Vision 2030: Saudi Arabia's Grand Ambitions and Current Challenges

Unveiled in 2015, Saudi Arabia's Vision 2030 aimed to transform the kingdom's economy and global image with ambitious projects, but recent adjustments and challenges have necessitated a reevaluation of its grand plans

by Sededin Dedovic
Vision 2030: Saudi Arabia's Grand Ambitions and Current Challenges
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Many were astonished by the scope of the works and the boldness of the project in 2015 when "Vision 2030," a grand future project for Saudi Arabia post-oil boom, was unveiled. For instance, a special city dedicated solely to the sports and entertainment sector, including a ski slope, was planned in the middle of the desert, as well as the mega-city "Neom," which would be climate-neutral and car-free.

"Vision 2030," particularly championed by Crown Prince Mohammed bin Salman, was intended to change the world's perception of Saudi Arabia. It was seen as a sign of modernization for the religiously conservative country governed by an authoritarian royal family.

However, much has changed since 2015 – so much so that several ministers have already stated in recent months that the "Vision 2030" project will be scaled down. For example, the series of glass skyscrapers in the desert called "The Line," one of the key parts of the "Neom" project initially planned to span 170 kilometers, will be realized at a length of just over two kilometers.

This is not the only "adjustment" to the "Neom" project: it was initially supposed to be completed by 2030, but it is now estimated that it will likely take another 20 years. "Neom" was supposed to cost around $500 billion, but it is now suggested that it could rise to as much as $2 trillion.

Difficult search for investors

Other parts of "Vision 2030" are also not going as planned. Some of the most ambitious projects were supposed to attract foreign investors to Saudi Arabia. However, foreign direct investment has been less than expected.

According to analysts, political instability in the region – for example, due to the war in Gaza – as well as the lack of transparency in Saudi regulations, are causes of investor hesitation. Saudi Arabia initially planned to bear most of the costs, but now it appears it will have to pay almost everything itself.

A significant portion of these funds comes from the Public Investment Fund (PIF), one of the largest state funds in the world, funded by oil revenues. The Saudi government recently transferred eight percent of its stake in the state oil company "Aramco," valued at $2 trillion, to the PIF, making it now hold 16 percent of the giant.

Critics, however, point out that although the PIF manages assets worth $940 billion, it only has $15 billion in liquid funds. Oil and bonds According to analysts, dependence on the price of oil makes the "Vision 2030" projects unstable.

According to IMF data, Saudi Arabia needs an oil price of around $96 per barrel for "Vision 2030." This year, the price of a barrel of crude oil has risen from about $70 in January to only $81. And as Bloomberg reports, Saudi Arabia has become the country issuing the largest amount of bonds compared to other emerging markets and countries, surpassing China for the first time in a decade.

Government bonds are issued to finance public expenses; they are a type of loan for which the issuing government pays interest to bondholders. Thus, Saudis are now taking out this type of loan more than ever to compensate for the lack of direct foreign investment.

"Vision 2030" in danger?

"Given the combination of various factors, it can be concluded that Saudi Arabia is currently economically and politically juggling," says Robert Mogielnicki of the Washington-based Arab Gulf States Institute.

According to him, the status of the "Vision 2030" project is neither spectacular nor as catastrophic as sometimes portrayed. "The reality is somewhere in the middle." Some parts of the "Vision 2030" project are evidently developing well.

In a February report by the American investment bank Citigroup titled "Halfway There," significant progress was noted in women's participation in the workforce, the share of domestic ownership of real estate, and revenues from non-oil sectors.

In a mid-June statement, IMF researchers concluded that the country's "unprecedented" economic transformation is progressing well. They also welcomed the "reallocation of expenditures" within "Vision 2030." Gulf states expert Mogielnicki believes that Saudis still have many opportunities to realize their future plans – however, the project is currently stalled, reports DW.

Discovery of new oil and natural gas fields

Saudi Arabian authorities announced last week that they have discovered new rich oil and natural gas fields in the east of the Gulf country, Anadolu reported. Saudi Energy Minister Prince Abdulaziz bin Salman said that the discovery of new oil and gas reserves was carried out by the state oil company Aramco, reported the SPA news agency.

"Aramco has discovered two unconventional oil fields, one Arabian light oil deposit, two natural gas fields, and two natural gas reservoirs in the Eastern Province and the Rub' al Khali," the minister said. Saudi Arabia is the world's largest exporter of crude oil and the leader of the Organization of the Petroleum Exporting Countries (OPEC).

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