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National Transformation Plan: many promises, few details The National Transformation Plan (NTP) released by the Saudi government is a further step towards execution of Saudi Vision 2030 through a set of ambitious interim targets to achieve by 2020 by 24 government bodies. The NTP is a comprehensive program encompassing medium-term growth boosting initiatives and fiscal consolidation measures. The sequencing and details of the fiscal measures are however still left nebulous. Implementation of growth-boosting initiatives will require a challenging crowding in of private sector investment, particularly from domestic sources. The NTP is likely to introduce a number of one-off supply-side shocks to inflation through its fiscal or labor measures, which could negatively impact Real Effective Exchange Rate (REER) competitiveness. Discretionary consumption growth and real incomes are likely to remain under pressure. We find the diversification measures encouraging, although they appear too ambitious to be met within the time frame envisaged in the NTP, in our view. The focus on diversification could introduce medium- term incentives to adopt a more competitive exchange rate, while also detracting from the binding fiscal constraint under which the government has to operate. Energy policy is likely to be less aggressive and support oil prices. Fiscal targets are difficult to reach, but medium-term oil prices of at least US$50-65/bbl could support NTP progress. Table 4: Selected macro Key Performance Indicators (KPIs) under the National Transformation Plan Regional Global Government entity Key Performance Indicator (KPI) Unit Baseline 2020target b’mark b’mark Ministry of Finance Total non-oil revenues SARbn 163.5 530 10.9 691.0 Budgeted salaries and wages SARbn 480 456 NIA N/A Salaries and wages as a percentage of the budget % 45 40 30 12 Approved projects according to criteria and timeline (% of total) % 0 40 30 78 Credit rating - Al Aa2 Aa2 Aaa Government debt as percentage of gross domestic product (%) % le 30 35 54 Total recorded non-oil assets SARtrn 3 5 NIA N/A Ministry of Economy & Planning Total revenue resulting from privatization projects Under Study Under Study Under Study NIA NIA Value of water and electricity subsidy decrease SARbn 0 200 NIA N/A Percentage decrease in non-oil subsidy % 0 20 NIA NIA Value of private sector contribution to GDP SARbn 993.3 Under Study 1226 14,133.8 Ministry of Energy, Industry and Mineral Resources Value of exports of non-oil commodities SARbn 185 330 Under Study Under Study Value of the mining sector's contribution to GDP SARbn 64 97 13 262 Local content in expenditure of public and private sectors % 36 50 Under study 57 Petroleum production capacity mn bpd 12.5 12.5 3.8 11 Dry gas production capacity bn cf pd 12 178 SL 16 Refining capacity mn bpd 2.9 3.3 1.1 1.9 Ministry of Labor and Social Development Unemployment rate for Saudis % 11.6 9 Under Study 5.8 Cost of employment of Saudis compared to expatriates % 400 280 NIA N/A Proportion of female labor force % 23 28 Under Study Under Study Ministry of Hajj and Umrah Number of formal Haij pilgrims (domestic and foreign) mn 1.5 2.5 NIA NIA Number of Umrah Pilgrims from abroad mn 6 15 NIA N/A Number of Umrah pilgrims (domestic and GCC nationals) mn Under Study = Under Study NIA NIA Commission for Tourism and National Heritage % contribution of tourism sector to GDP % 2.9 3.1 4.9 5.4 Ministry of Civil Service % decrease in the payroll and benefits expenditure % Under Study 20 Under Study 22 % of workers reduction in the civil service sector % — Under Study 20 Under Study 18 Saudi Arabian General Investment Authority Foreign Direct Investment (FDI) SARbn 30 70 45 481 Time needed to issue work visas for new expat employees Day 30 10 10 3 Time needed to issue new business permits Day 19 1 8 0.5 Source: National Transformation Plan OO erartll Lynch GEMs Paper #26 | 30 June 2016 +13 HOUSE_OVERSIGHT_016123