
The $2 Trillion Project to Get Saudi Arabia’s Economy Off Oil - phodo
http://www.bloomberg.com/news/features/2016-04-21/the-2-trillion-project-to-get-saudi-arabia-s-economy-off-oil
======
gotchange
Actually, this report should be celebrated but for the completely different
reasons that this wannabe boy king could be the last in House of Saud to rule
the bulk of the Arabian Peninsula.

Usually when an inexperienced, reckless and spoiled brat succeeds in a corrupt
and undemocratic political system, it's likely the final chapter of that
system because the new power holder/grabber would wreck the house beyond
repair thinking that he's instituting reforms when he's really undoing all the
hard work done by his tyrannical but savvy predecessors to keep things
together.

Kudos to Mohammad Salman and I wish him all luck in his endeavor and that he
outperforms the likes of Mohammad Reza Pahlavi or King Farook of Egypt in
destroying monarchy in their respective lands.

Also, it's very intriguing that there was not a single political item on his
"reformist" agenda and yet Bloomberg managed to portray him as some kind of a
visionary man that will emancipate women by finally granting them the right to
own and drive cars as in other neighboring reactionary countries like Qatar,
and restructuring the economy away from fluctuating oil revenues to another
rent-seeking investment banking venture to finance the lavish lifestyle of
their family, House of Saud.

I guess those IB fees and pending privatization deals do make wonders to
Bloomberg's editorial policy. Money talks, bullshit walks indeed.

~~~
sLm
It's difficult to see it that way because being young or old is not really the
criteria for the Saudi leaders. It's the opposite for this man, because the
education is the biggest factor. The previous king hasn't even completed high
school, and he was just... way too simple and knew nothing about politics.
This guy got a bachelor's degree in politics and he's already received super
positively in Saudi Arabia from both the religious and non-religious,
especially because they have already seen a lot of positive changes done by
him in the past few years.

------
vezycash
Here's something I never thought I'd see in my lifetime: "The men spoke for an
hour about the de facto alliance of Israel and Saudi Arabia..."

I went through the article, hoping to discover how the prince got his
education.

* "His father is an avid reader, and he liked to assign his children one book per week, and then quiz them to see who’d read it."

* "His mother, through her staff, organized DAILY extracurricular courses and field trips and brought in INTELLECTUALS for three-hour discussions."

'

His mother's practice of matching intellectuals with her kids supports John
Holt's theories of proper child education.

~~~
chris_wot
There is barely any information other than the two sentences you quote about
how the Prince was educated.

~~~
vezycash
True. I'm of the opinion that creating the love of reading (learning) could be
more important than schooling. From the article, you'll get the sense that the
prince could think outside the established ways of doing things in the
government. I'd wager that his father's reading exercises caused this.

'I have never let my schooling interfere with my education.' -Mark Twain

"Education is what remains after one has forgotten what one has learned in
school." \- Albert Einstein

As for his mother's actions, I believe children who are exposed to more adults
(especially experts), grow up to be quite confident and unencumbered by their
age or perceived inexperience.

From my view, those who put the prince in trouble with the previous king were
less annoyed by the changes than the fact that a 26 year old BOY (prince) was
causing changes.

------
cheriot
The Royal family can diversify, but the Saudi people still have little to
offer the world economy after such a long dependence.

[http://atlas.cid.harvard.edu/explore/tree_map/export/sau/all...](http://atlas.cid.harvard.edu/explore/tree_map/export/sau/all/show/2014/)

------
davidhariri
Planet Money has an excellent episode on this topic from a few weeks ago:
[http://www.npr.org/sections/money/2016/02/03/465476188/episo...](http://www.npr.org/sections/money/2016/02/03/465476188/episode-681-the-
oil-kingdom)

~~~
noobie
Thank you for mentioning this podcast. It's amazing!

~~~
PascalsMugger
Planet Money is one of the only podcasts I can just let run through all the
episodes and still enjoy them all.

------
joeyspn
tl;dr: They plan to launch the world's largest sovereign wealth fund ($2
trillion in assets) via an IPO for 5% of Aramco, and diversify into
nonpetroleum assets.

I guess this signals interesting times ahead for tech, biotech, and clean
energy entrepreneurs in S.A.

~~~
bayesian_horse
I certainly wouldn't want to live in Saudi Arabia. And I wouldn't recommend
any one else to relocate there, especially women.

------
etaty
This article has be to read next to the articles about SA and 9/11, and Obama
veto. This is pure bullshit. SA have the same system of the Catholic Church
and the European kingdoms during middle age, they protect each other.

