Saudi Arabia’s Vision 2030: How analysts reacted

Analysts react to the kingdom's bold new vision for the next one and a half decades

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Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman announced on Monday the Vision 2030 reform plan, a package of economic and social policies designed to free the kingdom from dependence on oil exports.

Following are analysts’ comments following the announcement.

Ali al-Nasser, fund manager at London-based duet group, which has more than $1 billion invested in Middle East and North African strategies:

“The question is now again about execution. He said all of the right things, it is a matter of putting it all to work, and he seems to be very keen and very focused and all else being equal, there is pretty strong momentum behind it, and locally there is strong support for his agenda.

In terms of the stock market’s reaction - the market reacted positively to the interview and some of the headlines that have been coming out. The one take-away is that the move was restricted to the blue-chips in the market - large banks, large petrochemicals. Interestingly enough, the sectors that probably people were positioned in, in terms of expectations like for example healthcare, those did not move much higher during the interview or after the interview.”

Patrick Dennis, lead economist at Oxford Economics in Britain:

I think you need to see action in a country like that rather than yet another medium-term national transformation paper, because we had these things for decades but actually diversification has progressed at a slow pace and even diversification that you have seen in terms of non-oil GDP going up is not real - in a sense that it is always going up when oil prices are going up. You only get increased spending on the non-oil economy when oil prices go up.

You can argue this time is different because the pressures are magnified compared with in the past given the pressure on the public finances, and the pressures on the currency peg, so they may be forced to do these things.

But it will be very difficult for them to do, whether they have the skills ... and they need foreign investment to achieve this.

Shakeel Sarwar, head of asset management at Bahrain’s Securities and Investment Co:

“The Saudi stock market’s depth and breadth will improve considerably with the listing of assets such as Aramco.

The market capitalization and traded values will rise substantially and in terms of importance, the Saudi market may end up becoming as valuable and critical to an international fund manager based in New York, London and Hong Kong as China or India, if not more.

Future economic and political analysts may end up identifying this current oil price decline as a blessing in disguise for Saudi Arabia and rest of the Gulf region

Shakeel Sarwar

If these economic reforms and liberalization can be successfully implemented over the next five to 10 years, future economic and political analysts may end up identifying this current oil price decline as a blessing in disguise for Saudi Arabia and rest of the Gulf region.”

Jason Tuvey, Middle East economist at London-based Capital Economics:

“The Saudi government’s “Vision 2030” plan outlined today has been welcomed by the local financial markets but it provided few fresh details on the reform agenda and missed key issues such as education reform.

We were hoping for more, although we will await the “National Transformation Plan”, due to be released in May or early June, before passing full judgement on the government’s plans.

Given that the authorities will be coming up against significant vested interests within the royal family, the
business elite and the religious establishment, we think that political concerns rather than oil prices are more likely to determine whether the government’s plans come to fruition.”

Mohieddine Kronfol, chief investment officer for global Sukuk and Middle East fixed income at Franklin Templeton Investments:

“The Saudi 2030 vision, as articulated by H.H. the deputy crown prince and consequently approved by the cabinet, will probably be viewed positively by market participants.

Plans for improved governance, transparency, structural reform, and evolving social contracts should underpin the outlook for many industries.

The ambition is evident and the government appears confident in embracing technology and cultural development

Mohieddine Kronfol

Details are still scarce, but the ambition is evident and the government appears confident in embracing technology and cultural development in the execution of its plans. Implementation and the impact on government finances will likely continue to be closely monitored.”

Mohammad al-Ahammasi, head of asset management at Riyadh-based Derayah Financial:

“Initial reaction - I appreciated the transparency and addressing issues that have previously not been addressed, such as military spending, the housing issue and unemployment ... I believe this vision has a lot to offer and I am optimistic, but the biggest challenge will be the execution.

The markets did react positively as the interview was taking place, but the efficacy of this reaction may be short-lived.”

Ahmed al-Jundi, executive at Jeddah-based architectural firm Diyar Consultants

“The proactive approach to try and reduce the corruption and inefficiencies that led to mispricing, and cost the government billions of riyals, is a huge step forward in the right [direction.]

As a Saudi I am optimistic, as a businessman I am encouraged, but we have to see how the government plans on pushing through with those plans in a way that is mutually beneficial to the private sector, so that we can continue absorbing more employees from the public sector.”

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