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Saudi economic diversification plan gets cabinet nod
June 11, 2016, 4:14 pm

Saudi Arabia’s National Transformation Programme (NTP) 2020, a five-year roadmap that plans to diversify the national economy away from oil and generate more than 450,000 jobs by 2020, received endorsement from the country’s cabinet last week. The plan also seeks to cut public expenditures by 40 percent over the next five years and boost private sector contribution to the economy.

NTP is one of several programs designed to achieve the goals of the Saudi Vision 2030, released in April by Deputy Crown Prince Mohammad Bin Salman, who will spearhead the reform charge.

At the heart of Vision 2030 is a plan to float less than five percent of state oil firm Saudi Aramco on the stock market and form the world’s largest state investment fund, worth over $2 trillion, from proceeds of the sale.

Profits from the investment fund are planned to help economic diversification and provide an alternative to oil revenues that have fallen by about half since the middle of 2014. The fall in oil revenues has led the government to project a deficit of $87 billion this year.

The NTP will be implemented through 543 initiatives across 24 government bodies at a cost of 270 billion riyals over the next five years, said Minister of State Mohammad Al Shaikh. “This is Phase One of addressing the challenges,” he said, adding there will be “no substantial fiscal impact” on the state budget, partly because some savings have already been made. Neither would income taxes be imposed, Shaikh said.

Minister of Energy, Industry and Mineral Resources Khaled Al Falih said that under the program, Saudi Arabia will be “a very strong competitor in renewable energy,” and will implement “massive” projects to produce more natural gas, while increasing non-oil exports. Saudi oil production capacity would remain unchanged at 12.5 million barrels a day between now and 2020, the NTP says.

Among its wide-ranging goals, the Vision 2030 aims to reduce unemployment, increase women’s participation in the workforce, boost private sector economic contributions, and develop cultural and entertainment activities in the kingdom.

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