The Saudi economy .. the trinity of oil and corruption, and the vision of the crown prince stumbled

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Since King Salman bin Abdulaziz took power in 2015; his young son, Crown Prince Mohammed bin Salman, has led massive changes in the economic system, which came or were imposed on the regime in light of the sharp and volatile decline in world oil prices, along with the military cost of the war that the Saudi regime is waging in To whom. So it seemed clear to the deficit in the budget of the Saudi state, the increase in the pace of domestic and external borrowing, in addition to withdrawing cash reserves during the past years.

These developments have cast a shadow over the most important pillars of government upon which the political system in Saudi Arabia is based: reliance on the economic rent system. If the rentier system depends on the existence of the rent distribution (in the Saudi case, the distribution of oil production resources), then the Saudi royal family takes over this source and monopolizes its “legitimacy” entirely.

The Saudi regime governing contracts for the approved rent model has invested – in large part – on the flow of oil revenues, rather than seeking a productive and sustainable economy, because it allows providing free services to individuals (in the areas of health, education, jobs, infrastructure, loans, etc.) in exchange for granting political loyalty and compliance with decisions regime. The guardian prefers this model because he avoids the option of the ballot box, and establishes a client relationship between the ruler and the ruled; the guardian derives the legitimacy of the ruling by distributing rent to individuals.

However, it seems that the economic rentier system is subject to tremendous shocks due to the contradictions and problems of Bin Salman’s “reforms”, because it is impossible to get rid of the excessive and dangerous dependence on the rent system without radical political reforms, especially in the absence of a rational governance system that helps direct economic development and the optimal use of resources Available, ensuring reduced corruption and enhanced transparency.

The “Vision 2030” and the National Transformation Program – which were announced in 2016 – are new aspects of the efforts of previous Saudi governments to face the dilemma of the Saudi economy’s dependence and government spending on oil revenues, as it exceeded 90% of contracts, and thus was formed – at different periods – A bundle of five-year plans and economic city projects that did not pay off, and in some cases completely stalled due to various reasons, including widespread corruption.

The difference now is that “Vision 2030” seeks to diversify the sources of income through radical steps and austerity policies that were previously impossible to think about, including: imposing value-added tax, fighting corruption in the attic of the people, lifting subsidies on some commodities, reducing wage spending, and eliminating Allowances and allowances for state employees.

The Saudi regime governing contracts for the approved rent model has invested – in large part – on the flow of oil revenues, rather than seeking a productive and sustainable economy, because it allows providing free services to individuals (in the areas of health, education, jobs, infrastructure, loans, etc.) in exchange for granting political loyalty and compliance with decisions regime. The guardian prefers this model because he avoids him the choice of the ballot box, and establishes a client relationship between the ruler and the ruled, so the guardian derives the legitimacy of the ruling by distributing the proceeds to individuals

The ruling regime has already started implementing these steps during the past years, without making the necessary political reforms (on the basis of no taxes without representation and no representation without taxes) that would transfer it peacefully from the rent model; therefore the pillars of the system were shaken and generated public discontent once these steps were announced Then, after a few months had passed, the implementation of some austerity decisions, which included the suspension of bonuses and bonuses, was abandoned; and the citizen account for people with low incomes was created to alleviate the burden of taxes on the middle and poor classes. This confirms that the system is still not ready to completely cede the rentier economy, because it provides it with political gains and protects its existence.

The “Vision 2030” approved the system of associations and private institutions, but this system limits the role of these bodies to charitable work, rather than civil society institutions that, as usual, in any society – exercise oversight roles in favor of the most vulnerable.

In light of all these rapid economic transformations, the effects of austerity and economic structural changes on the middle and poor class, documented in the report of the United Nations expert on extreme poverty and human rights, which was published in 2017 and detailed scenes of misery in the oil countries, began to surface. It failed to provide the necessary social protection network for this community group.

One of the most important obstacles to development and reform in the Kingdom was the problem of corruption in the Saudi economic system. The selective anti-corruption campaigns led by the current ruling regime are only a step to rotate the heads of corruption from the hands of the old guard to the new guard or the new ruling minority, in order to grant loyalty Absolute de facto ruler Muhammad bin Salman.

