(Photographer: Simon Dawson/Bloomberg)

For Saudis, life is changing. An infamous ban on women driving was lifted in June, and the government is permitting commercial movie theaters to open. There are more gender-mixed music concerts and other kinds of entertainment, including professional wrestling. The loosening up comes as the biggest economy in the Middle East struggles to urgently wean itself from oil revenue, which fuels a vast welfare state. That means fitting in better with the modern world and tampering with the cash-for-loyalty contract that Saudi kings have had with their subjects for decades. The man forging this future is Saudi Arabia’s 33-year-old crown prince, Mohammed bin Salman, who has amassed unprecedented power, cracked down on dissent and embarked on a grand remake. Two years into the reform drive, Saudi Arabia is trying to save money and speed up social change against a backdrop of one of the world’s most conservative religious establishments.

The Situation

Government funds are pouring into education, health care and tourist resorts as part of a campaign called Vision 2030. It includes $500 billion for a futuristic megacity on the Red Sea coast to be called Neom. At the same time, Saudi Arabia is increasing military spending and reining in clerics, journalists and activists through intimidation and arrests. Jamal Khashoggi, a Saudi journalist and government critic, went missing after entering the kingdom’s consulate in Istanbul Oct. 2. Turkish officials have said privately that he was killed there, a claim the Saudi government has denied. Dozens of princes were locked up for about three months in the Ritz-Carlton Hotel in Riyadh and forced to hand over billions of dollars to the state in what authorities called a weeding out of corruption. Meanwhile, subsidies on basics like electricity have been cut, and more revenue is being raised with a value-added tax. There are renewed efforts to get more Saudis working, since youth unemployment is about 30 percent and expatriates fill half the country’s jobs. Women are increasingly encouraged to work, despite traditional disapproval of face-to-face contact with men. There has been some pushback. After canceling bonuses for state employees that had long been taken for granted, the government reinstated the perks in 2017 after complaints on social media. Saudi Arabia had announced plans to partly privatize its state-run oil company, Aramco, to help fund the transformation, but the listing has been postponed.

The Background

The kingdom was founded in 1932, with the Al Saud family ruling under a compact with clerics belonging to the austere Wahhabi form of Islam, who kept control over social and religious laws. The country became the biggest oil exporter in the 1970s and remained resistant to Western cultural influences and political liberalization. The throne of Saudi Arabia, one of the world’s last remaining absolute monarchies, passed in 2015 to King Salman, who then set up his favorite son to be the first from a new generation of princes to take charge of the country’s 21 million citizens. An economic transformation became vital after oil prices plunged in 2014, ballooning the budget deficit and forcing the kingdom to burn through foreign currency reserves at a record pace. Prince Mohammed has also pushed Saudi Arabia deeper into regional conflicts, including a war in neighboring Yemen. Previous efforts to reduce the reliance on government handouts and expand the private sector have had only limited success, in part because many Saudis lack marketable skills and continue to view many occupations as beneath them.

The Argument

With the world’s biggest petroleum fields and about $500 billion in foreign reserves, Saudi Arabia can continue to rely on its oil money for some time. The question is whether it can reconfigure the economy and create enough jobs for its people before the clock runs out. While it’s becoming less tradition-bound and isolated, Saudi Arabia is still mainly a conservative, male-dominated society. The crackdowns have raised concerns that the considerable powers of the state are being concentrated in the hands of just one man, unnerving some of the foreign investors the country will need to prepare for the post-hydrocarbon age. With almost half of Saudis under the age of 25 and the size of the workforce expected to double by 2030, Saudi Arabia can no longer afford its unproductive population. At the same time, if more Saudis earn their own living and are asked to pay taxes, they could begin to demand a greater say in how their country is run.

To contact the authors of this QuickTake: Glen Carey in Riyadh at gcarey8@bloomberg.netDana El Baltaji in Dubai at delbaltaji@bloomberg.net

To contact the editor responsible for this QuickTake: Leah Harrison at lharrison@bloomberg.net

First published June 10, 2015

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