Significant cabinet and non-cabinet changes, and a long overdue TV interview by MbS. Still the dots of vision cannot be fully connected.
Last week, Saudi Crown Prince Mohammed bin Salman gave an interview to selected Saudi TV channels. There aren’t many anyway. The interview was more of a Q&A session on Vision 2030 left an impression of justification on the audience for the painful steps taken. Taking through from Aramco’s IPO, unemployment, reinserted allowances, housing, Iran but not women. They were not mentioned at all. With a fatherly protective tone combined with a fair share of simplicity reflecting openness mixed with transparency, build up the trust needed.
The interview was long overdue and gave answers to questions that people squeezed their thinking over since Vision 2030 was launched. Actually no, the interview just connected dots together that the public had already found the answers for. Now, answers have been approved officially.
No doubt, Vision 2030 needed to be created. Saudi Arabia is at a critical juncture; its economic model is no longer sustainable in today’s world of depressed oil prices, and there is a youthful population waiting to enter the workforce. A totally different thinking about how to get revenues had to be found.
“2016 was a tough challenge… for a country that is heavily heavily dependent on oil for revenue, it was a big shock,” said Mosaed Al-Ohali, chief financial officer at Saudi Arabia’s petrochemicals company Sabic. “The good thing about it is the response, the 2030 vision came at the right time.”
Saudi Arabia is embarking on a radical transition that hopefully will open up many economic opportunities if done properly. However, Saudi Arabia was and will remain a challenging environment to work in. It is a must to integrate the traditional way of doing business with new economic models. Informed analysis of the rapidly changing political, economic and social landscape in the country are vital to seizing the opportunities presented by Vision 2030.
It is a sweeping reform agenda. Necessary for reaching the goal is reorienting the economy away from oil a more engaged and an open society needs to be created. Social aspects go hand in hand with the economic reform agenda to create a productive society that will support economic growth.
Businesses need to continue to monitor the fiscal and social pressures the government is facing, as these will be primary factors shaping the government’s resolve to follow through on these fundamental reforms.
Yet, how will this be done? Plans for reforms exist. The question that is left unanswered is the how?
Since MbS’s surprising appointment, Saudis got used to his leading position. It may be the unspoken answer to the long discussion of changing generations in the royal family.
Steps required for implementing Vision 2030 are heavy on Saudi society to take. The slashing of housing, vacation and sickness allowances last September reduced some salaries by a third. At the same time subsidies fell. Facts that have been for a long time unuttered. It is an open secret that civil servants are lazy, too many and mostly inefficient. Some saw the unveiling of the transformation plan with austerity measures a step in the right direction.
This was not a popular step. Hit by changes without seeing or being told what the real cause is beside “saving” is not enough. The most question among the public was always – will all Saudis tighten their belts too?
Changes came on April 22nd. The government took a U-turn, restoring most of the bonuses enjoyed by government employees. By reducing the grumbling, MbS may regain the middle-class support and confidence he needs to bolster peoples’ confidence in Vision 2030. Critics believe that it is to strengthen himself among them public position against opposition from senior princes.
A wave of royal appointments were decreed on that day as the restoration of perks. His younger full brother, Prince Khalid – 28 years old and inexperienced – becomes ambassador to US, helping cement ties to the Trump administration. Another half-brother very competent vice oil minister became minister of state for oil affairs. The promotion of Major-General Ahmed Asiri, the defence ministry spokesman, who becomes deputy head of intelligence.
People are worried because the ambiguity surrounding their future at home remains – despite the so many same explanations given about the why how and what for on Vision 2030 – unclear. The how is the question that looms over people’s heads. More and more initiatives are created some points become more realistic, some can be handled others will take years to overcome. Vision 2030 has the feeling of learning by doing. Taking steps, each one at time, evaluating and then confirming or make a u-turn. No one has an answer, but is there one? It is a difficult u-turn for Saudi Arabia and its people. A change long overdue, givens on ground – among them cemented tradition hard to break, powers of religious people, building up skills – are not supportive. None has the answer.
Claims by analysts that he personally overvalued the Saudi oil company, Aramco, a fraction of which he intends to float next year, by at least $500bn, may have hit confidence in MbS economic competence. Yet, the family remains loth to do anything that might compromise the absolute monarchy, on which all their perks depend. A reality that has been approved after the Arab Spring. Saudis have had resistance to the royal family in the past has been but the failure of Arab Spring, uprising of ISIS made the country move closer to each other.
It feels like MbS should not be proven wrong. Necessary reforms can’t be sacrificed. Vision 2030 fails, Saudi Arabia will fail. Cabinet ministers say he is sharp minded and will find mistakes in a 200-page document within minutes, businessmen are invited for discussions to give their opinion about a better public and private sectors partnerships and recommendations for improving business environment. Most importantly he listens to create the better.
“The Gulf can’t do austerity measures,” fumed a veteran investment banker, after Saudi Arabia announced the reversal. Despite a rise in the oil price to above $50, the budget remains deeply in deficit. Restoring the allowances will add a further $13bn to a shortfall already projected at $86bn, 12% of GDP. The government insists its finances are improving, but bankers say that capital is leaving Saudi Arabia. The search for second passports is increasing.
Time and experience are missing and badly needed. No one knows what shaky times is, fear and insecurity are spreading. We may not know the how but the urge to make it happen we have, there is no choice. Vision 2030 is for Saudi Arabia.