The absence of transparency and corruption is the regime’s failure to publicly publish the royal family’s allocations of oil revenues, and other “checkbook” allocations linked to the strengthening of political influence. In addition, the Bin Salman family owns the “Tharawat Holding Company” for investments headed by Prince Turki bin Salman, and it is not excluded that this company obtained governmental and private investment contracts, taking advantage of the patronage network and their family relationship with the king and crown prince. This represents a pattern that is far from reform: the system privatizes some sectors, but it remains the owner of them through this company and through the elite loyal to it.

Therefore, corruption in the absence of good governance will continue until the regime seeks to find an independent mechanism that imposes oversight on public financial affairs. It is illogical for the crown prince and his bureaucratic apparatus to monitor himself, especially after he installed himself head of the anti-corruption agency, and head of dozens of official government bodies . This threatens the characteristics of good governance in light of the relations of power and influence between these institutions, not to mention that the executive, legislative and judicial authorities still overlap with each other, and are concentrated in the hands of one man who insists on liberating his system from oversight and accountability.

The steps of neoliberalism and the privatization of the most important institutions of the government sector are carried out in an authoritarian manner, rather than engaging community members in the consultative discussions. The move towards privatizing vital sectors such as education and health in a society deprived of independent civil society institutions is considered an explicit threat to the needs of the middle class, in light of the income disparity between the classes In addition, the absence of trade unions that protect Saudi employees and workers in the private sector forces the regime to submit to pressure from the private sector and accept unfair employment policies.

Therefore, it is difficult to rely on the involvement of the private sector and its heavy dependence on direct investment and providing services to citizens, as a form of income diversification without building a social safety net and the existence of groups that protect workers’ rights. Otherwise, this privatization will become the main recipe for conflicts and political and social instability.

One of the most important decisions of the national transformation program urges the development of non-oil revenues, through international investment funds such as sovereign funds, or investment in international companies in the form of bonds and shares. Reports have indicated that Saudi Arabia’s purchases of US Treasury bonds increased to $ 177 billion by 2019. Thus, Saudi Arabia has become one of the largest foreign creditors of the United States, not to mention that the Saudi riyal is still not financially independent because of its association with the US dollar.

The performance of the Saudi economy has been and still depends – mainly – on oil; there is no doubt that this oil is a depleted resource and carries many risks. Certainly, without recognizing the importance of political and legal reform and applying the principles of good governance, the unemployment rate that remains in place since the announcement of the economic transformations will continue to rise, and the phenomenon of poverty may increase; which will create a threat to social peace.

These steps have been criticized by veteran voices such as the economic expert, Dr. Abdulaziz Al-Dakhil, who warned about the investments that fall under the sovereignty of other countries because they expose the investments to great risks. Some local economists have also criticized Aramco’s offering to subscribe in order not to expose it to the risks of market fluctuations, which are the country’s most important natural resource facilities.

Recently, the transformations of the Saudi economy have faced major tremors outside the control of the state, due to the developments of the Corona virus, which struck the stock market sharply, except for the “oil war” waged by Saudi Arabia and Russia, where oil prices tumbled to less than $ 30. This, of course, will affect government revenue and public spending.

Five years after the announcement of the “Vision 2030” and the national transformation program, the International Monetary Fund has warned the kingdom of the depletion of its financial wealth and its entry into the bankruptcy tunnel. The World Bank Fund also indicated that difficult times are looming on the Saudi horizon, and this calls for important measures to protect human dignity and secure the minimum level of decent life for the citizen.

Saudi economist Ihssan Bouhalika has previously criticized the absence of a clear vision to combat poverty within the terms of the economic transformation program, and this means that the system still deals with the problem of poverty as a problem created by the poor rather than dealing with its solution as a basic duty of the state. There is no doubt that ending the state of the rent economy in light of the depletion of oil, dismantling the “rent mentality” that has taken root in the relationship of the ruler and the ruled, and the transition to a productive economy is an unavoidable necessity.

The performance of the Saudi economy has been and continues to depend – mainly – on oil. There is no doubt that this oil is a depleted resource with great risks. Certainly, without recognizing the importance of political and legal reform and applying the principles of good governance, the unemployment rate that remains in place since the announcement of the economic transformations will continue to rise, and the phenomenon of poverty may increase; which will create a threat to social peace.

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