Saudi Reforms

Saudi Reforms

Revolution or Rebranding?

09/2018  | Reading time: 12 minutes

Since 2015, Saudi Arabia has been waging a controversial military campaign in Yemen, and since 2016, the kingdom has also been immersed itself in the most comprehensive economic and social reform process the Middle Eastern country has witnessed since the its foundation  in 1932. Crown Prince Mohammed bin Salman’s costly ventures challenge the social order of Saudi Arabia. However, the main obstacle to success might be the issues of regime security, failed identity politics, and an overambitious foreign policy.

Source: Shutterstock

Criticism regarding the Saudi reform agenda is usually twofold: it questions the state’s capacity to realise its projects and the honest intentions of the ruling family to serve public interests. Regarding the first, we talk about revolutionizing the country’s economic system and social relations at the time of serious fiscal problems. Thus, structurally speaking, it is a legitimate and objective criticism based on past experiences and capacity assessment. As for the second one, destroying a well-established structure that benefitted a large chunk of society requires austerity measures, which might be legitimately criticized in an absolute way. On the other hand, it is undeniable that some radical steps seem to be unavoidable if the ruler prioritizes regime security over public interests.

Between the mid-1970s and mid-2010s, the rule of the Saud family rested on the three pillars of generous state subsidies distributed from the oil wealth to family members, the religious establishment, and other segments of the society considered to be clients. The country was able to maintain this rentier state model even at the time of the Arab spring. In 2014, oil prices went at least by 70 per cent down, and in the following year, the International Monetary Fund predicted that Saudi Arabia would reach the state of bankruptcy by 2020 if the country proceeded on surviving by eating up its foreign reserves. Thus, King Salman inherited the throne of Saudi Arabia in 2015 in economic circumstances the country had never witnessed since the oil boom in the 1970s. Consequently, the foundations of the Saudi rentier state definitely need to be reconstructed in line with the new conditions.

Mohammed bin Salman (MbS), Crown Prince, First Deputy Prime Minister, Minister of Defense, Chief of the Royal Court, and Chair of the Council of Economic Development Affairs, is the chief architect of the reform plan titled Saudi Vision 2030. This plan not only aims to conclude economic reforms initiated by former rulers in the previous decades, but it also challenges the well-established social contract, political tradition, and bondages within the kingdom, which have so far hindered real, far-reaching socio-economic reforms. Since 1932, the two main components of Saudi Arabia’s political leadership have been the close relatives of the founder of the modern state, Abdulaziz, and the higher council of the religious leaders, whose members are the descendants of the co-founder of the first Wahhabi state, Mohammed ibn Abd al-Wahhab.

The political (and also marital) bondage between the Al Saud (House of Saud) and the Al ash-Sheikh (House of the Sheikh) has been the guarantee to secure the status quo of the country’s socio-economic conditions. The assassination of King Faisal (1964–1975) by his nephew is a good illustration of the continuing efforts to preserve the status quo of the country. Following the oil price boom in the mid-1970s, King Faisal pushed for the modernisation of the kingdom, launching the first television broadcast, implementing socio-economic reforms, and promoting public education (including girls’ schools). However, conservative members of his family conspired with religious leaders against his reforms.

Now history seems to repeat itself, but this time precaution prevails in Saudi domestic politics. MbS applies coercion or the elimination of uncooperative business and religious leaders (either conservative or liberal), and the predominant tribal clientele, including his family members. The assertiveness on his part is more than reasonable, as he not only aims to eliminate the structural obstacles in the way of sustainable economic development, but he promises the youth (at least 51 per cent of the population consists of people under the age of 25), so far the most disenfranchised part of the Saudi society, new opportunities and a brand new social order. Under these circumstances, it was not unexpected that news media started to circulate rumours on the attempted assassination of MbS in August 2017, which was deemed to be an anticipated development in domestic politics due to his reform plans.

Protestors in the UK support Mohammed bin Salman for his reforms…
Source: Shutterstock

Probably unrelated, but shortly after the alleged assassination attempt on MbS, he launched an anti-corruption campaign targeting every level and sector of the society, including the purge of family members alongside political and business leaders. Between October and December 2017, as many as 500 notables were arrested on charges of corruption for the total value of hundreds of billions of US dollars. While some of the high-level detainees were released in exchange for their assets, others’ fate remained unclear. MbS arrested family members who could have challenged his succession to the throne, claimed authority over the National Guard, the only military establishment he had not controlled before, arrested conservative religious clerics who could have hindered the socio-economic reform plan, and  confiscated huge amounts of money from business tycoons probably only to illustrate his unlimited power. Although the lack of transparency of prosecution might be criticised in an ideal world, and probably basic human rights have been seriously violated during the process, the regime needed this reorganization of family bondages and the reallocation of privately-held but often state-related assets in order to ensure the feasibility of the reform project—at least from the perspective of regime security and fiscal capacity. Even if MbS’ consolidation of power has been criticised by many and understood as a manifest authoritarian act, it has been endorsed by the greatest power and role model for democracy in the world (and not condemned by many more).

Concurrently with the elimination of political opposition, the rulers have utilized identity politics by constructing imaginary social categories that never existed in the public discourse. This might be understood as a positive step towards transforming the rentier state to a work-reward-based society. The Saudization of the workforce has been an official state policy for decades, which has been supplemented by identity politics. It is debatable whether Saudi Arabia is a nation; however, the Saudi state’s sovereignty was always based on a social and economic contract between the ruling elite, the clientele, and others. By radically reducing state subsidies, the state must somehow equalize among the different segments of society. The most cost-effective tool for this is building a new shared identity which promotes Saudiness on which unity and equality can rest. Some of the most recent slogans of this trend are “Saudi Arabia for Saudis” or “Saudi Arabia first,” which resembles President Trump’s similar campaign tools.

