Saudis have shown loyalty to their country and the ‘Day of Rage’ turned into a ‘Day of Unity.’ One factor ignored is that Saudis want to see King Abdullah bring change and reform. Saudis are also savvy in knowing that the violence in Libya and Yemen, uncertainty in Egypt and Tunisia are not sought by most. In today’s Saudi Arabia, the political will is there for economic reforms to unfold. There is no better evidence than a constant change in the welfare of society recently announced by King Abdullah: unemployment benefits enacted for the first time, extra capital for housing lending projects, social benefits, debt forgiveness for the needy and civil service wage increases. These projects amount to 8.3% of the country’s GDP.
The Saudi monarchy has brought change and reform in critical moments in the history of the country. It was all too easy to call for the collapse of Saudi Arabia prior to 9-11 as oil revenues were subdued and Saudi Arabia run consistent budget deficits. It is true that Saudi Arabia hit the jackpot since 2003 due to oil prices rises. But money was saved and invested toward building its human capital.
During the wave of terrorist attacks from 2003-2005 there were also plenty who were ready to call an end to the House of Saud. It is easy to discount the resilience of Saudi Arabia as its inevitability for change. It is too easy to call for increasing instability to rise within Saudi Arabia as Yemen’s domestic political labyrinth gives ample sparks for centripetal actions. Just like during the post-2003 Iraq, pundits were ready to call for political instability in Saudi due to external forces. Saudi Arabia withstood the shocks and managed superbly internal terrorist threats due to change and resilience. At every point in the history of Saudi Arabia, difficult internal and external challenges compelled policy makers and Royals to inevitably change for the better.
The economic challenges facing Saudi Arabia today are plenty but manageable. The youth bulge of Saudi Arabia is an opportunity for the country as well as a challenge to find them jobs and endow them with the right skills. Change is inevitable for Saudi Arabia. The recent history is a telling example: more than 100,000 young Saudis are sent abroad under the government’s scholarship program. These young Saudis are an important engine of change. The labor market is on an inevitable path of reform as the current dynamics are very telling: in the private sector for every nine jobs going to expatriate workers only one goes to a Saudi. Labor market reform is a necessity as more Saudis will be joining the labor force over the next decade. More than two-thirds of Saudis are below the age of 30. Given the right incentives Saudis will find employment in the private sector. Although female participation rate in Saudi Arabia is among the lowest in the Middle East, economic necessity will compel women to look for jobs. In the early 1990s, only around 5% of the labor market was comprised of women, today it has increased by three-fold. No longer can a Saudi household live off from a single bread winner. Women have to contribute as well. Life has become more expensive.
Housing as well as the energy future of Saudi Arabia necessitates inevitable changes. Affordability of housing is an issue for today’s young Saudis as most are opting to rent or stay with their parents for longer periods of time after marriage. The passage of the mortgage law as well as allocation of more land by the state for real estate development is inevitable.
Saudi Arabia is working toward its energy future knowing that its current reliance on hydrocarbons is not sustainable. If its current oil consumption continue unabatedly, by 2028 Saudi Arabia will have capacity to export no more than 7 million barrels a day and its population increasing from 27 million today to 34 million then. As a result, Saudi Arabia is working towards an inevitable future in clean and green technology.
Moreover, Saudi Arabia today is very different from the 1950s in terms of institutions, knowhow and capital resources. The institutions managing the economy in all its facets have greater depth and continuity. The financial crisis which shocked the advanced world since 2009 did little damage to the Saudi banking system. Banks and regulator alike learned well from the systemic excesses of the 1980s. Today Saudi Arabia is standing on solid macroeconomic ground with 10.2% of government debt to GDP, which is among the lowest for a member of the G-20. It is has also made sure that the more its foreign assets, currently greater than 102% of its GDP. Saudi Arabia has always met all the global oil supply calls over the decades. Recently, Saudi Arabia invested more than $63 billion toward increasing its oil capacity to 12.5 million barrels per day when few did so.
Saudi Arabia’s future is far brighter but more inevitably bound to change than people can forecast.