Saudi's National Transformation plan: First details revealed

Published June 8th, 2016 - 07:00 GMT
The plan also aims to improve the quality of services provided by the government and achieve a prosperous and sustainable future. (File photo)
The plan also aims to improve the quality of services provided by the government and achieve a prosperous and sustainable future. (File photo)

Saudi Arabia has revealed initiatives to more than triple its non-oil revenue and reduce public-sector salaries over the next five years under its National Transformation Plan.

Elements of the plan revealed yesterday to reporters, showed the kingdom aims to boost non-oil revenue to SAR 530bn ($141bn) by 2020 and create 450,000 non-government jobs.

Reuters said the plan aims to improve the quality of services provided by the government and achieve a prosperous and sustainable future.

It includes more than 500 projects and initiatives in addition to performance indicators for government agencies and ministries, estimated to cost around SAR 270bn to implement.

The newswire cited minister of state Mohammed Al al-Sheikh as saying the cost would have no impact on the Saudi budget, with initiatives from the private sector expected to contribute SAR 300bn.

The NTP follows on from long-term reform roadmap Vision 2030, announced by Deputy Crown Prince Mohammed bin Salman in April. The overall goal is to both diversify the economy away from oil and implement social reforms after the country posted a nearly $100bn deficit last year linked to tumbling crude prices.

One key element of the plan is to increase government debt to gross domestic product to 30 per cent from 7.7 per cent today.

Non-oil revenues will be boosted by value-added tax, taxes on tobacco and sugary drinks and fees on the private sector.

Al al-Sheikh said there were no plans to introduce income tax for citizens but a text document provided to reporters proposed SAR 150m was allocated to prepare income tax for residents, likely meaning expatriates.

The official said VAT was the only tax commitment approved so far.

Other major initiatives of the NTP will be the reduction of public salaries as a proportion of the budget to 40 per cent, from 45 per cent by 2020, and an SAR 200bn cut to water and electricity subsidies.

Reuters cited the document as saying oil production capacity would be maintained at 12.5 million barrels per day, gas output would increase from 12 billion cubic feet a day to 17.8 billion and refining capacity would increase from 2.9 million bpd to 3.3 million bpd.

The kingdom will also look to install 3.5 gigawatts of renewable power by 2020 and spend SAR 300m on identifying locations for nuclear electricity plants.

Other spending plans include SAR 4.7bn on improving hospital emergency rooms and intensive care units, SAR 2.1bn to restructure the postal sector, SAR 5m to set up an intellectual property authority, SAR 8m to improve civil service performance and SAR 3.5bn to maintain cultural heritage.

To date the plans have been applauded, although some critics have suggested a 2020 timeline for ending dependence on oil and a focus on the private sector for new revenue streams while reducing government spending many companies depend on may not be realistic.

Among the measures announced yesterday were the transfer of all power generation from the Energy Ministry to “strategic partners” by 2020. Water desalination in the capital Riyadh will also be privatised.

Within the kingdom itself conservatives have also appeared resistant to plans to increase the number of women working and the creation of more entertainment opportunities.

The NTP is the result of months of planning with foreign consulting firms and Saudi nationals.

Elements of Vision 2030 that were not disclosed as part of the NTP yesterday include the privatisation of state-oil company Saudi Aramco and the transformation of the Public Investment Fund to the world’s largest sovereign wealth fund.

By Robert Anderson

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