The US and Canada President Trump’s statement in Mississippi in which he said Saudi Arabia might not last two weeks without US military support was inaccurate but his speech would not undermine Saudi relations with the US.
Canada’s criticism of Saudi treatment of dissidents was a different matter because it dealt with internal affairs. Canada needs to admit it’s made a mistake and apologise. Trump in contrast was talking to his own people.
Saudi Arabia pays for equipment supplied by the US. Before the election of Trump, the kingdom had decided to buy most of its armaments from other countries. But since Trump’s election, Saudi Arabia has chosen to buy more than 60 per cent of its defence equipment from the US for the next ten years. Some will be manufactured in the kingdom.
“If you look at the picture overall, you have 99 per cent of good things and one bad issue…I love working with him (Trump).”
Oil Saudi Arabia aims not to fix prices but make sure there are no shortages. The kingdom was asked by the US to offset the fall in exports from Iran and this has happened. The recent rise in prices was not due to Iran but to developments in Canada, Mexico, Libya, Venezuela and other countries.
The kingdom is producing 10.7m barrels a day (b/d) and has spare capacity of 1.3m b/d. That doesn’t include possible supplies from the Neutral Zone with Kuwait which have been stopped. Saudi Arabia is negotiating about the issue with Kuwait but a solution will not come quickly.
The rise of electric cars will not harm oil. Production in other countries will fall. Saudi Arabia needs to supply more in the future.
Saudi Aramco Saudi Aramco’s future is in downstream industries, including in petrochemicals. For that to work, it has to reach an agreement with Sabic and it’s been decided that the PIF will sell the 70 per cent of Sabic it owns to Saudi Aramco. This will allow Saudi Aramco to create a single, global, integrated oil and petrochemical business producing more than 3m b/d of petrochemicals in 2030. The purchase will take place around the middle of next year and there will need to be a full financial year before the IPO will happen in 2020 or early 2021. Saudi Aramco will be valued at $2trn or more.
The PIF, Softbank Vision Fund and Neom City The PIF will get $70bn-80bn for its Sabic shares and receive the $100bn proceeds from the Saudi Aramco IPO. The PIF’s assets are now close to $400bn. The target for this to rise to around $600bn in 2020 will be surpassed.
The PIF has invested $45bn in the Softbank Vision Fund and plans to invest a further $45bn. Work will start in 2019 on 2GW of the planned 200MW solar power project planned with Softbank. In 2020-21 this will rise to 4GW. The timeline for the remaining 196GW will be announced in 2019.
Neom Riviera, the first part of the Neom City project, will be completed in 2020. After that, two to three new Neom City districts will be finished each year until the project is finished in 2025.
Privatisation In 2019, more than 20 services will be privatised, most of them in desalination but also in agriculture, energy and sport. The government will hold minority stakes and some will be IPO-ed.
Public spending and the deficit Government spending is now SR 1trn riyals for the first time. Non-oil income has been increased from SR100bn to SR 300bn. The government is reducing the proportion of its budget allocated to wages and the target is for it to fall to 30 per cent.
The higher oil price will lower the deficit but it will not affect spending much though it will rise by about 10 per cent this year which is not abnormal. The government’s completed gas, electricity and water price adjustments and VAT’s been introduced. These reforms are finished and therefore higher oil prices won’t be relevant.
The Citizen’s Account system of transfers to low-income people has been launched but the government is debating whether it should continue or whether other forms of compensation might be launched. Provisions have already been made for this and it won’t alter budgetary projections.
The economy is to be boosted by increasing capital spending and investment by the new Saudi development fund, increasing resources for the PIF to invest in Saudi Arabia and abroad, making regulations easier and restructuring other industries to create more opportunities for growth and for more businesses to come.
Unemployment Unemployment is now about 13 percent, but only 6 per cent of men are out of work compared with more than 20 per cent of women. It will start to decline from 2019 until it reaches the 7 per cent target level in 2030.
Business confidence and foreign direct investment The arrests of business people and others in an anti-corruption crackdown in 2017 hasn’t had an impact on foreign investment. Net foreign investment in the Saudi stock market in the first half of 2018 was 40.4 per cent higher compared with the same period of 2017.
Foreign direct investment fell by 80 per cent in 2017, partly due to Kingdom Holding’s purchase of shares held by foreigners in Banque Saudi Fransi, but will rise by more than 90 per cent this year. A large non-oil foreign investment deal will be announced at the Future Investment Initiative conference on 23-25 October.
The corruption crackdown About $35bn has been recovered from people held in the anti-corruption crackdown and the process will be completed in two years. Forty per cent is in cash, which goes to the Finance Ministry, and 60 per cent in other assets, which are managed by Istidama. Only eight people are still detained and they are subject to Saudi legal processes.
On Jamal Khashoggi, arrests of Saudi Arabians and social reforms Jamal Khashoggi is not in the Saudi consulate in Istanbul and the Turkish government can search it. The kingdom has nothing to hide.
People have been arrested for communicating with foreign secret services not for complaining about government policies. These include those run by Qatar and indirectly by Iran. About 1,500 people have been arrested in the past three years as part of the counterterrorism and counter-subversion programme. People are free to speak openly to the media. The overwhelming majority of Saudi Arabians support the government and its reforms.
Male guardianship of women is being reviewed in collaboration with the Senior Council of Ulema. The kingdom’s working to improve the quality of life without undermining religious laws.
Yemen The kingdom hopes the conflict in Yemen will end soon and pressure is being applied on rebels. But the kingdom will not contemplate a new Hezbollah group capable of interrupting the sea route where about 15 per cent of world trade passes. Mistakes have been made during the war but the kingdom won’t jeopardise its national security for the sake of relations with foreign countries.
On the Vision 2030 reform programme In 2015, Saudi Arabia had to do unexpected things but that’s no longer necessary. It’s sticking to the long-term vision which will involve a programme of activities from 2020 and then from 2025. It’s better to set stretch targets, even if they are not all hit, rather than easy ones and deliver little.
On himself “I am the crown prince of Saudi Arabia and I am trying to do the best that I can do through my position as the crown prince and the deputy prime minister of Saudi Arabia. Whatever serves the Saudi people and Saudi Arabia as a country, I will do it with full force, regardless of the impressions that it will create about me. If it’s good, thank you, that’s great. If it’s bad, I will try to clarify myself. If it works, good, if it doesn’t work I have to do what’s good for my country and for my people.”