RIYADH (Reuters) - Saudi Arabia’s government plans to provide 200 billion riyals ($53 billion) of incentives to the private sector over the next four years in its drive to diversify the economy beyond oil, according to an official planning document.
A reform program launched this year, after a plunge in oil prices slashed state revenues in the world’s top oil exporting country, envisions the private sector investing tens of billions of dollars over the next several years on projects from industrial zones and power stations to housing, schools and communications.
But the willingness and ability of private sector companies to invest in projects in an economy which has traditionally relied on infusions of petrodollars by the government has been a major uncertainty in the program.
”An incentives package is proposed and set at 200 billion riyals between 2017 and 2020 to help boost economic growth,” said a document released by the government late on Thursday along with its 2017 budget plan.
An investment fund will be established to provide capital that will facilitate investments, the document said without giving details of the fund’s operations or the nature of the incentives. It said the incentives would be directed towards sectors that supported economic growth and created jobs for Saudi citizens.
The document did not say how the government would raise money to fund the incentives, but it outlined a plan to increase the state’s non-oil revenues by raising fees on foreign workers and their dependents. About 10 million foreigners live in the kingdom, in addition to roughly 20 million local citizens.
Companies now pay 200 riyals a month to employ each foreign worker above the number of Saudi workers they employ; from 2018, the fee will rise to 400 riyals per month, and it will increase further to 600 riyals in 2019 and 800 riyals in 2020.
Companies will pay smaller fees for foreign workers who number less than their Saudi workforce. Expats will pay fees on each of their dependents living in the kingdom, and the fees will increase gradually through 2020.
While the higher fees will boost the government’s revenues, they will also increase costs for companies, which could hurt their ability to invest.
Reporting by Marwa Rashad; Editing by Andrew Torchia/Jeremy Gaunt