Saudi Arabia is reportedly revising its ambitious plans to change its economy

[Shapur Zol Aktaf]

• Saudi Arabia is revising its major reform strategy just over a year after its launch.
• The timeline of some targets has been extended and others have been removed entirely.
• The National Transformation Plan is an attempt by Crown Prince Mohammed bin Salman to reduce the kingdom's dependence on oil.

Saudi Arabia is revising its major reform strategy just over a year after its launch, extending the timeline of some targets and removing others entirely, according to reports.

A government document seen by the Financial Times said that the country's amended National Transformation Plan, dubbed NTP 2.0, would "change existing initiatives and add new ones." Saudi Arabia's National Transformation Plan is a pivotal element of the country's "Vision 2030" reforms which were announced last year by Deputy Crown Prince Mohammed bin Salman. This redraft reportedly updates the plans which were originally set out to overhaul the economy and reduce what the deputy crown prince called Saudi Arabia's "dangerous addiction to oil."

The program had aimed to use a number of measures to wean the country off oil by 2020. These included privatizing state assets, creating 1.2 million private sector jobs and reducing unemployment from 11.6 percent to 9 percent.


Yet, according to insiders, the delays announced Thursday highlight the ambitious nature of the mammoth task. As the world's leading oil exporter, the oil and gas sector accounts for 85 percent of Saudi Arabia's export earnings and around 50 percent of its gross domestic product, according to OPEC.

"There is a recognition that too many of these targets were too aggressive and maybe having too much impact on the economy," a government adviser told the Financial Times.


David Degner | Getty Images
A view The King Abdullah Financial District (KAFD) on April 13, 2016 in Riyadh, Saudi Arabia.
Saudi Arabia has been dogged by compressed oil prices since they slumped in mid-2014 and has been leading a measure by OPEC countries to reduce an ongoing supply glut. Figures from the International Monetary Fund predict that the Kingdom's economic growth will be just 0.1 percent this year, versus 1.7 percent in 2016.

The government document stated that the timeline of the NTP will continue to 2020, but that implementation of certain projects would be extended to between 2025 and 2030.

However, advisors have suggested that the delays could hurt the country's hopes of attracting international investment.

"Flexibility is great, but changing the goalposts isn't a healthy habit," another government advisor said to the Financial Times.

The amends made no reference to the partial privatization of Saudi Aramco as it sits outside of the NTP. Five percent of the state oil company is expected to be put up for an initial public offering next year.

Full details of the changes are expected to be announced in October.

Saudi Arabia's king to soon abdicate
The news comes as discussions heat up around the anticipated transfer of power from the Kingdom's King Salman to his son Prince Mohammed.

A research note released Thursday by analysis firm Eurasia Group suggested that the transfer could occur within the coming weeks to prevent the likelihood of dissent from other members of the ruling family.

"We think King Salman will proceed with promoting his son to his place in the next few weeks (if not imminently) to prevent MBS's (Mohammed bin Salman) rivals from organizing to challenge the transition plan," Ayham Kamel, practice head, Middle East & North Africa, at Eurasia Group noted.

But analysts have opined that the revisions indicate that infighting is already underway.

"Reports that the Saudi government is planning to dilute its reform plans may be the first sign that the power and influence of Crown Prince Mohammed bin Salman is starting to wane and that broader opposition to reform is building," Jason Tuvey, Middle East economist for Capital Economics, wrote in a research note.

"There's a clear risk that the reforms, which already fell short in a number of key areas, will be watered down even further."

"This supports our long-held view that Vision 2030 will fall short of its lofty intentions," Tuvey added.

https://www.cnbc.com/2017/09/07/sau...ts-ambitious-plans-to-change-its-economy.html

 

[somebozo]

Vision 2030 is a fools dream...a most logical and anticipated move would be to devalue riyal against dollar peg..economist even suggested the expected value of 4.5 Riyals to Dollar. This could have cut imports and boosted internal economy, contracting, manufacturing etc and would have also cut down contractor woes over unpaid dues by government. Instead the central bank opted to defend the 3.75/1 SAR/USD peg, effectively cutting down its own money supply which means financial crunch in Saudi...

The McKinsey plan is another idiotic fantasy, as it ask to raise 4 Trillion dollar, the likes of which don't even exist in world largest economy of China and India...

Levy on expats have caused massive exodus of families and workers out of Saudi arabia..no expats no levy...so this anticipated source of funding will only exist in fantasy...

Saudi is destined to become the laughing stock of the world and another one in McKinsey hall of fame for economic disaster...

The amends made no reference to the partial privatization of Saudi Aramco as it sits outside of the NTP. Five percent of the state oil company is expected to be put up for an initial public offering next year.

