1. Introduction and Background
Oil is the core of the Saudi Arabian economy. The country is the largest exporter of oil in the world, and it typically derives about 90 percent of its government revenue from it. Thus, Saudi Arabia can be classified as a rentier state – defined by Hossein Mahdavy as a state that derives a majority of revenue from rents on natural resources like oil. Oil rents, as a percentage of gross domestic product (GDP), have typically consisted of between a quarter and two thirds of total Saudi Arabian GDP.
Revenue from oil, however, is not reliable as it once was for Saudi Arabia. Between 2010 and 2014, a barrel of oil sold at an average of 100 dollars, but between 2015 and 2018, the price dropped to an average of 50 dollars per barrel and has only slighted rebounded in 2023 to 70 dollars. The International Monetary Fund (IMF) has warned rich Arab Gulf countries, like Saudi Arabia, about the risks of relying on oil to support citizen and government income. Additionally, the IMF has encouraged the diversification of oil-dependent economies to better support and stabilize economic growth.
In response to the decline in world oil prices and concerns about economic stability, Saudi Arabia’s Crown Prince Mohammed bin Salman bin Abdel-Aziz Al Saud (MBS) launched an economic redevelopment plan in 2016. Based on a report from the American consulting firm McKinsey & Company, this plan – named Vision 2030 – aims to diversify the country’s economy and reduce dependance on oil. Vision 2030 plans to transform the Saudi Arabian oil-based economy to one based on knowledge instead. A knowledge economy recognizes the role that knowledge and technology have in economic development and emphasizes progress in human capital, education, employment, information and communications technology, and innovation. Saudi Arabian citizens would have access to better education and career opportunities without the risk of economic downturn due to fluctuating oil prices.
But, Vision 2030 and its current trajectory will fail. As is, it overpromises and will underdeliver. The plan can be successful, though, if three major components are implemented: greater input from Saudi Arabian citizens, non-exploitative economic roles for women, and extensive education reform. MBS has the power to refine Vision 2030 into a feasible plan – one that can actually be completed by 2030. He can break the failed streak of five previous economic development plans for Saudi Arabia that began in 1970. Furthermore, the Saudi Arabian government has a duty to ensure a stable economy and competitive opportunities for its people in an increasingly globalized world.
2. Vision 2030’s Underwhelming Policies and Progress
Vision 2030 has made little progress since its introduction in 2016. Coupled with this disappointing start, the plan’s budget is ambitious. The projected budget is 2 trillion dollars (a decrease from the initial McKinsey estimate of 4 trillion dollars), which is supposed to double Saudi Arabia’s GDP. However, the ability to raise such an amount of money is “practically next to impossible, unless crude oil prices see a significant appreciation, or Saudi Arabia plans to sell a higher portion of Aramco,” the national oil company. Additionally, the Saudi Arabian budget is notably opaque, ranking 107th of out 115th in the world in transparency levels – which does not inspire faith in budget reform or accountability. Saudi Arabia already spent billions of dollars on several failed 5-year reform plans, which resulted in 90 percent of its annual budget still dependent on oil revenues.
The plan’s underwhelming record – and near impossible budget – foretells a corresponding underwhelming outcome for the Saudi Arabian economy and its people. In fact, the three main sections of Vision 2030 – the Privatization Program, the Public Investment Fund Program, and the National Industrial Development and Logistics Program – are particularly behind schedule in their goals. And, the lack of economic growth under these three programs must be interpreted by the Saudi Arabian government as a call to action.
2.1 The Privatization Program
The Privatization Program aims to increase employment in the private sector while reducing the number of citizens reliant on government income. Seventy percent of the Saudi Arabian workforce is employed by the public sector, mainly in bureaucratic positions, where they are accustomed to relatively high and stable salaries. Saudi Arabia has recruited foreign nationals to work in the private sector; they consist of more than 80 percent of the privatized workforce. These private sector jobs are often in the industrial or retail sectors or in private households– jobs that the average Saudi Arabian citizen does not want. Rather, they prefer the security, longevity, and high income of a government post. Paradoxically, greater privatization could actually increase foreign skilled labor, for many Saudi Arabians currently “lack the necessary skills and motivation to do [the private sector’s] manual or strenuous work.” The government has attempted to create “favorable conditions” to encourage private sector job growth through teleworking policies and an online job-seeking platform. But, there is little evidence that these policies have supported growth.