------
bayesian_horse
Saudi Arabia's problems are an indication that Islam is a bigger problem for
Muslims themselves than it is for anyone else.

Innovation and technology just doesn't thrive in an illiberal society.

~~~
alanwatts
Back in the day, Islamic society actually made many great notable scientific
discoveries:

[https://en.wikipedia.org/wiki/Science_in_the_medieval_Islami...](https://en.wikipedia.org/wiki/Science_in_the_medieval_Islamic_world#Notable_fields_of_inquiry)

~~~
desireco42
Yes, unfortunately those days are long gone.

------
asamm
This family has been the cause of so much destruction and pain in the region
and beyond. What do they do? Export Wahabism to a lot of Muslim countries, and
that is the mother of Taliban, ISIS and many other terror groups.

------
Zenst
Was a recent article about how the government used to employ nearly everybody
on good wages, now with the demise of government jobs and the reality that the
golden pay day from oil is not infinite and more volatile in today's economic
and environmental awareness climate. The need to invest in alternative
industries is paramount. The country has invested lots into education and with
that many highly qualified people who have no goverment jobs find the public
sector in that country very spartan. The drive to change that and produce TAX
revenue outside of oil is the key factor here. Sure the country has other
issues, but they are totaly diferent topics and some may see this as PR spin,
but isn't any goverment touched or provate company annoucement PR one way or
another.

Way I see it is a step in the right direction for the country and a good move,
let us not lambaste it upon other area's and surely some praise for the good
moves as well as lambasting the bad moves should be equally viewed. This is a
good move, nothing to do with other issues and if anything only touches those
other issues in a way that helps address them at the core.

After all people without money and jobs are people with time to ponder
alternative avenues of life choices with some seeing them as the only way,
that is how many get drawn down the darker paths of life. This helps prevent
that.

Another way to view this is - what harm can come from this initiative and with
that I have nothing to add. So it is a good thing.

------
return0
I actually think this is good news for them. Aside from the self-promotion and
the dick-size contest that is typical of the region's princes, laying money
for investments away from oil is going to force them to change. They can't
really expect free trade without also free flow of people, and ideas. For a
society that essentially keeps its citizens in the infantile stage this will
be quite a shock. Bringing the relative openness of dubai to SA sounds quite
revolutionary for their standards.

------
ck2
It is hilarious that rather than let women drive, the Saudis are building a
billion dollar rail system to get around the problem.

Now fathers will teach their daughters, oh you don't have to drive (or even be
allowed to ride a bicycle) because you can just take the train.

~~~
21
Relevant joke: A young Saudi prince studying abroad receives a call from his
father asking him if everything is alright. He tells his dad that he is
feeling ashamed that everyday he goes to college in his brand new Lamborghini
while all the other students take the train. His father replies: "I understand
your shame son, take this 50 million dollars and buy yourself a train".

------
Retric
Most interesting thing I saw was apparently even multi billionaires still end
up with several remotes on their table. That's just sad.

------
joosters
The article mixes up the plans to diversify from oil production with all the
talk about helping the worse-off. These are two separate issues, and changing
one won't magically help the other.

Right now, Saudi has a huge income from oil. If they divest well, they could
have a huge income from investments. In either case, the lot of the poor in
Saudi Arabia doesn't change. Unless they change how they allocate the money,
the rich will get richer and the poor will get poorer.

~~~
baltcode
It is sort of linked. The working class and middle class will have a better
access to meaningful and diverse jobs in diversified free economy compared to
a rent seeking one. It will also be in the state's best interest to educate
more people for these kinds of jobs in order to grow the economy and keep them
off welfare, crime, and violent opposition.

------
surfmike
They could start by ending domestic oil subsidies. Saudi Arabia uses a huge
amount of oil and people pay a fraction of the real cost at the pump.
[http://www.economist.com/blogs/freeexchange/2012/04/oil](http://www.economist.com/blogs/freeexchange/2012/04/oil)

------
jordache
the open court yard looks nice with arbian themed decoration.. Look closer and
there is a f-ing lazy boy recliner in front of the TV.. LOL it's like a
college apartment...

------
desireco42
I see them collapsing before they get better. They are pretending to be
stronger and more important than they actually are. Their army is corrupted
and can be beaten by ragtag rebels from Yemen.

The only thing aside from oil that they have is Mecca and Hajj.

~~~
return0
> only thing aside from oil

Do they need anything more than oil? Many here pretend to be ready to crusade
to save SA women, or install democracy or anything, but are they willing to
impose a trade embargo to SA? Obvious answer is no.

