Some projects that are a part of the Vision 2030 are delayed.
Saudi Vision 2030 is a government program created by the Kingdom of Saudi Arabia to attain the goal of enhanced economic, social, and cultural diversification, as envisioned by Saudi Crown Prince and Prime Minister Mohammed bin Salman.
The vision is past the hallway mark and faces financial obstacles which prompts a scale back of the project as it aims to redefine the nation and move away from the traditional oil dependency.
The Finance Minister Mohammad Al Jadaan remarked at the World Economic Forum in April echoing these challenges that the kingdom of Saudi would blend into the economic and geopolitical pressures in two ways, either by “downscaling” or “accelerating” few projects under the Vision 2030 programme.
Following this, Al Jadaan commented in December 2023 that the some projects that are a part of the Vision 2030 are delayed.
The huge futuristic and green megacity, NEOM that was originally touted to be worth $1.5 trillion will face a scale back on the capacity.
While The Line was envisioned to accommodate 1.5 million residents originally in the desert has now increasingly scaled down its capacity and will house just 300,000 people.
The initial ambitious plan called for the construction of a 500-metre-tall (546-yard) mirrored line of parallel towers spanning 170-kilometres (105 miles). However, recent updates have lowered The Line’s length to 2.4 kilometres (1.49 miles), representing a 98.6% reduction.
There have been conflicting messages of the progress of Vision 2030. Saudi Arabia states to have the project on track while the kingdom moved far away from NEOM’s original blueprint.
On 30 April, Economy Minister Faisal Al Ibrahim stated at the World Economic Forum’s special meeting in Riyadh that “all projects are moving full steam ahead,” adding that “there is no change in scale” for NEOM.
Vision 2030 has produced mixed results as per other reports. On the one hand, it has made significant advances in female labour participation, unemployment, and non-oil fiscal income.
There have been photos posted by an executive that is leading the project of the progress on construction done to provide accommodation facilities for staff working on The Line project within the NEOM.
Three aerial photos with the caption “NEOM is real part 16” were shared by the chief officer Giles Pendleton of The Line project. He described them as “our home at NC1 and base of operations to support NEOM and The Line.”
While most other areas are functioning as intended, Citigroup reports that Saudi Arabia is still lacking in attracting foreign investment, tourism, and non-oil exports, posing a challenge to its diversification efforts.
The ultimate goal of Vision 2030 which is the idea of the Crown Prince Mohammad bin Salman, is not just to transition Saudi Arabia away from its dependency on oil, but also to strengthen Saudi Arabia’s position on the global arena.
Hence the plan includes the flourishing of many sectors like manufacturing, clean energy, AI, sports and entertainment alongside the enhancement of projects like NEOM and Sindalah which is a luxury island in the middle of the Red Sea.
Saudi Arabia also looks forward to making use of Islam’s holiest cities, Mecca and Medina and offer profitable packages to the pilgrimages of Hajj and Umrah.
The government granting more rights and easing the social restrictions on women have made the social reforms more crucial as a means to shake off the kingdom’s traditional conservative image.
Investment in renewable energy sources, notably the ongoing development of Al Shuaibah, the “region’s largest” green-hydrogen plant, is emphazised as critical for offsetting low oil demand.
Vision 2030’s Dependency on Oil
Despite the measures taken by the project, oil will always remain a fundamental part of Saudi Arabia’s economy and the dependency will continue at least in the foreseeable future.
On this note, the President and CEO of Aramco, a Saudi Arabia energy giant, Amin Nasser said that the world must leave out the idea of eliminating oil and gas as a reflection of Saudi Arabia’s belief of abandoning fossil fuel. At the end of it all it was the discovery of oil under the plains in Dhahran in Saudi Arabia’s eastern provinces in the 1930s that witnessed the surge of the kingdom’s influential power with which the world was forced to engage.
According to the International Monetary Fund, Saudi Arabia’s Vision 2030 would require international crude oil prices of roughly $86 per barrel to be successful. Given the reduction in oil production, it may be necessary to raise prices.
Economic shocks ranging from the 2020 Covid-19 lockdowns, which temporarily lowered oil prices below zero, to Russia’s invasion of Ukraine, which boosted oil prices to a peak of $136 per barrel in March 2022, have all had various effects on Saudi Arabia’s spending capacities.
In case of a drop in the oil prices, Saudi Arabia’s capabilities will unconsciously rigid the funds for the projects.
Cutbacks on the major projects are said to continue as the budget for many of the projects are quite high and there have been limited options in terms of matched private investments. On large parts it has only been public money to date and this is one of the most general challenges of the Vision 2030 giga-projects as per Steffen Hertog, associate professor at the London School of Economics and Political Science.
But Dr Hertog added, “some budget adjustment at this point is arguably a sign of more mature policymaking; it would have been worse to run with very large budgets for longer until the money runs out”
Attracting investments may still be critical. However, Saudi Arabia has suffered in this endeavor, mainly due to projects viewed as overly ambitious.
Riyadh made an announcement in April that it had been aiming to raise funds by selling bonds in foreign and local currencies in order to raise a record amount of debt to support the Vision 2030. This may imply that lenders issuing minimum $1.5 billion bonds to maintain Vision 2030 on track.
However, regional and global tensions have prompted increased caution among both domestic and international investors.
The IMF expected Saudi Arabia’s economy to grow 2.6% in 2024, down from 4% in October, amid regional tensions and continuing oil supply restrictions.
Riyadh would certainly hope that regional tensions, which have hampered its economic prospects, will diminish.