Saudi’s government is set on overhauling its oil dependent economy, with a detailed ‘vision for the future’ set to be announced on April 25.
The plans will include continued subsidy cuts, and the already announced IPO of state oil giant Aramco, and a $2 trillion sovereign wealth fund.
Many of these reforms will take years to be implemented and felt – although the subsidy cuts are a clear and present reality.
Yet the atmosphere in the streets of the capital Riyadh is relaxed. Some welcome the reforms.
“Water has become very expensive,” a group of Saudi college students said while relaxing at a terrace near one of Riyadh’s main thoroughfares. “But if it benefits the country it is no problem for us.”
The students are aware of state plans to soften the blow of further subsidy cuts with cash handouts for poor Saudi families. “The cuts will be for people with a high income. We live in a small house and don’t use that much. And water and fuel are still much cheaper than in Qatar and Bahrain.”
A survey this year by PR firm Asda’a Burson-Marsteller found that 86 percent of young Saudis approve of the government subsidies, and when water tariffs were introduced earlier this year many Saudis complained on social media.
It won’t be the first time that subsidies levels change in the kingdom. In 2011, an additional $130 billion was handed out in subsidies and payouts to Saudi citizens.
Ahmed, a Saudi national who works in sales, is quick to mention this. “Expensive water and fuel is not new. Under King Fahd it was also expensive. Cheap water and fuel was a gift under King Abdullah, which is why everyone was so sad when he died.”
The subsidy cuts have hurt the wallets of some, but the wider economic liberalization is embraced by many Saudis. Mohammad, a young Saudi who works at university and bears a striking resemblance to the deputy crown prince who shares his name, is positive about the reforms.
“It’s a good idea to open the economy. In the last two years there has been a lot of change,” he said.
“But we’ve needed these changes for many years. I know that some people are angry with increases in prices but they need to look at the bigger picture and what the government already does for us.
Some people were angry for a while when water prices first increased, but not for very long.”
Mohammad is one of many Saudi youths who identifies with the 30-something Deputy Crown Prince Mohammed bin Salman, who is spearheading the kingdom’s reform and modernization process.
“We like Mohammed bin Salman. He is our age, he is more open minded and he is easy to communicate with,” said Mohammad.
“For sixty years all of our leaders were over fifty, now we have someone like us. We Saudis don’t like to sit in the back, we like to sit in the front. Now we are sitting in the front again.”
Financial experts in the Kingdom are also upbeat. Mohammad Alsuwayed, head of capital and money markets at Adeem Capital in Riyadh, speaks enthusiastically about the proposed cuts.
“The subsidy cuts are the best thing that ever happened,” said Alsuwayed. “Because of all of the subsidies the economy has not been able to grow correctly. The different sectors were not motivated to innovate because everything was extremely cheap.”
While the reduction of the water subsidy was met with a frosty reception by some, the idea behind the subsidy reductions and other changes to the economy seem to resonate with the Saudi population.
There is a real acceptance on the streets of Riyadh that the kingdom cannot continue the way it has in the past.
It is a sentiment that is shared by non-Saudis living in the country. Omar, an Egyptian expat who has worked at the Saudi fast food chain for the last four years, believes the plans are long overdue.
“All the money at the moment is from oil and Islamic tourism, that can’t continue,” said Omar, in reference to Saudi’s hosting of the Hajj pilgrimage, which sees millions of Muslims around the world descend on the kingdom every year.
International experts are also positive about the reforms, though more reserved about the proposed timeline.
“If the kingdom is to have a market economy then the cuts have to be made,” said Roby Barrett, a specialist in Saudi Arabia from the Middle East Institute in Washington DC.
“The five-year plan may be too ambitious - but here again, true economic modernization requires that the prices associated with petroleum products, electricity, and water move toward a more market driven footing.”
As the Saudi government continues putting in place market driven policies, several moves may hurt in the short run. But Saudis seem optimistic about their government’s plans and the future of their economy.