Vision 2030 & the Political Costs of Saudi Reforms

A pillar of the Saudi social contract has been the allocation of oil rents to the population in exchange for loyalty and fidelity to the Saud clan. A key weakness of Vision 2030 is its lack of focus on the potential political consequences of economic reforms. The plan seems to assume that its ramifications will be easily borne by the Saudi population.

However, the IMF postulates that the potential failure of the reforms to produce economic growth and ultimately private sector jobs for Saudis may lead either to rising unemployment and social pressures or increased public employment, which would have negative fiscal implications. If the government becomes unable to sustain its current level of payouts to the population, this will almost certainly result in rising public dissatisfaction.

As more austerity measures are pursued, the social contract between the population and the government is likely to come under unprecedented stress. According to a report by Chatham House, an effective renegotiation of the social contract is critical if the government is to secure the public’s buy-in on the socioeconomic changes that it is attempting to make.

This renegotiation is already unfolding. While it is unlikely that Saudi Arabia will democratize soon, the recalibration of its authoritarian bargain may mean greater avenues for involving the public in decision-making and some increased transparency and accountability.

Seven years after the Arab uprisings, chaos has resulted in some of the region’s countries affected by changes brought on in 2011. Consequently, Saudi Arabia’s argument for stability holds strong sway.

The government is presenting itself as a bulwark against regional instability. It has also encouraged hyper-nationalistic discourse, which was evident in the 2017 National Day celebrations, and its rhetoric regarding the ongoing GCC crisis.

According to the Arab Gulf States Institute, this push to reinforce the Saudi identity is part of a long-term effort by Gulf states that aims to increase a sense of national belonging, where loyalty to the state takes precedence over the tribe, region, or sect.

The arrest of a number of Saudi princes and business tycoons in November 2017, besides helping Prince Mohammed consolidate his power, is also designed to show the population that King Salman and his son are serious about fighting corruption, however selective this fight may be.

Overall, the government needs to increase its levels of transparency and openness. While all these new monitoring and reporting institutions are admirable, they are still government bodies. For Vision 2030 to have a chance for success, there has to be involvement from civil society actors and more freedom of the press.

The exact opposite has been happening as the government has cracked down on dissent and has jailed many of its critics, including a number of journalists and writers.

Barriers to transformation: Education and training

As a result of the government’s push to increase the employment of Saudis in the private sector, companies are facing substantial difficulties in hiring and retaining suitable local talent. Education and training remain key issues as the Saudi educational system—despite going through a multitude of reforms—is still unable to provide enough graduates who are able and willing to work in the private sector.

Saudi workers demand higher wages and underperform in the private sector, creating an array of issues for multinational firms operating in the country that need to meet their Saudization quotas.

By 2030, a full half of the Saudi population is expected to be under the age of 25. Educating, training, and placing those youth in economically productive jobs is one of the biggest challenges Saudi policymakers face in the coming decade.

Significant investments in education over the past two decades have led to a sharp increase in university enrollment figures, making the kingdom a regional leader in terms of educational attainment.

However, the quality of Saudi education remains a key issue. Primary and secondary education has historically been biased toward religious subjects at the expense of STEM (science, technology, engineering and mathematics) subjects.

In the 2015 Trends in International Mathematics and Science Studies (TIMSS) global rankings which take place every four years, Saudi students ranked in the lowest tenth percentile in both mathematics and science. Similar to other Arab countries, the Saudi education system encourages memorization over the development of problem-solving and creative thinking skills.

At the university level, increased investment has led to a rise in the number of graduates, but the Saudi economy is increasingly unable to absorb them into the workforce. Sustained economic growth over the past two decades has indeed increased the number of white-collar private-sector jobs. However, many of these new positions are being filled by expats.

Saudi women: the fight for equality continues

In the World Economic Forum’s 2016 Gender Gap Report, Saudi Arabia ranked 141, ahead only of Syria, Pakistan, and Yemen. The male guardianship system in the kingdom remains a major obstacle toward equality. Saudi women need their male guardian’s approval to access healthcare, get married, travel, work, or open a business.

Over the past decades, Saudi Arabia has made incredible progress in terms of women’s education and currently more than half of all university graduates are women. Despite this progress, the unemployment rate for women is 32.7 percent. Saudi women continue to face formidable cultural and regulatory barriers of entry to the labor market.

