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Saudi Arabia is looking to attract almost US$430 billion in foreign investments for a large-scale infrastructure program, Energy Minister Khalid al-Falih told media, as quoted by CNBC during the weekend.
“It is quite ambitious but it is over a 10-year period so we have the time to do it,” Al-Falih said, adding that both the local and international private sector will be expected to take part in the ambitious program, which will span the energy, logistics, mining, and industrial sectors.
The funds will go into the National Industrial Development and Logistics Program, which is part of the Vision 2030 economic transformation program pioneered by Crown Prince Mohamed and aimed at reducing Saudi Arabia’s dependence on oil revenues.
This transformation has proven to be a challenge in a lower oil price context, but the Kingdom is apparently persevering: Al-Falih also said later today he will announce specific projects that need financing over the next ten years and that are already “ready for negotiations”. These projects, he said, were worth a combined US$18.66 billion (70 billion riyals).
Foreign investment will be instrumental for the success of the program, CNBC and Reuters note, but foreign investment might be harder to come by than imagined as it has been declining steadily over the last decade.
In 2008, it reached US$39.5 billion, CNBC recalls, but as of 2017 this had fallen to a meager US$1.4 billion, according to data from the UN. Locally, things are not looking particularly well for potential investors, either. The last oil price crash prompted cuts in many subsidies, which led to higher prices at the pump and consequently various private sector services. Saudi businesses, according to CNBC, are still struggling with these and a 5-percent VAT introduced this month, and unemployment is at an all-time high of 12 percent.
The chances of Crown Prince Mohammed’s program working out as planned have been questioned based on this economic context, and they will likely continue to be questioned until specific results materialize.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.