Saudi Arabia's Full Statement to Bloomberg on Its 2017 Agenda

  • Senior source in economic council responds to questions
  • Discusses Aramco IPO, government efforts to cushion slowdown

A senior source in Saudi Arabia’s Council of Economic and Development Affairs, a body overseen by Deputy Crown Prince Mohammed bin Salman, responded to Bloomberg questions on the government’s 2017 agenda with the statement that follows. Questions have been edited for clarity.

Busy Agenda

This year will be a key year for Prince Mohammed’s plan for life after oil, Saudi Vision 2030. How do you respond to those concerned that the to-do list for 2017 is too crowded?

Answer: Firstly, I would like to make it clear that the to-do list is ambitious but not impossible, and we have already begun applying it. Our work has started in the beginning of 2016 with the formulation of our future vision for the Kingdom of Saudi Arabia’s position and our approach until 2030, and applying it realistically, clearly, ambitiously and decisively by the identification of challenges and visions.

Since the announcement of the Vision, we have started the actual implementation of several courses, including promoting the government performance by forming a specialized council in the field of economy and development, integrating some ministries, creating new executive government agencies and creating executive programs to achieve the objectives of Saudi “Vision 2030”.

With the launching of Vision 2030, several programs, such as National Transformation Program 2020, Fiscal Balance Program 2020, bonds issuing, paying the delayed full dues to the private sector, Citizen’s Account Program, Parallel Financial Market, General Entertainment Authority and activities directed to the citizens have been launched.

These are some examples of the success stories we have. These successes are directly contributing to achieving the objectives of the Saudi Vision 2030. Thanks to God, Saudi Arabia has social, economic, political and geographic abilities to achieve the Vision.

Taking Action

How will the government shift from talk to action in 2017?

Answer: As I mentioned in the previous answer, the government is working in several avenues that contribute to implementing the plans and achieving the objectives, including paying the delayed full dues to the private sector, creating the Small and Medium Enterprises Authority and providing financial funds to support this sector. In addition to allocating many opportunities to enable the partnership between both public and private sectors. In 2017, four variety allocation opportunities in the Saudi market will be offered for private sector, locally and globally.

Austerity Buffer

How will the government ensure that the Citizen’s Account, the new cash payout program for Saudis, is implemented without mistakes?

Answer: Citizen’s Account Program is a national program that aims to change the method of offering the government subsidies to be directed to low and average income groups rather than being comprehensive support. This program will cover all kinds of government subsidies in the future not only gasoline, electricity and high cost living allowances.

I recall that on Dec. 22, we announced the Citizen’s Account program. We also announced that registering for the program would start in February 1st of 2017, which was accomplished, thanks to God. Until now, more than 3 million Saudi families including 11 million male and female citizens had registered in the program. This means that more than half of Saudi society have registered in less than 30 days, and about 5 million male and female citizens registered in the first week easily and without any difficulties or technical malfunctions with high reliability.

In the kingdom, we also successfully established similar support programs in an electronic format such as Hafiz (a program meant to support job seekers) and social security and protection programs. This has acquired the kingdom an experience in management of these programs that draws on advanced technical infrastructure that we own and the electronic connectivity between more than 18 different government bodies. It should also be noted, that more than 80% of the registrations were done via mobile phones.

What has been said does not mean necessarily there will be no mistakes. Therefore, plans aimed at hedging against possible errors were developed. When examining the global experiences of such programs we found that all of them have suffered some faults in the beginning, and they have been improved and edited until they became efficient programs. That is why we included in our plans very conservative numbers and budget to make sure that the program covers all beneficiaries. In case we detected that the program did not cover an entitled category, we will adjust it and pay them retroactivity to achieve justice in coverage and support. With the intention of achieving objectives for which the program was created, the entitled citizen will always be a matter of concern for the program.

Growth Risk

How can the government prevent new taxes and a levy on expatriates from further slowing economic growth or putting too much pressure on the private sector?

Answer: The financial reforms are expected to cause some slowdown in economic growth. However, the state is working to cushion the slowdown through a number of procedures that will be taken in 2017. They include but not limited to the following:

  • Increasing government spending in 2017 in comparison to 2016.
  • Increasing the paid capital of Saudi Industrial Development Fund from 34 billion riyals to 59 billion riyals during 2017 in order to finance the private sector to stimulate economic growth and sustainable economic diversity.
  • Easing some of the regulatory restrictions (exporting as an example) in order to give private companies a chance to enter larger markets.
  • Establishing the National Center for Allocation to increase private sector contribution to the economy through the National Transformation Program and through state-owned enterprise’s privatization. In 2017, there will be privatizations of four opportunities for the private sector.
  • The prior announcement and gradualism of reforms will grant private sector adequate chance to invest and increase efficiency.
  • Launching the Citizen Account Program to minimize the impact of reforms on citizens and their in-home consumption.
  • Supporting main industrial sectors through loans and programs of increasing efficiency in energy consumption.
  • Paying the delayed full dues in 2016 to the private sector.
  • Increasing the transparency significantly in terms of financial reforms, the public finances of the state and the mechanism of dues payment for the private sector.
  • Improving export-financing capabilities in the Kingdom by increasing the size of existing programs to provide export companies with necessary funding.
  • Developing new economic sectors, such as the mining, logistics and entertainment sectors.
  • We believe that the enhancement of the economic efficiency will be the main key to raise the profitability of the private sector and promote the level of salaries, which will increase the attractiveness of the private sector to the Saudis and employment. Consequently, this step will support the domestic consumption and investment because of keeping money in the Kingdom. In addition, one of the most important goals that we seek to achieve is to diversify the national economy to support sustainable economic growth, which is based on productivity."
  • Launching the fund of funds by the Public Investment Fund, to invest in Venture Capital Funds and strengthening small and medium enterprises growth.
  • The local and international private sector is an important partner in the achievement of the vision, and is expected to adapt generally with the economic and financial measures and reforms, especially in the presence of incentive programs that increase efficiency and productivity. Saudi Arabia suffers from economic distortions due to the abundance of low-cost expats, which have encouraged the private sector to employ these workers, rather than investing in increasing the efficiency through using advanced technology.
  • We believe that the enhancement of the economic efficiency will be the main key to raise the profitability of the private sector and promote the level of salaries, which will increase the attractiveness of the private sector to the Saudis and employment. Consequently, this step will support the domestic consumption and investment because of keeping money in the Kingdom. In addition, one of the most important goals that we seek to achieve is to diversify the national economy to support sustainable economic growth, which is based on productivity.

Aramco IPO

How will Prince Mohammed’s team convince those who believe the initial public offering of Saudi Aramco is not in the country’s interests?

Answer:

  • Aramco will remain a Saudi company that contributes to the domestic product.
  • Saudi Arabia will not give up on its majority ownership of Aramco, and will not relinquish the control of it as the owner of largest proportion.
  • Citizens will be given the priority for the IPO by offering the shares on the Saudi stock exchange, Tadawul.
  • IPO proceeds will be invested in the development and diversification of the kingdom’s economy and will raise its sustainability.
  • Aramco IPO will raise transparency of the company and the efficiency of its business.
  • All the suggested options in the IPO are there to maximize the economic benefits of the kingdom.
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