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The New Arab

Saudi Arabia's Vision 2030 diversification plan will benefit royal clique

Saudi Crown Prince Mohammed bin Salman [Getty]

Date of publication: 24 September, 2017

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Crown Prince Mohammed bin Salman's Vision 2030 diversification plan will do little to benefit the average Saudi citizen, and instead further embed cronyism, analysts have claimed.

Experts have warned that Saudi Arabia's Vision 2030 diversification plan could lead to political stability in the kingdom with the privatisation of state firms only likely to benefit business leaders linked to the rulers of the kingdom.

Vision 2030 was unveiled in 2016 and aimed at accelerating Saudi Arabia's economic transition from oil to non-fossil sectors. When Crown Prince Mohammed bin Salman unveiled it (then deputy crown prince) it included included 80 projects, each costing between $3.7 million and $20 million.

But international experts say they are concerned the plan will not live up to its ambitions and predicted that the Saudi private sector could be hit by a financial crisis this year due to government austerity.

They also voiced concerns about a lack of funding available for local banks and geopolitical risks caused by the Gulf crisis, with Riyadh leading a blockade on neighbour Qatar.

These factors could make private investors more hesitant about investing in Saudi Arabia.

"The Saudi plan is trying to strike an impossible balance between economic austerity and economic activity in the private sector, but this could lead to a slowdown in economic growth," said Jean Michael Saliba, an economist at Bank of America Merrill Lynch in a research note.

In a paper published at the Gulf Institute for Studies in Washington, senior resident scholar Karen E. Young warned against making mistakes in Saudi Arabia's reform plans, as in Eastern Europe in the 1990s.

The economic shock caused by the quick and widepread liberalisation of former communist economies led to popular revolts against governments at the time due to the financial impact on the poorest people in East and Central Europe.

Young - who recently published a book on the political economy of energy in the Gulf region - pointed to the obstacles faced by Vision 2030. She said one problem will be that Riyadh has for decades relied on the disbursement of oil wealth but failed to move away from a reliance on the petrochemical industries.

While the goals of Vision 2030 were to develop the country's economy and benefit the average Saudi citizen, they may eventually serve the business families associated with the state and have relations with the royal family, Young added. 

Bids are given to companies with close ties to the royal family.

Bloomberg reported this month suggested that Saudi Arabia faces a fiscal deficit and an unprecedented slowdown in growth.

Other financial experts appear to agree and said the danger for Riyadh now is that it could get "caught in this cycle of constantly redrafting these strategy documents", as Griffiths at Control Risks said.

"You get involved in this kind of constant theoretical redrafting and outlining of goals and strategies and government structures and you never get around to doing actual concrete work."

 

 

 

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