Thus far, the Privatization Program has not met its goal of increasing employment in the private sector. It has, however, privatized four milling companies, finalized agreements for two water desalination projects, and completed Phase 1 of an initiative to “attract private investment to finance the construction of education buildings.” These accomplishments are vague and have not realistically contributed to increasing private employment levels. In 2019 alone, the number of private-sector jobs – both for foreign and domestic workers – dropped by more than 200,000. Moreover, the number of Saudi Arabians employed in the private sector only increased by 36,000 during 2015-2019 even when two million foreign workers left the economy since 2016.
2.2 The Public Investment Fund Program
The goal of the Public Investment Fund (PIF) Program is to become the world’s largest sovereign wealth fund and to transfer ownership shares of Aramco to the Saudi Arabian public. The program plans to reinvest the wealth it has accumulated into the Saudi Arabian economy to fund technology and infrastructure, hopefully creating jobs. For example, it committed to investing 150 billion Saudi Arabian riyals (equal to about 40 billion U.S. dollars) into the economy each year from 2021 to 2025. Yet, no data from the government has been released to substantiate the commitment, and instead, the PIF’s money is instead invested in Uber (3.5 billion dollars) and Softbank’s technology fund (100 billion dollars). Without transparency, the PIF is in danger of becoming a “political tool” rather than an economic one; it can also be vulnerable to corruption if the public cannot check the government’s power.
To raise money for the PIF Program, Saudi Arabia has decided to offer an initial public offering (IPO) of state-owned Aramco. Aramco is valued at 2.5 trillion dollars, and this IPO, at 5 percent, is worth approximately $125 billion dollars. Saudi Arabian policymakers hope that by selling shares of Aramco to the public, the PIF can become the world’s largest sovereign wealth fund and replenish the Saudi Arabian economy with its profits derived from citizens’ personal wealth. To be able to fund Vision 2030, however, the government will likely have to sell up to 49 percent of Aramco’s shares, which is a divergence from its initial 5 percent IPO. No data of Saudi Arabian citizens buying shares has actually been recorded or released. Oil, particularly the Aramco company, is still the backbone of the Saudi Arabian economy because Vision 2030 in its present state has not been successfully implemented. So, Saudi Arabia is unlikely to relinquish almost half its ownership of Aramco.
2.3 The National Industrial Development and Logistics Program
The National Industrial Development and Logistics Program’s objective is to diversify industry through the development of the energy, logistics, manufacturing, and technology sectors. It focuses on “unlocking the full potential” of “local content” and the “Fourth Industrial Revolution,” which is driven by technology advances and digitalization of information. Specifically, it aims to raise gas production, grow renewable energy sources, and improve the local, regional, and international “connectivity of trade and transport networks.” Technology is alluring to Saudi Arabia and its policymakers for modernization purposes. But, the country cannot become a center of industry under its current structure because its citizens do not have many of the necessary skills to adapt to a technology-driven workforce. Because of the underperforming education system, many Saudi citizens are unprepared to take on jobs like these that require training and critical thinking.
Increasing access and quality of education is crucial to economic success. The Saudi Arabian education system, though, is lacking in teaching critical thinking skills that spur innovation in students. Rather, rote learning methods, such as memorization, are implemented. To make the National Industrial Development and Logistics Program successful, the Saudi Arabian government must invest in education reform – and in their citizens.
3. A Tripartite Policy Recommendation
Vision 2030 can be successful. The Saudi Arabian government, however, must address three significant issues: the lack of citizen input, the exploited role of women, and the underachieving education system.
