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http://on.ft.com/1SZCPhd
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Saudi Arabia pledges economic overhaul to end 'addiction to oil'
-Kingdom unveils plan for $2tn listing of Aramco
-Move to bolster private sector
Simon Kerr — Riyadh
Anjli Raval — London
Saudi Arabia has unveiled a long-awaited plan for a radical transformation of its economy, pledging to end its "addiction to oil" and bolster its private sector in a shift that will see the planned $2tn listing of the state-owned Saudi Aramco.
Spurred by the collapse in oil prices, the kingdom has set out ambitious targets for economic and social reform under a "Vision 2030" plan that is the brainchild of Mohammed bin Salman, the 30-year-old deputy crown prince and the favoured son of King Salman bin Abdulaziz.
The kingdom could end its reliance on oil within four years, the prince asserted in a television interview after the Saudi cabinet approved the plan yesterday morning. Saudi Arabia currently derives more than 90 per cent of its budget revenues from hydrocarbons.
"We have an addiction to oil ... this is dangerous," Prince Mohammed said in the interview on the state-owned al-Arabiya channel. "It has delayed development of other sectors."
The planned flotation of a 5 per cent stake in Aramco would value the oil company at more than $2tn and mark a historic transformation of the kingdom's primary economic engine, boosting transparency around the state-owned company's finances, as well as granting Saudi Aramco more independence from government oil policy.
Saudi Aramco would be converted into a holding company and all financial information related to the company would be disclosed. Subsidiaries of the entity would also be listed and its board elected.
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According to the plan, the ownership of Saudi Aramco will then be transferred to the state's Public Investment Fund, which will help bolster it into a sovereign wealth fund valued at up to $3tn, which would be the world's largest, with a mandate to kick-start domestic investment. The prince, who is also defence minister and oversees economic ministries, has emerged as the key decision maker in the country since his father, King Salman, assumed the throne. The collapse in oil prices has forced a re-evaluation of economic priorities in Riyadh.
"Mohammed bin Salman wants to light a fire under a system that is accustomed to moving t a glacial pace. His thinking is sound. His timeframe less so," said Jim Krane, a fellow at Rice University's Baker Institute for Public Policy. "The kingdom desperately needs to diversify its economy."
Daniel Yergin, author of The Prize, a history of the oil industry, and the vice-chairman of data provider IHS. said one result of the plan would be to make Saudi Arabia a bigger force in global finance.
The vision sets out plans to boost the role of the private sector from 40 per cent to 65 per cent of gross domestic product by 2030. The kingdom is seeking to develop a mining industry that could create 90,000 jobs by 2030 and a domestic military industry that would allow 50 per cent of defence spending to be source locally by 2030.
Privatising government assets, from Saudi Aramco to healthcare and education, will help to meet ambitious diversification targets of raising non-oil government revenue from SR163bn ($43bn) to SR1tn by 2030. The plan also aims to boost the share of small and medium-sized enterprises from 20 per cent of GDP to 35 per cent.
Prince Mohammed said the vision had been planned with an oil price of $30 a barrel in mind.
It looks like they're finally turning around.
>>40930
They will still commit numerous humanitarian violations
Most children of the rich middle class Arabs say their parents had it easy-just work at the govt and get your paycheck and pension. Its so clear without oil, the Middle East would've seen the same fate as East Africa
>>40928
>>40929
First thanks for the full article. FT has good stuff (and this article's quote by Dan Yergin shows its worth), but if I didn't get it free from university I wouldn't bother with it.
My concern with the shift would be possible clients for their funds. Wahhabi thugs cannot into usury at trillion dollars levels. There's plenty of good stuff to invest in and there's even plenty of contracts in their Sunni sphere alone, but loyalty is scarce and fear is increasingly expensive.
The Saudis don't have a lot of soft power to mitigate bankruptcies by their clients in courts. Their military isn't distinguishing its self in Yemen right now. If there is a single big default I suspect there will be blood in the water and Saudis will be powerless.
How Saudi Arabia captured Washington
America's foreign policy establishment has aligned itself with an ultra-conservative dictatorship that often acts counter to US values and interests. Why?
http://www.vox.com/2016/3/21/11275354/saudi-arabia-gulf-washington
