Saudi Arabia launches 1.3tn dollar programme to stimulate the private sector

Whilst fighting the Covid pandemic and calibrating the vaccination strategy, Saudi authorities do not seem to lose sight of their long-term development plans. On March 30th Saudi Crown Prince Mohammed bin Salman (MBS) announced the launch of a 1.3 trillion dollar (SAR 5tn) economic programme addressed to private sector business es a s part of a broader investment plan totaling SAR 27 trillion (USD 7.2 trillion) over the next ten years. “Shareek” – the Arabic word for “partner” – aims to facilitate Saudi private sector investments by 2030. Led by Saudi Aramco and the Saudi Basic Industries Corporation (SABIC), th e short term goal is to facilitate and boost job creation in a country where youth unemployment stands at very high rates (29%) and, in the longer run, to help building a robust private sector. This program is part of the country’s effort to diversify its economy and a step towards its objective to turn the contribution of the private sector to GDP to 65% by 2030 from an actual 51% , a key of the Saudi Vision 2030 development strategy objective. Following the announcement , Saudi benchmark stock Tadawul All Share Index (TASI) registered its highest close since November 2014 on March 31st, up 2.8% and close to the 10 000 points barrier, reflecting positive reactions of the markets to the crown prince-led investment plan. But beside the positive sign this announcement represents, some aspects deserve attention . F irst, the foreign contribution to the programme seems rather ambitious : it prices a yearly foreign investment amount of ~ $50 billion while its 2019 contribution was just of $4.6 billion. Second, even though Aramco officials have expressed their voluntary participation to the released scheme , doubts subsist on whether the injunction to moderate dividends to raise capital spending for participant corporations may not be pushed by the government. Finally, this massive investment program may not help in solv ing a key issue of the non-oil economy: its low productivity (not low investment).