Women tend to work in a limited number of sectors such as healthcare and education. There are also restrictions on mixed gender workplaces, which further constrains employment options for women.

The Vision 2030 document states that the goal is to increase women’s participation in the workforce from 22 percent to 30 percent. The end of the driving ban for Saudi women is a step toward achieving that goal, and signals the government’s willingness to pursue socioeconomic liberalization and face down pressure from the religious establishment and more conservative elements of society.

In addition to the end of the driving ban, the government has moved to remove a number of restrictions on women over the past years including the ability to access some public services and attend sports events in stadiums. The next phase for the fight for women’s rights in the kingdom is to dismantle the male guardianship system. This will be the true litmus test for Saudi modernizers in the government.

Neom: Desert dreams

The plan to build Neom, a city operated by artificial intelligence, manned by naturalized Saudi robots, and powered by the sun, is certainly ambitious, but the plan raises more questions than answers.

To start with, aside from the robots, who will build and work in the city? The Saudi government already struggles to convince Saudis to work in the private sector, and executing a plan of this magnitude will certainly require, at least in the short to medium term, a surge of foreign consultants and contractors to build, then operate such a city.

Secondly, Saudi Arabia’s technology and industrial sectors do not have the capacity to undertake such an endeavor, meaning that all the necessary technology and equipment will have to be imported.

Thirdly, the costs of building and sustaining such a city can easily consume much of the amounts raised from the ARAMCO IPO and other revenue-generating initiatives, and there is no guarantee that the city would generate the types of returns needed to attract outside investment.

Such urban megaprojects have had mixed results in Saudi Arabia. The six “New Economic Cities” announced in 2005 are yet to be populated and as a result are not operating as intended. The most advanced of them in terms of development and infrastructure, King Abdullah’s Economic City (KAEC), has not been able to attract the projected number of residents, businesses, or investors. So far, nothing about Neom shows that it may have a different fate.

A prince with a plan, or a plan with a prince?

Central to Saudi Arabia’s drive to reform and Vision 2030 is Prince Mohammed, who was promoted to Crown Prince in June 2017 in what was considered a bloodless coup against a respected and powerful veteran prince, Mohammed Bin Nayef. Is Saudi Vision 2030 a historical attempt at reforming the kingdom, or is it a vehicle for an ambitious young prince to become king and rule Saudi Arabia for decades to come?

The truth is likely somewhere in the middle. The combination of lower oil prices and demographic changes has certainly increased the pressure on Saudi policymakers to attempt to deal with these issues before they come to a head at a later stage.

To that end, Prince Mohammed is the right prince at the right time to attempt to push through some of these much-needed reforms. However, should the plan stall or fall short of realizing its ambitious goals, the Prince Mohammed brand is likely to be tainted—domestically, regionally, and internationally.

The internal cohesion of the Saudi royal family remains an issue in light of Prince Mohammed’s moves to consolidate power, most recently by removing Prince Mutaib Bin Abdullah from command of the Saudi Arabian National Guard and arresting him with a number of other princes, technocrats, and businessmen.

While such moves may endear Prince Mohammed to the Saudi public as a fighter of corruption, internally they may add to Saudi royals’ resentment over the meteoric rise of Prince Mohammed. Should Vision 2030 stall or fail to achieve some of its stated objectives, it is likely the prince would face increased internal opposition from disgruntled elites resentful of his meteoric rise and the ongoing purges.

The relentless speed at which Prince Mohammed and his team are trying to remake Saudi Arabia is a cause for concern. According to IMF’s Director of Middle East and North Africa Masood Ahmed, “the transformation of oil-exporting economies is no easy task and will be a long-term project. It will require a sustained push for reforms and well-thought-out communication.” The kingdom would be better served by pursuing reform plans that proceed at a slower but more sustainable pace.

Saudi Arabia faces a number of long-term structural obstacles in education and employment, which may take generations to fully overcome. Doing so will require strong political will, flexibility, a willingness to reassess goals along the way and the public’s acceptance of the reforms, as they will take years to bear fruit. Time will tell if Prince Mohammed has the patience, or aptitude, for a slow-paced but sustained transformation of the kingdom.

*This piece originally appeared in The Cairo Review of Global Affairs.

IPS