3.1 Input from Citizens: The Saudi Center for Opinion Polling
MBS recruited the American consulting firm McKinsey & Company to construct Saudi Arabia’s economic development plan – notably without input from ordinary Saudi Arabian citizens. McKinsey’s Vision 2030 did not fully account for the people’s reluctance to leave higher-paying, public-sector work. Without understanding Saudi Arabian citizens’ perspective on economic reform, Vision 2030 cannot truly meet their needs. Thus, to make Vision 2030 more achievable, the Saudi Arabian government must survey its people to understand their realistic views.
The Saudi Center for Opinion Polling (SCOP) must adopt a greater role in surveying the Saudi Arabian people for Vision 2030 to reflect their economic needs more accurately. Previously, SCOP polled Saudi Arabian citizens above age 15 through a randomly generated list of phone numbers regarding women’s ability to drive. It was expected that passing a law to allow women to drive would be unpopular with the general public, but it was overwhelmingly popular – with over two-thirds of those surveyed in support. Policymakers were bolstered by the strong response and ultimately passed a law allowing for women to drive.
SCOP’s data has power and should be utilized by policymakers to devise and implement Vision 2030’s economic policy. Citizen engagement is “key to improve trust between government and citizen” and is “vital for improved evidence-based policymaking.” Too often, citizens’ voices are not heard. The anthropologist Fernando Coronil argues in his book The Magical State that oil-rich state planners, such as those from Saudi Arabia, often undertake developmental projects “beyond the limits of reality;” they overestimate their state’s capacity for “wholesale change.” MBS and McKinsey have manufactured an overly ambitious agenda. For example, increased private employment is a foundation of Vision 2030’s Privatization Program, yet many Saudi Arabian citizens do not want to leave their secure public sector jobs. I propose that SCOP must be considered as a crucial tool of the Saudi Arabian government to adapt Vision 2030 into a more realistic vision.
The main barrier to a greater role for SCOP is logistical. The government has already given the program its approval: SCOP was utilized in surveying Saudi Arabian public opinion before on single issues (for example, women and the right to drive). Now, SCOP’s abilities and technology must be expanded to survey Saudi Arabian adults, who comprise 75 percent of the country’s population, on the multitude of issues addressed in Vision 2030. SCOP may need to increase its size and hire more employees, which has the added benefit of adding jobs to the economy, one of Vision 2030’s main goals. The center’s research capability can grow if expanded and given access to greater funding and technology by the government.
3.2 Women as Equal Economic Partners: An Unexploited Role
Vision 2030 is not truly transformative in all respects because it plans to exploit female labor. While Vision 2030 proposes greater access to the public sphere for women, women are still denied agency in other areas of their lives. For example, women cannot open a bank account without permission from a male, thus preventing them from economic independence. Their interests are frequently neglected by Saudi leadership in an attempt to placate the country’s hardline Wahhabi Muslim clerics. From a Wahhabi religious perspective, women are seen as the “guardians of the moral integrity of the nation, producers of the future pious generation, keepers of tribal and Arab purity, and markers of the nation’s commitment to Islam.” Economic participation is not included in their role defined by the powerful religious leadership; the Wahhabi perspective conflicts with Vision 2030’s plans.
Vision 2030 claims that women are an integral part of the economy. It “alludes” to increasing the percentage of women in the workforce from 22 percent to 30 percent by 2030. How, though? Women are often banned from working in unsegregated places, and opponents persistently advocate for placing limits on how late they can work or how they can be employed. Thus, these limits must be repealed by the Saudi Arabian government to allow women to freely exercise their economic power. Women must be treated as equal economic partners rather than an influx to the labor force.
To create sustainable development for women as part of the labor force, Vision 2030 must implement measures to decrease influence of social and religious norms that prevent women from economic participation. The plan must break with traditionally conservative Wahhabi expectations of women as primarily the caretaker of the household.
