Saudi Arabia's 'Vision 2030' To Transform Its Economy

May 04, 2016 9:38 AM ETKSA6 Comments
Ati Ranjan profile picture
Ati Ranjan
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Summary

  • The oil-dependent Kingdom of Saudi Arabia has a long-term blueprint to transform itself into a diversified economy, with non-oil government revenues projected to increase six-fold to SAR1tn by 2030.
  • It’s an ambitious dream to transform an economy that relies on crude oil exports for more than 70% of government revenues.
  • Deputy Crown Prince Mohammed bin Salman’s 15-year economic plan is the boldest attempt yet in the Kingdom’s history to spur additional revenue streams amid a steep fall in commodity prices.

By Ati Ranjan, Nikhil Salvi, Samia Hazuria, and Subarna Poddar of Aranca Investment Research

Saudi Vision 2030 (full text) is built around three key themes: a vibrant society, a thriving economy, and an ambitious nation (proxy for an efficient government).

The roadmap outlines numerous commitments under each theme with tangible goals to be achieved in the next 5-15 years. The planned economic diversification emphasizes on the increased participation of the private sector, with its share of total GDP projected to rise to 65% by 2030 from less than 40% at present. The reforms would focus on key non-oil sectors including manufacturing, mining, tourism, healthcare, education, and retail. In addition, the diversification is intended at the creation of job opportunities for the Kingdom's growing workforce (approximately 50% of the population is below 25 years of age).

KSA aims to leverage its investment capabilities to become a global investment powerhouse.

A vital part of the plan encompasses the restructuring of its Public Investment Fund (PIF), which is touted to become the world's largest sovereign wealth fund post the transfer of funds from the stake sale in Arabian American Oil Company (Aramco). KSA intends to sell less than 5% stake in Aramco, the value of which is pegged around USD2-2.5tn. In addition to contributing to the PIF stake sale in Aramco and its subsequent IPO (expected to be the world's biggest IPO), the initiative would provide much-needed depth and breadth to the Saudi Stock Exchange (Tadawul). Most importantly, the PIF would provide necessary capital for the development of strategic sectors and establishing national corporations.

The plan also outlines more radical changes such as the women empowerment program to alter the Kingdom's ultra-conservative image. KSA is determined to increase the participation of women in its workforce to 30% by 2030. At present, women make up only 22% of the

This article was written by

Ati Ranjan profile picture
53 Followers
Ati Ranjan Kumar, Head of Investment Research & Analytics Services at Aranca Ati Ranjan heads Aranca’s Investment Research & Analytics Services practice. He has 12 years of rich experience in in designing and implementing client solutions across investment research requirements. He has extensive experience in guiding and managing teams involved in investment banking research & analytics, equity research for both sell side and buy side clients and market study & opportunity assessment assignments. Ati is an avid runner and participates in marathons. He is an MBA in Finance and a graduate in Economics. https://in.linkedin.com/in/atiranjan

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The article is a joint effort by Nikhil Salvi, Manager, Aranca Investment Research along with Samia Hazuria and Subarna Poddar; Asst. Managers, Aranca Investment Research.

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