What are the plans of Mohammed Bin Salman, the new Saudi Arabian prime minister?
The Crown Prince of Saudi Arabia, Mohammed Bin Salman (popularly known as MBS) has been appointed as the new Prime Minister of the country in the recent cabinet reshuffle as per the royal decree. This particular decree is an exception to Article 56 of the Basic Law of Governance in Saudi Arabia which states that the ruling king also serves as the prime minister and the executive head of the government. This is a major testament to the strengthening position of the crown prince in the Saudi government who had previously held the portfolio of the defence minister. Now, as the prime minister, he would also assume the responsibility of serving as the Chairman of the Council of Political and Security Affairs as well as the Economic and Development Affairs. In this capacity, he would have greater authority over the executive affairs of the Saudi Arabian government. The questions however, remain, why is Mohammed Bin Salman so significant in Saudi politics and what this shift in his portfolio would entail for the state in the long run?
The de-facto ruler of Saudi Arabia
Mohammed Bin Salman is often referred to as the de-facto ruler of the Kingdom. This title has been bestowed upon him due to the central place that he occupies in the governance of the state. As the Crown Prince, he is on-route to become the next ruler of the Kingdom and has taken up the responsibility to lead radical changes in the internal and external policy matters of Saudi Arabia. Mohammed bin Salman has often emphasised on the significant role of Saudi Arabia in the regional and international politics owing to its strategic location in the Middle East and hence has introduced various structural reforms within the country. Since 2015, as the Crown Prince began consolidating more power in the governance structure, the Saudi society started to witness significant changes within. These reforms changed the face of Saudi Arabia and contributed to creating the image of progress and social development in a country that is often considered to be conservative.
However, in retrospect one might consider that his reign as the “de-facto” ruler has not been free from controversies and international scrutiny. The murder of the Journalist Jamal Khashoggi still looms large on the Saudi government and particularly Mohammed bin Salman. Various media reports and investigations into the killing point towards the direct involvement of the Saudi state and hence it remains one of the most controversial issues. At present, the question of Sovereign immunity in the Khashoggi case is being debated in the legal proceedings in the United States. Now this sovereign immunity is often just granted to the heads of the government, the King or the Prime Minister. The timing of this Saudi royal decree making Mohammed Bin Salman the Prime Minister of the state is interesting to note in this regard. Many experts have pointed out that this could protect the Crown Prince from further accountability in the case. The killing of the Saudi critic Jamal Khashoggi is just one such example of Mohammed bin Salman’s bid to centralise and consolidate authority in the government, his position has been mired with further controversies of Human rights abuses and curbing of dissent within the Saudi society.
Now coming to the question of analysing this shift in the position, we must first consider the vision that Mohammed bin Salman holds for the future of Saudi Arabia.
The Vision 2030: Future Trajectory
The Vision 2030 is one of the most significant policy initiatives by the Crown Prince that seeks to open up the Saudi economy and reduce the dependence on oil exports for revenue generation. The realisation of oil as a turbulent resource, especially after the dramatic crash of the oil prices in 2014 has further fueled the aspirations of an economic transition in Saudi Arabia. Therefore, the Vision 2030 that was unveiled in 2016 forms an ambitious part of Saudi economic policies and now with MBS as the Prime Minister, there could be more developments in this regard.
It would be interesting to note the various changes brought about under this Vision 2030 with the aim to diversify and open up the Saudi economy. But first, what are the major elements that make up this Vision 2030?
The Public Investment Fund (PIF)
The Public Investment Fund (PIF) is the sovereign wealth fund of Saudi Arabia and primarily drives the economic policies within the state. By virtue of being the Sovereign Fund, the PIF is also a catalyst to the economic transition as highlighted by the Vision 2030. It is responsible for financing the major projects within the state and with the leadership of Mohammed bin Salman, the Sovereign Wealth Fund has found a central place in the finance of several mega-projects that make up the vision of economic diversification. Analysts have often pointed out that the PIF under Mohammed bin Salman is primarily directed by political aspirations rather than market conditions. So what is the current state of this Public Investment Fund?
At present, the Public Investment Fund makes up for about $620 billion and hence the Saudi Sovereign Wealth Fund is considered to be one of the biggest SWFs in the world. This has important implications for the future of the Saudi economy as they begin their attempts to attract foreign investments and also themselves invest in a wide range of diverse projects. As the chairman of the Public Investment Fund, one of Mohammed bin Salman’s radical visions is to maximise the value of the PIL to a whopping $1.07 trillion by 2025. With the reduction in the foreign flow of funds within the Saudi economy, it must be noted that MBS seeks to use the Public Investment Fund as the central tool in developing the economic diversification through expanded investments.
In this regard, recently, Saudi Arabia announced major investments in the energy, water, infrastructure as well tourism sectors. Five new renewable energy projects were introduced, which included three wind energy projects in Yanbu, Al-Ghat and Waad Al-Shamal as well as two solar energy projects in Al-Henakiyah and Tubarjal by the Saudi Power Procurement Company. Apart from this, the Ministry of Environment, Water and Agriculture also invested around 40 billion riyals in the water sector. Local infrastructural projects also saw an investment of around $10.6 billion across 11 cities. The Tourism Development Fund also sought to increase financing of tourism projects. These statistics point towards a major shift in the Saudi approach and its economic bend from non-renewable to renewable energy avenues.