~~~
desireco42
I don't think I would suggest trade embargo, seems that US lost ability to
talk, embargo is only way we can give feedback.

We don't really need their oil that much. We could mend relationships with
Venezuela which is closer (again, mend,not make a coup) and most of our
production is local anyway with fracking being popular. So it is not like we
don't have any choice.

I am disqusted with SA, over many things.

Also, to be clear, as someone who is not politician, I am just suggestion
options, I wouldn't presume I know exactly what US government should do, but
this can give you idea where I am coming from.

------
undersuit
I've always hoped the Saudis would take all their money and make the peninsula
green.

[https://goo.gl/maps/8XXa4zSxHAL2](https://goo.gl/maps/8XXa4zSxHAL2) They've
already got this massive farming operation in the middle of the desert. With 2
trillion they could desalinate so much water. Pricing is something like 1000
gallons of seawater for a few dollars, $2 trillion could desalinate a
millionth of the ocean.

------
bsaul
surely, saudi arabia is already working partly as an investment in activities
other than oil. Do we have a measure of how well those investments have worked
so far ?

i mean, investing requires skill, and you can get burned if you're not really
smart and knowledgeable and agile. All things in which many states ( not just
oil states) are not very famous for.

~~~
azazqadir
I thought Arabs are really good at investing money. The tall buildings in
Dubai and Saudi Arabia had Arab investors.

~~~
kchoudhu
I can't tell if this is sarcastic or not.

I live in the Gulf right now, and hang out with investment professionals
occasionally. The prevailing opinion appears to be that local investors are
shrewd at a tactical level, but _terrible_ at long term planning because of a
tendency to go after flashy, high risk/high return prestige projects.

There is also the distinct lack of local sophistication: almost all investors
are reliant on non-local agents for due diligence and investment lead
generation. I guarantee that this is going to come back to bite them down the
road: incentives need to be aligned, and right now, they simply aren't.

~~~
azazqadir
I seriously thought that Arabs were good at investment, especially in real
estate. For example, the Saudi Binladin Group.

~~~
kchoudhu
There's more than one asset class, and real estate isn't always the best one.

~~~
JBReefer
Especially in an unstable region

------
aerodog
Can someone explain to me how the sale of 5% of Aramco will yield $2T?
Certainly they don't believe Aramco is worth $40T?

~~~
msellout
Wikipedia says there are an estimated 268 billion barrels in Saudi Aramco's
proven oil reserves, with maybe 90 billion more undiscovered. It produces
somewhere between 3 and 4 billion barrels annually. If a barrel of oil is
worth about $50, then the total value of Aramco is about $18 trillion. We can
put a discount on that for time, but you might also want to consider that oil
will get more difficult to pump out of the ground and price should increase
faster than inflation. CPI is pegged to the price of oil, so all this stuff
gets complicated.

~~~
acchow
You need to measure how much _profit_ they'll make from the oil, not the
revenue it will generate.

~~~
orf
SA has the highest profit margin of any oil exporter.

~~~
msellout
Still, he's got a point. They are very mysterious about what their margins
are.

------
rkrzr
TLDR: Saudi Arabia wants to turn itself into a hedge fund to be less dependent
on oil.

What could possibly go wrong?

------
Cyph0n
Skimmed through it, saved it for later reading. It's pretty interesting to see
such drastic plans for change in SA. As an Arab Muslim, I truly hope they
follow through. It could push several other oil-dependent countries in the
region to follow suit.

~~~
wale
Definitely. Oil wells are drying up, because "demand." So it's sure a good
time to evaluate. If SA should be thinking of change on that front, others
shouldn't waste any more time in following suit. Good stuff

------
known
Is it difficult for Saudi to adopt/customize
[https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...](https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norway)

------
counterstriker
PR? [edit] SA have been in the press lately for another reason. [Saudi Threat
to Sell U.S. Assets Could Hurt, but Mostly the
Saudis]([http://www.nytimes.com/2016/04/20/business/international/sau...](http://www.nytimes.com/2016/04/20/business/international/saudi-
threat-to-sell-us-assetscould-hurt-but-mostly-the-saudis.html))

Is there another side to their story? [The Real House of
Saud]([https://www.youtube.com/watch?v=TmSRWXCosxc](https://www.youtube.com/watch?v=TmSRWXCosxc))
Abby Martin, (formerly with RT) conducts an expose.

