Saudi Arabia is revising its major reform strategy just over a year after its launch, extending the timeline of some targets and removing others entirely, some reports said.
A government document seen by the Financial Times said that the country’s amended National Transformation Plan, dubbed NTP 2.0, would “change existing initiatives and add new ones.” Saudi Arabia’s National Transformation Plan is a pivotal element of the country’s “Vision 2030” reforms which were announced last year by Deputy Crown Prince Mohammed bin Salman. This redraft reportedly updates the plans which were originally set out to overhaul the economy and reduce what the deputy crown prince called Saudi Arabia’s “dangerous addiction to oil.”
The program had aimed to use a number of measures to wean the country off oil by 2020. These included privatizing state assets, creating 1.2 million private sector jobs and reducing unemployment from 11.6 percent to 9 percent.
Yet, according to insiders, the delays announced Thursday highlight the ambitious nature of the mammoth task. As the world’s leading oil exporter, the oil and gas sector accounts for 85 percent of Saudi Arabia’s export earnings and around 50 percent of its gross domestic product, according to OPEC.
“There is a recognition that too many of these targets were too aggressive and maybe having too much impact on the economy,” a government adviser told the Financial Times.
Saudi Arabia has been dogged by compressed oil prices since they slumped in mid-2014 and has been leading a measure by OPEC countries to reduce an ongoing supply glut. Figures from the International Monetary Fund predict that the Kingdom’s economic growth will be just 0.1 percent this year, versus 1.7 percent in 2016.
The government document stated that the timeline of the NTP will continue to 2020, but that implementation of certain projects would be extended to between 2025 and 2030.
However, advisors have suggested that the delays could hurt the country’s hopes of attracting international investment.
“Flexibility is great, but changing the goalposts isn’t a healthy habit,” another government advisor said to the Financial Times.
The amends made no reference to the partial privatization of Saudi Aramco as it sits outside of the NTP. Five percent of the state oil company is expected to be put up for an initial public offering next year.
Full details of the changes are expected to be announced in October.
Saudi Arabia’s king to soon abdicate
The news comes as discussions heat up around the anticipated transfer of power from the Kingdom’s King Salman to his son Prince Mohammed.
A research note released Thursday by analysis firm Eurasia Group suggested that the transfer could occur within the coming weeks to prevent the likelihood of dissent from other members of the ruling family.
“We think King Salman will proceed with promoting his son to his place in the next few weeks (if not imminently) to prevent MBS’s (Mohammed bin Salman) rivals from organizing to challenge the transition plan,” Ayham Kamel, practice head, Middle East & North Africa, at Eurasia Group noted.
But analysts have opined that the revisions indicate that infighting is already underway.
“Reports that the Saudi government is planning to dilute its reform plans may be the first sign that the power and influence of Crown Prince Mohammed bin Salman is starting to wane and that broader opposition to reform is building,” Jason Tuvey, Middle East economist for Capital Economics, wrote in a research note.
“There’s a clear risk that the reforms, which already fell short in a number of key areas, will be watered down even further.”
“This supports our long-held view that Vision 2030 will fall short of its lofty intentions,” Tuvey added.