PATRYCJA CHOMICKA
While discussing Islamic finance, it is not possible not to mention the situation currently developing in the Kingdom of Saudi Arabia. Although the economic and social changes in the country aren’t as rapid as in other parts of the region, they may bring reforms long expected from King Abdullah bin Abdilaziz Al Saud.
Long live the King
At the beginning of his reign in August 2005, the monarch of Saudi Arabia was perceived as an innovative leader and reformist. In fact, he succeeded in guiding his country through the Arab Spring without great harm done to the Saudi Arabia’s people and without many riots on the streets. His leadership’s been considered strong and even though he hasn’t taken any significant actions towards liberalization of the traditional Muslim society, his strategy of small steps kicked in really effectively.
Looking from a wider perspective, it is quite clear that dealing with small problems and coping with social discontent patiently and gradually may yield better results than trying to reform the whole system at once. Changes that started in the middle-eastern countries in December 2010 in many cases ended tragically. Human rights have been denied to the people of most of the Arab states, religious movements have radicalized their actions (for instance in Egypt, Syria and Iraq), yet countries of the Arab Peninsula are still seen as the most stable in the current situation.
So what are the most important issues as far as the Saudi economy is concerned? Without a doubt saudization (Nitaqat program to be precise), an increasing role of women in business and the problem of higher integration within the Gulf Cooperation Council (GCC).
Saudization – the new rule of economic nationalism?
With population of 27 million, of which 30% are immigrants, Saudi Arabia is nothing exceptional in the Persian Gulf. Foreigners constitute most of the workforce (they come from both southern Arab countries and non-Arab countries) since many Gulf citizens regard work as something unworthy. The young often lack motivation to find a job, as they believe that government will pay for their living regardless of what they do. Interestingly enough, they are not wrong – many families are so wealthy that they willingly sponsor their relatives’ whims. As a result, now only foreign workers are skilled and determined enough to work and keep the economy running.
As a remedy to this situation, in 2006 king Abdullah bin Abdilaziz Al Saud launched the project of so-called ‘saudization’. Its aim was to reduce number of foreign workers and thus provide young Saudis with jobs. Since 2006 the specifics of the initiative have changed (e.g. five categories of business, based on the size of the enterprise, were created), but in general the idea has not changed one bit. It oblidged companies to hire an exact number of employees of Saudi origin, even if they are unfit for particular positions. In fact, they unable to work very often. Since they are required for company to exist, they sometimes don’t show up in the workplace. And even if they do, they don’t work as efficiently as other workers could. The Poles might remember the similar situation that occurred during communism: due to the ideology it was impossible to sack anybody.
Saudization simply backfired. By introducing this solution, the government encouraged laziness, punished the immigrants – main source of the country workforce – and impaired the business environment. Does the plan comprise any good points then? Actually it does, even though the initiative has not developed in the proper way. The reason for the saudization is important as never and the king made it particularly noticeable – the young don’t have suitable abilities and they lack motivation. If the country wants to be competitive on the global market, both these problems need to be dealt with in near future.
Women in the men’s world
The Saudi market is in trouble now and there aren’t any easy solutions. However, an increase in share of women in the business can solve some problems. Currently many educated women are facing enormous difficulties in both the private and the public sector. Even if they are better qualified and more eager to work than men, they’re not treated as equal. Parents do not perceive their daughters’ careers as something praiseworthy. Actually, taking up a job is thought to be something shameful, even if girls are working in women-only environment. They are often offered jobs below their qualifications (mainly in education or healthcare) and their pay is a few times lower than that of men on the same position.
Once married, the Saudi women are often given a solid sum of money from their parents, which they may spend as they wish. Of course not all of them want to set up their own businesses or to deal with investment, but some of them really dream about it. However, they are forbidden to contact male business partners even if they are foreigners. Fortunately, now they can take control over their lives, as banks decided to introduce services addressed solely to women. Financial institutions treat seriously the increasing role of the Saudi women in economy, especially the chief executive officers (CEO) wishing to expand their companies’ operations – they even plan to hire more women to serve the new female CEOs. Undoubtedly it will encourage more women to fulfill their ambitions.
Unlike the saudization initiated by government, this spontaneous and self-regulating movement may produce better results. If it is so, maybe the Gulf countries will finally realize that in a few years the oil prices will fall and it’s high time to give women the power. It seems that the Saudi Arabia in on the course to change its reputation as the most strict Islamic country – even though it may take a really long time to achieve it.
GCC – the exclusive club that may get even smaller
For anyone following the news from Middle East, it is clear that recently the Gulf Cooperation Council hasn’t had much to do with cooperation. Disagreements between Saudi Arabia and Qatar are becoming more and more apparent, especially since March 2014, when the United Arab Emirates, Saudi Arabia and Bahrain recalled their ambassadors from Qatar. This diplomatic incident was caused by rumours about the Qatar’s support for the Islamic extremist movements in the region.
The young sheikh of Qatar, known for his direct approach, has been source of many problems to the rulers of Dubai and Saudi Arabia and put the idea of the GCC further integration into a serious question. The main cause of concern is the country’s financial backing of the so-called caliphate and other terrorist groups in the region. Bearing these problems in mind, the GCC incumbents should really reconsider if and when the next step towards political union should take place. Given the current political situation, the vision of shared currency and transnational organization, in the mould of the European Union, seems as unrealistic as before.
Saudi Arabia – a leader or a straggler?
Having learnt all these facts, we have to answer the following question: is the Saudi Arabia a true leader of the region, ready to face the new problems and seize the opportunities or is it a straggler, unable to modernize and compete on the regional and global stage? It’s not easy to find and answer. The Kingdom of Saudi Arabia is definitely changing – not rapidly, but continuously. It is trying to work out its own way to solve economic and social problems. Should it be condemned for the slow pace of the process? Truly not. Changes and evolution always take time and – even more importantly – need reflection, not hasty decisions.
Patrycja Chomicka – studentka Instytutu Stosunków Międzynarodowych i Zakładu Hebraistyki na Uniwersytecie Warszawskim. Naukowo zainteresowana prawem międzynarodowym, polityką zagraniczną, regionem Bliskiego Wschodu (przede wszystkim Izraelem i krajami Zatoki Perskiej) oraz zagrożeniami terrorystycznymi. Prywatnie lubi podróże, dobrą literaturę oraz sztukę renesansową, a także jest zapalonym fotografem.
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