The company is valuated at 2 Trillion by no verifiable claims...and 5% IPO will be 100 Billion...which is way way minuscule amount of the target $4 Trillion projected by McKinsey

Saudi USD reserves are depleting because it has no exportable goods and services other than oil..and at this time to speak about raising 4 trillion USD in investment is a kind of crude joke costing 1 Billion USD - courtesy of McKinsey Consultancy~

 

[KediKesenFare3]

That was to be expected. Nothing bad about this move though. Experts explained months ago that Saudi Arabia's plan was too ambitious in many ways. Now they readjust the pace of reforms to the ground realities in the kingdom. This is showing us that some people in Riyadh are actually working on this program. As long as they follow this path, I'm fine with these kind of news.

 

[somebozo]

That was to be expected. Nothing bad about this move though. Experts explained months ago that Saudi Arabia's plan was too ambitious in many ways. Now they readjust the pace of reforms to the ground realities in the kingdom. This is showing us that some people in Riyadh are actually working on this program. As long as they follow this path, I'm fine with these kind of news.

If Riyal was devalued then it would have boosted local manufacturing and contracting, govt could cover the deficit by printing currency and discourage imports by making them expensive. Contrary to common sense logic, the SAMA bank decided to defend the peg which looks like battle of retreat...

 

[KediKesenFare3]

If Riyal was devalued then it would have boosted local manufacturing and contracting, govt could cover the deficit by printing currency and discourage imports by making them expensive. Contrary to common sense logic, the SAMA bank decided to defend the peg which looks like battle of retreat...

Never going to happen. It would jeopardise the rule of the Saudi clan.

 

[Morpheus]

The company is valuated at 2 Trillion by no verifiable claims...and 5% IPO will be 100 Billion...which is way way minuscule amount of the target $4 Trillion projected by McKinsey

I heard people say that the 5% IPO they are doing is part of the subsidiary of Aramco, mainly the construction part of the company. Investor would be buying shares in part of Saudi Aramco that deals with construction only, and not oil.

 

[somebozo]

Never going to happen. It would jeopardise the rule of the Saudi clan.

Back in the 1970 Riyal was pegged 4.5/1 SAR/USD

 

[somebozo]

Saudi Arabia's property market has been hit hard by the kingdom's stalled economy and austerity drive, all designed to help the government cope with low oil prices.

Rents in some part of the country could fall by more than 50 percent over the next year as millions of expatriates prepare to leave the Gulf state as the government takes aim at them to shore up cash, the Financial Times reported.

It comes as Saudi Arabia introduced the so-called expat tax, meaning foreign workers must pay $26 per dependent living in the kingdom with the tax set to rise rapidly in the coming years.

As many as 2.5 million of the country's 10 million expatriates are expected to leave by the end of next year as foreigners' tax-free lifestyle comes to an end.

Expat tax

The impact of the country's expatriate tax, austerity drive and sluggish economy is already being felt with sales of property falling 3 percent in the capital Riyadh, while new office rental deals in Jeddah fell by 9 percent in the second quarter.

A JLL study noted the trend could be seen across the board and the country, despite oil prices lifting slightly from low points in 2014 and 2015.

"The new regulations on expats are affecting the outflow of foreigners, which means population will decline, affecting demand," Mazen al-Sudairi, head of research at al-Rajhi Capital told the Financial Times.

The country's diversification and austerity drive was initiated by Saudi Arabia's Crown Prince Mohammed bin Salman, and was intended to strengthen government coffers following the 2014 oil price crash.

Among the measures were levies on expatriates to help cut the government deficit and encourage Saudi companies to recruit nationals.

The government has also attempted to tackle a housing shortage for Saudis with the construction of new homes and soft loans which could also impact on property prices.

Yet despite Riyadh meeting its target on defence spending in the first half of 2017, it could be seriously short of providing the capital needed to fund the expensive home buiding programme.

Dream and visions

There are already signs that bin Salman's ambitious economic vision for the country could be flawed as the UK financial daily revealed the crucial National Transformation Plan targets are being revised.

Over ambitious deadlines for meeting targets are being extended or dropped due to a failure to rescue the economy and reduce its reliance on oil.

"There is a recognition that too many of these targets were too aggressive and maybe having too much impact on the economy," a government insider told the daily.

"Flexibility is great, but changing the goalposts isn't a healthy habit," another official said.

Mohammed bin Salman's rapid rise to power came on the back on Saudi Arabia's war in Yemen as defence minister and promises to reconfigure the economy.

Saudi Arabia appears no closer to winning the war against Houthi rebels in Yemen, which has proven to be an excessively expensive exercise in power and so far showed no results.

The economic situation is probably of even more of a concern as bin Salman's economic vision appearing to be driven on hubris rather than clear and achievable aims and plans.

Rumours have been circulating this week that King Salman could be preparing to pass the crown on to his son before it is too late.

