Well, that is why I wrote about a "somewhat constrained" executive summary. The McKinsey guys I know are easily smart enough to understand in which kind of business they operate and who pays them for what. This doesn't devalue most of it's ideas but a "can do spirit" certainly helps in marketing them.
The value of "Beyond oil" lies in showing what happened with oil in the Saudi economy during the last decades. Some of that is captured neatly by those graphic graphs and stats. All in all the dire trends which I posted are nothing new and far more insightful guys like Evans-Pritchard and Khalid Alsweilem have come up with them before. Indeed two years ago the very author pointed out:
In short if something can not go on forever it will stop, however the institutional imperative is very strong in the royal clan.Prince Alwaleed bin Talal, the country’s best-known global investor, said the business model of Middle East oil exporters risks unravelling rich industrial states find ways of cutting demand. “Our country is facing a threat with the continuation of its near-complete reliance on oil: 92pc of the budget for this year depends on oil,” he said in a letter to Saudi oil minister Ali Al-Naimi.
As this is the SWC it is proper to point out that military expenditures are about $60bn a year, roughly 40% of projected revenues for 2016. The Saudi defence budget is quite opaque, to put it mildly, and with no independent institutions things can easily be shifted around or kicked down into the next year. The takeaway is simply that it is massive relative to budget and indeed to the economy, no doubt in part due to the big salaries payed for the upper echelons.
Devaluation would of course help a great deal with some internal spending, witness Russia for which every $ goes now twice as far, and some of the military ones like salaries but should make replacing those bombs dropping in Yemen a lot more expensive.
Finally they seem to cut some of the harmful subsidies:
The Saudi government will raise the price of gasoline by two-thirds to 0.75 riyals a litre from 0.45 riyals for 91 Octane fuel. Higher electricity, water, and gas tariffs were announced by the Saudi Press Agency on Twitter, following the release of the Kingdom’s 2016 budget on Monday.
Subsidy cuts aim “to achieve efficiency in energy use, conserve natural resources, stop waste and irrational use”, the Ministry of Finance said in the annual budget statement. The changes will be monitored to ensure that they do not harm either “low and mid-income citizens [or] the competitiveness of the business sector,” the Ministry said.
P.S: In an ironic twist percentage-wise the dependence on oil of the Saudi revenues decreased this year from 93pc to 73pc just as they post a huge deficit largely because oil prices crashed...
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