Can Saudi kick their oil addiction?

Tue Apr 26, 2016 | 2:23 PM EDT Saudi reform plans flirt with social change 4h ago | 01:27 Saudi reform plans flirt with social change By Angus McDowall RIYADH (Reuters) - Reforms promised by a young Saudi prince are couched in references to the kingdom's Islamic tradition but include ideas likely to upset some conservatives, risking future ruptures over the direction of society. Deputy Crown Prince Mohammed bin Salman's "Vision 2030" plan, which the 31-year-old announced on Monday, largely aims to transform Saudi Arabia's economy in an era of low oil prices and made few specific pledges of social change. However, it also stepped into areas that have long been cultural battlegrounds in a country defined by its religious conservatism. For the Al Saud dynasty, which has always ruled in alliance with the powerful clergy of the kingdom's semi-official Wahhabi school of Sunni Islam, that may require care in how far to risk a conservative backlash. Presenting the plan, Prince Mohammed batted away the question of whether women would soon be allowed to drive. Instead, he turned to the usual formulation of Saudi rulers that their society was not yet ready for this, but he appeared to raise the possibility of change elsewhere. Seemingly anodyne promises to invest in cultural events and entertainment facilities, to encourage sports and promote ancient heritage and Saudi national identity, are highly controversial among conservatives. In Saudi Arabia, cinemas are banned and women's sports are discouraged as promoting sin. The pre-Islamic era is dismissed as the age of ignorance, its relics deemed ungodly, and some clerics even see patriotism as tantamount to idolatry. "When he talked about quality of life, about entertainment, he is aware of the changes in our culture and that's what people understood him to be talking about. But at the same time, he showed reluctance," said Jamal Khashoggi, a leading Saudi journalist. Prince Mohammed has presented himself as the face of Saudi youth, devoutly Muslim but in a way different from the older generation of clerics, being more open to the outside world and more accepting of its cultural influences. As a mark of the internationally-oriented nature of Prince Mohammed's ambitions, Vision 2030 used the Western calendar in its title, not the Islamic Hijri calendar officially used in Saudi Arabia, under which this year is 1437. When he presented his plan, the prince gathered clergy, intellectuals and journalists from across the spectrum. But the government's recent decision to increase curbs on the religious police, and continued support for women working, have prompted conservative anger, showing how sensitive the cultural struggles are. A video posted on YouTube before Prince Mohammed announced the reforms was titled "Before the Catastrophe" and portrayed a society riven by the moral degeneracy of the West before succumbing to chaos and violence. WARY STEPS OF CHANGE The Al Saud have always stepped warily with the clergy, aware that the most dangerous challenges to their rule in the kingdom's 70-year history have come from aggrieved religious conservatives. However, they have also traditionally balanced that caution by giving space to the Westernized business elite, and to those liberal intellectuals who have historically backed Al Saud rule, to push social boundaries and nudge the kingdom toward change. Under a pact between the Al Saud and the Wahhabi clergy dating back to the 18th century, the princes had responsibility for governing and the clerics for religion. Over the centuries, however, the definition of where each of those spheres of influence begins and ends has shifted, often marking the boundary of cultural battlegrounds. In recent years changes to education, which is shifting from the domain of the clergy to that of government, to law, in which proposed reforms have encroached on clerical prerogatives, and to the public role of women, have dominated internal disputes. "If you do it too fast, it has a negative impact. Reform in Saudi Arabia always has a precondition: it has to come from inside, it has to be gradual and it has to take into account what people believe is right," said Abdulaziz al-Sager, head of the Gulf Research Centre based in Jeddah and Geneva. CULTURAL TUSSLING Saudi Arabians are avid consumers of Western media and culture. Despite the cinema ban, Hollywood films and recent television series are widely watched at home and discussed. Saudis view YouTube more than any other nationality, measured per capita, and both liberals and conservatives use social media to spread their views. Slick, often funny, online videos produced by young Saudis score millions of hits on YouTube and the 2012 movie Wadjda - the work of a female Saudi director about a young girl navigating religious strictures - won awards at a number of international film festivals. So when Prince Mohammed promises land for cultural and entertainment projects, and support for "talented writers, authors and directors", he seems to point toward a reversal of the ban on cinemas, but without explicitly doing so. But potentially most explosive of all is the renewed commitment to reform education, a process started under King Abdullah who died last year. Prince Mohammed has sworn to create "an education system aligned with market needs", a far cry from schooling that still draws heavily on Koranic teachings. Traditionally, one way the Al Saud had of persuading the clergy to accept change was to spend money on a big religious projects, thereby demonstrating their continued support for Islam in Saudi Arabia. While one aspect of the new plan was for a huge Islamic museum, even that may cause friction: Wahhabi doctrine holds the display of ancient artefacts, even those associated with the Prophet Mohammed, to risk committing idolatry. With his plan predicated on cutting the indiscriminate spending of the past, however, and with a new age of austerity looming due to cheap oil, Prince Mohammed might be denied the luxury to stage cultural warfare with petrodollars. (editing by David Stamp) ===================================================== By Samia Nakhoul, William Maclean and Marwa Rashad RIYADH (Reuters) - The powerful young prince overseeing Saudi Arabia's economy unveiled ambitious plans on Monday aimed at ending the kingdom's "addiction" to oil and transforming it into a global investment power. Deputy Crown Prince Mohammed bin Salman said the world's top oil exporter expects state oil company Saudi Aramco [SDABO.UL] to be valued at more than $2 trillion ahead of the sale of less than 5 percent of it through an initial public offering (IPO). He added that the kingdom would raise the capital of its public investment fund to 7 trillion riyals ($2 trillion) from 600 billion riyals ($160 billion). The plans also included changes that would alter the social