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Fri 6 Oct 2017 12:06 AM

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Opinion: How Saudi Arabia is steering the way to Vision 2030

Saudi Arabia's decree on women driving is one of the first concrete steps to achieve long-term promises being set out in the National Transformation Program 2.0

Opinion: How Saudi Arabia is steering the way to Vision 2030
Under review: The kingdom is redrafting its transformation agenda.

News of a royal decree allowing Saudi women the right to drive from June next year has rightfully caught the headlines recently. However, the bigger news has perhaps been behind the scenes, as Saudi Arabia has been working to define the long-term objectives and near-term reforms needed to achieve its Vision 2030 targets.

Vision 2030 is an ambitious economic and social undertaking, which is effectively a roadmap to position the kingdom for a future that is less reliant on oil. Saudi Arabia needs a more diverse economy to create greater numbers of sustainable jobs, and reduce unemployment for a rapidly expanding young population.

Initiatives include a plan to convert the Public Investment Fund into the world’s largest sovereign wealth fund; boosting private sector contribution to 65 percent of GDP; reducing unemployment to seven percent from 11 percent; privatising government services; reforming education; and continued investment in infrastructure.

From goals to action plans

Launched last June, two months after Vision 2030, the National Transformation Program (NTP) 2020 aimed to crystallise some of those longer term goals through more workable near-term targets that address economic policy and social reforms. One year later, Saudi authorities have announced that a new version of the NTP 2020 will be produced this year. While some are suspicious that such revisions are a sign of Saudi Arabia letting up on reform commitments, it is more likely that these steps will speed up the reform process.

A new draft of the NTP is expected by the end of this month. From what we are led to believe, this new version will be more streamlined and structured. Reducing government bureaucracy is one key target, by working on improving the productivity of civil servants and also enhancing transparency.

Ten ministries are to be involved in the revised plan down from 18 in the first version, giving them more autonomy. Furthermore the objectives have been streamlined to 36 objectives, down from hundreds previously.

Digitising the Saudi economy is another element likely to get greater attention in the upcoming NTP document.  Saudi Arabia needs a more effective bureaucratic ecosystem, so the development of e-government services, and the efficient provision of these services, will be key in allowing Saudi Arabia to apply rapid improvements to its services.

E-services provide a shortcut to improving deficiencies and addressing bureaucracies by automating many processes. The new version will also focus on boosting transparency and improving the efficiency of the public sector workforce.

Boosting female participation and building a digital economy will also realise more economic potential for the country that so far remains untapped. Female participation in the workforce is one of those key goals to be defined in the new version of the NTP. Women currently account for 22 percent of the workforce, but 50 percent of university graduates, making them an under-utilised resource.

Some of the challenges Saudi women face range from social acceptability of having women work in conservative Saudi households, to regulations requiring segregation of men and women. One challenge Saudi women faced for decades was that of transportation, as women were not allowed to drive. Hence allowing women the right to drive from June next year was a very powerful signal on the willingness of policymakers to take the decisions needed to implement important structural reforms.

Old-school industry

Other key targets are centred on building on the strength of the mining and petrochemicals sector, which will allow Saudi Arabia to develop a strong ecosystem for the manufacturing sector. The sector already contributes about $20bn dollars to GDP annually and employs close to 250,000 people.

The country has a large base of inputs needed for the manufacturing process, ranging from metals to other mineral resources. Its mineral bank includes precious and base metals, phosphate and bauxite, silica, limestone gypsum and magnesite, and it also has a growing labour footprint that needs employment.

By 2020, Saudi plans to boost the potential of the mining sector to reach SAR 97bn ($25.89bn) and create 90,000 jobs.

The success of the Aramco IPO will also be crucial in supporting Saudi Arabia’s industrial ambitions. The sector obviously has strong foundations around the oil and petrochemicals sector and presents one of the strongest opportunities for job creation in the kingdom.

The revisions to Vision 2030 are currently being dubbed as “NTP 2.0” and should not come as a surprise. The complexity and scope of the goals was one element detracting from progress on the earlier NTP, but equally important was the inability of ministries to execute important changes and achieve targets.

The document expected to be released later this month should provide greater clarity on all of these issues, and highlight the determination of Saudi Arabia’s rulers to make them succeed.

Tim Fox, Chief Economist and Head of Research, Emirates NBD

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