The Kingdom of Saudi Arabia seeks an alternative to its dependence on the petroleum sector and the House of Abdul Wahab
From the time of its establishment in 1932, the Kingdom of Saudi Arabia has always been recognised as one of the most powerful members of the Gulf states. With a rapidly growing economy on the international stage, success has been credited to the oil booms in the 1930s which led to Saudi Arabia becoming the largest exporter of oil in the world. That said, in recent developments, the Kingdom has come to the realisation that its once most valuable and profitable natural resource can no longer be its only source of income.
A young prince with a vision
Confronted with plummeting oil prices which has created a budget deficit spiralling to over 13 per cent of Saudi Arabia’s gross domestic product (GDP), the country was forced to mete out funds from its coffers, consuming roughly $116 billion of its foreign currency reserves in a matter of just one year. It appears that money has been leaking out of Saudi Arabia following the Arab Spring era, with the Saudi-led war in Yemen diverting roughly 8 per cent of the annual GDP. Since the Yemen war, the country has been using up its foreign reserves at an alarmingly high rate. While it is no secret that Saudi Arabia has always relied copiously on the petroleum sector for a significant portion of its state budget, and nearly 100 per cent of its earnings come from exports, extreme circumstances like these beg the question of whether or not experts and the Saudi government itself ever predicted such a possible collapse to its economy.
Taking heed to possible insolvency being only a few years away, 30-year-old Deputy Crown Prince Mohammed bin Salman recently decided to take matters into his own hands, announcing plans for a major restructuring of the Saudi government and its economic affairs. Having witnessed saturated oil markets with cheap prices, new reforms indicate plans involving a shift from unrefined petroleum to developing renewable energy. The deputy crown prince has reason to believe such transformations will help achieve what he refers to as his generation’s “different dreams” of a post-carbon future.
Last month, the Saudi government released the Vision 2030 highlighting the afore-mentioned reforms and restructuring. The main aim of the vision is to generate a significant amount of revenue from means other than petroleum. A number of action plans have already been put into place by reducing considerable subsidies for commodities such as gasoline, electricity and water. In fact, the price of retail gas was raised by almost 50 per cent, translating into a spike from 60 cents a gallon to about 90 cents. Furthermore, there is speculation regarding the possible implementation of an income tax in addition to a VAT and further levies on items such as luxury goods and sugary drinks. However, according to a statement made by Finance Minister Ibrahim Al-Assaf, the Kingdom has no plans to enforce income tax on its people but has made the decision to introduce VAT by 2018 as agreed on at the 102nd meeting of the Gulf Cooperation Council (GCC) finance ministers which was held in Riyadh.
Quick fix solution
The current position of Saudi Arabia is a difficult one where the country’s only feasible export can no longer sufficiently pay the bills to sustain the nation. The deputy crown prince, however, aims to change such bleak perceptions of the Kingdom by raising funds at a time of low oil prices, announcing plans to make shares of Saudi ARAMCO – a state-owned oil company – open for public purchase. Sceptics are not too happy with the privatisation of the state’s largest asset even though the total shares of the IPO amount to less than 5 per cent of the company potentially being valued at $2 trillion.
Taking a look at the bigger picture has some people wondering what the rationale or end game is behind such an unprecedented move. Why is Saudi Arabia taking such actions now when they had 80 years to do so? Perhaps they see the IPO as a quick fix solution to the plummeting oil prices in the market.
Wahhabism and social reforms
Considered the power behind the throne, Deputy Crown Prince Mohammed bin Salman has a vision that not only focuses on economic reforms, but also on social restructuring, a plan which he claims will work towards promoting and reinvigorating social development in order to build a much stronger and more productive society. The new reforms programme intends to introduce a modern curriculum focused on rigorous standards in literacy, numeracy, skills and character development. What’s more is that the prince has spoken about providing more freedom and rights to women, proof of which can be seen in the new ban issued to the Saudi religious police stopping them from making any arrests without obtaining assistance from other authorities.
These social transformations are potentially going in a positive direction, but the truth of the matter is that things are not always as simple as they may seem. All this would call for a massive breach of a historic pact the House of Al Saud made with the House of Abdul Wahab in which Al Saud agreed to protect and promote the doctrines of the Wahhabi movement, while Ibn Wahhab would support the ruler with power and monolithic control of the Kingdom in exchange for clerical power in matters such as education and the judiciary, in addition to segregation of women. As part of this status quo, for instance, the Minister of Religious Affairs has always been from the Al-Sheikh family, a descendant of the house of Ibn Wahhab.
The extremely conservative religious movement known as Wahhabism has often been referred to as the predominant feature of Saudi culture. So much so, that one can argue that education has always been the vital binding element that connects the religious clergy with wider state bureaucracy. With education as a powerful agent of socialisation, the clergy are at the forefront of creating a national vision of the state’s values which are tailored to the official narrative of the state. They play a major role in writing school materials and preparing textbooks which are in accordance with the religio-political parameter of the Wahhabi-Saudi coalition.
With that in mind, the government may be providing more social freedom and rights in the country, but educational and curriculum reforms will prove to be a much greater challenge. Clerical control over the curriculum at school and university results in generating Islamic extremists among Saudi youth, which may translate into domestic security issues. Such control is also producing graduates that have a weak understanding of numeracy, foreign language development and other skills that may be required to find employment. In other words, Wahhabi ideals are serving as barriers to economic reforms as they are hindering progress, as well as holding back women in the workforce.
As such, the Saudi government is currently cornered; it must consider the consequences of upsetting the House of Abdul Wahab in order to sustain the economy. What the future holds for the Kingdom of Saudi Arabia and its plans for development is something only time will tell.
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