Does this mean that Saudi Arabia’s dependence on oil will completely reduce under Mohammed bin Salman?
While the aim of these economic reforms is to reduce this dependence, Saudi Arabia still cannot completely neglect the contribution of oil and natural gas to its economic development. The economy still remains largely oil-based while opening up avenues for diversification. Oil and natural gas exports still make up for a significant portion of the Saudi GDP. Crude oil and natural gas were still the highest contributors to the GDP, about 32.4 percent, as per the reports for the first quarter of 2022.
As far as the further investments of the state are concerned, the International Monetary Fund has predicted that Saudi Arabia might be one of the fastest growing economies in 2022 because of the greater attention paid to the economic reforms. Changes in the tax policies and the revenue generation from non-oil assets is also one of the biggest contributor to this growth.
This brings us to another important aspect of the Saudi economy that could see a major boom under the reign of Mohammed bin Salman - Saudi Aramco.
The Saudi Arabian Oil Company (Saudi Aramco) is the most significant driver of the Saudi economy since it engages in the exploration, production, transportation and sale of crude oil and natural gas from Saudi Arabia. In this regard, it is very interesting to note that the Governor of the Public Investment Fund, Yasir Othman Al-Rumayyan was also appointed as the chairman of Saudi Aramco in 2019 by Mohammed bin Salman. Another important aspect is that after the sale of about 1.7 per cent of Saudi Aramco’s assets in the Initial Public Offerings (IPO), the whole of the profit of $29.4 billion went to the Public Investment Fund, or put another way - to the Sovereign Wealth Fund of the kingdom. This is a significant aspect to consider, keeping in context the Vision 2030, that even with the attempts to diversify the economy into various areas, Mohammed bin Salman might still keep oil and natural gas at the centre of his economic policies.
Mohammed bin Salman also seeks to employ the Public Investment Fund (PIL) towards the enhancement of the tourism industry. His aim is also to increase the contribution of tourism revenues to constitute about 10 per cent of the GDP (gross domestic product) by 2030.
Now, coming to the question of tourism, there is another significant mega-project introduced by the Crown Prince that would be a major step towards increasing tourism in Saudi Arabia.
NEOM - The futuristic city
Now that Mohammed Bin Salman is the Prime Minister of Saudi Arabia, it would be interesting to note how he approaches one of the biggest and most awaited projects as a part of his Vision 2030. Recently, the Crown Prince announced that the designing and planning for the futuristic city has commenced. It would be one of the most significant projects to look out for as MBS starts his journey as the prime minister. The aim of this project, as per the Crown Prince is to add to the Saudi market value as well as make it one of the most important tourist hubs in the world.
Now, even though the aims and aspirations associated with the Futuristic City seem quite grand, there are various questions attached to this project. One of the most important of these is related to the investment. As the sovereign wealth fund stands strong, there still is a need to attract foreign investment in order to build this project to reality. The controversy of Jamal Khashoggi has negatively affected the foreign investments in the region and it would be interesting to note how MBS plans to form partnerships with the other countries over this project. The Saudi relationship to the United States would also be an important area to consider in this regard.
All things considered, Mohammed Bin Salman seems to have a radical economic vision for this country that may materialise in the future. However, what would Saudi Arabia look like on the inside as the Crown Prince takes the office of the Prime Minister?
A reformed Saudi Arabia?
MBS is credited with bringing about significant reforms in the Saudi society while also managing to centralise and tighten the grip over his political authority. Various reforms regarding the education and public presence of women in Saudi Arabia have been introduced under his authority. The famous law permitting women to drive on the streets of Saudi Arabia was also passed under the leadership of MBS. Over the last couple of years, analysts have noted a steep rise in the female workforce in the Saudi economy. It has been noted that the female participation in the labour force has increased substantially to about 64 per cent by 2020.
However, all is still not well with the situation of human rights in Saudi Arabia. Women, even though granted a few basic rights, still struggle to find their voice in the 'new Saudi Arabia' of Mohammed bin Salman. It would be very important to observe how the Crown Prince deals with the social and political aspirations of the people as he now holds the office of the Prime Minister and hence assumes greater accountability to the internal matters of the state as well.
As the defence minister, Mohammed bin Salman had launched aggressive operations against the Houthi rebels in Yemen. His stand towards Iran was also considered to be radical and aggressive. However, now, as the Prime Minister of the Kingdom, it would be relevant to note how he attempts to approach the issues of foreign policy within the region as well as outside. His comments to seek better relations with Iran might be an indication of a more amicable approach towards the regional rival.
The shift in the portfolio of Mohammed bin Salman would likely bring in little change to the status-quo in Saudi politics because even before becoming the head of the government, MBS sat at the helm of the major executive matters related to defence, economy and internal security. However, we could expect more engagement and development of his Vision for Saudi Arabia as his position as the prime minister solidifies. As far as the internal security situation in Saudi Arabia is concerned, based on the Crown Prince’s modus operandi, one can predict that the limitations on the challenge to his authority is going to further tighten in times to come.