by Dena Kleemeier
My family has worked for Saudi Aramco, a national petroleum and natural gas company based in Dhahran, Saudi Arabia for the past 16 years. In my time living in Saudi, I have experienced first hand the way in which the Kingdom uses/wastes their resources, providing oil to their citizens at a cheaper price than water, and subsidizing electricity to their populations. However with the decline in the price of crude (lost 67% of value since September 2014), the growing domestic oil demand of 7% per year, and the state of the environment, Saudi Arabia is in an awkward geopolitical situation, and is in need of comprehensive economic reform.
Although I am critical, Dr. Mamdouh G. Salameh’s article “Saudi Arabia’s Vision 2030: A Reality or Mirage” was enlightening to read an article explaining reality of Crown Prince Mohammed Bin Salman’s plan. The article reports three major points to the vision; 1.) Expand the non-oil sector of the economy (a good starting point, as over 85% of the KSA’s revenues are from oil). 2.) Triple the share of non-oil exports to $100 bn by 2020, and 3.) Reduce unemployment, and create 3m jobs by 2020. However, in order to carry through this vision, the kingdom needs to diversify its economy, invest in food production, petrochemicals, solar energy, nuclear power, water desalination plants, and phasing out financial subsidies for gas, diesel and electricity. The specific strategies that the KSA intends on adopting are adding value to exported fossil fuels, introducing energy efficient measures, and withdrawing from the petrodollar. This success will depend on the influence and power that the prince possesses. From my experience seeing solar panels implemented at Saudi Aramco, dust has hugely influenced the effectiveness of the panels, to the point that the company doesn’t want to pay to get the panels cleaned, thus leaving them unused. Vision 2030 is designed to create a 21st century Saudi economy virtually from scratch, which I don’t see as currently being an economically viable option. It isn’t clear which parts of Prince Mohammed Bin Salman’s plan will be effective, and which parts will not be environmentally and economically viable.
Salameh, Mamdouh G., Saudi Arabia’s Vision 2030: A Reality or Mirage (July 12, 2016). USAEE Working Paper, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2808611