Nov. 11, 2019
Launched in 2016 by Crown Prince Mohammed bin Salman, Saudi Arabia's National Transformation Program (NTP) is a subcomponent of the better-known Vision 2030 document. The action plan was set out with the aim of diversifying the Kingdom's mainly oil-based economy, creating alternative channels of revenue, and preparing the nation for a post-oil future.
In the run-up to 2030, NTP 2020 also aims to improve Saudi Arabia's business ecosystem through carrying out social reform. Unlike many similar plans in the developing world that never go beyond enumerating broad and vague objectives, NTP 2020 has specified 543 initiatives across a number of sectors, with an estimated total cost of USD70 billion. This clarity of objectives is partly due to the fact that, much like its parent document, NTP 2020 was devised and launched in a specific context.
After nearly a decade of economic growth thanks to high crude prices, in 2014 most oil-based economies were challenged by the plummeting value of oil. Saudi Arabia, in particular, had to adjust its budget to account for lower oil revenues, while facing all-time high demand for housing, electricity, and other services. As a result of the world's reduced reliance on hydrocarbon fuels and the rise of new crude oil suppliers, prices have remained low for the last five years, prompting many Saudi decision makers to conclude that the time is ripe for the reinvention of the Saudi economy in a post-oil world.
Speculations about the falling importance of oil as a commodity may turn out to be premature, and there may well be another oil boom in the offing, but the Kingdom has nothing to lose by diversifying its economy. Some of the action plan's objectives include raising the government's non-oil income from SAR163 billion to SAR600 billion by 2020 and increasing the private sector's contribution to the GDP to 65%, while keeping the oil production at levels higher than 12 million bpd.
A fair and comprehensive assessment of the NTP 2020's success will not be possible until such time that all 24 ministries and national authorities involved in the project publish their annual statistics for 2020—presumably sometime well into 2021; however, we can make informed predictions about the likelihood of some strategic targets being met.
Quite probably, some key targets set in 2016 in areas such as energy, health, and housing will be accomplished by 2020. The housing sector will see USD21 billion of investment, according to Majed Al-Hogail, the Minister of Housing. This will go a long way in raising the contribution of the real estate sector from 5% of GDP to 10%. Meanwhile, the Council of Ministers upgraded the Private Health Institutions Law in 2019, thus paving the way for more overseas investments in the sectors. This decision, too, has moved the country closer to meeting the set target of increasing private healthcare spending from 25% to 35% by 2020. However, as NTP 2020 is essentially a stepping stone toward meeting the objectives of the Saudi Vision 2030, it makes sense to evaluate the NTP 2020's achievements in light of the lofty goals the Kingdom has set for itself under Vision 2030.
One such benchmark objective specified in the vision is to upgrade Saudi Arabia's status as the 19th-largest economy in the world to 15th place by the end of the plan. According to the IMF, the Kingdom was still in 19th place in 2018. However, chances are the Saudi economy will manage to improve its ranking—by one spot—by the end of 2021, especially as hosting the G20 summit in 2020 may have a stimulating effect on the nation's economic growth. We will have to wait and see whether the Saudi economy manages to kick-start its decade-long leap in 2020.