Introduction
The Saudi vision 2030 was launched in April 2016. It is the blueprint for deviating Kingdom’s economy’s dependency on oil and super scribes the tightening economic situations. World Bank has given a gloomy forecast for oil prices for 2017 as well. Though they are expected to recover from previous years’ blow but do not appear to be a promising source of good revenue in near future. To answer the questions raised by current market conditions for oil and energy sector, a “National Transformation Plan 2020” (NTP) was launched to accomplish the interim targets by end of this decade through implementation of various innovative measures across all governmental bodies.
NTP as well as KSA Vision 2030 accentuate private sector involvement and investment into large number of business which were solely handled by governmental bodies until recently. It also proposes large scale restructuring of ministries, government departments and institution to align them with the requirements of NTP and the vision 2030.
Key Highlights
Sovereign fund of USD 2.5 trillion: KSA aims to transform its Saudi Public Investment Fund to Sovereign fund asset with a value of USD 2.5 trillion which will be the largest of its king globally. As per the statement given by the Prince initial data suggest that the fund will controls more than 10% of investment capacity of the globe and more than 3% of total global assets. It will be key driver of investment into the region.
Listing of Aramco: The giant oil company of the company will be offering 5% of its shares through IPO and giving a large part of its proceeds to the Sovereign fund. It will not only increase transparency and bring it into under control of Saudi Banks, thinkers and regulators.
Restructuring: Restructuring of the state assets and agencies will be the key rather than spending cuts to making government finances viable in the long run; Prince Mohammed said the reforms would not require any substantial allocation of government funds but work on existing infrastructure projects would deliver the desired results. He cited the housing ministry as a target for restructuring.
Shifting from Dependence on Oil: Considering the recent turbulence bought by oil prices, the plan aims to minimize the dependency on oil and increase its non oil revenue up to six times. KSA also seek to improve its position to amongst top fifteen economies in the world. It is currently in twenties.
Promoting Tourism: The Kingdom is planning to open tourism to all nationalities. However, it will be in line with the values and beliefs of the country. It also aims to increase the number of pilgrims to thirty millions. The infrastructure development work is already in process for the same.
Investment Opportunities
Recent advancements since the launch of Vision 2030 and the NTP provide strong confirmation of the fast pace of change, opening doors of investment opportunities for both foreign and local investors in Saudi Arabia, since the Governmental authorities are working proactively in seeking and promoting new initiatives and private sector involvement.
The renewed policies allowing 100% foreign-owned trading companies are already in force and although aimed at large investments by multi-national entities, various foreign groups have already been licensed to establish such entities.
In August 2016 it was reported that the RCJY had signed as many as 24 contracts with up to 16 private sector investors for the development of various housing, commercial centers, hotels, medical clinics and other projects in line with Vision 2030 within a couple of month of its launch.
The policies allow that investments may take the form of joint ventures and/or public private partnerships and given the initiatives by the NTP many opportunities can be anticipated in the Eastern Province.
Bottom Line
KSA have already identified the need of hour and started taking effective and dynamic steps for diversifying their economies from oil and gas products on one side and formulating and amending the existing Corporate and Financial Laws to bring them in line with international laws on the other side. KSA already implemented new Company Law, Employment Law, trademark law and arbitration law and will soon be implementing International Financial Reporting Standards for recording of financial statements to increase confidence of international investors.
Launch of NTP and Vision 2030 surely aware the world that economy of Kingdom is still very strong and it shall come up as a better and brighter economy very soon.
