RIYADH/DUBAI, April 25, (Agencies): Saudi Arabia will introduce a “green card” system within five years to allow resident expatriates in the kingdom to have more rights in order to improve its investment climate, Deputy Crown Prince Mohammed bin Salman said on Monday. Speaking in a television interview, he said planned sweeping reforms, of which the proposed green card is one, will be implemented even if oil prices rise back above $70 a barrel and pledged to end Riyadh’s dependence on crude revenue by 2020.
Saudi Arabia on Monday approved a long-awaited plan laying out reform priorities for the next decade and a half, setting in motion what is likely to be a period of significant economic change in the oil-rich kingdom.
The project, which includes plans to float a stake in the world’s largest oil company and set up one of the world’s largest government investment funds, is meant to provide a blueprint for sweeping reforms to steer the OPEC kingpin sharply away from its decades long reliance on cheap-to-produce oil.
King Salman said in a short televised announcement that the Cabinet approved the “Vision 2030” plan on Monday, and he called on Saudis to work together ensure its success. But it was left up to the king’s powerful son, Deputy Crown Prince Mohammed bin Salman, to spell out some details of the program in a pre-recorded interview aired shortly after the announcement on Saudi-owned broadcaster Al-Arabiya.
The prince is second in line to the throne, serves as the country’s defense minister and chairs a committee formed soon after his father’s ascension last year overseeing economic policymaking. That committee, the Council on Economic and Development Affairs, has been focused on reorienting the kingdom away from its heavy reliance on fossil fuels, creating jobs and boosting foreign investment.
In the wide-ranging interview, Mohammed bin Salman described the country as having become addicted to oil and said a planned partial initial public offering of the state-owned oil giant Saudi Aramco was part of the reform program. He said that while there’s been no final assessment on the value of Aramco, estimates have placed it at more than $2 trillion, and that less than 5 percent of Aramco would be offered to public shareholders. Subsidiaries of the company would also be part of the share sale, he said.
The Aramco shares would be listed on the Saudi stock exchange, known as the Tadawul, and on an international exchange, possibly in the United States. “The vision is a road map of our development and economic goals,” he said. “Without a doubt, Aramco is one of the main keys of this vision and the kingdom’s economic renaissance.” Aramco boasts the world’s largest oil reserves and produces some 10 million barrels of crude a day, giving it outsized influence over world energy markets. It traces its history to a 1933 agreement between the kingdom and the Standard Oil Company of California to develop the country’s oil reserves, and has been known as Aramco — an acronym for the Arabian American Oil Company —since 1944.
The Saudi government took full control of the company in a series of buyouts that ended in 1980. The prince discussed plans to set up a $2 trillion sovereign wealth fund that would be managed by an outside board of directors. It will include cash generated from the Aramco IPO, an existing $600 billion in reserves, and state-owned real estate and industrial areas estimated to be worth $1 trillion.
The fund’s revenues would go into developing the kingdom’s cities, he said. He said the economic goals of the reforms are intended to eliminate housing and unemployment problems and ensure that water and energy subsidies go to those most in need. Another way to drive up non-oil revenue, the prince said, is by investing more in mineral mining and boosting the kingdom’s own military production capacity.
Saudi Arabia was the world’s third-largest arms buyer last year, with purchases of more than $87 billion last year. The prince also said the kingdom, which annually welcomes millions of Muslim pilgrims to the holy cities of Makkah and Madinah, would become more welcoming to other types of tourists — in line with Saudi Arabia’s values. A new residency visa program could generate additional revenue and would allow Muslims and Arabs to live for extended periods in the country, he said.
Lower oil prices have exposed Saudi Arabia to urgent domestic challenges, including a projected budget deficit this year of nearly $90 billion. Despite past efforts to move the economy away from its reliance on oil, the kingdom’s main export still accounted for 72 percent of total revenue last year. In addition, 70 percent of Saudis work in the public sector, where the government is spending heavily on wages.
The government is looking for ways to support the private sector to help create jobs for the millions of young people who will be entering the workforce in the coming years and will also be looking for affordable housing as they approach milestones such as marriage.
The reform plans were announced just days after US President Barack Obama paid his fourth official visit to Saudi Arabia to press the kingdom and other Gulf states for more help fighting the Islamic State group and in tackling other regional challenges, such as providing financial and political support to Iraq. Saudi society, not the government, will determine whether women will be allowed to drive cars, Prince Mohammed said.
Mohammed was asked whether one of the plan’s goals, to increase women’s participation in the workforce from 22 percent to 30 percent, could lead to their right to drive. “So far the society is not persuaded — and it has negative influence — but we stress that it is up to the Saudi society,” he said, adding that change cannot be forced. Saudi Arabia has one of the world’s toughest restrictions on women and is the only country where they cannot get behind the wheel.
The sexes are separated in restaurants and other public facilities. Women are subject to male “guardians”, family members who must authorise a woman’s travel, work or marriage. The kingdom’s major cities are expanding their public transport networks but for the moment they remain limited, and a woman’s ability to work is hindered unless she can afford a driver.
Here are the main points of the “Saudi Vision 2030” economic reform plan announced by Deputy Crown Prince Mohammed bin Salman and approved by the cabinet on Monday:
■ Selling less than five percent of national oil company Aramco to raise hundreds of billions of dollars through a domestic Initial Public Offering (IPO). This is the first time that part of Aramco, valued at between $2 trillion and $2.5 trillion, will be offered into private hands.
■ Turning the Public Investment Fund into the kingdom’s first sovereign wealth fund, the world’s largest with $2 trillion in assets. Around $1 trillion will be raised from sales of state-owned real estate holdings and industrial and economic areas. Aramco sale proceeds will also go into the fund.
■ Raising non-oil revenues six-fold from $43.5 billion to $267 billion through, among other measures, major cuts in energy and other public subsidies.
■ Increasing the number of Muslim pilgrims performing the Umrah, or minor pilgrimage, from eight million to 30 million per year through massive investments and incentives.
■ Raising the private sector contribution to Gross Domestic Product (GDP) from 40 percent to 65 percent in 2030.
■ Boosting Foreign Direct Investment (FDI) from 3.8 percent of GDP to the international level of 5.7 percent.
■ Manufacturing half of Saudi Arabia’s military needs within the kingdom.
■ Increasing women’s participation in the workforce from 22 percent to 30 percent and lowering the unemployment rate from 11.6 percent to seven percent.
■ The kingdom, where crude sales provide the vast majority of state revenues, wants to “live without depending on oil by 2020,” according to the deputy crown prince.
■ The efforts aim to move Saudi Arabia from the 19th biggest economy in the world into the top 15.