Saudi Arabia has been greatly dependent over the revenues being generated from the oil since a long period of time. Its most of the expenses were being bared by means of the exporting the oil. According to the recent news, Saudi’s prince named Prince Mohammed is starting out a newer project which will be worth to about $2 Trillion and will make Saudi self-sustained by means of investment and not just being dependent over the export of the oil.
In the first 10 days of his power Prince Mohammad has completely restructured the government. Last year there had been panic among the advisers of the Prince Mohammad when they discovered they had been buring their own foreign reserves at a much faster rate then any of them knew, with the insolvency being just two years away. Plummeting oil revenue has resulted in the $200 billion shortfall. It is prediction of the future where the only means of the export of Saudi Arabia is not being able to pay the bills.
Relying over the Petroleum Sector
Previously, the kingdom relied over the petroleum sector for about 90 percent of the state budget, almost all of the export earnings and about half of its gross domestic product. On 25th April Prince is going to unveil the Vision for the Kingdom of Saudi Arabia which will prove to be a broad historic plan for the further economic and social changes. It would be including the creation of the world’s largest sovereign wealth fund having more than $2 trillion in terms of the assets which is quite enough to buy Apple, Google, Microsoft, and even the Berkshire Hathaway which are the world’s four largest companies.
The prince is planning for an IPO and selling of about less than five percent of the Saudi Aramco, which will be raising the funds being utilized over the non-petroleum assets. Adding to the same Prince says that within 20 years of duration it will be an economy which is not being completely depending over the oil. It’s been newer bargain being dictated by the Prince. He has already given the massive subsidies over the gasoline, electricity and even the water. He may also be imposing the value added tax and levies over the luxury goods and sugary drinks.
The prince wants to increase the income of the government but not at the cost of those whose income is low but by burdening the wealthy people with the respective taxes. Further adding to the same he says that women’s will also be given the permission for the right to travel, which is also their fundamental right even according to the Islam. One of the U.S. military officer once meet the Prince who has confronted with him that he is wanting to give rights to the women’s to drive, but is waiting for the right moment for confronting the conservative religious establishment, which is dominating the social and religious life.
Even the random arrests by the Saudi Arabia police without the permission of the higher authorities is been banned. The ascendency of the third generation prince is of the acute interest for the people being below the 25 years of age, well-educated Saudi’s who is finding restrictions over the women an embarrassment. Still planning all of this and actually implementing over the ground level is both a different things. Many of the Saudi’s this winter took over the twitter regarding the jump of 1000 percent in the water bills and even the complain about the prospect of the Saudi Aramco, which is being sold off for financing the economy.
Returns over Aramco
Barjas Albarjas who is one of the economic commentator says, “W e’ve been screaming for alternatives to oil for 46 years, but nothing happened. Why are we putting our main source of livelihood at risk? It’ s as if we’re getting a loan from the buyer that we’ll have to pay back for the rest of our lives.” They are also wondering how the investment will be helping in maximizing the profit, or why should they trust the unaccountable managers of the sovereign wealth fund to bring higher returns as compared to the Aramco’s own executives.
The size of the company is being staggering, being the world’s no. 1 oil producer and having a capacity of pumping about more than 12 billion barrels a day is making more than twice the any of the other company. Aramco is also being controlling the second largest oil reserves which is located behind the Venezuela which is quite in contrast to the Orinoco Belt. The oil in Saudi Arabia is quite cheap and being easy to obtain. Saudi Arabia economy is expanding at the slowest pace of 1.5 percent in 2016 after the global financial crisis as the engine which is powering the economy is being declining for the first time in time duration of more than a decade.
The state will be employing two thirds of the Saudi workers with the foreigners being accounting for about 80 percent of the private-sector payroll. The $10 billion King Abdullah Financial District, for example, begun in 2006, sits largely unleashed. A ghostly monorail track snakes through some 70 buildings, including five brandnew glass and steel skyscrapers. Quite some of the workers left the project quite recently due to the claim of not being paid. It is quite difficult for the current scenario of the Saudi and it needs to be looked upon how it is being going to generate the employment needs.
Prince won’t be going into the details regarding the planned non-oil investments. He adds that gargantuan sovereign fund will be funding up the private equity firms for investing eventually half of the holdings overseas, which is excluding the Aramco stake. Adding over the same Prince says that he wants to convince the public about what they are doing and also convincing the world for the same. Prince says that he is quite being used to such resistance by the public and being hardened by the bureaucratic enemies who had once accused him regarding the grabbing of the power.
