Saudi Arabia recently launched a new strategy for the economic development of the Kingdom over the next 15 years. The Vision 2030 outlines the government’s medium term goals and how it aims to achieve them. The overriding theme of the document is one of diversifying the economy away from oil in order to create jobs and improve the living standards in a sustainable way.
According to a recent report by international consulting firm McKinsey, at least 4.5 million working-age Saudis will enter the labour market by 2030. If female participation continues to rise, then this figure could rise to 10 million. This would mean “almost three times as many jobs for Saudis as the Kingdom created during the 2003–13 oil boom”, according to the report.
In this context, the public sector cannot be the employer of last resort, and the private sector will need to be the engine of job creation in the coming years. One of the explicit goals of the Vision 2030 is to increase the size of the private sector to 65% of the economy (from 40% currently), with particular focus on small and medium sized enterprises. Several challenges need to be address in order to achieve this goal, including reducing red-tape and improving the business environment, attracting foreign investment which often brings new technology and skills transfer, and overhauling the education system equips young people with the skills they need to be productively employed in the private sector. All of this will take time to achieve, but the Vision 2030 explicitly recognizes and addresses these challenges, which is a key first step.
One of the most important components of the new Vision 2030 is the transfer of the national oil company Saudi Aramco into the restructured Public Investment Fund, along with the sale of a small share of the company (maximum 5%) to release some equity, which can then be used to invest in other non-oil revenue assets. Aramco itself will be restructured in due course, so that it is no longer just an oil company, but a diversified industrial giant. This will ultimately make the government’s revenue less vulnerable to oil prices, and more stable. At the same time, the development of non-oil industries will create jobs within the Kingdom and add to the economy’s capacity to grow in a sustainable way over the longer term.
In addition to developing the industrial sectors of the kingdom, the Vision 2030 strategy outlined plans to grow the tourism and hospitality sector, to make the most of Saudi Arabia’s culture and heritage and the already substantial number of visitors coming to the Kingdom on pilgrimage every year. The tourism sector is a labour intensive one, and again, developing this sector can add to the employment opportunities open to young Saudis in the coming decade.