We asked Mr. Marcello Marani, Marazzi&Advisors partner, specialized in the Arabic world, a comment on "Vision 2030"
Saudi Arabia's cabinet has approved "Saudi Vision 2030," a comprehensive plan to significantly reduce the Kingdom's dependence on oil over the next 15 years.
"Saudi Vision 2030" was described by Bloomberg as the "biggest economic shakeup since the founding of Saudi Arabia in 1932." The drastic move comes as plunging oil prices have prompted the Saudi government to re-calibrate its strategy after its budget deficit comprised almost 15% of its economic output in 2015. Oil accounted for 72% of Saudi's total revenue in 2015, according to the IMF.
Saudi Arabia's deputy crown prince Muhammad bin Salman
This objective will be achieved by focusing on privatizations, additional cuts in government subsidies, the sale of part of Saudi Aramco, and the creation of a $2 trillion Sovereign Wealth Fund, according to the official SPA news agency. The plan includes regulatory, policy and budget changes that will be enacted over the next 15 years to decrease the Kingdom's dependence on oil.
Planned Sale Of -5% Of Saudi Aramco.
The Council of Economic and Development Affairs (CEDA), led by Saudi Deputy Crown Prince Mohammed bin Salman, spearheaded the development of "Vision 2030." King Salman, commenting on the cabinet's passage of the initiative, said, "We hope citizens will work together to achieve Saudi Vision 2030." In an interview with Al Arabiya News Channel, the deputy crown prince reiterated the kingdom's plan to sell less than 5% of Saudi Aramco in an initial public offering (IPO). Reuters reported him as saying in the television interview that he expects Aramco to be valued at more than $2 trillion. He added that he wanted it to be transformed into a holding company with a board that is elected. He then said that subsidiaries of Aramco would also be sold via the IPO. "The 5 percent is from the parent company," Reuters reported him as saying in the interview.
"The vision is a road map of our development and economic goals. A part of that is related to Aramco and this is a very small aspect," Prince Mohammed bin Salman said in the interview.
Details Unveiled In Coming Weeks
The economic details of "Vision 2030" are expected to be released over the next 4 to 6 weeks, Arabnews.com reports. These details include regulatory changes, a series of state budget reforms and policy plans for the next 5 years, called the "National Transformation Plan."
Bloomberg, citing political analysts, observed that the crown prince's efforts could foster resentment among a population "accustomed to government largess and power circles stunned by the rapid rise of the 30 year-old prince..."
King Salman: A Reformist Monarch
In a televised speech in mid-December, King Salman decreed economic reforms aimed at diversifying sources of revenue and decreasing high dependence on oil amid the steep decline in crude prices.
Saudi King Salman Bin Abdulaziz
And in late December, the monarch released Saudi's 2016 budget, which includes plans to reduce a record state budget deficit through spending cuts and efforts to raise revenue from non-oil sources.
The Saudi government ran a record deficit of 367 riyals ($97.9 billion) in 2015. Its 2016 budget seeks to reduce that to 326 billion riyals. This year's budget forecasts spending of 840 billion riyals. That's down from 975 billion in 2015. The original budget plan for 2015 forecasted spending of 860 billion riyals.
Revenues for 2016 are forecast at 514 billion riyals, down from revenues of 608 billion riyals in 2015. Last year's original budget plan projected 715 billion riyals of revenues. Oil revenues are expected to reach 444.5 billion riyals, representing 73% of the total revenue. That is 23% less than oil revenue during 2014. Non-oil revenue increased from 126.8 billion riyals in 2014 by 36.7 billion to 163.5 billion riyals- an increase of 29% compared to last year.
Laywer Marcello Marani: “The goal of decreasing dependence on fossil fuels as sources for the production of energy, of which humanity has even greater need, part of the general topic of environmental sustainability. Other Middle Eastern countries are in fact preparing policies and initiatives to strengthen the commitment to the environment and sustainable development, as a response to the natural eco-system changes that have occurred at national and global level. Among them the United Arab Emirates, which have put the environmental issue as a major concern, considering it as the key element in achieving sustainable development, and to this end, in February 2016 was established the Ministry of Environment and Water Resources (MoEW).
As early as August 2009, the Supreme Council of Energy in Dubai had been established (DSCE), whose mission is to ensure that the economic growth of the emirate has everything it needs to the future, providing energy at a reasonable cost and reducing the negative environmental impact. The Authority will need to develop new energy funds in such a way that the emirate itself is less dependent on its own oil resources. Relating to the "Sustainability", there are many scientific research that the United Arab Emirates are putting in place, with substantial funding, including the study of a fuel made from algae that grow in abundance in the desert to be used for propulsion of the aircraft, the creation of micro-cells and extremely high yield to be inserted in installations of photovoltaic panels.
In this regard, the invitation that the claim of Dubai EXPO 2020 addressed to humanity is to unite all those who can make contributions to the study of new sources and methods of producing clean energy, and is more than implied that the interest of attraction to the Emirates is targeted not only to the "minds" but also the "capital" that serve to finance them to devise and organize an environmentally sustainable development that takes into account the natural changes in the ecosystem. "
About Marcello Marani: He was born in Bologna in 1961 and there graduated from the University, company lawyer, mediator with professional certification from 2010, a practicing lawyer since 1992, paying its business consulting and assistance mainly in favor of companies (including multinationals ) and in particular in the areas of commercial law, corporate law and intellectual property law, both in contracting (national and international) and in that litigation. And 'member of the Licensing Executive Society (LES Italy).