In a gold-gilded ballroom inside the royal court, last year Mohammed bin Salman al-Saud hatched a plan to thrust Saudi Arabia, a conservative oil kingdom, into a modern economy based on flourishing industry and services. In April, the crown prince set out a highly ambitious agenda to wean the nation’s economy off hydrocarbons in four years and revolutionise its private sector.
Mass Economic And Social Reform
“Vision 2030” was a blueprint for mass economic and social reform. Prince Mohammed bin Salman, the 30-year-old assumed power behind the Saudi throne, outlined ideals of Islamic tourism, logistics hubs and a “financial free zone” in Riyadh which could provide more job opportunities for the 50% of the country which is under the age of 25.
Vision 2030 sets out a path to diversify revenues from the kingdom’s private sector and its $2-3 trillion sovereign wealth fund built on ownership of Saudi Aramaco, the national oil giant that is on track for an initial public offering next year in what could value the company at more than $2 trillion.
Its targets are to raise non-oil government revenue from SR163 billion to SR1 trillion by 2030 and increase the share of private sector in overall GDP from 40% to 65%. Foreign direct investment is also, it is hoped, to increase from 3.8% to 5.7% of GDP by 2030.
The crown prince also wants to cut unemployment from 11.6% to 7% during the period, increase women’s participation in the labour force from 22% to 30%, and create an extra one million jobs in Saudi Arabia’s retail sector by 2020. Meanwhile, Vision 2030 says the nation plans to boost SMEs to 35% of GDP, from 20% currently.
A Response to The Plunge in Oil Prices
Behind the bold vision is the savage plunge in oil prices over the past two years, which has forced Saudi Arabia to slash its budgets and cut energy subsidy reforms in a bid to balance its budget deficit and prop up its economy.
But another motivation is the growing restlessness of Saudi Arabia’s youth, and the crown prince’s desire to appeal to Generation Y. The plan refers to a growing need for more entertainment in the kingdom — a desire among many young people who want a less restrictive social atmosphere which is currently heavily influenced by the kingdom’s clerics; cinema is banned in Saudi Arabia.
Reforms and Appeal to The Younger Generation
That, however, will be a gargantuan task, given the conservative social fabric of Saudi Arabia. “Enacting and implementing wide-ranging policy reforms poses a serious dilemma,” wrote Majid Bin Ayed Al-Ayed, head of research and studies at the National Center for Performance Measurement in Saudi Arabia, in an analysis of the reform plans.
“The country’s political leaders need to contend with the short-term gargantuan challenges, such as the required structural adjustments that are needed to establish the country’s new socioeconomic paradigm, in addition to establishing a recognisable linkage with the long-term objectives that the people can relate to.”
Nevertheless, the appetite for reform remains high.
According to an interview with Prince Mohammed published in the Washington Post, a recent survey by Saudi Arabia revealed that 85% of the public would support policy-makers rather than the religious establishment on rule changes. In addition, 77% of the people whom the kingdom surveyed supported the government’s reform agenda, while 82% were in favour of public music performances attended by both men and women.
“I’m young. Seventy percent of our citizens are young,” the crown prince told the newspaper. “We don’t want to waste our lives in this whirlpool that we were in, [in] the past 30 years. We want to end this epoch now. We want, as the Saudi people, to enjoy the coming days, and concentrate on developing our society and developing ourselves as individuals and families, while retaining our religion and customs. We will not continue to be in the post-’79 era. That age is over.”
Change is Underway
There are signs that change is already underway. A Japans orchestra, including women, performed in the kingdom this year. And at a ComicCon in Jeddah recently, youngsters dressed up as characters from popular western television shows. King Fahd International Stadium in Riyadh, meanwhile, held a Monster Jam (live motorsport) event.
Yet many young Saudis are unconvinced that Prince Mohammed can deliver, and modernise the highly conservative kingdom. A survey last year by the King Salman Youth Centre found that youngsters were chiefly concerned about their job prospects. More than one-third of the 1,500 people who were polled said it took them at least one year to find their first job. Saudi Arabia’s youth unemployment rate is around 40%.
How Mohammed bin Salman Consolidates His Power
Prince Mohammed seems steadfast in his approach to achieving reform. The young prince has consolidated power with the recent arrests of 11 princes including the billionaire Alwaleed bin Talal, one of the world’s richest men. Prince Mohammed is already the leading voice on a host of Saudi affairs, including military, foreign, economic and social policies. Some have warned that he is concentrating too much power in one branch of the royal family.
The arrests sent jitters through financial markets. Funds had sold Middle East bonds in the wake of the arrests, and credit spreads and the cost of insuring debt against default have increased across the Gulf.
In an interview with The Economist magazine last year, Prince Mohammed said he was an avid admirer of former UK prime minister Margaret Thatcher. While some draw parallels between the pair’s economic plans, unlike the UK under Thatcher’s rule in the 1980s, Saudi Arabia has no free press, no elected parliament, and a poor record on human and in particular women’s rights. Balancing economic and social reform, and enlisting Generation Y, with the extremely conservative principles of the kingdom, would appear to be the crown prince’s greatest challenge. The future of Saudi Arabia’s prosperity depends upon whether he succeeds.