Critics of this policy emphasize that the shortfalls are the employment problem and the limited political participation guarantees, issues that lead to the lack of social equality and opportunities. Past experiences in similar circumstances forecast a limited success if the state aims to create a more liberalized social and economic order while closes the door in front of real democratic development. The example of the United Arab Emirates (UAE) clearly shows that identity politics provides the disenfranchised with entitlement for having better-paid public service jobs, which is more profitable than taking risks in the private sector. This policy does not create an entrepreneurial environment which is characteristic of open capitalist economies. Thus, the Saudi state might just recreate the same structural problems it wanted to eliminate, only for a higher price.

Real democratic development has been substituted by top-down social liberalization projects. At the same time, as he curbed the political and religious leaders off their power, Prince Mohammed stripped the religious police of their power of arrest and expanded the space for women in public life, also by promising them the right to drive. In fact, this move serves the economic interests of the country and overshadows the fact that human rights and social interactions remain to be contended issues in the kingdom. Regime security and identity politics force the leader of the reform not only to utilize the curbed religious establishment for its foreign policy objectives, but also to eliminate liberal religious thinkers, which disturbs the feelings of the same social groups MbS targets with his socio-economic reforms.

Since 2014, falling oil prices have heavily affected the Saudi state, which has so far based its economy solely on oil revenues. The loss of income forced the kingdom to restructure its oil industry through different measures, such as extending the privatization plans to the latter, so far exempt from economic liberalization. Privatization has been identified as a main policy objective by the Saudi government in the country’s quest for sustainable economic development since the mid-1980s. After the country’s accession to the World Trade Organization in 2005, economic reform and liberalization became ever more important. However, as a general rule in all Arab countries, history, psychology, law, and politics combined to produce an essentially restricted process of liberalization. Highly productive labour, for example, is critical for the success of the privatization program. Since the 1980s, the Saudi rulers have prioritized the employment of Saudi workforce and made it difficult for employers to hire expatriate workers, who are cheaper, more productive, and willing to work under conditions unacceptable for Saudis. This results in the soaring of the unemployment rate within Saudi nationals and the shortage of labour in the private and service sectors. Despite this clear controversy, MbS proceeded with the Saudization policy, and, as a result, almost 700 thousand foreign workers have left the country since 2017 due to new work regulations. The point here is that while expatriate workforce is leaving, the Saudi government is unable to fill in the usually low-quality underpaid jobs with Saudi citizens, as the latter almost exclusively apply for high-paying and prestigious governmental jobs.

A cure for the present illness of current government policies might be provided by the large-scale multisector projects the government initiated, probably following examples from the UAE. Neom, a newly built self-sustaining megacity might provide thousands of new public and private job opportunities among others in administration, trade, and technology. On the other hand, it might be a new tourist destination in itself and due to its proximity to Madain Salih, Saudi Arabia’s well-preserved Nabatean necropolis, one of the few world heritage sites in the country. However, even if social relations could be efficiently reorganized in order for the Saudi people to welcome foreign investment and Western tourists on the ground, it remains unclear if MbS will be able to finance his project as long as oil prices continue to stagnate, and the massive hole in Saudi Arabia’s budget keeps growing. Neom’s projected costs are 500 billion US dollars, while the non-oil sectors of the kingdom are still under development. Thus, the country will need a massive amount of foreign investment for which the prerequisite would be a safe and stable political and economic environment.

Although Saudi Arabia needs foreign investment to solve its internal political and economic problems, the kingdom invests a lot in fighting mainly against Iran in Yemen and Syria. Considering the many ways in which the Saudi state’s foreign policy and military missions in the North and South are destructive, these two might secure the overall failure of MbS’ reform project. The proxy war against the Saudi state’s adversaries in the Levant and the traditional war the kingdom wages in Yemen not only shatter the moderate image the Saudi reform plan tries to sell to the world, but these ventures also threaten the state and regime security by emptying the state treasury. Additionally, certain actions of the Saudi armed forces in Yemen considerably damage the kingdom’s public image, which might lead the Western allies of the Al Saud to abandon the royal family at some later point or dissuade foreign investors from allying with the regime. The history of the Saudi state sponsoring terrorist organizations in the Levant during the Syrian civil war and its highly questionable morale stand in the Yemeni conflict just not serve the interests of the royal family neither at home nor abroad.

…while other protestors condemn MbS for his alleged human rights records
Source: Shutterstock

Although the Saudi rulers are in the possession of a well-architected plan for creating a sustainable economy for the country, due to probably overrated concerns over regime security, they apply identity politics and wage costly wars that do not lead to beneficial changes, but only rebrand the system’s status quo. Restructuring client relations and reducing state subsidies were probably inevitable in order to create the environment for the socio-economic reforms. However, so far the regime have executed contested social reforms while overrated the Iranian threat, which diverted its attention from domestic reforms. Indeed, the environment created by the shared American, Israeli, and Saudi sentiment against Iran’s regime is not helpful at all. As MbS’ reform initiatives meet more and more suspicion even from his father and family members, it is questionable whether he would be able to uphold this limited success. The most defining developments in the following months and years are going to be the public listing of Aramco and the outcome of the war in Yemen, two issues that would remove the financial burden and create the material resource to proceed with domestic developments. Primarily, it depends on MbS’ personal advancement in domestic politics which would define the course Saudi Arabia takes on the path of reforms.

Register and subscribe to access all contents on AJKC Digital!

Are you interested in the latest articles by our researchers? Would you like to be the first to read our analyses? Then submit your registration now!

Do you seek a platform with all the knowledge you need to subscribe to? Where you will find not only deep analyses but content related to exclusive online events? Don’t hesitate then, order now one of our subscription packages available for a reduced price!