The likely future king of the Saudi Arabia says that it doesn’t really matter now whether the oil prices are going down or going up. If the prices of the oil goes up then there will be more inflow of the money for the nonoil investments. If the rates goes down then Saudi Arabia being the lowest-cost producer of the oil can possibly expand in the growing Asian Market. He scuttled one of the proposed freezed oil production on 17th of April during the suppliers meeting being held in Qatar, mainly because archival Iran couldn’t possibly participate in the same.
It is quite rare for the case of the observers for seeing the member of the royal family who has given ample room for the technocrats at the Petroleum Ministry. Further adding over the same he says that he doesn’t care about the possible oil prices as this particular battle is not being his battle.
First Meeting with Prince Mohammad
The meeting was being held between the Prince Mohammad and the caravan heads on 30th March, which was a kind of the marathon discussion. The discussion went on while listening to the questions in English and responding to them immediately to them in Arabic. During the interview he repeatedly corrects its interpreter. The reporters has also joined the table with the Prince with his economic team which also included the chairman of Aramco, the chief financial regulator and even the head of the sovereign wealth fund. Over the meal time Prince Mohammad asks Mohammad Al-Sheikh who is one of the Harvard educated financial advisor and even the formal lawyer at the Latham and Watkins and even the World Bank for giving the update about the fiscal condition of the Saudi Arabia.
During the oil boom in the Saudi (2010 to 2014) the spending of the same went berserk. Prior requirements which the king approved was about 100 million riyals ($26.7 million) which slowly got looser and looser – first to 200 million, then to the 300 million and even went to 500 million which resulted in the government suspending the rule.
During the second meeting which was being held on 14th of April he discusses about how he and his brothers has grown up so competitive and how he is being so declined towards the use of newer techniques for the effective development of the Saudi Arabia. He also confesses that his generation was the only one who is also on the internet and using the education as the main tool for harnessing development of the nation. His one of the brother is an astronaut, other is an University Professor.
In 2007, Prince Mohammad graduated fourth in the class from the King Saud University with the bachelors degree in Law. With this the kingdom came knocking to him which he resisted at first and gone for pursuing master’s degree overseas, but his father urged him to give one chance over the government. With this he gave two years to the same, focusing over changing the certain corporate laws and regulations with which he had struggled with.
Stepping up into the Ministry
He tried many of the innovative methods to save the king from the drowning paper work which resulted him felling into trap by one of his old guard. Hence in 2011, King Abdullah ordered Prince Mohammad never to step into the ministry again. The Prince thought his career was over but he started working with his father which turned into his fortune. He started his work of his father’s foundation, which builds housing, starting a non-profit organization which was being mainly aimed at fostering the innovation and leadership among the youth of Saudi. In 2012 his father became the crown prince and six months later he was being made chief of the court.
Later the king came to him with the big contract of cleaning the Ministry of Defence. For this he further brought Booz Allen Hamilton and Boston Consulting Group and quite changed the complete procedures of weapon procurement, contracting, information technology and even the human resources. Previously the legal department had been marginalized which had became the main source of the corruption. The prince quite strengthened the law department and even sent dozens of the contract for the revision. The Prince quite created an office for analysing the arms deals.
Working Tirelessly into the Defence Sector
He also started to spend few days of the week with King Abdullah in the palace and pushing off several reforms, though it had been difficult with the present number of people. Less than a week after the king died King Salman took over the throne and named Prince Mohammad the defence minister, chief of the royal court and president of the newly created council to oversee the economy. The decree passed gave Prince Mohammad control over the Saudi Aramco by royal decree about 48 hours later.
The Prince is dividing his time for his father’s palaces and the Defence Ministry, being working from the morning till the midnight most of the days. Courtiers even claim that his relation with the crown prince Mohammad bin Nayef is quite good and they are even having the neighboring camps at the royal desert encampment. Prince Mohammad is taking frequent meetings with the king and is spending longer sessions with the consultants and is being aiding poring over the economic and even the oil data.
Prince Mohammad is having one wife and is not being intending over marring the other as he feels life is too busy in the current era as compared to the past era. Hence there is not much time for sparing it for another household. After the meeting with President Obama last May he finds the Prince “extremely knowledgeable, very smart, and wise beyond his years”. In March, Republican Senator Lindsey Graham of South Carolina met Prince Mohammed in Riyadh with a delegation from Congress. Commenting over the Prince he says he is quite understanding their culture and instead of seeing at the problem he is ready to find out opportunities in the same. Prince Mohammad says that the opportunities which we are having are much bigger than our problems.