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Aramco bond proceeds and the possible finalization of the Aramco-SABIC megadeal are seen as a stepping stone in achieving Saudi Arabia's Vision 2030 targets, specifically in creating sustainable employment opportunities over the medium-term.
According to a BofA Merrill Lynch Global Research report, unemployment rates amongst Saudi nationals are still high (12.5 percent in Q1 2019) and mega projects may be needed to structurally reduce them by providing new industries and venues for creating jobs.
High unemployment rate amongst Saudi nationals is one of the most critical long-term challenges for the kingdom as it has increased considerably over the past few years and 1.6 million Saudis are expected to enter the workforce over the next five years, the report said.
Public Investment Fund's (PIF's) sale of its 70 percent stake in SABIC to the world's largest oil producer Saudi Aramco for $69.1 billion is expected to give the sovereign wealth fund the firepower to continue its mega projects that aim to diversify the Saudi economy from oil and create more jobs.
Some of the key targets of Vision 2030 include reducing unemployment rate from 12.8 percent to 7 percent; increasing female workforce participation from 22 percent to 30 percent, raising the private sector contribution to Gross Domestic Product (GDP) from 40 percent to 65 percent, and increasing the PIF's assets from 600 billion Saudi riyals to seven trillion riyals.
Initially, however, job creation could likely be geared towards expatriates in the construction sector, the report said.
While it is difficult to quantify the impact of these projects, the availability of funding post-SABIC deal could support the first phase of mega projects, it said.
The report also noted that with unemployment remaining a long term challenge, job growth needs to match labour force growth to maintain unemployment rates at current levels or exceed it to reduce them.
The initiative by the Ministry of Labour to replace expat employees with Saudi nationals over the medium-to-long-term will aid in reducing the overall unemployment rate given the higher unemployment rate amongst Saudi nationals compared with expatriates, the BofA Merrill Lynch report said.
(Writing by Seban Scaria; editing by Anoop Menon)
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