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December 6, 2017

Saudi Arabia in transition


December 6, 2017


We are living in interesting times marked by massive transformations that have informed the global order. While the gradual American withdrawal from its traditional global leadership role has been matched by the peaceful rise of China as the harbinger of globalisation, the Kingdom of Saudi Arabia is undergoing a historic transition under the leadership of Crown Prince Mohammad Bin Salman, known as MBS in the international media.
Described as the Saudi version of the Arab Spring, the changes brought within the kingdom by MBS appear to be set on the path of an ambitious restructuring. The only difference is that the Arab Spring was a bottom-up phenomenon in the Middle Eastern countries that were under its influence but failed miserably in having an impact. However, in the case of Saudi Arabia, a top-down restructuring, led by the country’s 32-year-old crown prince, has been witnessed.
The scale and depth of what Saudi Arabia is currently going through was amply reflected in the headlines about the arrests of leading royals and businessmen in, what has been described as, an anticorruption drive. In an interview with Thomas Friedman of The New York Times on November 23, the crown prince said: “our country has suffered a lot from corruption from the 1980s until today. The calculation of our exports is that roughly 10 percent of all government spending was siphoned off by corruption each year, from the top levels to the bottom. Over the years, the government launched more than one ‘war on corruption’ and they all failed. Why? Because they all started from the bottom up”.
While critics are quick to paint the anticorruption drive as an attempt to humble the powerful rivals and strengthen the crown prince’s grip on the levers of power, the government expects to collect “around $100 billion in settlements”.
In order to understand what exactly is happening in the kingdom, it is important to get the context right. The Saudi Arabia of today has

been shaped by three key events of 1979: the occupation of the Grand Mosque in Makkah by Saudi puritanical extremists who singled out the ruling family for all manner of allegations from corruption to a brazen surrender to Western values; the Islamic revolution in Iran and the Soviet invasion of Afghanistan.
These mega events put the kingdom on the path of orthodoxy in an effort to outcompete the Iranian religious establishment. At home, the ruling family entered into a partnership with the influential Wahabi clergy to cement its hold on power. On the external front, the kingdom – together with Pakistan and the US – started an international jihad to free Afghanistan from the clutches of the Red Army. In all three fronts, Islam was pushed to the centre of the policy debate.
Mohammad Bin Salman’s efforts to reshape the Saudi state – both as a polity and a society – is marked by his plans to bring moderate Islam to Saudi Arabia and implement his Vision 2030. His vow to give birth to a more moderate Islam is reflected in the baby steps that he has taken towards achieving this goal, such as curbing the role of the religious police and giving women the permission to drive. In other words, he is asking his people to judge his government “not on the touchstone of piety but on performance”, especially the key performance indicators (KPIs) such as health, education, economic growth and unemployment. He seems to have chosen a relatively less religious and more secular Saudi nationalism to redefine the Saudi identity.
In his interview with Thomas Friedman, the crown prince instructed the journalist: “do not write that we are ‘reinterpreting’ Islam. We are ‘restoring’ Islam to its origins and our biggest tools are the Prophet’s (pbuh) practices and (daily life in) Saudi Arabia before 1979”.
Saudi Arabia’s Vision 2030, which was enunciated by Mohammad Bin Salman in April 2016 to break free from the shackles that have halted the growth of the Saudi state, is triggered by the new realities that the kingdom is facing. Saudi Arabia faces the biggest youth bulge, with 70 percent of its population under 30 years and roughly 25 percent of them with no job. Around two lakh Saudi young men and women are studying abroad and 35,000 of them are coming home with foreign qualifications, looking for productive and rewarding careers in the non-oil economic sectors.
Traditionally, since its discovery, the Saudi economy has thrived on the strength of oil that has provided 90 percent revenues, giving the kingdom unprecedented power and prestige in the world. Since 2005, the Saudi economy has grown at an average of 5.5 percent annually with $300 billion going towards the government treasury every year. However, oil prices have plummeted since 2014. A barrel, which was sold for $100 for much of the decade, is now available at $20. The oil prices are unlikely to bounce back, with the experts describing $100 oil as “an aberration that would not recur [without] an international crisis”.
Vision 2030 seeks to reduce dependence on oil as the principal source of revenue generation and promotes self-reliance in all sectors of the economy. “Our vision is a strong, thriving and stable Saudi Arabia …with Islam [as] its constitution and moderation as its method.” That is how Mohammad Bin Salman, the architect of the plan, described the guiding vision underlining his ambitious project.
The intended privatisation of the national oil company, Saudi Aramco, which is known as the “crown jewel” and “golden goose” of the kingdom, underscores the message that “nothing is secure from the sweeping change”. The sale of a five percent share of the oil giant is expected to fetch $100 billion.
The reforms have not been without pain. A majority of Saudis – who have seen good times as their basic necessities are provided for by the state at little or no cost – have had their subsidies on water, energy and electricity reduced. In September, the government cut the salaries and other benefits offered to government employees who comprise 60 percent of the workforce. This has suddenly slashed their take-home salaries by 30 percent. Though the decision was subsequently reversed, the message that was sent across was loud and clear: the days of the state’s largesse were over.
The economic strains generated by reduced oil revenues are manifest from the fact that the foreign currency reverses fell below $500 billion in May this year – the lowest level in four years – with the result that the deficit was funded in part by drawing down reverses that stood at $750 billion in 2014. This practice cannot continue.
The space for women in the Saudi economy is increasingly expanding. Vision 2030 aims to encourage the participation of women from 22 percent to 30 percent by 2030. Women constitute 60 percent of university graduates and symbolic steps are already underway on this count to involve them in public affairs. With a view to increase the role of Saudi women in the economy, a woman was named as the chairperson of the Saudi stock exchange. A woman heads a major bank while another has been appointed to lead women’s sports.
However, the goal of diversifying the economy by encouraging privatisation is proving to be a hard nut to crack. Though the government has earmarked $53 billion for the development of the private sector, the challenge lies in continuing with the reform process to achieve sustainable results.
The leadership of the crown prince will be the key to ensure that the reforms process is taken to its logical conclusion. Getting embroiled in the fight for regional supremacy is another challenge that the Saudi leadership will have to take measures against so as to focus on internal consolidation.
Chinese philosopher Laozi famously said: “A journey of a thousand miles begins with a single step”. Surely, the kingdom has started on a long but unpredictable journey of a massive transformation.
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