Saudi’s US$3.2 trillion economic overhaul plan

Crucial role: An employee looks out over oil transport pipelines on the Arabian Sea in Saudi Aramco’s Ras Tanura oil refinery in Saudi Arabia. Aramco will lead the country’s investment drive by contributing five trillion riyals over the next decade. ─ Bloomberg

Riyadh: Saudi Arabia has announced plans to pump investments worth US$3.2 trillion (RM13.28 trillion) into the national economy by 2030, roping in the oil-reliant kingdom’s biggest companies in a major new economic diversification push.

The announcement by de facto ruler Crown Prince Mohammed bin Salman underscores an effort to jumpstart the domestic economy as the top crude exporter battles high youth unemployment and a coronavirus-triggered downturn.

“The total investment injected into the national economy is expected to reach 12 trillion riyals (US$3.2 trillion) by 2030, ” Prince Mohammed said in a speech carried by state television.

Twenty-four of the kingdom’s biggest companies, including energy giant Aramco and petrochemical firm SABIC, will lead the investment drive by contributing five trillion riyals over the next decade, the crown prince told reporters later at a virtual briefing.

He said the companies, many of them listed, had agreed to lower their dividends and redirect the money into the domestic economy in exchange for incentives such as subsidies.

The Public Investment Fund (PIF), the kingdom’s sovereign wealth fund, will provide three trillion riyals.

And the remaining four trillion riyals will come from a new “national investment strategy”, which will soon be announced, Prince Mohammed said.

The initiative will help boost economic growth, create hundreds of thousands of new jobs and strengthen the private sector, he added.

The programme is part of a mammoth 27 trillion-riyal (US$7 trillion) investment plan over the next decade, which will include huge government spending to spur the domestic economy, the prince said.

It is designed to “promote the development and diversification of the national economy”, the state-run SPA news agency said, adding that it will “strengthen cooperation between public and private sectors”.

But the investment push should be “taken with a grain of salt”, said Ellen Wald, president of Transversal Consulting and author of the book Saudi Inc.

“It doesn’t help grow the private sector to compel nominally private sector companies to invest in government programmes at the expense of their shareholders or investment in their own endeavours, ” Wald told AFP.

The announcement comes after the crown prince said in January that the PIF would invest US$40bil annually in the domestic economy over the next five years. ─ AFP