles) of new railways and start 60 newinfrastructure projects, including five airports. This part of the plan,the minister said, would cost some 135 bln riyals ($36.18 bln).
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“We aim by 2020 that the logistics sector will contribute 221 billionriyals to GDP,” al-Amudi said.
The announcements come after several years of budget deficits and sluggisheconomic expansion in Saudi Arabia. Ever since the massive plunge in globaloil prices decimated Saudi budget revenues in late 2014, the kingdom’sfinances haven’t fully recovered — despite a rebound in crude prices.
The Saudi economy was in a recession throughout 2017 and has returnedto modest growth of 1.15 per cent annually in 2Q18, accelerating to 2.5percent in the fourth quarter of the same year. However, oil prices fellagain in late 2018, and OPEC production cuts have only provided modestsupport to the market.
Al-Falih said he expects the lion’s share of investments to comefrom the private-sector, either domestic or international, while Saudibudget spending would ideally play a secondary role.
“We will have a huge contribution from the private sector outside thekingdom, but we will leave the bigger share for the Saudi private sector,”al-Falih said.
Meanwhile, MBS expected his Vision 2030 plan to be driven mainly by foreigninvestments — and Riyadh is trying to gradually improve its internationalrelations in the West and in Asia after last year’s controversies.
Saudi Arabia ‘s government also said it plans to improve its transportinfrastructure and expects its new roads, seaports, railways, and airportsto be operated mostly by private-sector enterprises. The cabinet took aclassical liberal stance on its plans, saying the government will play therole of a regulator and a watchdog in the modernised economy. – Sputnik