------
mafribe
PR fluff piece. He's working 16 hours a day to make the world a better place?
Gosh, what a saint ... I wonder how much the Saudi-Arabia's PR agency had to
pay to get it into a mainstream publication. See also:
[http://www.paulgraham.com/submarine.html](http://www.paulgraham.com/submarine.html)

No meaningful questions of 'marginal' topics like the pointless the Yemen war,
the support of ISIS and other unsavoury organisations. And exactly why does
the interview accept him has head of state at all? Why should the House of
Saud govern, and not be replaced by a democracy?

~~~
themartorana
A toppled government in a fundamentalist region suffering economic fallout
from the falling global demand for oil does nota democracy fuel. While I agree
with everyone that sees SA as a terror-governed state, perhaps you've been
around for some portion of the past 50 or so years and have witnessed what
Western-exported democracy looks like in the Middle East right now.

SA's problems are plenty, but it shares the entire region's SPOF economy.
Tackling that shouldn't be dismissed because we don't like the government.
Suffering the hardest happens to the least of people, so making the transition
to a post-oil economy as smooth as possible - House of Saud in tact - still
prevents an incredible amount of suffering.

~~~
mafribe
I agree with you in many ways, and have been critical of military means that
were marketed as "bringing democracy". Irak, Libya, and Syria come to mind as
terrifying recent examples. Incidentally the House of Saud supported the
military actions in all three cases.

But yhere is a world of difference between a journalist asking critical
questions, and bombing a country.

It's a journalist's task to ask autocratic rulers critical questions. The
Bloomberg piece does not do this, instead raving "how comfortable meeting him
was".

The target audience of this piece is the US population. The house of Saud
invests a great deal of money in misleading the US population, so as to ensure
that the US continues its support of the status quo, which is highly
convenient for the House of Saud, but a disaster for just about anybody else.
See e.g.
[https://www.washingtonpost.com/news/powerpost/wp/2016/04/20/...](https://www.washingtonpost.com/news/powerpost/wp/2016/04/20/saudi-
government-has-vast-network-of-pr-lobby-firms-in-u-s/)

The question how to engineer a peaceful transition away from the House of Saud
to a meaningful democracy (or even a more enlightened dictatorship such as
Dubai), is a deep and complex one, and I don't purport to have an answer. But
it's good to understand how autocratic rulers such as the House of Saud
manipulate public opinion.

~~~
iheartmemcache
> "It's a journalist's task to ask autocratic rulers critical questions." Yes
> in theory.. Look at it from a "who benefits and how, POV" and this puff
> piece makes sense. Oil's been bearish for a remarkable length of time.

It's in Bloomberg's best interests to make the ME look less like a one-trick
pony so general market consensus goes up (any volatility = TV going off mute +
viewership retention & people going to their Bloomberg terminals, etc).

It's in the journo's best interests because he gets '8 exclusive unprecedented
hours' upping his profile so his executive editor will choose him for the next
interview with Bill Gross or whomever.

It's in the House of Saud's best interest for a wide variety of reasons.
Everyone's got to get their pound (Franc, greenback, yen, ruble, or .. )

W/r/t having a nation with a PR/lobby in the US - I guarantee you every nation
with a GDP of eh maybe half a trillion will have one. Look at the registered
employee list of K-street firms and their clientele.

The closest thing you'll get to 'hard hitting questions' (and I'm not talking
hit-pieces, I'm talking about Kronkite and Murrow) is the BBC Newshour (Lyse
Ducette and Owen Bennet Jones -- though Americans find it dry, I couldn't love
their coverage more, although it's a bit of a family love-affair), PBS
Newshour (basically everyone on their staff), and to some extent Shane &
Sooresh's VICE which has retained some of the best producers and on-the-ground
coverage I've seen in recent news.

~~~
usefulcat
> Oil's been bearish for a remarkable length of time.

Yes, and it's largely because of Saudi Arabia:

"Saudi Arabia has maintained a high level of oil production despite the slump
in crude oil prices, arguing it needs to protect its market share in an
economy in flux because of the glut of U.S. oil."

[http://www.upi.com/Business_News/Energy-
Industry/2015/07/13/...](http://www.upi.com/Business_News/Energy-
Industry/2015/07/13/Saudi-oil-production-at-new-high/5171436789895/)

------
electriclove
What does he mean by: “We don’t care about oil prices—$30 or $70, they are all
the same to us,”

------
droithomme
$2 trillion / 28 million population = $71k per person.

------
viach
Heh, with this money it could work for some time

~~~
alanwatts
Assuming the dollar remains strong. Oil is the single commodity which drives
the greatest amount of demand for the dollar. So, in theory, a drop in demand
for oil could signal a drop in demand, and thus value, of the dollar.

