Saudi Arabia unveils SR1.02 trillion budget in privatization push

Cars drive past the Kingdom Centre Tower in Riyadh, Saudi Arabia, January 30, 2018. (REUTERS)
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Updated 10 December 2019

Saudi Arabia unveils SR1.02 trillion budget in privatization push

  • King Salman pledges to empower private sector and boost transparency across the economy
  • Saudi Finance Minister Mohammed Al-Jadaan said government would continue its focus on developing the private sector

RIYADH: Saudi Arabia is set to spend SR1.02 trillion ($272 billion) next year as the Kingdom embarks on a major privatization push amid a widening budget deficit.
The government’s annual budget released on Monday predicts revenue of SR833 billion in 2020, leaving a projected deficit of SR187 billion — or the equivalent of 6.4 percent of GDP. It anticipates real GDP growth of about 2.3 percent next year.
King Salman announced the figures at a cabinet meeting in Riyadh.
“We are determined to continue implementing economic reforms, diversifying sources of income, including investing the proceeds of Saudi Aramco by the Public Investment Fund, optimizing the use of available resources, empowering the private sector and raising the level of transparency and efficiency of government spending to boost growth and development rates,” he said.

Announcing the budget breakdown, Saudi Finance Minister Mohammed Al-Jadaan said that while spending next year would be less than in 2019, the government would continue its focus on developing the private sector, stressing there would be no increases in taxation.
“Privatization is at the top of the government’s priorities,” he told reporters.
“We will continue to support big projects and will continue to support promising projects,” he said. ” Enabling the private sector is the top priority of Vision 2030. We have more to come and our journey toward Vision 2030 demands it.




Saudi Finance Minister Mohammed Al-Jadaan said the government would continue its focus on developing the private sector. (Ahmed Fathi)

The budget takes place against a backdrop of quickening reforms in 2019 and a number of key events from the record initial public offering of Saudi Aramco to the creation of fast track tourism visas.
“We believe that the revenue assumptions in the budget are realistic, both oil and non-oil,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, told Arab News.
“Despite the planned pullback in government spending, we expected to see a pickup in real non-oil GDP growth as investment activity strengthens. Spending by the PIF will be central for the higher investment activity.

"The finance ministry hosted a visit of international investors to coincide with this year’s budget announcement, underscoring the government’s desire to attract more overseas investment in the slipstream of the world’s biggest IPO. The group included a number of international investment companies, insurers and asset managers, including Goldman Sachs, Mayfair Bank, Etiqa Insurance and Nippon Life Insurance Company among others.
Saudi banks such as SAAB, Samba, NCB, Bank AlJazira and Alinma Bank also attended.
While reducing the Kingdom’s dependence on oil revenues is a key part of the Vision 2030 reform agenda, the commodity remains the principal driver of spending trends for both Saudi Arabia and other Arabian Gulf oil-exporting nations.
They have been coordinating production cuts since 2017 through the OPEC+ group of producers that includes Russia, in an effort to keep the market in balance amid surging output from US shale producers.
Last week the Kingdom spearheaded an agreement between the OPEC+ group of exporters to commit to further output cuts to help avert an oversupply of oil on the global market.
Education gets the lion’s share of government spending in 2020 with some SR193 billion set aside for the sector after more than 500 schools were opened in 2019.
The budget analysis also reveals that most non-oil sectors of the economy posted positive growth rates during the first half of this year with the construction sector recording growth for the first time since 2015.
That helped to reduce the unemployment rate among Saudis at the end of the first half of the year by 0.4 percentage points to 12.3 percent compared to the end of 2018.
US-based IHS Markit analyst Bryan Plamondon, told Arab News: “The 2020 budget highlights rationalized spending, with debt issuance and reserves helping to fill the gap from weaker revenues. We expect the Kingdom’s fiscal account will post wider deficits during 2020–21 as spending on Vision 2030 continues.”

*Click here for the full budget statement from the Ministry of Finance


The case for protecting Saudi Arabia’s ancient art of Khawlani coffee production

Updated 17 January 2020

The case for protecting Saudi Arabia’s ancient art of Khawlani coffee production

  • Saudi Arabia is asking UNESCO to provide protection for the tradition of Khawlani coffee cultivation
  • Six out of 16 provinces in the region of Jazan practice the cultivation of Khawlani coffee beans

JAZAN: At the southernmost tip of Saudi Arabia, just a few kilometers from the Saudi-Yemeni border, is the verdant region of Jazan, blessed with its rocky mountain tops, green wadis, deep forests, hot springs and boundless fertile land. It is also home to the local Khawlani coffee bean.

