For Iran’s new president, the acceptance into the Shanghai Cooperation Organization is an important diplomatic achievement as Raisi tries to bolster his image as a statesman and look toward the East for economic and strategic partnerships.
Five years have passed since the announcement of Vision 2030, Saudi Arabia’s roadmap for a post-oil economy. In April, Crown Prince Mohammed bin Salman sat down for an extensive interview to mark the occasion, focusing on the economic concerns of the Saudi public. In follow-up interviews, Saudi ministers and officials have also stressed the importance of the vision and highlighted objectives that have been achieved so far. While Saudi officials have recognized the obstacles posed by the coronavirus pandemic, they have emphasized the reforms they say will benefit Saudi citizens and improve their living standards. The government’s outreach at this juncture of the economic transformation is an acknowledgment of the strains diversification plans and austerity measures have placed upon on the Saudi population and, at the same time, an appeal for continued public support.
Mohammed bin Salman’s widely watched interview focused on the Saudi economy, demonstrating an awareness of the economic difficulties facing Saudis today. While the crown prince discussed unemployment, he also said that 50% of employed Saudis have “bad jobs” that barely cover their living expenses. Moreover, he insisted that the increase in the value-added tax from 5% to 15% would be reconsidered within the next five years, when the economic situation improves. Mohammed bin Salman’s focus on the economy, especially for Saudis burdened by the government’s current fiscal austerity and low-paying jobs, aimed to demonstrate an informed and responsive approach toward the economic hardship Saudis have been confronting, which he maintained would be temporary. At the same time, government spending during the coronavirus pandemic, notably the Public Investment Fund’s shopping spree for distressed global firms, while the government was hiking up the VAT, displayed a degree of detachment from the economic reality on the ground.
In May, four ministers, who serve as heads of various Vision 2030 committees, held a press conference to mark the fifth anniversary of the vision’s launch. Members of the media were invited to ask the ministers questions, which focused mainly on the economy and government spending. Ahmed Al Khateeb, minister of tourism and head of the Quality of Life Program – one of the committees tasked with implementation of Vision 2030 – sought to justify the government’s increased spending on entertainment and tourism despite the austerity measures the kingdom has enforced. Saudi Arabia has allocated $810 billion to develop various megaprojects in the tourism sector over the next several years. He suggested that such spending is only “transitional,” a measure to allow the private sectors for tourism and entertainment to grow, which he said would eventually reduce the need for government spending. Khateeb also noted a 30% decrease in travel outside the kingdom in 2019, citing this as an indicator of the pre-pandemic government effort to emphasize domestic tourism. Despite the Saudi leadership’s abundant spending to develop the tourism industry, Saudi tourists traveling across the kingdom have complained about the lack of adequate infrastructure, high prices, and low hotel standards. Khateeb also said that 400,000 foreign tourists visited the kingdom within four months of launching the electronic visa service in 2019, although no distinction was made in his comments between regular and religious tourism.
The coronavirus pandemic stalled Saudi Arabia’s ambitious plans to attract foreign tourists. Nevertheless, the Saudi Tourism Authority had success in attracting Saudis and foreign residents with initiatives such as “Saudi summer,” which took advantage of the southern region’s cooler climate. In 2020, the authority began running luxury cruises between Jeddah and Neom, the futuristic centerpiece of Vision 2030 located on the Red Sea coast. However, such bold plans faced challenges as a contagion-free environment was difficult to maintain in the middle of the pandemic. Nevertheless, Saudi Arabia’s interest in the cruise industry was not deterred by the pandemic. The Public Investment Fund acquired an 8.2% stake in coronavirus-hit Carnival Corporation in the spring of 2020. In January 2021, the fund launched the Cruise Saudi company to develop the local cruise industry, and the organization has already entered into a partnership with a Switzerland-based cruise line to expand routes to Aqaba in Jordan and Luxor in Egypt, marquee regional tourist destinations.
Khateeb’s comments during the press conference focused on high-end projects in the tourism and entertainment sectors. He did not explain, when asked, whether more affordable options would be available for middle-class citizens and those with limited income. Entertainment and tourism projects have catered mostly to a specific target group due to the costs and types of events promoted. The high prices of restaurants and hotels led Saudis to complain on social media, arguing that traveling abroad could be cheaper than vacationing at home. And while domestic tourism did grow in 2020, government officials acknowledged that restrictions on international travel were the primary reason for the increase.
