Saudi Arabian business executives are more bullish than those in the UAE about diversification efforts since the crash of the price of oil two years ago, a survey shows.
These include Saudi Arabia’s mammoth plan to boost revenues by means other than hydrocarbons through share sales including that of Aramco, one of the world’s biggest oil companies, and new forms of taxation as well as subsidy cuts and plans to implement a regional value added tax (VAT).
Research carried out exclusively for The National by Borderless Access revealed that 58 per cent of Saudi Arabian respondents surveyed strongly agreed that the National Transformation Plan, also known as Vision 2030, would boost the non-oil sector’s contribution to Saudi Arabia’s growth and has improved the outlook for the economy for next year. That compared to 36 per cent of those polled in the UAE who strongly agree with the question.
“People have shown a very positive take on Vision 2030 to boost non-oil based economy,” Borderless Access, an online marketing and research firm, said. “[The] degree of positivity is higher in Saudi than in UAE, possibly due to higher awareness about the Vision 2030 at market level. It also demonstrates willingness to contribute towards developing a non-oil economy. Results clearly indicate that market understands the positive impact of reduction in subsidies coupled with other steps being taken for a balanced and diversified economy.”
When it came to the question of subsidy cuts and V AT, respondents in a poll released last week by The National and Borderless Access, were less upbeat about the ability of these measures to enhance growth, with 25 per cent of respondents strongly agreeing in Saudi Arabia and 20 per cent of those polled in the UAE who felt the same way. Rolling back subsidies and implementation of tax system are always a tricky part given its apparent effect on consumer confidence, Borderless Access said.
The Saudi transformation plan was largely unveiled in April when Saudi Arabia’s deputy crown prince Mohammed bin Salman promised to massively boost home ownership, launch “the biggest IPO in history” and end the country’s reliance on oil revenues by 2020, as he announced a slew of details of the long-awaited economic reform programme that was approved by King Salman and the Saudi cabinet.
At the heart of the country’s economic transformation plan, which has been unveiled in a gradual process over recent months by Prince Mohammed, is lessening the nation’s reliance on revenues from oil and coming up with new ways to raise money through taxes, such as VAT and privatisations.
The planned measures would raise at least an additional US$100 billion a year by 2020, according to Prince Mohammed.
“There is lots to do in Saudi Arabia but it’s encouraging to see government institutions such as the central bank adopting a very commercial approach, a market driven approach,” said David Hunt, the chief executive of Gulf Finance, the small business financing unit of the Dubai investment bank Shuaa Capital. “Saudi has lots of challenges but they are making a start.”
Borderless Access surveyed senior business executives in Saudi Arabia and the UAE.
Consumer sentiment could shift during the next few months when the Saudi transformation plan will become more entrenched with consumers and business’s mindset, said Dushyant Gupta, of Borderless Access.
Read Saudi Arabia’s National Transformation Plan here.
Follow The National’s Business section on Twitter