A great deal can be said about the components of Saudi Arabia’s recently-disclosed economic vision until 2030. This piece focuses on some of the economic challenges and opportunities, as illustrated in the vision.
Much to their credit, Saudi authorities are transparent about the unemployment challenge, putting the jobless rate at 11.6 per cent. This is the highest announced figure for any Gulf country.
Conversely, jobless rates in Bahrain and Oman, the other two Gulf states suffering from high unemployment among nationals, are lower than the Saudi’s. However, what sets the kingdom apart is its acknowledgement of the extent of the problem, in turn a requirement for overcoming the problem.
The aim is to reduce the rate to 7 per cent in the years to come, something that is possible as officials push for greater participation of women. The vision, quite remarkably, calls for enhancing participation of women from 22 per cent to 30 per cent — clearly a desirable objective. One estimate puts unemployment rates among females and males at 33.3 per cent and 6 per cent, respectively.
Still, there is the challenge of joblessness among the youths, who comprise the majority of locals in the workforce. According to the “Rethinking Arab Employment” report produced by the World Economic Forum, youth unemployment is a challenge in three GCC countries. The levels stand at 27.8 per cent, 27.5 per cent and 20.6 per cent in Saudi Arabia, Bahrain and Oman, respectively.
However, actual jobless levels among youths in Saudi Arabia should be lower given the nature of the economy. A good number of nationals generate earnings from jobs related to Haj and Umrah pilgrimages. They often provide transportation services while others engage in trading activities such as during the last 10 days of Ramadan.
The plan calls for tripling the number of people performing Umrah, which takes place any time except during the annual Haj. Currently, some 8 million Muslims perform Umrah annually.
This should be made possible following the completion of expansion works in and around the Grand Mosque in Makkah. It goes without saying that Saudi officials would ease visa procedures for foreign nationals requiring visas to enter the kingdom. Currently, obtaining visas to Saudi Arabia is a cumbersome process.
The Haj serves as a golden opportunity for Saudi businesses to launch new consumer products. Demand tends to be high for anything and everything; hence the benefits derived to Saudi companies working in diverse areas including foodstuffs.
In fact, the 2030 vision envisages an enhanced role for Saudi private sector firms. Understandably, this goal requires streamlining business laws by making them as friendly as possible to investors.
Last but not least, the vision calls for strengthening the public investment fund from nearly $160 billion to $2 trillion. The projected expansion relies in part on the sale of less than 5 per cent of Saudi Aramco via an IPO.
The Sovereign Wealth Fund Institute estimates Saudi SWF at $637 billion at the start of 2015 down from $746 billion in August 2014. This places the kingdom a distant second after the UAE among Arab countries.
The authorities felt the need to draw on international reserves to meet public finance needs. Still, financing the war in Yemen is partly responsible for the decline in the size of Saudi SWFs. Happily, with the Yemenis entering negotiations in Kuwait, Saudi authorities are exerting maximum efforts to address the economic questions.
The writer is a Member of Parliament in Bahrain.
