RIYADH: In a historic move, the Kingdom has cut its reliance on oil-generated income to 70 percent in 2015, which signals a progressively growing economic diversification program strongly backed by the Saudi government.
“This will further incentivize private sector to further invest in Saudi economy,” said Abdullatif Al-Othman, governor of Saudi Arabian General Investment Authority (SAGIA).
Al-Othman said that “the budgetary announcement coupled with the royal mandate to further improve the Saudi business environment to maintain its place among the top 20 countries sends a strong signal to the private sector — both domestic and foreign — that the Kingdom is serious about it diversification programs and the restructuring of its economy toward higher efficiency.”
The SAGIA chief was speaking to Arab News about the vision of the economic growth as spelt out by Custodian of the Two Holy Mosques King Salman in his speech at the Shoura Council session.
He at the same time shared his thoughts and expert opinion, while commenting on the national budget approved by the king on Tuesday.
Referring to the ambitious programs launched by the government to diversify economy, Al-Othman said that the Kingdom managed to lower its dependence on oil-generated income to 70 percent in 2015 through the government’s diversification efforts, which are expected to continue gaining momentum in the years to come.
“This is the lowest that it has been in Saudi Arabia’s modern history,” he observed.
Al-Othman is confident that this year’s budget will “help us take the right steps in diversification and growth in the mid to long terms.”
In fact, Saudi Arabia outperforms its Gulf counterparts in terms of its volume of industrial investments, as well as the number of factories it hosts.
The Kingdom held 55 percent of total investments made within the GCC’s industrial sector between 2010 and 2014. It also ranked first in the manufacturing category, as it accounted for 41 percent of plants, according to figures released by the Gulf Organization for Industrial Consulting (GOIC).
Referring to the national budget, Al-Othman said that the budget shows government’s commitments to diversification, social development and above all determination to address economic challenges in a responsible manner.
“It shows commitment to raising the quality of services and social welfare by maintaining a high level of government spending, despite the budgetary deficit, in order to enact the critical programs,” he added.
“We are confident that this will also show the resilience of the Saudi economy to spending cuts, through structural transformations that will help minimize waste and bring utility prices closer to regional levels while continuing to support low income households and competitive industries,” said Al-Othman. This is a strategic imperative for the Saudi economy, he noted.
On falling oil prices, the SAGIA governor said that the time is right to affect economic reforms and gradually normalize utility and energy prices, while continuing to improve the overall efficiency of the Saudi economy over the medium to long terms.
“It is noteworthy to underscore that utility prices in the Kingdom remain one of the lowest in the world — an important consideration for local and international businesses alike,” he suggested.
He said that the economic synergy resulting from the alignment of the Saudi government and the private sector on diversification goals as well as the efficient restructuring of the Saudi economy, will augur well for the long term soundness of the Kingdom’s economy.
“Moreover, it will support the efforts that we are taking at SAGIA to promote economic diversification through catalyzing local investments and attracting quality foreign investments,” he noted.
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