When was Saudi Arabia Vision 2030 put forward?

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Economic Reform in Saudi Arabia's Vision 2030

On Monday (April 25th), Saudi Deputy Crown Prince Mohammed bin Salman launched a new strategic plan called "Saudi Vision 2030". The main task of the strategic plan is to apply the changes in supervision, budget and policy in the next 15 years to help the oil kingdom reduce its dependence on crude oil and implement effective reforms.

The Saudi government will implement this long-term economic blueprint in countries with low oil prices, but the key structural challenge is to test Saudi Arabia's determination. Judging from the current actual situation, this reform is tantamount to starting from scratch and will not bring much stimulus to the rebound of international oil prices. As the largest oil exporter in the world, most of Saudi Arabia's income comes from energy exports. However, with the continuous decline of crude oil prices, the global benchmark Brent crude oil price has fallen by 60% since the oil price collapse began in June 20 14. In 20 15, the national budget deficit was $98 billion. But this time, Saudi Arabia and its "post-oil" economic reform strategy have limited effect on the rebound of oil prices and need greater openness than the economic reform plan implemented by Saudi Arabia.

The Saudi government plans to take action to diversify its income sources before the national treasury is exhausted. This month, Deputy Crown Prince Salman said that Saudi Arabia hopes to take out 5% shares of Aramco for IPO, and the ownership of assets of Aramco and other countries will be transferred from oil and gas business to public investment funds in other industries. These state-owned public investment funds will be transformed into large-scale sovereign wealth funds to manage the funds of the Saudi royal family. The fund will pay Saudi Arabia's return in the form of investment income. Meanwhile, the Saudi government plans to reduce the unemployment rate from 1 1.6% to 7%. The idea of cutting power subsidies and creating sovereign wealth funds to manage assets will help the Saudi royal family resist the impact of falling oil prices. According to IMF statistics, Saudi Arabia has oil companies with a valuation of 2 trillion US dollars, and oil still accounts for 78% of Saudi Arabia's exports. In order to replace the pillar role of oil in the Saudi economy, Deputy Crown Prince Salman needs to carry out a more thorough reform of the conservative Saudi royal family.

McKinsey's analysis shows that Saudi Arabia's GDP is likely to double from 2065438+3.4% in 2005. By 2030, by focusing on eight non-oil industries such as manufacturing, mining, tourism, health care and finance, as many as 6 million jobs will be created.

Hertog, an associate professor at the London School of Economics, warned that although Saudi Arabia has been pursuing the policy of economic diversification since the first "Five-Year Plan" in 1970, structural obstacles have been hindering progress, and these obstacles still exist today. Hertog said that the main obstacle is that almost all the Saudi economy depends directly or indirectly on the government to pay its expenses. The public sector employs nearly two-thirds of Saudi employees, and most of the needs of Saudi families come from the salaries paid by the government. Hertog also pointed out that the total wages paid by the private sector to Saudi families only account for about 4% of GDP. Therefore, in the case of austerity, oil prices have fallen, national expenditure has decreased, and domestic demand has declined. The private sector feels that it is difficult for the private sector to flourish under the existing structure. He also said that the "Monday Plan" does not include special policies on how to narrow the gap between the two industries.

The main industries of the private sector include construction, real estate, electricity and communication, and 80% of the workforce is foreign workers. The low wages of these migrant workers prevent Saudi citizens from finding jobs in this industry. In addition, because government jobs are usually secure and stable, most citizens tend to try high-paying government jobs.

Even though the topic of "Saudi Arabia" has been discussed for many years, the progress of promoting citizens to engage in high-skilled or semi-skilled jobs in the private sector is still slow. The International Monetary Fund (IMF) pointed out in a report in June+February, 5438 that the reform of the labor market is crucial to the national economic diversification plan. At the same time, the International Monetary Fund has also proposed key measures, mainly including strictly controlling employment and wages in the public sector, adjusting skills education needed by the private sector, and improving the citizen competitiveness of the private sector.

Experts pointed out that another key factor restricting economic diversification and liberalization is the political system. Rashid, a visiting professor at the National University of Singapore, said, "It is ok for McKinsey's consulting firm to put forward quite a lot of ideas for Saudi Arabia's economic prospects, but these measures need to be run in an open political system, in which there are no challenges and problems like Saudi Arabia." Rashid pointed out that the lack of transparency and accountability, coupled with a high degree of corruption, hindered the further development of the private sector. Rashid said, "We don't even know what the real problem is. We don't know what the private sector is or how much oil there is, because it is top secret. " In order to solve these problems, the State Stock Exchange said that it would begin to disclose the equity information of executives of listed companies, including the equity ratio.

Although the reform faces challenges, some stock investors are still optimistic about Saudi Arabia's economic prospects. Tessellington, stock director and chief information officer of JPMorgan Chase asset management companies EM and APAC, said, "We have invested in Saudi Arabia for many years, which is one of the markets that people usually underestimate." He believes that the "Saudi Vision 2030" is inspiring. Tesselington pointed out that people usually only associate Saudi Arabia with oil, but Saudi banks and consumer companies are also very interesting. "We are still optimistic about the Saudi market".

Although the future of Salman reform is full of challenges, there are also successful precedents. Neighboring Dubai faced similar problems in the early 1980s, when oil exports accounted for 50% of Dubai's economy. Subsequently, Dubai formulated policies that not only attracted talents and foreign employees with high profits, but also developed tourism and trade. At present, oil accounts for less than 2% of Dubai's economy. In order to achieve similar results, Saudi Arabia must consider the link between openness and investment. This may require an attack on Saudi Arabia's past human rights and social equality issues. Introducing a "green card" system to encourage Arab and Muslim expatriates to stay in Saudi Arabia for a longer period of time will not bring similar results.