The Saudi Arabian government can enact several measures to help women achieve their full economic potential. First, it can eliminate the gender pay gap between women and men to demonstrate that it understands the value of women in the workplace. Women currently earn about 56 percent of a man’s wages. The Saudi Arabian government could direct money from the PIF Program to reducing and eliminating the pay gap. Equal pay is an investment in their labor force, after all. Second, it can allow women to be employed in any profession – as of now, certain opportunities, such as becoming a judge, are restricted to men only. Third, it must penalize employers who require a male guardian’s permission for a woman to work, for it is technically legal – although Vision 2030 claims that women are equal economic partners to men.
Increasing female economic participation in Saudi Arabia will receive pushback. Even though MBS’s Vision 2030 aims to modernize the economy (and Saudi Arabia as a whole), Wahhabi doctrine and traditional gender norms are ingrained in the country. For instance, women were only allowed to drive beginning in 2018. And, it is not expected that Saudi Arabia will achieve full gender equality in its economy by 2030. However, the country will achieve no progress if it does not at least try to integrate more women in the workforce. My proposals can be viewed as starting points in the pursuit of economic equity that can one day lead to a long-term solution.
3.3 Education Reform: Implementing Critical Thinking Skills
Saudi Arabia requires a trained and educated citizenry to form a knowledge-based economy. But, there is a lack of knowledge and implementation of critical thinking in the Saudi Arabian education system. Thus, the education system must be reformed by the state to produce skilled workers in a knowledge-based economy and allow its National Industrial Development and Logistics Program to succeed.
The World Bank and the McKinsey Global Institute advised Saudi Arabia even before Vision 2030 was created to reform its education policy to avoid future economic decline. A majority of Saudi Arabian teachers interviewed in a recent study added that there is a “lack of trained professionals [in the system,] and many schools are now staffed by employees ill-equipped to implement reform or improve quality.” Additionally, the education system has been criticized for giving “less importance to the social and hard sciences” while “emphasizing religious studies at all levels of education.” Saudi Arabia was one of the lowest performing countries for mathematics, performing below the low benchmark scores. Vision 2030 needs to make education reform a priority for the country.
Teachers must be trained in depth to replace rote learning methods, common in Saudi Arabia, with a more collaborative, thoughtful, and critical approach to develop students’ higher-order thinking skills. School curricula must include opportunities for students to practice critical thinking, often practiced in liberal arts courses. Schools must teach critical thinking and other higher-order cognitive skills that can encourage creativity. To that end, Saudi Arabia can establish more universities and/or programs that focus on the social and hard sciences and the liberal arts. For example, there are no institutions in Saudi Arabia that teach business or political science, which is deeply hurting the country’s attempt to transform into a knowledge-based, industrious economy. Education is connected to the economy, for a citizen’s education prepares them for their life’s work. Put simply, knowledge is required for a knowledge-based economy.
Education reform in Saudi Arabia is related to Vision 2030’s labor goals. The country wants to strengthen the manufacturing, energy, and technology sectors, among others, and in return needs an educated citizenry to fill those jobs. Reform will also increase employment among Saudi Arabia’s indigenous population and reduce the needs for expatriate labor. The teaching standards in Saudi Arabia must be raised to create a skilled workforce that can strengthen and diversify the economy.
The Saudi Arabian education system cannot be transformed quickly. Like my proposal to increase female economic participation, education reform will be met with criticism, perhaps even disapproval. Teaching critical thinking in schools will lead to an educated public, and an educated public has the power to strategically organize and lobby against the government for increased rights. To an authoritarian government, such as Saudi Arabia, an educated public is a threat, for it can demand reform across society. So, to obtain government support for an education system founded on honing critical thinking skills, reforms must be framed mainly – if not solely – as economically beneficial. Future economic prosperity through a learned citizenry must be at the forefront of the campaign for economic reform.
4. Conclusion
Currently, Vision 2030’s plans to revitalize the economy are unrealistic and have made underwhelming progress thus far. But, Vision 2030 can be made feasible if the tripartite policy solution – greater citizen input, increased female economic participation, and education reform – is implemented by the Saudi Arabian government.
Image source: BroadArrow on English Wikipedia
