What is Behind the Changing Temperament of the Saudi Leadership?
- Khalil Zahr
- Oct 17, 2018
- 6 min read
The rising repression of domestic political and social dissent, the backsliding on promised institutional and economic reforms, and the heightened sensitivity to outside criticism of human rights violations, reflect increased levels of anxiety of the Saudi leadership caused by increasing risks and uncertainties.
In his quest to consolidate and centralize power in his hands, the young Crown Prince and strongman Mohammed Bin Salman, better known as MBS, has mobilized domestic and international support by promising social and economic reforms. These have included, widening the space of social and political freedoms, conducting institutional reforms to weed out corruption, building a diversified economy, and reducing unemployment among nationals, particularly women and youth unemployment.
Since consolidating all power in his hands, and contrary to initial expectations, MBS has appreciably reduced the space of free speech and peaceful dissent. Criticism of government policies are increasingly repressed and prosecuted, while the regime’s sensitivity to outside criticism of domestic repression has risen to previously unprecedented levels. (A case in point is the recent spat with Canada and previously with Sweden and Germany, triggered by the latter’s criticism of alleged human rights violations).
Not surprisingly, these actions have raised serious doubts about MBS’s commitment toward reforms in the minds of many observers, particularly those-myself included- who hoped that his quest for power consolidation was not a power grab as some has suspected, but a genuine temporary measure, necessitated by the need to undertake ambitious reforms.
While the reform process is naturally a long-term endeavor that requires several years to be fairly assessed, early indications point to growing challenges and obstacles that span the social, economic, and political dimensions of the reform process. These obstacles would explain, but in no sense justify, the heavy handedness of the Saudi authorities.
On the social and political fronts, it seems that the authorities have miscalculated by assuming that the limited reforms advanced so far; such as permitting women to drive, allowing them to start a business without the need for a male sponsor, opening theatres, and permitting other forms of entertainment, would be sufficient to mollify the forces of reform. The implemented reforms however, as laudable and important as they are, are thought to fall well short of the long standing but suppressed popular aspirations for fundamental rights and freedoms. These aspirations have lately taken on more force and credence by the collapse of the social compact which formerly traded those rights for the social and economic benefits provided for free by the welfare state.
By decreasing subsidies, raising fees and prices, and applying taxes such as the VAT tax which took effect this year, the authorities have effectively broken the compact which allowed the Kingdom to be governed as an absolute monarchy since its founding more than a century ago.
Adding to the above challenges is a lackluster economic performance and backsliding on basic economic reforms, which if not checked, could derail the economic transformation process and risk the attainment of the much-touted National Vision. For according to a recent assessment by the International Monetary Fund (IMF), progress on the economic reforms front is mixed at best, while the economic transformation process is beset by a combination of unrealistic expectations and conflicted policies.
Economic growth has been disappointing with GDP shrinking by -0.9 percent in 2017 and is expected to grow at modest rate of around 2.0 percent over the period until 2022. Most alarming in this regard is the unsatisfactory growth expected in the private sector, which is counted upon to reduce the high unemployment levels and provide additional opportunities for the large number of new entrants to the labor market expected over the coming years.
Most demoralizing is the failure of recently adopted measures to increase the employment of nationals in the private sector. These measures have centered on raising the cost of expatriate labor, with the objective of boosting the competitiveness of Saudi nationals in the job market. Recent employment data however, indicates that while Saudi female unemployment has come down, Saudi male unemployment actually rose. This curious result can be explained by the fact that female unemployment was positively influenced by increased opportunities resulting from opening new sectors to women that were previously prohibited from.The failure of unemployed Saudi males to benefit from the above measures is due, as many experts have long asserted, to the fact that Saudi unemployment is structural in nature, the result of a mismatch between the professions demanded by the private sector and the expertise offered by the national workforce. The main issue with employment of nationals is therefore “employability”, which would require a comparatively longer time to fix than the authorities seem to think. Continuing to ignore this fact, which was well appreciated in the corridors of policy planners before the reign of MBS, is leading to the adoption of ineffective and harmful policies.
Consequently, the labor policies adopted as a part of the reform package have been particularly harmful to the private sector. The labor market is being drained of qualified expatriates driven out by much reduced incomes. If continued, these policies are destined to lower productivity and depress economic growth.
Also frustrating to Saudi economic planners should have been the lackluster performance of the private sector. Over the past two years foreign direct investment (FDI), an essential input for the transformation process, has slowed down to a trickle. Worse still, there are reasons to believe that capital has been fleeing the Kingdom, especially after last year’s arrest and shakedown of the most prominent businessmen under the guise of fighting corruption.
In an attempt to stimulate and attract private investment to the many ventures proposed by MBS to diversify the economy and create employment opportunities for nationals, the government has been lauding its role as a major investment partner in these ventures under the banner of “Private-Public Partnership” with government investment as catalyst. This partnership model however, when intended to compensate for inherent shortcomings in the investment climate as the case is, is destined to fail as it did in the past.
The Kingdom has tried this model in developing a large number of so-called economic cities or growth centers but ended up taking on most of the financial burden, with the counted upon private sector falling far short of expectation. Furthermore, the expected returns on most of these investments never materialized and their contribution to economic diversification and development has been limited. It is unwise to repeat the same policies and expect different outcomes.
As if his domestic challenges were not enough, MBS’s position is also being undermined by his close friend and supposed ally US president Donald Trump. The latter, in his transactional and unusual approach to diplomacy, has been pressuring the Saudi leadership into increasing purchases from the US, especially of arms and munitions, in return for protecting the Monarchy. By linking the alleged dependence of the Monarchy’s survival on US support and protection, President Trump has, in effect, raised the Saudi leadership’s levels of anxiety and vulnerability, and strengthened the hand of their adversaries.
Furthermore, the Trump administration, by withdrawing from the Iran nuclear deal and reinstating anti-Iran sanctions, has emboldened its regional allies and consequently hardened the positions of its adversaries. This has led to rising regional tensions and renewed fears of military conflict. It also reinforced a wide spread perception in the region, Saudi Arabia included, that the US is stoking the fires of Saudi-Iranian conflict in order to increase arms sales to the region, exploit its resources, and promote Israel’s strategic interests.
These actions have generated lots of skepticism about the wisdom of MBS’s close association with Trump and galvanized domestic and regional opposition to his policies. This dynamic is thought to be behind the indefinite postponement of Aramco's IPO, and the move by King Salman, MBS’s father, to check the rush by his son toward normalization of relations with Israel, by reaffirming Saudi commitment to the Arab Peace Plan. (The Arab Peace Plan with Israel was proposed by his predecessor the late King Abdullah and adopted by the Arab League but rejected by Israel).
Furthermore, by removing all potential competition and centralizing power in his person, MBS has effectively ended the former power sharing arrangement among influential princes of the Al-Saud Family. Consequently, where shared power has in the past implied shared responsibility, under the new paradigm all responsibility for success or failure lies solely in the court of MBS. This naturally amplifies the rewards of success, but more importantly the risks of failure. Consequently, if the reform and transformation agenda stumbles, the risks of irrational and self-defeating behavior are expected to escalate accordingly.
The exaggerated response to Canada’s criticism of human rights violations, which resulted in jeopardizing the future of thousands of Saudi students studying in Canadian colleges and universities, among other damages, reflects an emerging temperament that can only harm the transformation process and increase the risks of instability. Worse still, if the allegations about the disappearance of the Saudi journalist and regime critic Jamal Khashoggi, while visiting the Saudi Consulate in Istanbul, are confirmed, then this would unfortunately be a mortal blow to the Kingdom’s interests and a harbinger of more difficult times ahead.
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