The Foreign Service Journal, May 2018

THE FOREIGN SERVICE JOURNAL | MAY 2018 41 rate is less than 6 percent (private estimates are significantly higher), nearly one-third of young Saudis are unemployed. • As demand for jobs grows, the traditional employers—the public sector and the energy sector—are increasingly incapable of providing opportunities. • Young, urbanized Saudis are demanding reforms that will relax the country’s highly restrictive social climate, especially in regard to gender issues. In response, Mohamed bin Salman, the country’s young crown prince— familiarly known as MBS—has already instituted a number of popular social reforms, and is now undertaking sweep- ing economic changes to address the country’s challenges. But as of now, a real democratic opening in the political sys- tem does not appear to be in the cards. The United States has a strong inter- est in seeing the crown prince’s reform efforts succeed. Regional security and stability, as well as the health of the global economy, depend on a stable Saudi Arabia fully integrated into the international community. Saudi reforms would also open doors for greater U.S. business participation in one of the most prosperous economies in the world. At the same time, efforts to address the demands of a young, urbanized and well-educated population must also include meaningful political reform. It is therefore in the interest of the United States to encourage the Saudi leadership to include measures to build a more open, democratic government in their plans. It’s the Economy, Stupid MBS’ project revolves around “Vision 2030,” a comprehensive economic and social initiative with three core elements: • Developing a diversified and sustainable economy that shifts away from reliance on the energy sector as the main pillar; • Shifting the main driver of economic growth and prosperity from the public sector to the private; and • Creating the millions of jobs needed to absorb the coming demographic wave as the public sector retreats from its historic role as employer of first resort. Perhaps no element of the Saudi economic reform package has received more international attention than the proposal to privatize a small portion of the country’s crown jewel, Saudi Aramco, which Saudi authorities value at $2 trillion. The exact percentage of the company that would be sold to the public has not yet been announced. In addition, the timing of the sale is still unknown; there is some speculation that the release of stock for sale on international markets may be delayed at least until 2019 in hopes that rising prices in the energy sector will strengthen the company’s valuation. But whatever the details of the initial public offering turn out to be, it’s important to remember that this is only one element of a much broader reform package. Another important element of the Saudi economic strategy involves major investments to turn the private sector into the main engine for job creation, increasing its contribution to gross domestic product from the current 40 percent to 65 percent by 2030. The effort has two prongs: expanding the private sector of the economy, and privatiz- ing elements that had until now been public-sector enterprises. Specifically, Riyadh sees significant potential in areas as diverse as retail, mining, tour- ism and (surprisingly, for a country uniquely associated with the oil and gas industry) renewable energy. Another consideration driving the Saudi interest in solar and nuclear energy is the recognition that the country’s growing domestic energy demands are eating into its capacity to export its most marketable asset. In addition to diversifying the economy, the Saudis have announced their intention to transition certain labor categories, particularly in education and health care, from governmental control to the private arena. Beyond developing new sectors for economic growth, Vision 2030 also proposes measures to make the Saudi private sector more competitive and more attractive for investors. Specifically, it sets the ambitious goal of placing Saudi Arabia in the top 10 nations on the Global Competitiveness Index and increasing the share of foreign direct investment in the economy from 3.8 per- cent to 5.7 percent of GDP. Building on the country’s geographic advantages, the plan aspires to make Saudi Arabia a regional Saudi Arabia’s Crown Prince Mohamed bin Salman. THEWHITEHOUSE