Is Saudi Vision 2030 doomed to fail?

Saudi Arabia has put in place a plan to diversify the economy called "Vision 2030", but this vision is not without challenges. Can such a comprehensive plan for the world's largest oil exporter succeed in the promised time frames?

Get rid of the dependency of oil
In a report published by Oil Price, the writer Julian Geiger said that Vision 2030 is ostensibly an ambitious plan for Saudi Crown Prince Mohammed bin Salman, which aims to modernize the Kingdom and diversify its economy away from oil.

But this raises many questions, as oil and gas represent 50% of the Kingdom's GDP and 70% of export earnings. The kingdom also holds 18% of the world's oil reserves, according to OPEC.

Indeed, Saudi Arabia has long used oil booms in favor of economic development plans designed to eliminate its dependence on oil.

Re to see 1970
The writer stated that Saudi Arabia has at least nine five-year development plans dating back to 1970, each designed to the same goal of diversifying the country's economy away from oil. How to put this plan into action is evident today.

Along with its reliance on oil, most of the kingdom's plans have called for a greater role for the private sector and human capital development. The Saudis are accustomed to such grandiose plans, which have been moderately successful.

If the 2030 vision of Saudi Crown Prince Mohammed bin Salman succeeds, its main objective will be to reduce the kingdom's dependence on the oil industry. Part of Vision 2030 calls for greater energy efficiency.

Although Vision 2030 aims to further rationalize the use of air conditioners, Saudi electricity demand is expected to double by 2030. In contrast, intensive use of electricity will increase the demand for renewable energy.

As the Kingdom's renewable energy needs grow, costs in the renewable energy sector should see some improvements. On the other hand, the 2030 vision will cause OPEC to lose its largest source, which will weaken its ability to manipulate prices.

The lesson of experience
The writer added that true success cannot be measured by promises. Evidence suggests that there are many challenges that the Kingdom will face in the path to achieving Vision 2030.

In fact, Saudi Arabia is still making huge investments in the oil sector. In August, Aramco said it wanted to buy 20 percent of Reliance Industries' refining and petrochemicals for $ 15 billion. Reliance will buy 500,000 barrels of crude oil from Aramco a day.

Vision 2030 includes a plan to integrate India as a strategic partner, but its desire to do so in the field of petrochemicals keeps it away from its goal.

The writer pointed out that Saudi Arabia has huge plans to finance the vision 2030 through the proceeds of offering 5% of the shares of Aramco, but this plan, which will be the largest initial public offering ever, has seen many delays.

On the other hand, human rights issues still plague Saudi Arabia, and progress in this area is necessary if the Kingdom wishes to flourish other industrial sectors and take over the status of the oil industry.

Tourism, one of the industries on which Saudi Arabia relies to help generate non-oil revenues, cannot thrive as planned in light of the current social climate in the kingdom. 10% by 2030.

The writer touched upon the unforgettable Ritz Carlton incident. The kingdom's laws also discourage foreign tourists from visiting.

Decline in foreign investment
Foreign investors do not have a positive view of Saudi Arabia. Foreign direct investment (FDI) in the Kingdom fell 12 times last year from just 10 years ago, and large multinational corporations were delayed by planned investments due to instability in the kingdom.

The 2030 vision is an ambitious plan that requires a lot of money, and the success of Aramco's IPO plans will determine Saudi Arabia's ability to achieve its goals by 2030.