Saudi 2.0: Can the kingdom really be remade?

Saudi Arabia’s young Crown Prince is bent on reinventing the country, with social reforms, a crackdown on corruption and an ambitious new city all on his agenda. But can it work? Matthew Hardeman reports

At midnight on 6 November 2017, dozens of billionaires, princes and tycoons began arriving under armed guard at the Ritz-Carlton in Riyadh. Nobody quite knew it yet, but the five-star hotel was transformed into the world’s most luxurious prison.

Meanwhile, Saudi troops took up positions on runways to stop private jets fleeing the country as up to 500 other senior officials and members of the business elite were woken into custody. The events marked the start of an unprecedented crackdown on corruption in the kingdom, and along with it a new chapter in Saudi history, one led by the 32-year-old Crown Prince Mohammed bin Salman, more commonly known as ‘MBS’.

The young heir’s show of force sent shockwaves through Saudi society, but it was only the opening salvo of a far broader and more ambitious plan: to transform a corrupt and deeply conservative petro-state into what observers might call a ‘normal’ country – one that is stable, sustainable and attractive to foreign investors and visitors alike. The sweeping goals of ‘Vision 2030’ – as the plan has been officially dubbed – were outlined by the Crown Prince before an audience of international investors in the same ballroom where the officials and plutocrats would be detained only a month later: to move beyond oil, combat extremist ideology, employ young Saudis and open up their lives.

The need for reform has been clear since the 1970s, but in 2016, after years of low oil prices, a moment of reckoning came when the IMF projected that spending rates would see Saudi Arabia’s foreign currency reserves disappear within five years. Alarm bells rang in the House of Saud. Those reserves fell below $500 billion last year, down from $750 billion just over three years ago.

Pictured above: arrivals at the Ritz Carlton in Riyadh

The situation hasn’t been helped by unsustainable domestic consumption, endemic unemployment and the cost of the war in Yemen, which continues to suck an estimated $50-60 billion from Saudi coffers every year. To try to plug the shortfall, the government introduced VAT and other taxes, and subsidy cuts for citizens, but it tempered the measures after a backlash. Saudi Arabia is a country that moves slowly, but when hard times hit, changes are often reversed.

‘I don’t think anyone knows what’s going on – the kingdom has become more opaque than at any time since I can remember, and it is very difficult to understand where these decision-making processes are headed,’ says Michael Stephens, a Gulf specialist at the Royal United Services Institute. ‘We know where [MBS] wants to go, but less clear to me is how these are being implemented, why they are being done at the speed that they are being done.’

One thing was clear: the macro-economic indicators were pointing in all the wrong directions. But a lighter purse hasn’t prevented the newly empowered Crown Prince from pledging $500 billion to Vision 2030’s most lavish proposal: a new, hi-tech city called ‘Neom’ (‘neo’, or new, and a derivation of the Arabic word ‘mustaqbal’, meaning future), which is to be built on 10,000 square miles of desert by the Red Sea. Brimming with shiny new hotels, luxury homes and offices, cutting-edge transport and infrastructure (‘Everything will have a link with artificial intelligence, with the internet of things – everything,’ the Crown Prince told Bloomberg), it promises its own, more relaxed laws (all policed by robots, of course). Neom has already attracted investors such as Richard Branson and SoftBank.

With a first phase due date of 2022, proponents suggest the futuristic city will boost the economy with 35,000 jobs and £3 billion in revenue – unusually utopian aims, even for the Gulf. Sceptics challenge the notion that Dubai – which took decades to establish – can really be dwarfed in Saudi Arabia in anything but size (‘They’re not going to liberalise to that degree very easily,’ a former UK ambassador to Saudi Arabia tells Spear’s). It’s an even bigger question whether the project can really help ordinary Saudis and avoid becoming a classic white elephant, leading some to question whether many of the other 2030 plans can be taken seriously.

Pictured above:  Dr. Klaus Kleinfeld, CEO of Neom, and Crown Prince Mohammed bin Salman

And they’re questions worth asking – especially when Vision 2030 relies heavily on the $100 billion that Saudi authorities expect from the long-awaited ‘IPO of the century’. Details of the sale of a 5 per cent stake in the state-owned oil giant Aramco, however, remain scant, and officials recently warned that the delay may extend into 2019.

‘It’s taken more than two years, and we’re still in the dark as to the exact form,’ says Kristian Coates Ulrichsen, a Gulf expert at the Baker Institute for Public Policy and an associate fellow at Chatham House. ‘There’s this mismatch between saying something with expansive speculative intent and then putting together the policy detail that will allow them to put it into operation.’ Higher hopes have also been pinned on Saudi’s sovereign wealth fund, which aims to double assets under management to $400 billion by 2020.

