At a three-day conference in Riyadh, hundreds of Saudi Arabian officials and businessmen discussed ways to rescue the economy from low oil prices, by developing new industries and giving opportunities to the private sector.

Outside the luxury hotel where they met, worsening business sentiment and flagging consumer spending suggested the reforms may not come in time to prevent a deep economic slump.

As cheap oil pressures its currency and opens up a record state budget deficit of around $100 billion, Saudi Arabia - assisted by a small army of Western consultants who are believed to number in the hundreds - is plotting its biggest shake-up of economic policy in well over a decade.

Stakes in the operations of big state companies, including national oil giant Saudi Aramco, would be sold off; underused assets owned by the government, such as vast land holdings and mineral deposits, would be made available for development.

Parts of the government itself, including some areas of the national health care system, would be converted into independent commercial companies to improve efficiency and reduce the financial burden on the state. The number of privately run schools would rise to around 25 percent from 14 percent.

Meanwhile, the government would use its massive financial resources to help diversify the economy beyond oil into sectors such as shipbuilding, information technology and tourism, by awarding contracts to new firms and providing finance.

Proposals for some of these policies have been kicked around the government for years with no result. But the political momentum behind them is clearly stronger than it has ever been, as they are backed by a powerful new economic policy council chaired by the king's son, Prince Mohammed bin Salman.

"This is a quantum leap in all aspects," Abdullatif al-Othman, governor of the Saudi Arabian General Investment Authority, told the conference.

The problem for Saudi Arabia is that the difficult, complex reforms are expected to take years to implement. In the meantime, the kingdom will continue to depend heavily on oil, leaving it at the mercy of fluctuations in the price of crude.

To ease the drain on its reserves, the government has been forced into austerity steps that are slowing the economy from last year's 3.3 percent expansion. In December, growth in the non-oil private sector hit its lowest since at least 2009; retailers say consumers' discretionary spending is falling.

The government's austerity budget for this year assumed a Brent crude oil price of about $40 a barrel, analysts estimate. If oil stays at its current levels of around $30, more austerity could be on the way.

Fadl al-Boainain, a prominent Saudi private-sector economist who attended the conference, said he welcomed officials' emphasis on developing parts of the economy that had long been neglected because of the focus on oil.

But he added: "The overall economic situation does not support the great optimism that ministers expressed, and it does not support the indicators they referred to...

"There is a real concern in the private sector about spending cuts and the liquidity drain, which will increase borrowing costs. The sector is also worried about job cuts related to the economic changes."

WINDOW FOR REFORMS

Three big areas of concern emerged at the conference. One is how finance will be provided to projects, such as a shipbuilding and repair complex that Aramco announced it would establish on the eastern coast, eventually creating as many as 500,000 jobs.

Market interest rates are rising sharply as commercial banks face a liquidity squeeze caused by smaller flows of new oil revenues. So the government may end up footing most of the bill, which would be costly and involve its inefficient bureaucracy.

Another challenge is creating the skilled Saudi workforce needed for new projects, in a country where some two-thirds of local workers are employed by the state, which offers cushy conditions and higher salaries. Aramco said it would leverage its own extensive training and education programs to help develop a skilled national workforce.

In some cases, Saudi Arabia's conservative culture may slow reforms. An all-woman panel at the conference discussed boosting the role of Saudi women in business, but women are not allowed to drive in the kingdom.

As many as a million foreign chauffeurs are estimated to be in the kingdom to drive women around. Eliminating the need for them could save household budgets hundreds of millions of U.S. dollars which the workers remit home annually but so far authorities have not said they are studying the politically sensitive issue.

The size of the central bank's net foreign assets, $628 billion in November, suggests Saudi Arabia may have a window of several years to make its economy less vulnerable to oil prices before reserves fall to levels which would panic financial markets, making further spending on reforms much more difficult.

Meanwhile, the economy may struggle. An executive at a major Saudi company told Reuters that one million of the country's roughly 10 million foreign workers might be sent home in the next year as businesses slowed and construction companies, hit by cut-backs in state contracts, laid off staff.

Saudi employees will not be laid off in the initial stages but that could conceivably happen next year, he said.

A foreign banker who has worked in Saudi Arabia for a decade said the direction of oil prices would ultimately decide whether it faced a slump as severe as the one suffered in the 1980s, when the economy shrank for several years.

If oil rebounds to around $60, pressure will ease, he said. If prices near $30 become entrenched for seven or eight years, "Saudi Arabia will have a very difficult time."