Saudi Arabia’s plan for the post-hydrocarbon era will have to overcome habits developed over decades of relying on crude sales to fuel economic growth, create jobs and build infrastructure.
Almost eight decades after oil was first found in the country, officials yesterday unveiled Deputy Crown Prince Mohammed bin Salman’s “Saudi Vision 2030,” a blueprint seeking to reduce the reliance on revenue from crude exports. King Salman approved the package of developmental, economic, social and other programmes. Prince Mohammed disclosed details of the plan in interviews with Bloomberg in Riyadh.
“Shifting from an oil-based economy to something different is very difficult,” said Gregory Gause, a professor at Texas A&M University. “The Saudis have been talking about it for decades, but have made little progress. So the price has his work cut out for him.”
Prince Mohammed is leading the biggest economic shakeup since the founding of Saudi Arabia in 1932, with measures that represent a radical shift for a country built on petrodollars. 
King Salman said pursuing a “comprehensive development” has been a central goal, according to state-run television. He urged Saudis to help implement the plan.
Part of the programme envisages selling less than 5% of Saudi Aramco and the creation of the world’s largest sovereign wealth fund.
Authorities are also considering more steps to restructure subsidies, a value-added tax as well as a levy on energy and sugary drinks and luxury items. The National Transformation Program, which will be launched within 45 days of yesterday’s announcement, will focus on ways to boost economic growth, create jobs, attract investors and hold government offices more accountable.
Other oil-dependent countries that succeeded in reforming their economies started before crude revenue sank, according to an International Monetary Fund study in 2014, suggesting that Arab producers may have missed the best opportunity to move beyond oil when prices were high.
The drop in crude prices has prompted Gulf Arab countries to dip into reserves they had accumulated since 2000. Saudi Arabia’s net foreign assets fell by $115bn last year to plug a budget deficit that reached about 15% of economic output. The government also turned to the domestic bond market and is planning its first international dollar bond sale.
Other Gulf Arab countries are also taking steps to reduce spending. The UAE scrapped subsidies for transport fuels. The Kuwaiti parliament approved a government plan to increase the price of water and electricity for expatriates and businesses in the Opec nation, but voted against including the homes of Kuwaiti citizens. A second and final round of voting is scheduled on April 26.
After decades of talk of diversification, more than 70% of Saudi government revenue came from oil in 2015 and the state still employs two-thirds of Saudi workers. Foreigners account for nearly 80% of the private-sector payroll.
“The issue really is how to get the Saudi private sector to hire locals, how to make the numbers on that right, since so much of the Saudi private sector has had business models based on lower-wage foreign labour,” said Gause.
In response to the country’s weakened fiscal position, Prince Mohammed’s plan is to raise non-oil revenue by $100bn by 2020. The government announced cuts in utility and gasoline subsidies in December. Including future reductions, authorities expect the restructuring to generate $30bn a year by 2020.
“There is a realisation among many Saudis that the economic challenges that the kingdom is facing are daunting,” said Fahad Nazer, who worked at the Saudi embassy in Washington and is now a political analyst at JTG Inc. “Given the fact that some 70% of Saudis are under age 30, Prince Mohammed’s penchant for making quick decisions and holding officials accountable for their performance – or lack thereof - does have wide support among Saudis.”
Past rulers of Saudi Arabia have largely avoided seeking additional revenue from their citizens. As water prices surged after the reduction in subsidies, Saudis turned to social media to express their anger at the government. King Salman fired the water minister on Saturday.
Saudi leaders also have unique social challenges that other nations implementing economic changes didn’t have to manage. While steps have been taken to get women into the workforce, the kingdom still prohibits them from driving. 
The prince told Bloomberg that he has no problem with the official religious authority on the issue of women driving, but rather “with those who distort the facts of the religious establishment so that women don’t get their complete rights granted them by Islam.”
His efforts to shake up the economy come against the backdrop of mounting security threats and regional turmoil, with the kingdom is engaged in a war in Yemen against rebels it says are backed by Iran.


Plan to bolster military industry to meet demand


Saudi Arabia plans to set up a holding company for defence industries as it seeks to meet more of its military needs domestically, Deputy Crown Prince Mohammed bin Salman said, Bloomberg reported.
The holding company is expected to be operational next year and will be offered later on the stock market to increase transparency, Prince Mohammed said in an interview with Saudi-owned Al Arabiya television. The kingdom will also restructure several contracts and tackle wasteful spending in the defence industry, he said.