How Saudi Arabia plans to shake up its economy

Thu Apr 14, 2016 11:06am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Katie Paul, Marwa Rashad and Andrew Torchia

RIYADH/DUBAI (Reuters) - In late February, several hundred Saudi officials, company executives and foreign consultants gathered in a luxury Riyadh hotel to discuss how Saudi Arabia's economy could survive an era of cheap oil.

One company manager at the event told Reuters that officials from about 30 Saudi government bodies manned booths in which they described their challenges. Corporate bosses were encouraged to "figure out ways to do partnerships to address those needs, to offer feedback, to complain, and to plan future ventures or even just future meetings," the manager said. "It was like a private sector version of a national parliament."

The workshop was part of Saudi government attempts to work out how to restructure the economy so it no longer relies on oil.

The National Transformation Plan (NTP), as Riyadh has dubbed the changes, is expected to be unveiled in the next few weeks. Much is still secret. Ministries have refused to discuss plans in detail and Western consultancies contacted by Reuters declined to confirm their involvement, let alone policy details.

Officials, consultants and executives, though, say the five-year programme is both ambitious and risky. It includes asset sales, tax increases, spending cuts, changes to the way the state manages its financial reserves, an efficiency drive, and a much bigger role for the private sector.

Such changes have been talked about for years but never put into action. One reason to think this time could be different is that policy-making has in the past year shifted away from conservative bodies such as the finance ministry and central bank. Power is now concentrated in a new 22-member Council of Economic and Development Affairs, formed after King Salman took the throne in January 2015.

The Council is chaired by his son, Deputy Crown Prince Mohammed bin Salman, who is about 30. In his role as defence minister, Prince Mohammed launched Saudi Arabia's military intervention in Yemen in March 2015. Now, he wants to shake up economic policy.

"Since the foundation of the kingdom there has been no government-led programme that innovates in this way," said Mohamed al-Afif, a veteran banker who now runs Cash Solutions, a boutique financial services firm.   Continued...

 
A man walks past the Kingdom Centre Tower in Riyadh, Saudi Arabia April 12, 2016. REUTERS/Faisal Al Nasser