Kingdom_Tower_at_night.JPGCulture Economy Human Well Being 

Saudi Economic Reforms Need a Cultural Angle

By Emily Ericksen

Deputy Crown Prince of Saudi Arabia Muhammad bin Salman made international news headlines early in 2016 when he led the charge for economic reform and diversification in Saudi Arabia. The recent tumble of oil prices, unlikely to recover to pre-2014 levels, and a highly unproductive youth labor force have pushed the Saudis into a corner they need to escape in order to maintain economic prosperity. Salman has stated that there are no reforms the Kingdom would not implement—with proper consideration, of course—including “the shedding of do-nothing public sector workers,” doing away with subsidies, and privatizing health care and education. But these reforms are unlikely to actually result in decreased unemployment rates nor create an oil independent, sustainable Saudi economy without coupling them with changes in societal norms.

The Ministry of Finance published a press release in December 2015 that detailed many of the reforms the Kingdom was planning to implement over the course of five years (2016-2020) as well as 2015 figures relevant to the impending economic difficulties as a result of low oil prices. There are 14 reforms listed, with the vast majority calling for changes to government operations in developing and implementing the annual budget. There are two notable exceptions: One reform addressed investment in education, health, and scientific research, among other things, and another addressed diversification of the economy through such means as privatization, improving transparency, and increasing public-private partnerships.

However, before the Saudi government publicly acknowledged its development of economic reforms, a document emerged from a 2014 World Economic Forum event that detailed 14 proposed “interventions” intended to solve the issues of the employment system in Gulf Cooperation Council countries. The contributors to this document were representatives from the GCC countries.

The results of the World Economic Forum provide an even deeper analysis of what is necessary in Saudi Arabia to produce real, positive results in terms of reduced unemployment and increased productivity. Comparing both lists, some of the interventions proposed at the World Economic Forum match the Saudi government’s reforms well, while others pair loosely or do not match at all.

Of particular concern is that while the GCC group called for tapping into the potential of women, the Kingdom fails to adequately address the abysmally low participation of women in the labor force, which currently rests at 18 percent, one of the world’s lowest rates. Robert Powell, an economist with expertise in the Middle East from the Economist Intelligence Unit, explains that the low rate of women participating in the labor force is by far a larger a problem than overall youth unemployment itself. He states that one the most important challenges Saudi Arabia faces is the large numbers of young Saudis who are often well educated but still unprepared to enter the workforce, particularly the “huge numbers of often better educated and highly motivated women who are indirectly blocked from entering the workforce every year.”

Powell notes that Prince Salman is of course aware of women’s low participation rate, and he wants to raise it to 30 percent. When the crown prince was questioned about whether or not increased participation by women in the labor force would be a good thing for the economy, he responded, “No doubt. A large portion of my productive factors are unutilized. And I have population growth reaching very scary figures. Women’s work will help in both of these issues.” However, when pressed to explain how women could fill an expanded role in the workforce when they were still limited socially and professionally, Prince Salman responded that it was not legal restrictions holding women from participating in the labor force at greater rates, but rather a result of being unaccustomed to working by their own choice. However, Powell points out that more women than men are graduating from college, and they are doing that “because they want to be [economically] productive members of society.” Even if the deputy crown prince’s statements were true, it would still indicate that the top leadership in Saudi Arabia does not have a plan—at least not one they are willing to discuss openly—for addressing the cultural changes that need to accompany economic reforms.

The list of interventions generated by the GCC group also specifically included equalizing labor rights between nationals and non-nationals so as to even the pool from which employees are hired, and in that way, increase nationals in the private sector. This is issue is crucial to address due to the makeup of the Saudi labor force. In the public sector, 90 percent of jobs are held by Saudi citizens; however, in the private sector, an astounding 80 percent of jobs go to foreign expatriates.

Moving nationals into the private sector was a focus of both the government reforms and the GCC group. However, the deputy crown prince stated that if nationals did not flow into the private sector labor force as a result of the reforms being employed, he would re-introduce a policy of “Saudization” and effectively force out non-nationals. Saudization has been used in the past as recently as 2002 and 2011. According to a 2007 article by Kamel Mellahi, the government implemented this policy in 2002 with the stated objective of moving skilled Saudis into jobs currently dominated by non-nationals, creating new jobs in the private sector, and improving the welfare of all workers. Considering the current labor force demographics and the often poor treatment of non-national workers, the policy has clearly had little success.

Powell seems optimistic for the future of the Saudi economy, noting both large amounts of spending on education as well as increasing numbers of vocational colleges. However, he grants that cultural changes will need to accompany economic reform. The seeming reluctance to encourage women to become an active part of the workforce, the government’s threat to force non-nationals out of the work force as a solution to bringing in nationals, and the lack of detailed measures by which to implement and then gauge the success of economic policy changes call into question how successful these economic reforms will be.

Of course, as the reforms are implemented and their results are monitored, the Saudi regime will observe and adjust accordingly. Although the Saudis face several major impediments to substantial economic growth—to include regional conflict and a domestic resistance to political and social change—it is unlikely that the regime will allow the country to slip into economic despair. The question then remains to what degree concern over the economy will prompt substantial cultural change.

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Emily Ericksen is an editorial assistant at World Policy Journal.

[Photo courtesy of BroadArrow at English Wikipedia]

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