The rethink suggests that Riyadh may have realized that some of the objectives of its National Transformation Plan (NTP) were overambitious. But according to the Saudi document, the full details of the changes will not be known until the end of October, when officials are scheduled to present a final draft, the newspaper reported.
Riyadh is seeking to privatize many economic sectors as a prelude to raising the share of the private sector in Gross Domestic Product (GDP) to about two-thirds. In general, privatization of public assets increases efficiency and promotes good economic policy in the long term. But such steps could entail high unemployment and prices, along with the loss of government control over the firms that will be sold.
The International Monetary Fund (IMF) considers transparency in privatization processes an essential element that will help reduce the risk of corruption. But it warned that a lack of adequate regulation and competition after privatization could lead to market monopoly and consumer exploitation.
In addition to the privatization of state assets, Riyadh is looking to increase non-oil revenues by about $100 billion a year by 2020. Bank of America Merrill Lynch expects non-oil revenues in Saudi Arabia to rise by SR80 billion ($21.3 billion) in 2018. This is a positive development if it is achieved.
Another major challenge for the government is to reduce high unemployment among Saudis, particularly youths. The latest official data indicate that reducing unemployment and creating new jobs, as envisaged by the government, is easier said than done. For example, in the first quarter of 2017, unemployment rose by more than 1 percent compared to the same period in 2016, when Saudi Arabia announced Vision 2030.
Riyadh is seeking to privatize many economic sectors as a prelude to raising the share of the private sector. In general, privatization of public assets increases efficiency and promotes good economic policy in the long term.
Dr. Naser Al-Tamimi
Importantly, considering the low growth rates expected by the IMF for the economy over the next five years, Riyadh is unlikely to be able to create 450,000 new jobs in the private sector and achieve the stated goal of reducing the unemployment rate to 9 percent by 2020.
“In the coming period, it will not be possible to absorb new entrants into the labor market in government jobs because of the need to control public finances, and the unemployment rate will rise unless employment rates in the private sector increase,” said the IMF.
Meanwhile, BMI Research expects that the government will not succeed in reducing unemployment in the coming years, as the economy will not be able to create enough jobs for many newcomers amid fiscal austerity and slowing economic growth.
The government plans to invest about 50 percent of the Public Investment Fund (PIF) — which is believed to have roughly $183 billion in assets, according to Reuters — in domestic and foreign investments, amid optimistic expectations that the fund’s revenues will end Saudi reliance on oil revenues by 2020. But several international institutions and economists consider this target unrealistic.
The government is looking to attract $18 billion in foreign direct investment (FDI) by 2020, compared with $8 billion in 2015. But attracting more FDI may be linked to the successful initial public offering (IPO) of Saudi Aramco, which is expected to take place next year, and the adoption of more competitive and catalytic measures within the economy.
• Dr. Naser Al-Tamimi is a UK-based Middle East researcher, political analyst and commentator with interests in energy politics and Gulf-Asia relations. Al-Tamimi is author of the book “China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance?” He can be reached on Twitter @nasertamimi and e-mail: [email protected]