Saudi Arabia 2016 | DIPLOMACY | YEAR IN REVIEW

Many Gulf nations boast a plan to one day be free of their dependence on hydrocarbons, yet Saudi Arabia's bold Vision 2030 hit headlines around the world this year as a definitive glimpse of life after oil and how to get there.

The spotlight was on HRH Mohammad bin Salman bin Abdulaziz Al-Saud, Deputy Crown Prince of Saudi Arabia, this year as the architect of the Kingdom's bold Saudi Vision 2030. Saudi Arabia has long been known for its dependence on the black stuff, its glistening cities' skylines shaped by the industry. It is this reality, however, that the Deputy Crown Prince has set out in his vision to leave behind.

Currently, the country derives 90% of its revenue from oil, and with crude prices in the doldrums and looking unlikely to top $100 a barrel again any time soon, diversification has quickly become the byword. For Saudi Arabia, the fall in oil prices has been a wake-up call. Back in 2011, when oil sat at a sumptuous $110 a barrel, the country was able to post a fiscal surplus of 20% of GDP with zero public debt and an eye-watering $700 billion in foreign reserves. Fast-forwarding to 2015 and the country posted a deficit of 16% of GDP, public debt of 10%, and currency reserves of less than $600 billion.

Saudi Vision 2030, unveiled in April 2016, includes a host of regulatory, budgetary, and policy reforms. One of the headline plans, however, is for a flotation of up to 5% of Saudi Aramco, Saudi Arabia's state-owned oil firm. The listing would make the oil giant the most valuable listed company in the world, with estimates suggesting the firm is worth over $1 trillion—more valuable than Apple, ExxonMobil, and Facebook combined. The cash generated is then expected to be injected into the Kingdom's sovereign wealth fund, which will swell to $2 trillion and enable it to become an even more significant player in global investments. In a single stroke, the Saudi authorities will have created a gargantuan investment vehicle, fostered a culture for future foreign investment, and also offered the strongest endorsement yet for the private sector it hopes will drive the vision.
Presently, Saudi Arabia has a crude oil production capacity of 12.5 million bpd, giving it the ability to affect global oil prices by expanding or reducing supply. Despite pressure to drop production to boost prices, however, Saudi Arabia has sought to maintain its market share. With 17% of all global supplies sitting under its sands, OPEC estimates that the country has some 266.46 billion barrels of proven reserves. Over 2015, the Kingdom produced around 10.19 million bpd on average, according to statistics from the newly created Ministry of Energy, Industry, and Mineral Resources (MEIMR), formerly the Ministry of Petroleum. Of this, 7.16 million bpd were exported in crude format, while 1.15 million left Saudi shores as refined product. Saudi Arabia had 3,555 wells in operation as of end-2015, up some 149 wells on the previous year. The lower price of crude has not only hit the budget, but also the public after a price hike of some two-thirds from SAR0.45 ($0.12) to SAR0.75 ($0.20) in January for Octane 91.

The construction sector is often the best barometer of overall economic activity, and Saudi Arabia's constructors remain busy despite falling investment. Following budget cuts, the government's National Transformation Plan 2020 has determined which construction projects are essential to the economic diversification that underpins the overarching Vision 2030. Elsewhere, authorities have taken the unprecedented move of introducing a “White Land" tax, which involves a 2.5% annual levy on the total value of undeveloped land. The move looks to tackle the endemic challenge of undeveloped plots, with a massive 40% of land within major cities remaining undeveloped according to recent reports. The tax will also open up opportunities for the private sector, and revenues pumped into government housing projects. Another sector that is set for special treatment under Vision 2030 is the tourism industry. Previously open to visits only for the Hajj or Umrah, the authorities hope to open up a wider portion of the country to visitors, although it is mainly the domestic tourist industry that the government has in its crosshairs. By the end of the decade, the Saudi Commission for Tourism and National Heritage (SCTH) expects tourism numbers to rise to more than 140 million, with 128 million domestic and 13.1 million foreign tourists, the latter mostly from the Gulf and other Arab countries. Domestic tourism spending, in turn, is set to rise from its current $13.1 billion to $20.7 billion by 2020, and foreign spending nearly doubling, from its current $3.1 billion to $6.1 billion.

Saudi Arabia, by unveiling its vision for 2030, is looking to avoid the current predicaments of large oil-dependent nations. While still in the early stages, observers are confident that the Kingdom has the right leadership in place to make the dream a reality and transform Saudi Arabia into a prime investment destination outside of the oil and gas sector.