The address given by Custodian of the Two Holy Mosques King Salman to the Shoura Council last Wednesday (Dec. 23) was his first since ascending the throne in January. The address, delivered at the start of the fourth year of the sixth session of the Council, covered economic, political and security policies. Today, my focus is economics, especially indicators for change in economic policies.
The economic policy outlined in King Salman’s address preserves traditional goals of Saudi policy. But it adds clear indicators for new directions, in light of the sharp drop in oil prices, and the need to improve performance of government agencies and raise economic competitiveness.
As human development is priority number one, the government intends to continue (with its) “unlimited” support for health, education, housing, training, transportation and other “quality of life” services. The rise in oil prices in recent years, before their collapse last year, had enabled the government to amass significant financial resources, which were used to launch massive development programs and improve physical infrastructure. They also improved government finances and enabled it to weather external economic crises and continue its development plans.
Economic policy “constants” referred to in the address include continuing to raise GDP and physical infrastructure and manpower development levels; improve employment rates; maintain low public debt levels; as well as diversify revenue sources by reducing oil dependency and increasing reliance on other economic resources.
However, new objectives were also highlighted: More effective government spending; fiscal discipline through balancing revenue and expenditure; and higher returns for government investments. These three objectives are closely related to serious challenges of public finance, including modest public investment returns, rising budget deficits, and uneven spending effectiveness.
To fulfill those objectives, both old and new, King Salman emphasized the role of the newly created Council of Economic and Development Affairs (CEDA), which has been tasked with putting together “plans, policies and programs” for that job. CEDA will follow up implementation to ensure compliance and high performance. A national center to measure government agencies performance has been set up for that purpose.
To improve economic competitiveness, the government is committed to providing a more attractive business environment for local and foreign companies. To encourage investment the government would reduce red tape, facilitate investment and in particular open retail and wholesale trade to foreign investors.
In nearly each economic sector covered, the king’s address charts new territory. For example in health services, it stresses the need to raise the level of those services and increase Saudi nationals’ participation in it, including by opening new medical and health colleges, and increasing the number of scholarships to study medicine abroad.
In education, the government is determined to improve quality and effectiveness, and upgrade teachers and administrators’ skills. A new change in the external scholarship program is foreseen: Adding a new criteria of aligning the program’s graduates’ qualifications and those needed by the job market, with special emphasis on medical and health fields.
In housing, government policy will be based on encouraging investment, through public-private partnerships and bringing about a balance between supply and demand. It also incentivizes owners to develop their lands, which is the main objective of the vacant land levies introduced recently.
The main focus of the government’s program is clearly development of human resources and improving civil servants’ performance. Those objectives are behind establishment of the Human Resources Development Program, the recent Job Generation Authority, the Public Commission for Small and Intermediate Enterprises, and the National Program to Support Public Project Management.
The government is also determined to raise Saudi women’s participation levels in development, referring to the significant advances made by Saudi women lately, including their “effective participation in the recent municipal elections.”
Thus King Salman’s address provides several important, forward looking indicators of the innovative directions intended by the Economic Transformation Program, unveiled recently to private audiences. Those directions seek to balance achievement of high levels of economic welfare with the need for fiscal and economic sustainability. The Council of Economic and Development Affairs will perform a key role in monitoring program implementation and evaluating performance of government agencies in carrying their assigned tasks in this new economic direction.