Mil­len­nial prince’s plan to fix ail­ing Saudi econ­omy

The Washington Post Sunday - - THE WORLD - ADAM TAY­LOR adam.tay­[email protected]­post.com

Saudi Ara­bia has prob­lems. From its geopo­lit­i­cal ri­valry with Iran to the threat posed to the country by ex­trem­ist groups such as the Is­lamic State, the king­dom is fac­ing pres­sure from a va­ri­ety of an­gles. Even its long­stand­ing re­la­tion­ship with the United States is on the rocks, with re­newed pub­lic scru­tiny of al­leged links be­tween Saudi of­fi­cials and the 9/11 plot­ters just the tip of the ice­berg.

Th­ese prob­lems are sub­stan­tial, but be­yond them all lies a less ex­cit­ing but just as im­por­tant is­sue for the Saudis: how to fix their country’s il­log­i­cal econ­omy.

On Mon­day, the world will learn a lot more about that plan. The king­dom is set to re­lease the widely an­tic­i­pated “Vi­sion for the King­dom of Saudi Ara­bia,” a blue­print to di­ver­sify its econ­omy away from a re­liance on the country’s gar­gan­tuan oil in­dus­try and to stop wast­ing bil­lions of dol­lars each year.

How many bil­lions have been wasted ex­actly? Well, we know that Saudi Ara­bia ran a deficit of $98 bil­lion last year. In a lengthy new pro­file from Bloomberg Businesswe­ek, Mo­hammed al-Sheik, a fi­nan­cial ad­viser to the Saudi state, re­luc­tantly es­ti­mates that over the past few years, there has been $80 bil­lion to $100 bil­lion of “in­ef­fi­cient spend­ing.”

The in­ef­fi­cient spend­ing wasn’t ex­actly new, of course — Saudi Ara­bia has long been known for its gen­er­ous state ben­e­fits and its sprawl­ing bureau­cracy — but it be­came a big prob­lem as the price of oil dropped from more than $100 a bar­rel in 2014 to less than half that amount in 2015, tak­ing the king­dom’s rev­enue with it. Saudi Ara­bia’s oil had long been the country’s only vi­able ex­port, ac­count­ing for 90 per­cent of the state bud­get. In the new re­al­ity of cheap oil, things needed to change: The Saudi govern­ment has al­ready be­gun slash­ing some of the more gen­er­ous sub­si­dies it gives its citizens — rais­ing the price of gaso­line within the country by 50 per­cent in De­cem­ber (though it still costs less than a dol­lar for a gal­lon).

The man in charge of all this is Deputy Crown Prince Mo­hammed bin Sal­man, the 30year-old son of King Sal­man and third in line to the throne af­ter a some­what con­tro­ver­sial shakeup. Saudi Ara­bia Bloomberg’s Peter Wald­man got to spend eight hours re­cently with the pow­er­ful young prince, who ex­plained what his country will do now that oil prices are sig­nif­i­cantly lower.

Mo­hammed said the “Vi­sion for the King­dom of Saudi Ara­bia” will see the cre­ation of the world’s largest sov­er­eign wealth fund, de­signed to even­tu­ally hold $2 tril­lion in as­sets, while there are plans for an ini­tial pub­lic of­fer­ing to sell off less than 5 per­cent of Saudi Aramco, the enor­mous sta­te­owned oil com­pany. A va­ri­ety of other moves also are ru­mored to be un­der con­sid­er­a­tion — fur­ther cuts to state ben­e­fits and sub­si­dies, the in­tro­duc­tion of a value-added tax on lux­ury goods and sug­ary drinks, at­tempts to tap into new min­ing re­sources, and a new tourism push.

In an ear­lier in­ter­view with the Econ­o­mist, Mo­hammed had sug­gested that what Saudi Ara­bia was plan­ning bore some sim­i­lar­i­ties to the pri­va­ti­za­tion of state in­dus­tries in Bri­tain in the 1980s. “Most cer­tainly,” the prince re­sponded when asked whether “this was a Thatcher rev­o­lu­tion for Saudi Ara­bia.”

Bloomberg’s ar­ti­cle also of­fers in­sight into the mind-set of the mil­len­nial chart­ing the course for Saudi Ara­bia’s fu­ture. While Mo­hammed’s main tar­get seems to be his country’s bureau­cracy, he also raises ques­tions about its cul­tural val­ues. He thinks women should be al­lowed to drive but is wait­ing for the right time to raise the is­sue with Saudi Ara­bia’s pow­er­ful re­li­gious au­thor­i­ties. The king­dom’s notorious re­li­gious po­lice also are be­ing reined in un­der his watch. And, per­son­ally, he doesn’t think his gen­er­a­tion has much in­ter­est in the polygamy of pre­vi­ous gen­er­a­tions. “It’s tough [enough] liv­ing with one fam­ily,” Mo­hammed says.

The calm, ra­tio­nal, Western­friendly Mo­hammed you see in re­cent me­dia ap­pear­ances seems de­signed to bol­ster in­ter­na­tional con­fi­dence in Saudi Ara­bia’s fu­ture. That’s prob­a­bly some­thing the king­dom needs if it wants help with the tril­lions of dol­lars in in­vest­ment that some out­side ex­perts say it needs to cre­ate a di­ver­si­fied econ­omy.

How­ever, Mo­hammed’s sud­den rise has caused alarm in some quar­ters. The prince may be por­tray­ing him­self as a mod­ern­izer with a plan for ac­tion, but he also ap­pears to be be­hind some of King Sal­man’s most ag­gres­sive and con­tro­ver­sial for­eign pol­icy moves: spear­head­ing an “Is­lamic mil­i­tary al­liance” against ter­ror­ism that has left many an­a­lysts baf­fled; and cham­pi­oning the Saudi-led mil­i­tary in­ter­ven­tion in Ye­men. And while the prince may be point­ing to­ward a thriftier fu­ture for Saudi Ara­bia, the fi­nan­cial cost of th­ese ac­tions is huge — and the hu­man­i­tar­ian cost prob­a­bly far greater.

CHARLES PLA­TIAU/REUTERS

Deputy Crown Prince Mo­hammed bin Sal­man is point­ing to­ward a thriftier fu­ture for Saudi Ara­bia now that oil prices have fallen.

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