Saudi Arabia's Vision 2030: A Reality or Mirage

Abstract

Since the discovery of oil in commercial quantities at Dammam oil well No.7 in March 4, 1938, Saudi Arabia has been almost totally dependent on the oil-export revenues. Seventy eight years later and a cumulative production of 146 billion barrels of oil (bb) since then, Saudi Arabia’s budget is still dependent on the oil revenues to the tune of 90%. This is a moment of high anxiety in Saudi Arabia. Oil prices, currently $50/barrel, are less than half the level the Saudi government needs in order to balance its books. Moreover, its financial reserves are depleting very fast. There is nothing the Saudis need more than comprehensive economic reform. The kingdom must end its deep reliance on the oil revenue and build a dynamic 21st century economy. The current path can’t be sustained much longer. That is why the kingdom has launched Vision 2030 which aims to expand the non-oil sector of the economy and reduce unemployment. However, to achieve the objectives of Vision 2030, Saudi Arabia needs to start the diversification of its economy without a minute’s delay. The paper will argue that as Vision 2030 is a plan designed to create a 21st century Saudi economy virtually from scratch, it will encounter some huge hurdles not least because of the suspicion that this project has something to do with the generational change in leadership when king Salman departs the scene. It will also argue that Vision 2030 may not achieve much since it's not bold enough in the area that matters most ― developing human capital. Still it is a step in the right direction if there is the political will to go ahead with it.

Keywords: Vision, Diversification, Oil Price, Reforms, Oil Strategy, Mirage