Insights / 17 Feb 2017The Kingdom, Turning Crises into Opportunities
As a member of the G20, the Kingdom is not only affected, but is also taking an active role in creating solutions to these problems.
The Saudi Government recently announced the 2016 budget, relatively large as the past few years with strong public spending in spite of the falling oil prices, in a clear indication that the Kingdom is keen to continue its development projects.
This might be why I find myself optimistic for the Kingdom's future, and its ability to overcome any crisis by diversifying its sources of income, and to not limit itself with oil. We have witnessed crises in the past, and we know from experience that they can also hold opportunities, grabbed by those who dare, those who innovate and see beyond the black smoke of the crises - these creatives later become sought experts and their endeavors topics in business literature. A prime example is Malaysia in the 90s, when the former Prime Minister Mahathir Mohamad led his country to an economic and social renaissance.
With the drop in oil prices, our country is taking major steps in creating new sources of income and reviving economic sectors sidelined in the past. Attention is being placed on small and medium enterprises. SMEs are the backbone of healthy economies; accounting for 97 percent total enterprises in most countries. Focusing on this sector will help to reduce unemployment and reduce job demands in government sectors.
Another encouraging announcement is the Kingdom's plans to activate privatization programs to include a substantial number of its important sectors, including: Airports, seaports, education and health. There is no doubt that privatization has significant positive impacts, including improvement of customer service, reduction of bureaucracy, improved efficiency, influx of both domestic and foreign investment, organic and sustainable employment and many more benefits that support the local economy. These entities move from being an operator to becoming a regulatory body.
Most significant of these announcements was studying the possibility of listing part of Saudi Aramco. A step of this magnitude will have transformational effects on both Saudi Aramco in terms of operations and transparency, and boost the government's ambitious National Transformation Program. It will support the Saudi stock market and enable it to play a significant role in the global financial markets as the largest joint-stock company, and it will add a great deal of momentum and market value.
My optimism stems from the observation of Saudi Telecom Company - STC, for over a decade and a half, which I always compared to the condition of a patient needing an urgent life-saving operation. Yes, a medical operation that has its risks but also promises a more fulfilling continued existence, God willing. Many of us remember the level of service when it was still a government entity, the struggle to receive decent service, and the cost of it regardless of its flaws. The operation was done (privatizing the company, and the government moving from operations to strategy and regulator), the critical stage passed, and soon after became fully recovered and now delivering impressive results:
- STC's contributions to the GNI doubled exponentially
- The Government's proceeds increased
- The return on investment is on the rise
- Private citizens became shareholders
- Increased infrastructural projects and support companies and service providers
- Introduction of regional and international players in the market
- Telecommunication services reaching and sometimes exceeding global standards
- Attractive employer for Saudi youths and professionals
I emphasize again, that the oil crisis will bring opportunities that must be capitalized on, and most importantly the ones in non-oil sectors. Working on supporting it will contribute to the GDP, which was approximately 163 billion riyals in 2015.
In my opinion, the tourism sector is one of those sectors that can create thousands of jobs for Saudis, and support the economy in an outstanding way. Similarly, the real estate sector, which contributes to around 20 per cent to the Kingdom's economy, and has the key to unlocking the solution to the country's housing crisis, has much to offer. If we capitalize on these opportunities and think creatively, we will overcome this hard phase, and with it establish a strong and sustainable economy based on knowledge and diversity. By achieving this, we can influence, in our favor, the global oil price and we can lower production to the preferred level. We can and should develop alternative resources to support the public treasury rather than oil, therefor we should have the courage to operate in any sector that is draining the government's resources.
With Warm Regards,