TEHRAN – An international business expert who served as special advisor to Saudi finance minister is of the opinion that the reform plan unveiled by Deputy Crown Prince Mohammed bin Salman “will be politically challenging for the Al-Sauds and the government.”

The plan, unveiled on April 25, is aimed at ending the Saudi kingdom's “addiction” to oil and transforming it into a global investment power. The initiative is approved by the cabinet.

Hossein Askari, professor of International Business at George Washington University, tells the Tehran Times that “turmoil is sure to follow unless (the reform) handled very wisely, transparently, equitably and slowly.”

Following is the full text of the interview:

Q: The Saudi government has ratified the 2030 prospect plan. What made Saudi Arabia to ratify such a plan?

A: Let me give you a brief background as I try to answer your question. Saudi Arabia has, maybe and finally, come to terms with the fact that that oil revenues cannot sustain its future. This is something that all countries that are major oil exporters and rely heavily on oil/natural gas for government revenues and exports revenues must address. I have spent a better part of half of my life preaching this fact and suggesting the reforms and policies that assure a thriving and sustainable economy for resource dependent countries. However, all governments including Iran have not adopted the basic reforms. At its core, the reforms must include institutional reforms that lay the foundation for sustainable and vibrant economies. Here I list them: The rule of law; a modern constitution; economic/financial policy reforms to include sound business regulations and their monitoring and enforcement; consistent long-term economic goals and policies; reduction in both the size of the government sector and unproductive and wasteful subsidies; reduction in government dependence on oil revenues over a period of 10-15 years so that oil revenues can eventually go into a sovereign wealth fund, adoption of an effective and equitable tax system to replace oil revenues for financing the government’s budget; and the establishment of  a transparent and well-managed sovereign wealth fund to receive oil revenues in order to provide similar benefits to all future generations of citizens.”

Q: Based on this plan Saudi Arabia is going to prepare itself for post-oil economy. What are the hurdles for such a goal?

A: “The hurdles are simple to list but politically difficult to adopt and implement:

-Effective, comprehensive and equitable taxation of its citizenry (including the ruling Al-Saud family)

-A dramatic reduction in subsidies

-A dramatic reduction in the size of the public sector, public sector employment and public sector salaries (to become comparable to the private sector)

-Reduction in corruption and the privileges of the ruling Al-Saud family

-Institutional reforms that must include the rule of law and a modern constitution

All of these will be politically challenging for the Al-Sauds and the government. Each will cause a backlash from different segments of the society: business interests, the ruling Al-Saud family, those with lucrative government jobs, the religious establishment, and even the general citizenry who lose the handouts afforded by benefits. Turmoil is sure to follow unless handled very wisely, transparently, equitably and slowly. All of this would have been easier during the good times. But rulers and governments do not adopt reforms unless they are forced!!”

Q: According to the plan, Aramco will be changed into a holding company. What elements necessitate this for Saudis?

 A: “Nothing necessitates this but, to my thinking, young Prince Mohammad bin Salman desires to do this for a number of reasons:

-It will give the government a quick source of revenues, namely the proceeds from 5% or 10 % sales of ARAMCO shares through an IPO—in my opinion, this could raise them $150 billion (5% IPO)-$300 billion (10% IPO).

 -It will introduce transparency into the management of oil and the public sector more generally.

 -It will send an important signal to foreign investors and companies that the country is now open for business.

 -It will then allow the government to sell a number of other public sector assets through IPOs; if it can do it in the case of oil, then it can do it for anything—such as PIF (the public sectors’ holdings in joint stock companies and the like), Saudia Airlines, etc.

 -If all goes well and it is successful, it will cement Prince Mohammad’s position and maybe move him up to the position of Crown Prince.!”

(Interview is conducted by Javad Heirannia)