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Saudi Arabia presents plan to move beyond oil

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Saudi Arabia outlined ambitious plans on Monday to move into industries ranging from information technology to health care and tourism, as it sought to convince international investors it can cope with an era of cheap oil.

A meeting and presentation at a luxury Riyadh hotel was held against a backdrop of low oil prices pressuring the kingdom’s currency and saddling it with an annual state budget deficit of almost $100 billion – the biggest economic challenge for Riyadh in well over a decade.

Top Saudi officials said they would reduce the kingdom’s dependence on oil and public sector employment. Growth and job creation would shift to the private sector, with state spending helping to jump-start industries in the initial stage.

“It’s going to switch from simple quantitative growth based on commodity exports to qualitative growth that is evenly distributed” across the economy, said Khalid al-Falih, chairman of national oil giant Saudi Aramco.

Over 2,400 people, including local and foreign officials, business, consultants and academics, registered for the event, staged by the government’s investment promotion agency.

Commerce and industry minister Tawfiq al-Rabiah said Saudi Arabia had been a victim of the “Dutch disease” – a condition in which the oil sector had crowded out other parts of the economy – but was now working to correct that.

Under the reforms, parts of the national health care system would be converted into independent commercial companies, officials said.

Participants in the conference, including the chief executives of U.S. aerospace firm Lockheed Martin and Pepsico, discussed subjects ranging from how to foster entrepreneurs to ways of developing dynamic cities and increasing the role of Saudi women in the business world.


The heavy presence of foreign business representatives suggested many saw opportunities in the Saudi strategy. Although Riyadh is burning through its foreign assets to cover the budget gap, it still had $628 billion in November, enough to finance years of new projects.

Some participants expressed doubt about the scale of the planned change in a country where about two-thirds of local workers are in the public sector, preferring it to more rigorous private employment.

There is little tradition of entrepreneurship in the world’s biggest oil exporter, and financial and legal systems have not been set up to encourage it.

“The transition away from being a rentier state is not a comfortable one,” said David Chaudron, managing partner of the California-based Organized Change Consultancy, which works with Saudi companies.

“They’re trying. But the fundamental question is: will their trying bear enough fruit before the downside of the current system hits? Or is it a day late and a dollar short? Will the forces of change ultimately be enough to overcome the inertia of the current system? I don’t know.”

The U.S. ambassador to Saudi Arabia, Joseph Westphal, pointed to risks in administering the plans.

“Saudi Arabia has to have a government system that is adaptable,” he said, adding that top officials would need to delegate decisions and authorities would have to be willing to take risks in the recognition that there would be some failures.

Nevertheless, many participants at the conference recognized that strong political momentum had now built up behind the reform plans, many of which had previously been discussed for years without result.

The momentum has increased since King Salman took the throne in January last year and created a powerful Council of Economic and Development Affairs chaired by his son, Prince Mohammed bin Salman. The government is believed to have hired hundreds of Western consultants to work on the plans.

Falih said that in addition to using its spending to start industries such as shipbuilding, Saudi Aramco would use its extensive educational and vocational training program to help create the human capital needed for the transformation.

“Saudi Aramco will be a bridge for a transition away from itself,” he said.



16 Comments on "Saudi Arabia presents plan to move beyond oil"

  1. makati1 on Mon, 25th Jan 2016 7:28 pm 

    Back to desert and camels…

  2. Rick Bronson on Mon, 25th Jan 2016 8:32 pm 

    They have started to acquire refineries around the World. And these refineries will buy crude only from Saudi Arabia and refine it and sell it in the local markets.

    But if they do not embrace the Women’s rights, they cannot develop. 3 generations have lived on Oil without working hard, and they cannot change overnight.

  3. pinkdotR on Tue, 26th Jan 2016 5:27 am 

    Why don’t they do everything to become a major producer of solar electric power? They will not replace oil exports income when they become net importer – 90% of their budged comes from exporting oil. Can it be replaced with tourism, healthcare and IT business? No way. When they become net importer they are going to have war 100 times worse than the one in Syria. When this happens even Angela Merkel herself will go on board of a war ship to protect Greek and Italian islands from the flood of refugees.

  4. ennui2 on Tue, 26th Jan 2016 8:29 am 

    It’s about time.

  5. Lawfish1964 on Tue, 26th Jan 2016 8:37 am 

    You said it, Makati! Saudi Arabia is not a tourist destination. When the oil’s gone, so is that country.

  6. GregT on Tue, 26th Jan 2016 9:46 am 

    “When the oil’s gone, so is that country.”

    And so will be our countries.

  7. PracticalMaina on Tue, 26th Jan 2016 10:53 am 

    What you guys dont want to go to a country to see a public beheading? They were talking about how over 50 have been executed there this year so far, on a central Maine radio station.

  8. GregT on Tue, 26th Jan 2016 11:26 am 

    Which guys would you be referring to Practical? I see no reference above to anybody wanting to go to SA to see a public beheading. Do you?

  9. Lawfish1964 on Tue, 26th Jan 2016 1:23 pm 

    Yeah, I don’t know too many tourist destinations where alcohol is illegal, and people are publicly beheaded. Sounds like a real swell time.

  10. twocats on Tue, 26th Jan 2016 1:24 pm 

    Maina – you might need to start throwing in an lol now and again I guess… although they are public they don’t seem to be very widely attended events. I quickly scanned through one and saw only official personnel. apparently even in SA this doesn’t pass for entertainment. I’d go see the trials and executions of the worlds elite though – to be ironically held in Davos.

  11. paulo1 on Tue, 26th Jan 2016 1:55 pm 

    This one is beyond the pale funny. When the money is gone they are fu%!ed, pure and simple. No water, no food, no work ethic, no tolerance, and no friends. They can’t even offer vice. Going to KSA for a holiday would be like going to Los Vegas without Los Vegas. No, it would be worse. At least Nevada has dry heat.

  12. shortonoil on Tue, 26th Jan 2016 5:25 pm 

    “No water, no food, no work ethic, no tolerance, and no friends.”

    28 million people, and the oil is about gone. How long before the Anthropologists start visiting there to study the reemergence of cannibalism? How do you say, “how to tenderize granny” in Arabic?

  13. BC on Tue, 26th Jan 2016 6:24 pm 

    Study the history of the KSA pre-1938 and thereafter through the decade after WW II.

  14. frankthetank on Tue, 26th Jan 2016 11:44 pm 

    That country is going to see a huge exodus sooner or later. They’ll all head north to Europe i’m sure.

  15. Apneaman on Tue, 26th Jan 2016 11:57 pm 

    That’s right frank, there will be plenty of blowback for the west as the great ME unavailing continues. Won’t be confined to just Europe either.

  16. Krnz300 on Wed, 27th Jan 2016 10:20 am 

    The world needs to move beyond OIL and all fossil fuels… if the planet is to survive…..

    Climate Change is real and fossil fuels are the cause.

    100% electric transportation and 100% solar by 2030


    How Is Climate Change Affecting the Philippines?

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