Crown Prince Mohammed bin Salman, who’s already embarked on the biggest overhaul of the Saudi economy in its modern history, is preparing to roll out details of a sweeping plan to develop infrastructure and industry across the Middle East’s biggest country by area.
Saudi Arabia is seeking 1.6 trillion riyals ($425 billion) of investment in railways, airports and industrial projects by 2030 as the world’s largest oil exporter looks to break its reliance on crude sales for government income.
The kingdom could sign about 70 deals worth more than 200 billion riyals when Prince Mohammed presents the plan on Monday, according to Energy Minister Khalid Al-Falih.
“It’s quite ambitious but it’s over a 10-year period so we’ve got the time to do it,’’ Al-Falih told Bloomberg Television. “All of this will happen while we’re building our oil economy. We’re not stopping.”
Saudi Arabia is getting a makeover under the crown prince, who assumed his de facto leadership in 2017 vowing to steer the economy from its near-total dependence on crude by masterminding reforms known as Vision 2030. The kingdom’s infrastructure - from roads to water supply - was ranked 40th among 140 nations in the World Economic Forum’s latest Global Competitiveness Report.
But while higher public spending is projected to drive non-oil economic growth to 2.6% in 2019, it remains below levels achieved before 2014, when crude prices collapsed, according to Bloomberg Economics. The share of the government’s oil income will grow to 68% of total revenue this year.
With Saudi Arabia finding it harder to continue pumping fiscal stimulus into the economy, the infrastructure push will test investor faith after the killing of Jamal Khashoggi sparked global outcry.
Al-Falih has said the program is expected to contribute $320 billion to the Saudi economy by 2030, equivalent to almost half of the country’s gross domestic product last year, and create 11 new industries from aerospace to biomedicine.
The kingdom is planning to boost expenditure this year by 7%, basing this year’s budget on an oil price estimated by Bloomberg Economics at as high as $80 a barrel. International benchmark Brent crude closed below $62 in London on Friday.
“The room for fiscal spending is actually quite limited,” Jaap Meijer, head of research at Arqaam Capital, said in an interview with Bloomberg Television. “Although fiscal policy is loosening a little bit into the new year, the scope of it has to be fairly limited.”
The program will link energy, mining and infrastructure projects and will include new defense industry initiatives seeking to bring technology and manufacturing to Saudi Arabia, Al-Falih said Saturday in Riyadh. The kingdom plans to restructure its power industry by separating ownership of power plants from the high-voltage lines used for transmission across the country and from the connections to homes and offices.
Known as the National Industrial Development and Logistics Program, the planned investment includes some projects that have already started and combines efforts across different industries. For example, the country has long planned to reform its electricity industry.
Some of Saudi Aramco projects will also come under the umbrella of the new program, including an industrial park on the Persian Gulf coast and a plan with Saudi Basic Industries to transform oil straight into chemicals, Al-Falih said.
Nabil Al-Amoudi, the Saudi minister of transportation, said a new airport for Riyadh, the capital, is also under consideration. The kingdom additionally plans to refurbish and expand five airports, and build 2 000 kilometers (1,200 miles) of railways, he said.