The urgency of the elevation of Mohammed bin Salman to king is seen as a way of blocking opposition to the crown prince whose power and support is believed to be waning.

 

[KediKesenFare3]

Back in the 1970 Riyal was pegged 4.5/1 SAR/USD

You know the Wahhabi cleric better than I know them. Do you think they're willing to change their expensive and luxurious lifestyle? I doubt so.

 

[somebozo]

You know the Wahhabi cleric better than I know them. Do you think they're willing to change their expensive and luxurious lifestyle? I doubt so.

A lot of clerics have ended in jail in a recent crack down few days ago...also a lot of twitter sheikhs are in jail...single friday sermon will now be delivered via IPAD..looks like petro-islam is dragging down Saudis now..

 

[KediKesenFare3]

A lot of clerics have ended in jail in a recent crack down few days ago...also a lot of twitter sheikhs are in jail...single friday sermon will now be delivered via IPAD..looks like petro-islam is dragging down Saudis now..

Which clerics are in jail now? What did they do? Personally, I'd like to see more Arab (ethnic) nationalism and less Wahhabi influence in foreign policy related decisions of Saudi Arabia. We indeed live in strange times, in which even Turks like me are favoring nationalistic Arab policies and parties.

 

[somebozo]

Which clerics are in jail now? What did they do? Personally, I'd like to see more Arab (ethnic) nationalism and less Wahhabi influence in foreign policy related decisions of Saudi Arabia. We indeed live in strange times, in which even Turks like me are favoring nationalistic Arab policies and parties.

Pan Arab nationalism does not exist and it risk being hijacked by the likes of Muslim brotherhood which Saudi have banned..also pan Arabism originating from Saudi will not go anywhere as the neighboring GCC countries are opening up for foreigners..the GCC no longer likes to be led by Saudi policies and the cracks became obvious in GCC vs Qatar dispute..

 

[KediKesenFare3]

Pan Arab nationalism does not exist and it risk being hijacked by the likes of Muslim brotherhood which Saudi have banned..also pan Arabism originating from Saudi will not go anywhere as the neighboring GCC countries are opening up for foreigners..the GCC no longer likes to be led by Saudi policies and the cracks became obvious in GCC vs Qatar dispute..

I know that the concept of Pan-Arabism is doomed to fail like all other irredentist ideas such as Pan-Germanism, Pan-Turkism, Pan-Slavism let alone concepts like Akhand Bharat. Of course, a nationalist policy doesn't necessarily mean that Saudi Arabia should invade its neighbors or dominate the Arab world as a sole power. But a re-balancing of the Saudi foreign policy with more nationalistic and populistic input is important. For instance, the MB is successful because it is following a Arab version of the Turkish-Islamic Sythesis.

https://www.cambridge.org/core/book...ial-movement/224C3B79BAA70A11CC989C8D60E66272

Being Arab (highlighted by Socialist parties) and being Muslim (highlighted by Islamist parties) are considered as two sides of one coin instead of two conflicting ideas. Why should such a mindset harm Saudi Arabia in the first place?

 

[KediKesenFare3]

I've forgot to mention that the only successful Pan-Movement of the last century is still alive. It's called Pakistan. In fact, the idea of Pakistan has proved itself so successful that we're talking about a 200m.+ country with nuclear war capacity today. I swear to God, many Pakistanis are yet not aware of the idea, the concept, the mindset, the philosophy behind Pakistan. The fact that Pakistan even exists is stunning because it is the result of the will power of several nations who voluntarily came together and what's more important: they still stick together. That's, by the way, the main difference in comparison to India in my opinion. Pakistan has a precious narrative, a story to tell, it's a community of destiny and fate. Simply amazing. Usually countries with a similar social composition like Pakistan are prone to become a failed state, to implode - but not in this case. Pakistan is really an intellectual challenge for outsiders like me and simply very interesting.

 

[somebozo]

I've forgot to mention that the only successful Pan-Movement of the last century is still alive. It's called Pakistan. In fact, the idea of Pakistan has proved itself so successful that we're talking about a 200m.+ country with nuclear war capacity today. I swear to God, many Pakistanis are yet not aware of the idea, the concept, the mindset, the philosophy behind Pakistan. The fact that Pakistan even exists is stunning because it is the result of the will power of several nations who voluntarily came together and what's more important: they still stick together. That's, by the way, the main difference in comparison to India in my opinion. Pakistan has a precious narrative, a story to tell, it's a community of destiny and fate. Simply amazing. Usually countries with a similar social composition like Pakistan are prone to become a failed state, to implode - but not in this case. Pakistan is really an intellectual challenge for outsiders like me and simply very interesting.

You can put Israel in the same chapter as well...beside the fact that Israel has done better....