Although the Arabica coffee bean is well known, most people don’t associate it with Saudi Arabia. While the actual origin of coffee is debatable, the ancient tribes of the Khawlan, in reference to their great ancestor Khawlan bin Amir, located between Jazan and Yemen, have practiced the skills and techniques of cultivating Khawlani coffee beans for over 300 years, with the tradition passed down from one generation to the next through non-formal educational methods, including practical training and observation.

The region of Jazan contains 16 provinces, and six of them practice the cultivation of Khawlani coffee beans. For farmers here, making coffee is a highly respected vocation that gives cultural identity and status to the entire region.

Today, the Saudi Heritage Preservation Society is asking UNESCO to provide protection for the ancient art of Khawlani coffee making. The project, which began in 2019 in collaboration with farmers in Jazan, included documenting the cultivation process of Khawlani coffee beans.

“The number of farmers in Jazan is really high and they face a lot of problems and difficulties, including with water and working resources,” said Rehaf Gassas, project manager at the Saudi Heritage Preservation Society, a nongovernmental organization established in 2010. “Hopefully, by the inscription of this (cultivation process) in UNESCO, it will help promote (Khawlani coffee beans) throughout Saudi Arabia and encourage the nation to help these farmers.”

The bid process itself is time-consuming. It normally takes around 18 months to work on, from field visits to theory work.

On March 31, 2019, the society finished the application and delivered it to UNESCO. By November 2020 they hope to know the decision as to whether they were successful.

“We are very optimistic,” added Gassas. “The community itself is the biggest supporter, because they are very invested in the coffee beans they are planting, and it is really very important to them to show the world that they have this rich culture and heritage.”

Khawlani coffee beans might be one of Saudi Arabia’s best-kept secrets. They are considered one of the finest types of coffee beans in the world, and Saudis are ranked as one of the biggest consumers of the beverage.

In many ways these beans are a national treasure, crucial to the preservation of Saudi heritage and the nation’s cultural identity. “They are described as the green gold of Jazan,” said Gessas. “But there is lack of knowledge amongst Saudis that the Jazan region is one of the biggest producers of coffee in the world.”

In 2017 the Ministry of Interior cited more than 76,390 Khawlani coffee trees farmed by 724 farmers, producing 227,156 kilograms of coffee from an average production of 4 kilograms per tree. “The trees are thought to have been brought from Ethiopia to Yemen, and perhaps from Yemen to the mountains of this governorate,” says deputy governor of Al-Dair, Yahia Mohammed Al-Maliki.

“In the past, people mainly relied on planting coffee beans as one of their major products to make a living during hard times. Nowadays, the situation has changed. People have started to come to the region looking for investments.”

The cultivation process of Khawlani coffee is an arduous one. It involves planting the seeds for the trees, harvesting the fruits that start growing 2-3 years after planting, pruning the trees, collecting the fruits and transferring them to the rooftops of houses to put on dehydration beds in a cool shaded area to dry.

There the fruits must be stirred by hand until they turn black. They are then peeled, roasted and ground. The picking itself involves attention and care. The red color indicates that the fruit is ready for picking, which needs to be done using a twisting method to ensure the branch is not damaged in the process in order to ensure it can bear fruit next season. 

“We hold the fruit and with a little twist, we pick it off the tree,” said Hussein Al-Maliki, owner of Mefraz, a local coffee brand that recently won a coffee roasting competition in the UAE, and which hopes to soon distribute internationally outside the Kingdom.

The significance of Khawlani coffee goes beyond its cultivation. The process entails a celebration of familial ties and heritage as well as respect for the local land. Mohammed Salman, a 70-year-old farmer in Al-Dair, has been cultivating coffee beans since he was born. “I have learned the process of planting coffee from my father, who had inherited it from his ancestors,” he said. “He gets up each morning, performs his prayers, has his breakfast and then goes out to his farm. 

“I stay at the farm irrigating my trees, cleaning the soil, helping the two workers I have here until the sun sets and then get back home,” he continued. On the weekends, Salman’s two sons join him and the cultivation becomes a family activity. “I teach them how to care for our coffee trees and even how to pick the fruits that are ripe,” he added.

At the core of Khawlani coffee is the beauty of generosity. Offering small cups of coffee to guests is an age-old tradition in Saudi Arabia — one practiced since ancient times. For the community of Khawlan, it is of utmost importance to offer visitors coffee using beans harvested from their farms. It’s a sign of honor and respect. Now, on the verge of UNESCO protection, the Khawlani farmers will soon offer their golden cups to the world.