IMF国际货币组织全球-Saudi-Arabia_Selected-Issues_38页_957kb

Summary of Saudi Arabia Selected Issues Paper (September 2019)

Core Content

This paper outlines the challenges and strategies for economic diversification in Saudi Arabia, emphasizing the need to reduce reliance on oil and create employment opportunities for Saudis. It provides an overview of the country's Vision 2030, structural reforms, and financial strategies aimed at fostering a self-sustaining, diversified economy.

Main Viewpoints

• Diversification is essential to create jobs for Saudis, enhance economic resilience, and reduce exposure to oil price volatility.
• Oil remains central to the economy, accounting for over 40% of GDP, nearly 70% of fiscal revenues, and close to 80% of exports.
• Non-oil exports are limited and concentrated, with petrochemicals and plastics being the primary non-oil export categories.
• Vision 2030 is a key initiative to drive economic diversification, targeting a significant increase in private sector participation, GDP growth, and job creation.
• Structural reforms are necessary to improve the business environment, reduce corruption, and enhance legal and institutional frameworks.
• High wages in the government sector, especially for Saudis, pose a challenge to private sector competitiveness and job creation.
• Financial diversification through the Public Investment Fund (PIF) and other financial instruments can support fiscal and external revenue streams, but may not be sufficient on its own.
• Industrial policy and special economic zones (SEZs) are being used to promote non-oil sectors, but must be implemented carefully to avoid inefficiencies.

Key Information

Economic Diversification Needs

• Saudi Arabia needs to create jobs for its young population, which is expected to require up to 1 million new jobs over the next five years.
• A diversified non-oil economy is necessary to ensure long-term economic stability and reduce vulnerability to oil market fluctuations.
• Oil price volatility and potential long-term decline in demand could threaten future economic growth and living standards.

Vision 2030 Objectives

• Private sector expansion: Increase private sector contribution to GDP from 40% in 2018 to 65% by 2030.
• Job creation: Develop employment opportunities in key sectors such as retail, manufacturing, mining, logistics, and tourism.
• GDP growth: Move from the 19th largest economy to among the 15th largest in the world.
• FDI increase: Target FDI to rise from under 1% to 6% of GDP by 2030.
• PIF growth: The PIF is expected to grow from SAR 570 billion to over SAR 7 trillion by 2030, with an annual return target of 4-5%.

Structural Reforms

• Legal and institutional improvements are needed to support a more competitive and dynamic private sector.
• Business environment has improved with reforms to bankruptcy laws and procedures for business formation and trade.
• Education and training must be enhanced to align with private sector demands and improve productivity.
• SEZs are seen as temporary solutions to address structural issues, with the aim of eventually extending supportive policies nationwide.

Cost Competitiveness

• High government wages and public services (healthcare, education, housing) create a misalignment between wages and productivity.
• Private sector wages are significantly lower than government wages, making it difficult for private firms to compete internationally.
• Wage subsidies and negative taxes on private sector wages (with caps) could help align incentives and improve cost competitiveness, though fiscal costs must be managed.

Industrial Policy and Financial Diversification

• Industrial policy should focus on sectors like manufacturing, mining, and logistics, with careful implementation to avoid inefficiencies.
• Financial diversification is important but insufficient on its own; significant financial accumulation is needed to replace oil revenues.
• Non-oil tax reforms are part of the strategy to increase fiscal revenues and reduce reliance on oil, including the introduction of VAT and expat levy.

Challenges and Recommendations

• Incentive misalignment between the public and private sectors is a major structural barrier to diversification.
• Fiscal neutrality is crucial in implementing reforms to avoid undermining economic stability.
• Private sector involvement is essential for the success of Vision 2030, with a focus on training and equipping Saudis with the necessary skills and wage expectations.
• Lessons from other countries suggest that creative policy solutions can address incentive issues without compromising fiscal priorities.

Conclusion

The paper concludes that while Saudi Arabia has made progress in diversifying its economy, more comprehensive structural reforms and strategic industrial policies are required to ensure sustainable and inclusive growth. The success of Vision 2030 depends on improving cost competitiveness, enhancing human capital, and aligning public and private sector incentives. Financial diversification through the PIF and other mechanisms is a critical component but must be complemented by real sector reforms to achieve long-term economic resilience.