Saudi Arabia To Create Sovereign Fund For Future Generations

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By P.K. Abdul Ghafour

The government will allocate SR 200 billion from 2012 budget surplus to implement transport projects inside cities, bringing total spending in 2013 to more than SR 1 trillion, Finance Minister Ibrahim Al-Assaf said yesterday.

“We have not yet finalized the 2012 surplus because of new expenditures and revenues, especially nonoil revenues,” Al-Assaf told Al-Arabiya channel. He said the remaining amount from the surplus of an estimated SR 386 billion would be kept in public reserve.

The minister said the government decided to make special allocations for these city transport projects considering their strategic importance. “We have done this before for housing and cutting down public debts,” he said.

Saudi Arabia

Saudi Arabia

Al-Assaf was speaking after Custodian of the Two Holy Mosques King Abdullah unveiled the country’s largest budget that projected spending at SR 820 billion in 2013.

Saudi Arabia earlier this year announced its plan to modernize public transport systems in major cities like Riyadh, Jeddah, Dammam and Makkah. Transport Minister Jabara Al-Seraisry said the design work on the Jeddah metro project is almost complete.

The planned mass transit system in Jeddah also includes a bus service using 816 buses to link metro stations with all the residential districts in the city. Buses will run 750 km in various districts and have 2,950 stops.

Measures have been taken to establish metro projects in Riyadh and Makkah. While the six routes of the Riyadh project will be 181 km long, the Makkah metro is projected to be 182 km with six branches. More than SR 62 billion has been allocated for the Makkah mass transport system including metro and bus networks.

Al-Assaf also disclosed plans to set up a sovereign fund to support future generations. “The Supreme Economic Council is currently studying a proposal on this matter,” the minister said while talking to Channel One of Saudi Arabian Television.

The new fund aims at channeling part of the Kingdom’s huge budget surpluses to long-term investment projects. “At present the Kingdom’s budget surpluses are managed efficiently through channels like the Public Investment Fund,” the minister said.

He said PIF’s investments had exceeded SR 500 billion. Saudi Arabian Investment Company (Sanabil) is another channel used for such investments, he pointed out.

Al-Assaf said the government has varied investment projects. “We are not investing in just government bonds, and it is not true that Saudi Arabia is the largest investor in US treasury bonds. Many countries have huge investments in the US,” he explained.

He said the 2013 budget reflected the government’s desire to achieve sustainable development by supporting vital infrastructure and welfare projects across the country.

During the past 10 years, the government has spent more than SR 1.5 trillion on infrastructure development and welfare projects and this huge spending has been the driving force of the national economy.

According to Saudi economist Ihsan Buhulaiga, a former member of the Shoura Council, funds allocated for government spending on projects in 2013 have increased by 600 percent compared to previous years.

“This huge spending had multiple effects. It not only enhanced the progress and prosperity of citizens through the establishment of advanced living facilities but also strengthened the private sector by offering them more economic opportunities,” he said.

However, Buhulaiga pointed out that the private sector had failed to create more job opportunities for Saudis, despite the benefits it had gained from government spending.

“Huge spending naturally creates more jobs in the private sector but few Saudis benefited from these jobs,” he pointed out. The government allowed private companies to recruit a large number of foreign workers in 2011 to meet requirements of development projects.

Buhulaiga said the Kingdom was facing three main challenges: Increase in unemployment among the Saudis; delayed government projects; and housing crisis. According to one report, there are SR 500 billion worth of delayed public projects across the Kingdom.

Arab News

Arab News is Saudi Arabia's first English-language newspaper. It was founded in 1975 by Hisham and Mohammed Ali Hafiz.

Today, it is one of 29 publications produced by Saudi Research & Publishing Company (SRPC), a subsidiary of Saudi Research & Marketing Group (SRMG).

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