Jeddah, Saudi Arabia: Saudi Arabia plans to more than triple the government’s non-oil revenues and clamp down on public-sector salaries over the next five years, ministers said on Monday as they described reforms designed to reduce the economy’s dependence on oil and build a sustainable future.
The National Transformation Plan (NTP) aims to boost non-oil revenue to 530 billion riyals ($141 billion) by 2020, creating some 450,000 non-government jobs, according to comments by ministers and documents distributed to reporters in Jeddah.
The plan aims to “enhance the level and quality of services” provided by government and “achieve a prosperous future and sustainable development,” it said.
The NTP, which includes over 500 projects and initiatives as well as performance indicators for ministries and other government agencies, will cost around 270 billion riyals to implement, the document showed.
Minister of State Mohammed Al al-Sheikh said the cost would have no impact on Saudi budget spending, and added that a further 300 billion riyals was expected to be contributed to NTP initiatives by the private sector.
The plan is part of a wider, long-term reform drive known as Vision 2030, which was announced by Deputy Crown Prince Mohammed bin Salman in April. He aims to overhaul many aspects of Saudi Arabia’s economy and society as the kingdom prepares for a future of shrunken oil revenues and a rising population.
The finances of the world’s top oil exporter have been hit hard since the summer of 2014, when crude prices plunged, producing a state budget deficit of nearly $100 billion last year.
The plan aims to increase the percentage of government debt to gross domestic product to 30% from 7.7% now.
Under Vision 2030, new non-oil revenue is expected to come from the introduction of a value-added tax, “sin taxes” on sweet drinks and tobacco, and fees imposed on the private sector.
Al al-Sheikh said there were no plans to introduce income tax for citizens. The text of the plan proposed to spend 150 million riyals on preparing income tax for residents, a phrase normally applied to expatriates. Al al-Sheikh said the only tax commitment approved so far was for VAT and said that further questions on taxation should be addressed to the finance minister.
According to the NTP, the government will strive to reduce the value of public salaries and wages as a proportion of the budget to 40% from 45% by 2020, and cut water and electricity subsidies by 200 billion riyals.
The energy ministry aims to maintain its oil production capacity at 12.5 million barrels per day (bpd), raise gas output capacity to 17.8 billion standard cubic feet a day from 12 billion, and raise refining capacity to 3.3 million bpd from 2.9 million, the document said.
Saudi Arabia will also aim to install 3.5 gigawatts of renewable power capacity by 2020 and spend 300 million riyals on identifying locations for atomic electricity plants and preparing them for construction, the plan said.
An appendix to the plans listed spending targets for hundreds of initiatives aimed at boosting both economic and social goals, including 4.7 billion riyals on improving hospital emergency rooms and intensive care units.
Other spending included 2.1 billion riyals to restructure the postal sector, 5 million to set up an intellectual property authority, 8 million to improve civil service performance and 3.5 billion to maintain cultural heritage.
Whether the plans are achievable has become a constant subject of conversation in the kingdom. On Monday, the first day of Ramadan, the annual satirical television show “Selfie,” which runs during the fasting month, lampooned the preoccupation with the plan.
It showed a vision of Saudi Arabia 100 years in the future, with a widely lamented shortage of adequate housing persisting and women still barred from using cars alone even in self-driving cars.
While some of the targets, such as cutting lavish energy subsidies, have been roundly applauded by economists as long overdue, others, such as a goal of ending dependence on oil by 2020, have provoked widespread scepticism.
A focus on the private sector to deliver new revenue streams and help boost employment has raised concerns that measures such as deregulation and privatisation will fail to help companies compensate for a fall in state spending.
The government aims to accelerate privatisation. Details in Monday’s plan showed the Energy Ministry aimed to transfer all its power generation to “strategic partners” by 2020. Riyadh will also privatise its water desalination agency, it said.
The plans have alarmed some social conservatives, who regard proposals to increase the number of women working and create more opportunities for entertainment in a country where cinemas are banned as risking a betrayal of Islamic values.
Managing such contradictory impulses will be a tough task for Prince Mohammed, the architect of the reforms, who has risen from near obscurity before his father became king early last year to a position of almost unprecedented power in the kingdom.
He was named head of the new Council for Economic and Development Affairs, a super committee tasked with overseeing long-term structural changes in Saudi Arabia’s domestic policy.
Monday’s national transformation plan is the latest manifestation of that process, the culmination of months of detailed planning that drew in foreign consulting firms and thousands of Saudis through workshops with the private sector.
Other elements of the Vision reforms which are not included in the National Transformation Plan include the privatisation of state oil giant Saudi Aramco and the transformation of the Public Investment Fund into a massive sovereign wealth fund.