RIYADH: Saudi Arabia’s deputy crown prince has announced a sweeping economic reform plan for the kingdom. The effort prmarily aims at using oil revenues to build a huge global investment fund and ensure diversification. Deputy Crown Prince Mohammad bin Salman announced Monday in Riyadh that the kingdom would begin a massive effort to diversify its economy and its global investments away from oil – a recognition that an economy too dependent on a single commodity is vulnerable to major shocks.
One such shock was the collapse in the oil price that begin in mid-2014, not least because Saudi Arabia, the world’s low-cost swing producer, refused to cut back crude oil production despite an excess of supply over demand. More recently, Iran and Russia have rejected calls to rein in oil production in their turn, which means oil prices may remain weak for some years. Moreover, if electric vehicles start to gain serious market share in the 2020s, that will present a permanent downward pressure on oil prices. “I think by 2020, if oil stops, we can survive,” Mohammad said. “We need it, we need it, but I think in 2020 we can live without oil.”
Mohammad bin Salman, a son of Saudi Arabia’s eighty-year-old King Salman and the king’s third wife, is thirty years old. Upon acceding to the throne in January 2015, Salman immediately appointed Mohammad – known in the kingdom as MbS – to several of the kingdom’s most important Cabinet-rank offices, including defence minister and head of the country’s economic council.
Almost immediately after becoming defence minister, MbS launched a war against Shiite tribes in Yemen that had taken control of much of the country and recruited other Sunni powers to join in. The war has been inconclusive in military terms, and has caused a humanitarian catastrophe. Peace talks are now underway.
MbS’s profile is now being raised by emphasizing his role in pushing forward economic reforms. Monday’s announcement of the kingdom’s new economic reform plan, termed Vision 2030, was made at MbS’s first nationally televised interview since taking office as head of the economic council early in 2015.
As part of Vision 2030, MbS proposed to restructure the state-controlled Public Investment Fund to make it a hub for Saudi investment abroad, financed mostly by oil revenues, but also by raising extra money through sales of shares in national oil giant Saudi Aramco. “We restructured the fund. We included new assets in the fund, Aramco and other assets, and we fixed the problems of the current assets that the public investment fund owns, both in terms of companies and other projects,” he said.