Other plans are obviously achievable, such as allowing women to drive and take part in public life – a key plank of the reforms that MBS insists will lead to the breakdown of rigid gender roles and encourage higher female employment. ‘It’s not shooting for the moon,’ Ulrichsen says. ‘It’s one of the few examples of a target that is not transformational, but incremental. And if they are going to succeed, it is going to be through a series of incremental steps rather than going from A to Z in one go.’

For all Vision 2030’s worthy ambition, the risks are stark: big promises mean big expectations, and Saudi Arabia remains a diverse country where the gaps between rich and poor, between liberal and conservative, remain wide: ‘If you have the benefits of Vision 2030 and successful change just being concentrated in Riyadh and Jeddah, and that doesn’t trickle down to many of the other parts of the country, you are just going to widen differentials that already exist and create additional grievances,’ cautions Ulrichsen.

Michael Stephens offers at least one way of tracking the reforms. ‘You’ve got to look at GDP per capita – but median income is the one indicator that will tell you if they’re getting this wrong or they’re getting this right,’ he says. ‘Because in a country like Saudi, the rich could get richer and the poor could get poorer and the GDP per capita could go up – the disparity isn’t accurately reflected.’

Pictured above: the Red Sea coast where ‘Neom’ is to be built

Either way, many Saudis living outside the cities remain extremely conservative and are unlikely to welcome some of the proposed social changes. The quest for cultural change has led to violence in Saudi Arabia before: the assassination of King Faisal in 1975 and the siege of the Grand Mosque in Mecca in 1979 were the most dramatic examples, both occurring after clerics decried the pace of change. The incidents unnerved the House of Saud, forcing greater concessions to the fundamentalists, and delaying many reforms until now.

A popular uprising might be unlikely – but ordinary Saudis may come to take a dim view of a man who paid $450.3 million for a Leonardo da Vinci portrait of Jesus while preaching austerity. And MBS might find competition closer to home. ‘The royal family – the al-Saud tribe – gets bigger and bigger, so the ability to keep them on board is always constrained,’ the former ambassador to Riyadh tells me. ‘But they’re all going to have to make their own way in the world more than they have in the past. It’s a big challenge. The recent moves will have created quite an upheaval in the family – there will be all sorts of people who lost out and will bear a sense of resentment. A young man with a lot of power and in a hurry is maybe what they need, but of course the risks are great.’

Indeed, it’s a growing criticism levied at MBS that he sometimes forgets to consider the consequences of his actions: ‘A lot of what MBS has done hasn’t necessarily had a plan B,’ notes Ulrichsen. ‘If you look at some of the foreign policy initiatives, he seems to act decisively but isn’t always thinking the consequences through.’ Yemen is the obvious case in point.

It’s also becoming harder to tell if MBS’s popularity among ordinary Saudis is what it seems, or if criticism is simply being silenced more effectively as he consolidates power. But so far, with his father’s blessing, he has been successful in remaking the kingdom in his own image, indicating a potentially seismic shift from the consensual balance of competing interests that has defined Saudi rule since the kingdom’s founding. Talk abounds that MBS could become the most powerful king since Faisal, or even Ibn Saud, Saudi Arabia’s founder, who took charge at roughly the same age. He even resembles the man.

Pictured above: Riyadh

If anything, Vision 2030 probably deserves more criticism for being late than too little or too much. But fortunately the Crown Prince has been unusually honest about the challenges – well, sort of. ‘He has set the bar very high for an international audience,’ says Ulrichsen. ‘But when you talk to people in Saudi Arabia, Vision 2030 is more of an aspirational milestone they want to try to achieve, not necessarily a set of indicators that they have to achieve… Even if they get 30, 40, 50 per cent of the way there, they will have moved a long way.’

Then there’s the promise of tourism: which according to one Saudi observer could add up to 7 per cent to GDP if it takes off. ‘There are plenty of rich Westerners who’ve been everywhere, but who are looking for somewhere new to go and could probably do without alcohol for a week or two,’ laughed the former ambassador. A good place for dry January, then, if that’s your thing? ‘It isn’t completely bonkers… you’ve got fabulous desert up there, and the Nabatean ruins are stunning. They rival Petra, but nobody’s ever seen them.’

Whatever happens, there’s only one thing we can be sure of: things are not going to be the same in Saudi Arabia as they have been for the past 30 years. Its new ruler knows the world isn’t going to stop spinning any time soon, and that he might as well take a step forward. Inshallah.

Matthew Hardeman is Senior Researcher at Spear’s 

Twitter: @MatthewHardeman