Ryad | Saudi Arabia on Tuesday announced a 12 trillion riyal (roughly $ 3.2 trillion, € 2.7 trillion) investment plan to boost its private sector by 2030, as part of the kingdom’s efforts to diversify its ultra-dependent economy on oil.
This announcement by Crown Prince Mohammed bin Salman, de facto ruler of the Saudi kingdom, comes as the country faces high unemployment and severe economic hardship caused by the Covid-19 pandemic and falling prices of gross.
“The investments injected (…) into the national economy should reach 12 trillion riyals by 2030”, declared the crown prince during a speech broadcast by state television.
This amount includes 3 trillion riyals (about 800 billion dollars, 682 billion euros) from the Saudi Public Investment Fund (PIF).
Twenty-four of the largest Saudi companies, including the oil company Aramco, will also contribute 5,000 billion riyals (1.13 billion euros), added the prince during a virtual press briefing. These companies have agreed to lower their level of dividends in order to redirect this money to the domestic economy in exchange for financial incentives, he further explained.
The remaining 4,000 billion riyals (908 billion euros) will come from a “new investment strategy” which will be announced soon, the crown prince added.
This plan aims to “strengthen the private sector”, creating hundreds of thousands of jobs and providing support to local businesses, added Mohammed ben Salman.
However, its effectiveness is questioned by some experts. “It does not help the growth of the private sector to force private companies to invest in government programs to the detriment of their shareholders or their investments in their own projects,” said Ellen Wald, president of Transversal Consulting and author. from the book Saudi Inc.
In January, the crown prince announced that the PIF would invest 40 billion dollars (around 34 billion euros) per year in the Saudi economy for five years.
The PIF had previously focused on investments in giants of the global economy.
The first economy in the Arab world, Saudi Arabia is struggling to attract foreign investment, the keystone of the Crown Prince’s Vision 2030 plan which aims to diversify the kingdom’s economy.
The unemployment rate reached 14.9% in the third quarter of 2020 in Saudi Arabia, a slight decrease from the record of 15.4% reached in the previous quarter, according to official figures.
In 2020, the double shock of the pandemic and the fall in oil prices pushed the kingdom to triple its VAT to 15% and to eliminate monthly allowances intended for civil servants to contain its budget deficit.
Highly unpopular among a population accustomed to state largesse, these austerity measures have been put in place even as the kingdom continues to increase its spending on mega-projects like NEOM, a futuristic megalopolis of 500. billion dollars being developed on the Red Sea.