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Prince Mohammed Bin Salman, Saudi Arabia’s deputy crown prince, Defence Minister and chairman of the Council for Economic & Development Affairs (CEDA), said in an interview with The Economist on 4 January that VAT could be introduced this year, non-oil government income will rise to $100bn in five years and that he personally supports selling shares in Saudi Aramco.
The interview, which The Economist says is the first on-the-record meeting between Prince Mohammed and representatives of international media, covered a wide range of issues including relations with Iran, developments in Yemen and the role of the US.
The key points made about economic affairs were:
* Taxation. “There are going to be no income taxes, and no wealth taxes. We’re talking about taxes or fees that are supported by the citizen, including the VAT and the sin tax.”
* Non-oil government income. “We have many opportunities in mining, we have more than 6% of world reserves of uranium, we have many unutilised assets. We have four million square metres in Mecca alone of unutilised state-owned lands…We believe we could reach a point of non-oil revenues reaching $100 billion over the next five years.”
* VAT. “We’ll try to do that by the end of 2016 or 2107…We’re talking about VAT, it will not be applied to any of the basic products; it will be on accessories…(The VAT will not be on basic products) such as water, dairy, milk…”
* Privatisation candidates. “Healthcare, educational sector, some military sectors such as military industries and some state-owned companies. It will decrease some of the pressure that the government has, and some of them may create good profit.”
* The sale of shares in Saudi Aramco. “This is something that is being reviewed, and we believe a decision will be made over the next few months. Personally I’m enthusiastic about this step. I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco.”
* Subsidies. “We want to reach free energy markets, but with subsidy programmes for those with low income, and not to have the subsidy in the form of lowering the energy prices, but through other programmes.”
* Using government assets. “We have a very magnificent area north of Jeddah, between the cities of Umluj and Wuj, there are almost 100 islands there, in one atoll. The temperature is ideal, five to seven degrees cooler than Jeddah. It’s virgin land, I spent the last eight holidays there. I was shocked to discover something like this in Saudi Arabia, and there were steps taken to preserve this land, 300km by 200km. This is one of the assets that we target, and we believe it has an added value other than generating income for state funds. So we have many unutilised assets. In Mecca, Medina, in rural areas and in urban areas. Jeddah for example: there is a land, total area about five million square metres, right on the beach front, in the heart of Jeddah, it’s owned by the air defence. The value of the land itself is about $10bn. The cost of transferring all the structures and buildings is about $300m. So this is a big waste. So to utilise the unutilised assets will create profit and generate development, this is massive work that we’re addressing. We are targeting to introduce new assets into the state-owned funds that are equivalent to $400bn, over the next few years…These will go to the funds, and then will turn into projects, and into companies, and then will be offered on IPOs to the public.”
* The role of private Saudi companies. “There’s one Saudi company that’s an example among many companies, like Amarai dairy company, their share in the Omani market is 80%. Their share in the Kuwaiti market is more than 20%. Their share in the Emirati market than 40%. In Egypt, where there is the Nile, their share is 10%. One Saudi company. We have other dairy, agricultural companies, and you can also do the same with the banking sector. The mining sector. The oil and petrochemical sector. There are many enormous opportunities to expand and develop.”
* On attracting foreign investment. “Profitability is the question, and this is what we’re trying to offer in order to attract investment. And this happens at the same time while having good regulations, and that could guarantee the safety of their investments. And we’re not a country new to foreign investment. The largest of international companies are present in the Saudi market: Boeing, Airbus, GE, GM, Sony, Siemens; all the large players are in the Saudi market. And all the major and key banks are opening branches in Saudi Arabia. So I’m not just opening up to the world; I’m already open to the world. I’m only giving out opportunities.”
* On jobs for Saudi Arabians. “We have great opportunities to create jobs in the private sector. The mining sector will help us a great deal in creating jobs, the programme addressing the pilgrims and the visitors will also generate many jobs, the investments will also create jobs. We do not expect that our unemployment will grow, we believe it will decline over the next few years, to a good extent. At the same time I have reserves now, ten million jobs that are being occupied by non-Saudi employees that I can resort to at any time of my choosing. But I don’t want to pressure the private sector, unless this is the last resort.”
* On social development in Saudi Arabia. “Fifty years ago we did not even have a legislative body. Today we have women with good representation at the parliament, and women do vote and nominate themselves for elections, and today we are making progress. According to our own needs, according to our own pace, and not as a response to any other model…But I guarantee to you that there are no obstacles in the way of women furthering their participation…Culture of women in Saudi Arabia; the woman herself. She’s not used to working. She needs more time to accustom herself to the idea of work. A large percentage of Saudi women are used to the fact of staying at home. They’re not used to being working women. It just takes time… A large portion of my productive factors are unutilised. And I have population growth reaching very scary figures. Women’s work will help in both of these issues.”
* On his vision of the future. “The Saudi Arabia that I hope for…(is) a Saudi Arabia that is not dependent on oil; a Saudi Arabia with a growing economy; a Saudi Arabia with transparent laws; a Saudi Arabia with a very strong position in the world; a Saudi Arabia that can fulfil the dream of any Saudi, or his ambition, through creating enticing incentives, the right environment; a Saudi Arabia with sustainability; a Saudi Arabia that guarantees the participation of everyone in decision-making; a Saudi Arabia that is an important addition to the world and participates in the production of the world, and participates in facing the obstacles or the challenges that face the world. My dream as a young man in Saudi Arabia, and the dreams of men in Saudi Arabia are so many, and I try to compete with them and their dreams, and they compete with mine, to create a better Saudi Arabia.”
* On the role of the US. “We understand the work carried out by the United States. America is carrying out many efforts. We try to assist with all the efforts carried out by the United States. We try to express our point of view and I can tell you that work between us and the United States is very strong and very magnificent. But the United States must realise that they are the number one in the world and they have to act like it…We realise that we are part of the problem of not putting our own perspective through to them. We did not put enough efforts in order to get our point across. We believe that this will change in the future.”
* On Saudi Arabia’s regional role. “In the region we are dealing with all of our allies on an equal footing. And we’re all dealing with facing the challenges of the region. We and the GCC countries, Egypt, Turkey, Sudan, the countries in the Horn of Africa, the countries of north Africa, west African countries, east Asian countries, Malaysia, Indonesia, etc., Pakistan. We try to collectively face these challenges. Because these challenges pose threats to us all, and we must face them as one team. And we try to do positive work.”
* On the Arab Spring and Saudi Arabia. “First of all I can say that the Arab Spring was the real test that put to the test the authoritative form of government and non-authoritative form of government, and the regime that represents its people versus the regime that does not represent its people. Any regime that did not represent its people collapsed in the Arab Spring, and the other regimes we saw what happened to them. We are part of a national process; we are part of the local tribes of the country; we are part of the regions in the country; we have been working together for the past three hundred years.”