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Saudis suffer slow pace of economic change

RIYADH Saudi graduate Suleiman has been waiting for more than a year for his government to squeeze him into its bloated, 900,000-strong bureaucracy to no avail.

The 23-year-old, one of thousands of Saudis to enter the oil-rich kingdom's already tight job market each year, is aware of the efforts to slash an unemployment rate estimated as high as 12 per cent, but he is losing patience with the economic reform drive which Saudi Arabia launched some five years ago. "I know the government wants to create jobs and is talking about making it harder for these foreigners to work here, but nothing has come to me yet," said Suleiman, who declined to give his complete name.

The graduate said he shared the frustration of Saudi leaders, such as Interior Minister Prince Nayef, over the lack of jobs for Saudi youth, but admitted his degree in Arabic literature was not much in demand in a jobs market where more than a quarter of men under 24 seeking work cannot find a job.

Prince Nayef has called on private Saudi companies to hire more Saudis in place of the millions of foreigners who make up just over half of the national workforce, largely performing menial and hard labour traditionally shunned by Saudis.

The private sector employs all but a few thousand of the 3.7 million non-Saudis registered as workers with the government. There are no figures for the thousands of others who work illegally.

"All of us Saudis are responsible for finding work for our youth, because if we don't find work for them, then the result will be corruption and unemployment and that leads to a lot of other (bad) things," Prince Nayef said recently.

With oil revenues increasingly unable to meet the needs of more than 17 million Saudis, about 45 per cent of whom are under 15, the days when Opec's largest exporter could absorb young Saudis into its bureaucracy are long gone.

Conscious of the social cost of unemployment since the 1990s, Saudi Arabia's Crown Prince Abdullah has long urged the private sector to take control of the economy from the state.

Yet even though the private sector has grown at four per cent a year over the last four years, it has barely made inroads into an economy dominated by oil prices, which are in turn determined by uncontrolled factors such as the weather and the global economy.
Crushed by the effects of an earlier oil price slump, Saudi Arabia's economy grew by less than one per cent in 2002.

While they acknowledge that there is a problem, officials often point to what has already been done to clear the way for the private sector to take over.

They cite a foreign investment law passed in 2000 to ease restrictions on foreign ownership, cuts in taxes on foreign corporations, a forthcoming law that will shake up the capital market and most recently the runaway success of the partial privatisation of the monopoly Saudi Telecommunications Company.

But the reasons why the largest economy in the Gulf has failed to turn into a "tiger" are not purely economic or legislative.
Suleiman's very decision to keep waiting for a job rather than actively seeking work -- a choice shared by thousands of compatriots who are unwilling to give up the promise of a comfortable bureaucratic post -- is one of the factors blamed for the glacial pace of economic change in this conservative absolute monarchy, analysts say.

In addition to the passivity of Saudi youth, diplomats blame a shadowy group of unnamed powerful royals and businessmen for allegedly blocking economic liberalisation that would threaten their business interests.

The civil service has also been accused of refusing to help the creation of a new investment-friendly business environment in order to preserve its hold on vast amounts of state revenue.

Other Saudis say mismanagement is at fault. They say senior policy makers suddenly declared sectors open for investment, before the civil service had time to create the regulations allowing for such outside funding.

But most bankers and diplomats say the real reason for the failure of the private sector to thrive has been the government's decision to pursue change through age-old channels such as the lengthy tribal process of consensus that has long been the tradition of the desert kingdom.

"Saudi Arabia hasn't developed a sense of urgency that would require it to move outside its established bureaucratic channels for coming up with new legislation," said Brad Bourland, chief economist at the Saudi American Bank in Riyadh.

One Western diplomat on his second tour of duty in the kingdom said that while in Saudi terms the changes in the foreign investment law "revolutionary", the government was taking too long from a regional and global perspective.

The lack of transparency was also a problem, he added. "No businessman is going to invest on a bun that's still in the oven and when you have lack of transparency it isn't going to allow an investor to judge whether the dough has been in there for a couple of minutes or is it about to come out," the diplomat said.

Despite the flagging economy, there are few signs that Saudi Arabia is doing anything to speed up decision making. "We know that we are losing time, but ours is a system of consensus and that is the cost we have to pay to get things done right," said U.S-educated economist Ihsan Bu-Hulaiga, a member of the 120-member consultative Shura council.