When the plans were announced, many onlookers marveled at their scale and grandeur. Saudi Arabia’s Vision 2030 — the country’s plan to diversify away from — included everything from a ski slope in the desert, to a whole city just for sports and entertainment, to a car-less, carbon-neutral mega-city, Neom, in the middle of the desert.
Vision 2030 was also about changing perceptions of Saudi Arabia on the international stage. The various projects being cast as a sign of modernization in the religiously conservative country, which is ruled by an authoritarian royal family that
However since , things have changed a lot. Over the past few months, ministers in the Saudi government have explained how Vision 2030 is being reduced in scope.
Last December the country’s Finance Minister Mohammed al-Jadaan said some Vision 2030 projects would be delayed. In April, at a Riyadh meeting of the World Economic Forum, al-Jadaan said Saudi Arabia was adapting to current circumstances.
For example, a gigantic, shiny line of mirrored skyscrapers in the desert called The Line — one of Neom’s most important sub-projects — is being reduced from the original 170 kilometer-long arc to just over 2 kilometers.
This isn’t the first adjustment to Neom either. The project was supposed to be finished by 2030 but now looks likely to take a further 20 years. It was supposed to cost around $500 billion (€468 billion) but Neom’s budget may go as high as $2 trillion, observers said.
Delays and budget overruns
Other aspects of Vision 2030 haven’t gone as planned either. Some of the more ambitious projects were meant to attract foreign investors to but the desert kingdom is having a hard time doing that and levels of foreign direct investment have remained lower than forecast. Analysts say that regional instability — — and a lack of Saudi regulatory transparency is keeping investors hesitant.
Although Saudi Arabia always expected to foot much of the bill for Vision 2030, it is now being forced to pay for almost all of it.
Much of that funding comes via the , or PIF, one of the world’s largest sovereign wealth funds, fueled by Saudi oil revenues.
In March, the Saudi government transferred 8% of shares in state-owned oil company, Aramco, to the PIF. This means the PIF now holds 16% of , valued at $2 trillion, making it the fourth most valuable company in the world. Critics have also pointed to the fact that, even though the PIF manages a portfolio of assets worth $940 billion, it only has about $15 billion in funds.
Analysts say this reliance on oil prices is what makes the Vision 2030 projects vulnerable. The International Monetary Fund says the Saudis need oil prices around $96 a barrel in order to achieve Vision 2030. So far this year, the price of a barrel of crude, often used as an indicator for the oil market, has gone from around $70 in January to around $81 this month.
This week, business media outlet Bloomberg also reported that Saudi Arabia had become the biggest issuer of bonds among emerging markets, beating out China for the first time in over a decade.
Government bonds are issued to finance public spending; they’re a form of loan on which the issuing government pays interest to bond holders. The Saudis are taking out more of these kinds of loans than ever in order to cover the lack of foreign direct investment, Bloomberg reported. Bankers also told the outlet that Saudi Arabia won’t be able to continue issuing bonds at the current pace for too long because the cost of financing them — that is, paying the interest — will become too great.
Is Vision 2030 in real trouble?
“With the combination of factors, it’s hard not to come to the conclusion that there is a certain degree of economic policy juggling going on [in Saudi Arabia] right now,” says Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington, DC.
Some of the recent statements from Saudi officials, stating that timelines may need to be reassessed on certain projects, could even be considered comparatively unusual, he said. “It’s something we haven’t really heard since the launch of Vision 2030.”
However, Mogielnicki argued, “the status of Vision 2030 is not as spectacular, nor as disastrous as a lot of people make out. The reality is that it’s somewhere in the middle.”
Some aspects of Vision 2030 are working out well. A February “half-time” report by US investment bank Citigroup found that things like , locals’ home ownership levels and revenues from non-oil related sectors had all seen “significant progress.”
In a June statement, after a mission to Saudi Arabia, researchers at the International Monetary Fund concluded that the country’s “unprecedented economic transformation is progressing well.” They also welcomed “spending reprioritization” around Vision 2030.
Ever since Saudi Arabia launched Vision 2030 launched, the various projects within it have evolved, Mogielnicki explained.
The program was hugely varied and predicated on speedy development. Add the costs of some of the more expensive Vision 2030 projects to the everyday funding required to keep Saudi Arabia running and you can see why there’s a need for reassessment happening now, he noted. Some projects, such as the development of green hydrogen, are now seen as more worthwhile, others will be given a longer timeline.
None of this is likely to dent the Saudi ruling family’s hold on power either, he noted.
“The Saudis definitely still have a lot of cards to play with, but it’s also true that right now they’re not operating with the strongest possible hand,” Mogielnicki concluded. “It [Vision 2030] has initiated a major and fundamental shift in Saudi Arabia’s economic and social trajectories. But there is still a great deal of work ahead.”
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