structure of the ultra-conservative Muslim kingdom by pushing for women to have a bigger economic role and by offering improved status to resident expatriates. "We will not allow our country ever to be at the mercy of commodity price volatility or external markets," Prince Mohammed said at his first news conference with international journalists, who were invited to a Riyadh palace for the event. "We have developed a case of oil addiction in Saudi Arabia," he had earlier told al-Arabiya television news channel. His "Vision 2030" envisaged raising non-oil revenue to 600 billion riyals ($160 billion) by 2020 and 1 trillion riyals ($267 billion) by 2030 from 163.5 billion riyals ($43.6 billion) last year. But the plan gave few details on how this would be implemented, something that has bedevilled previous reforms. The 31-year-old prince gave assured answers to questions on the plan, and appeared to pitch his comments to appeal across the Saudi social spectrum, and in particular to young people, who face unemployment and an economic downturn despite their country's oil wealth. Even before oil prices started to plunge in 2014, economists had regarded Riyadh's fiscal policy and economic structure as being unsustainable, but reduced income from energy sales has made reform more urgent. The plan appeared to lift sentiment on the Saudi stock market .TASI, where shares jumped by 2.5 percent in the heaviest trading for eight months, but it fell short of convincing skeptics that the kingdom can prosper in an era of cheap oil. At the center of the plan is the restructuring of its Public Investment Fund (PIF), which Prince Mohammed said would become a hub for Saudi investment abroad, partly by raising money through selling shares in Aramco. Asked where Riyadh would find the funds for a $2 trillion dollar fund after recent borrowing, he said it would come from transferring the ownership of Aramco to the PIF. "We are speaking about more than $2 trillion. We expect the valuation to be more than $2 trillion. In addition to that there are other assets that will be added to the fund, and part of it is already added. He said it could "turn into a global investment fund with a size of up to $3 trillion dollars". OPENING ARAMCO ACCOUNTS The partial privatization of Aramco was also central to the plans, and Prince Mohammed said it would be transformed into an energy company that he expected to be valued at $2 trillion to $3 trillion, and that less than 5 percent of it would be listed on the stock market. So big is the state oil company because of its rights to the kingdom's crude reserves, that selling even 1 percent of its value would create the biggest initial public offering (IPO) on earth, he said. He said other Aramco subsidiary companies would also be listed along with other publicly held companies, and added that one major benefit of privatization was that it would increase transparency and help limit corruption. "People used to be unhappy that files and data of Aramco are undeclared, unclear and not transparent. Today they will be transparent. If Aramco gets IPO-ed that means it has to announce its statements of accounts," he said. Since the prince was appointed to oversee Saudi long-term planning through the Council of Economic and Development Affairs, Riyadh's focus on reform has grown far more urgent and far more acute. Prince Mohammed has enjoyed a dizzyingly rapid rise since his father became king 15 months ago, from being little known outside the ruling Al Saud family to become the driving force of Saudi plans to prepare for a future after oil. In his rare press conference, he presented himself as a modernizing leader who seeks to shake Saudi Arabia out of its economic slumber and its reputation for opacity and rigid bureaucracy, showing an interest in topics including education, the public role of women, and football. Saudi Arabia would prepare a new education curriculum, Prince Mohammed said. Despite previous reform attempts, the kingdom's schools have long been seen as focused on religious teachings rather than preparing students for a role in a modern economy. Under the plans, Saudi Arabia would produce or assemble half of its defense equipment internally in order to create job opportunities, he said, and Riyadh would make foreign investment easier. The government ran a deficit of 367 billion riyals ($98 billion) or 15 per cent of gross domestic product in 2015, officials said, and this year's budget plan aimed to cut that to 326 billion riyals ($87 billion). His economic team has already announced efforts to curb wasteful government spending, to diversify revenue streams by introducing sales tax and privatizing state assets, and to make reforms in the education sector. Such was the speculation among Saudis over the details of the plan that hashtags associated with it were the top two trending on Twitter on Monday in the country with the highest rate of social media use in the Middle East. But ambitious targets, such as raising the private sector share in the economy to 60 percent from 40 percent, reducing unemployment to 7.6 percent from 11 percent and growing non-oil income to 1 trillion riyals ($267 billion) from 163 billion riyals ($44 billion) were not explained further. PLANS Some Saudis said they had hoped for more detail on crucial issues such as education reform. There were no further details of plans to increase revenue from tax or of any changes to the political structure of the absolute monarchy. "For me as a Saudi, I am concerned by the education transformation plan," said a Saudi entrepreneur. "If it is not at the top of the list, why not?" Related Coverage Saudi Aramco CEO expects oil price upturn by year-end Saudi reform plan pleases markets, doesn't reassure skeptics Saudi does not expect oil price below $30 due to global demand Analyst view: Saudi Arabia's Vision 2030 reform plan However, the plan also envisaged increasing women's participation in the workforce, something that has already grown quickly over the past five years, to 30 percent from 22 percent. But he also said he did not believe Saudi society was ready to end its ban on women driving. A green card system would also be launched within five years to enable expatriate Arabs and Muslims to live and work long-term in the country, Prince Mohammed said, in a major shift for the insular kingdom. But the focus was on economic restructuring to help reduce oil dependence. "I think by 2020, if oil stops we can survive," Prince Mohammed said. "We need it, we need it, but I think in 2020 we can live without oil." Appealing to Saudi youth, he ended his news conference by promising them a new Saudi Arabia. "The vision is not a dream, it's a reality that will come true," he said. ($1 = 3.7489 riyals) (Additional reporting by Riyadh and Dubai newsrooms; Writing by Angus McDowall and Noah Browning; Editing by Andrew Torchia and Giles Elgood)