Saudi Arabia will spend at least half the money it raises by selling shares in the state oil company, Aramco, to develop domestic arms manufacturing industry, the mining industry and the entertainment sector.
Deputy Crown Prince Mohammed Bin Salman announced the plan during a televised address to the nation where he tried to calm fears over the uncertainty about austerity measures.
Salam said that the Saudi sovereign wealth fund will use proceeds from the initial public offering in Saudi Aramco, estimated to be worth $2 trillion, to develop domestic arms manufacturing, the mining industry and the entertainment sector.
Reviving the economy
The share-sale is due to take place next year. Without it, the kingdom could take decades to develop its economy and new industries, he said.
Prince Mohammed, 31, used the interview, reported widely in the economic sections of national newspapers, to highlight planned investments, cash transfers and construction projects that he says will help revive an economy, which has been stuck in the worst slowdown since 2009. Excluding oil, Saudi output barely grew last year after the government slashed spending and suspended some allowances for state employees, a significant change for a public accustomed to generous handouts.
Some Saudis have complained privately and on social media about lower incomes and higher costs, reported the Economic Times, and there were online calls for protests on 21 April, spurring authorities to take unusual policing measures in the capital Riyadh. The day after, King Salman reversed some of the cuts, ordering the resumption of bonuses and allowances for state employees that had been suspended in 2016.
The prince rejected the idea that public pressure had forced the government to make a U-turn commenting that "the suspension of allowances was temporary and was to be reviewed periodically. "It was reviewed in the appropriate time after our oil revenue improved.''
Prince Mohammed said that all reform measures have side-effects. "These new programmes, which are being launched, will start yielding results by the end of 2017 and more strongly in 2018 and 2019."
He cited the effort to build a defence industry, saying that Saudi Arabia spends as much as $70 billion a year on its military and aims to include local content in all its arms deals. The government also plans home-building programmes, with housing to be made available free or at low cost to poorer Saudis, Prince Mohammed said.
Saudi Arabia's economic plan and its Vision 2030 programme to diversify the economy are heavily dependent on the sale of Aramco, but the $2 trillion evaluation is overly optimistic say experts.