Majid Al Qasabi, minister of commerce and investment, and Khalid al-Falih, minister of investment, addressed Saudi Arabia’s economic reform and investment strategy during the press conference. Qasabi insisted that key reforms should not be looked at in isolation but rather viewed in the context of the speed with which they were implemented and the impact they have had. Falih emphasized that foreign investment increased by 10% in 2020. Issued foreign investment licenses reached 1,200, which is higher than previous years (1,131 licenses in 2019, 736 in 2018, and 377 in 2017). While foreign interest in investing in Saudi Arabia dipped in 2018, it picked up again in 2019, especially in technology and entertainment. However, growing regional competition and uncertain intra-Gulf dynamics, evident in the recent Gulf Cooperation Council rift, might still deter potential investors.
Saudi ministers and officials have emphasized the importance of an oil price recovery to improve the economic situation for Saudis and relieve some of the government-imposed austerity measures. The crown prince in his interview acknowledged the continued centrality of oil revenue, saying, “there is a wrongful perception that the Kingdom of Saudi Arabia would like to dispose of oil.” Such statements seem to represent an effort to walk back his widely covered 2016 comment that, if oil revenue disappeared by 2020, Saudis would be able to “live without oil.” Mohammed Al-Jadaan, minister of finance and the head of Vision 2030’s Financial Sector Development Program, reiterated that the VAT would be lowered when oil prices recover. The promise of a VAT rate decrease seems to be an acknowledgement of how such austerity measures have been received negatively by the public, while tying it to an oil price recovery further underscores the continued importance of oil to the economy.
Following the crown prince’s interview and the associated media outreach, Saudi Arabia’s National Transformation Program, which has been central to the implementation of Vision 2030, released the documentary “The Transformation Journey,” in June. The documentary aimed to convince Saudis of the progress that has been achieved with Vision 2030 and focused on maintaining public enthusiasm. It included interviews with a number of Saudi ministers and officials in charge of different programs that are part of the vision. Interviewees compared today’s transformation with the bureaucratic system that used to exist, in comments that seemed aimed at persuading the public of the kingdom’s growing competitiveness and highlighting the achievements that they assert have specifically benefited Saudi citizens.
As Saudis assess Vision 2030 at the five-year mark, a return to pre-pandemic life seems to be slowly under way in the kingdom, offering an opportunity to consider how reforms will perform as society begins to open back up. Today, more than 40% of the population has received at least one dose of the coronavirus vaccine. In May, the kingdom opened its borders for vaccinated Saudis and foreigners after having closed them for more than a year. In addition to the kingdom’s ambition to attract foreign tourists, Saudi Arabia has placed high hopes on religious tourism, which contributes 2.7% of the kingdom’s gross domestic product. However, the hajj season, which begins in July, will be limited to Saudis and foreign residents for the second year in a row. The authorities announced increased capacity to 60,000 pilgrims from 2020’s limit of 1,000. In June, the Ministry of Hajj announced three packages for pilgrims ranging from $3,200 to $4,400, varying based on accommodations, amenities, and services provided. The prices do not include the VAT, which will be added to the packages. The high prices, with the addition of the 15% VAT, triggered criticism from Saudis on social media.
In recent weeks, the entertainment sector, an important non-oil revenue generator, has begun to ramp up its activities for vaccinated individuals after repeated shutdowns due to precautionary measures from the Health Ministry. The General Entertainment Authority has run a broad campaign to advertise its comeback by promoting events that, according to its Arabic slogan, will “compensate for the past two years.” At the same time, the post pandemic socioeconomic reality, which includes an increase in basic living expenses (such as fuel prices), the looming impact of the VAT, and an ongoing privatization process, might deter many Saudis from spending during these uncertain times.
Now that the pandemic looks to be nearing its end, the Saudi government has used the five-year mark to celebrate what it views as the progress made in reaching some of the ambitious goals embodied in Vision 2030, while also seeking to renew the public’s interest in achieving its goals. The Saudi leadership has acknowledged the economic hardship many are experiencing; reaching out to Saudis through interviews and documentaries – bolstered with data to support the individual views expressed – has aimed to reassure the population of the government’s continuous efforts. However, the Saudi leadership’s insistence that austerity policies and poorly paid jobs are only temporary won’t be convincing until concrete steps are undertaken to elevate living conditions for that large segment of the Saudi population that is often overlooked in the scheme of the kingdom’s grand projects. Achieving that improvement in living conditions will be one of the challenges as Saudi Arabia embarks on the next five years of Vision 2030.
The underlying economic factors driving debt issuances, issues related to how raised funds are redeployed within local economies, and the implications of looming debt maturities help to paint a comprehensive picture of the state of Gulf Arab economies.
Through its careful examination of the forces shaping the evolution of Gulf societies and the new generation of emerging leaders, AGSIW facilitates a richer understanding of the role the countries in this key geostrategic region can be expected to play in the 21st century.Learn More