Up to now, Saudi Arabia has survived on oil. Half its GDP and 80% of its exports are from hydrocarbons. But Saudi Arabia is no Norway. Rather than build for the future, it has used oil wealth to fund cushy public sector jobs and generous cradle-to-grave welfare. That’s resulted in a frail private sector that contributes only 40% to GDP and a relatively idle population. Eighty percent of its 8.4 million work force are foreigners.
Now that oil prices have sunk to half the level needed for the government to balance its books, and foreign exchange reserves are dwindling, the Kingdom knows it must change. But how do you peacefully empower a population? It’s awfully hard to take benefits away from people, especially when those benefits are in exchange for political support. Half the population is under the age of 25, but 40% of 20 -24 year olds are unemployed, while almost half of 15-19 year olds are. Combine that with extremist elements in the country and open conflict with Iran – and the potential for disruption is not insignificant.
And yet, there is hope and opportunity. A lot has happened since reform-minded King Salman bin Abdulaziz al Saud assumed the throne in January 2015 and then made his son Mohammed bin Salman deputy crown prince and a prominent policy maker. In the last year, the new leadership has announced a partial privatization of the state oil company Aramco, opened the stock market to foreign investment, and reshuffled the oil ministry. And last month, Mohammed bin Salman released a sweeping “Vision 2030” outlining how Saudi Arabia could become “a vibrant society, a thriving economy, and an ambitious nation.”
Beyond its main thrusts of reducing dependence on oil, privatizing industry, attracting foreign investment, getting more women to work, and reforming education, Vision 2030 covers everything under the sun – from improving the visa process to building the world’s largest Islamic museum, and treating non-Saudi workers better.
We even learn that only 13% of the population exercise once a week (the 2030 goal is to bring that to 40%), and that there are only 11,000 people who volunteer for charities (the 2030 goal is to bring that to one million). We also learn that small and medium enterprises contribute only 20% to GDP, versus 70% in more developed economies.
Among the more interesting themes are those under the headings of “An Ambitious Nation, Responsibly Enabled” and “Being Responsible For Our Lives.” Vision 2030 wants individuals to become more independent, active members of society. There is also a need to “deepen communication channels between government agencies on one hand and citizens and the private sector on the other.”
The big question, of course, is whether such comprehensive reform will work. Geopolitical expert Ian Bremmer for one, is pessimistic. He thinks marginal change is possible, but society won’t accept dramatic change. “Vision 2030 isn’t designed to restore the economic and cultural dynamism the kingdom has lost,” he writes. “It’s a plan to create it from scratch, which is why it’s likely too little too late.”
But others applaud Vision 2030’s radical ambition, saying that you need to know where you want to go before you try getting there.