In 2016, Crown Prince Mohammad bin Salman introduced Saudi Arabia’s Vision 2030, a plan aiming to reduce the country’s dependence on oil, diversify its economy, boost private industry and improve its public sectors.
Vision 2030 is an ambitious plan and one with vast economic and social potential, however, many obstacles have emerged that Saudi Arabia must overcome in order to realise such potential.
Vision 2030 contains over 80 projects, mostly funded by the Public Investment Fund of Saudi Arabia, and provide the foundations for extensive social, economic, state-level developments. Guided by the National Transformation Programme, there are many projects that open up many possibilities for Saudi Arabia’s diversification and development.
For example, the Red Sea Luxury Resort is an extensive tourism project that will aim to attract visitors from across the globe. The entertainment sector is also experiencing extensive support in the form of over $2 billion investment.
Saudi Arabia has also attempted to expand women’s rights, allowing women to run for political office in 2015 and move closer towards educational equality in 2017.
These developments, catalysed by a top-down approach from the Saudi elite, have already had notable positive outcomes. Morgan Stanley Capital International (MSC) reclassified Saudi Arabia as an emerging market, making it more accessible for external investors and facilitating greater economic growth, diversification and development for the future.
These developments could signal a new horizon for Saudi development, not just domestically, but globally. With a more attractive environment for foreign investment and seemingly-evolving civil society, Saudi Arabia's long-term plan has the potential to realign their economic trajectory and reshape their position on the world stage.
However, there are numerous obstacles for Saudi Arabia’s development and reform policies to overcome. The most prominent and problematic one is the lack of synthesis between their economic reforms and their political reforms.
Saudi Arabia has attempted to grow its foreign investment and private sector activity, but the continually changing nature of its regulatory environment poses challenges to this, as the tight state-control makes external investors wary of committing to projects.
Political oppositions are still subdued by the state and there is still a perception that corruption remains rife across the political system. This may be difficult to overcome as the Middle East Forum think tank has highlighted, as Saudi Arabia’s supposed ‘zero tolerance to corruption’ will be difficult to implement in a country where ‘family, tribal and regional ties’ are more powerful than those to the state. This induces a lack of trust in the Saudi economy that limits foreign investment and holds back the social, cultural and economic developments that are being pursued.
There are also social obstacles to Vision 2030. Previously, Saudi Arabia was governed by a social contract wherein the state would provide resources and support for their people in exchange for comprehensive control of micro and macro aspects of life.
However, now the government has increased taxes to finance projects which has changed state-society relations. Increasing prices of goods and services and heightened taxes has decreased domestic consumerism thereby decreasing the incentives for foreign investment as well as evoking social discontentment with the economic ambitions of the Saudi elite.
This also creates issues within the state hierarchy, as some Saudis are used to receiving extensive benefits from the government, now they are forced to reassess what they should expect with regards to jobs and services.
One sees how there are great possibilities in the Vision 2030 plan, with the potential for social, economic and state developments being sizable. However, the state is faced with a vast array of issues that they must overcome, social issues relating to their citizens, economic issues relating to domestic and foreign input, and state-level issues of transparency and efficacy.
If such hurdles can be cleared, Saudi Arabia could become the leading economic power in the region and act as an attractive destination of financial and social input, but only time will tell if the state hierarchy is capable of realising such an aim.
Author: Nicholas Madsen
Nicholas is a scholar in international relations at the University of Amsterdam, specialising in European and Middle Eastern integration and security.