‘Saudi Arabia a tourist destination? Who will go if women can't wear skirts or visit the beach?'
Saudi Arabia's defense minister has unveiled a plan to reduce the kingdom's economic reliance on oil. The plan called Vision 2030 is designed to adapt the world's largest oil-exporting nation for life in a world of low-priced crude. Among the priorities, for the next 15 years or so, are to boost tourism, expand the weapons trade and increase domestic investment.
RT: Do you think it’s a sensible plan or not? Is it realistic?
Jim Rogers: It is not very realistic at all. They tried this back in the 1970’s: they started raising wheat, they started raising agricultural products. The cost of raising products was more than they could buy them in the market, so they stopped, they gave it up.
RT: Isn’t it sensible none the less to look ahead and try to bring the plan to life?
JR: Certainly they need to do something. Unfortunately, I don’t think that most of the things they talk about doing – becoming a huge tourist county - but who is going to go there if they are not allowed to go to Mecca and Medina; they cannot go to the beach; women cannot sit in a restaurant with men. The restrictions are absurd. Now, if they break down those restrictions, there would be a gigantic tourist boom in Saudi Arabia, at least for a few years, because everybody would like to see it.
RT: What is happening behind the scenes? There was this OPEC meeting. Why did Saudi Arabia go against the oil production freeze outlined by OPEC, especially now taking into consideration these comments about being less dependent on crude?
JR: The OPEC people don’t trust each other because they know people will not maintain the quotas, and second, they know that is not going to do any good. The only way they are going to do something about oil production and oversupply is to cut the supplies. They want to put the frackers out of business. They want to put the deep drilling out of business. It is a very smart plan to the extent that they can pull it off.
RT: Saudi Arabia is one of the key players in OPEC. However, they have a huge budget deficit, don’t they?
JR: It depends on what happens first. Do they go bankrupt first or do the frackers go bankrupt first. They think they have enough reserves. We’ll see. I happen to know that their oil reserves are declining too. Either they are going to have to change very dramatically; otherwise, they don’t have any choice but to do that. If you really think they are going to let women go to Saudi Arabia and drive around, wear skirts and go to the beach, or go to Medina and Mecca...
‘Saudis should learn to live within their means’
Felix Moreno, portfolio manager at Rockflower Trading said the first step of the process of becoming more diversified is to be able to not spend more than you bring in.
RT: Is it even possible for Saudi Arabia to have an economy that doesn't depend on oil? Can the recently unveiled plan be achieved?
Felix Moreno: Not without a lot of difficulty. I’ve struggled a lot to find an example in the history of a country that was so reliant on one commodity and was able to do a turnaround without a lot of upheaval. In fact, it’s called the Dutch disease, when a country becomes very reliant on one major export. If that export stops being a source of cash as oil currently is for Saudi Arabia, they normally have to go through a very, very painful industrial and technological reconversion and it takes a lot of time and it takes many, many companies failing before the new economy starts to kick in.
RT: Haven't they got bigger problems to sort out, like tackling that record billion deficit?
FM: That is right. They might manage to offset that somewhat by the sale if they have an IPO of Aramco. But in any case, we’re talking about something that they need to start now. Obviously the first step to do that is to learn to live within their means. If they are spending more money than they’re bringing in now when they’re still receiving huge sums of money from oil exports, what are they going to do when those exports no longer bring them so much money? So the first step of that process of becoming more diversified is to be able to not spend more than you bring in right now.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.