Traditionally cautious Saudi officials rarely make explicit policy statements, but the signals coming from Riyadh are unambiguous: newly installed King Abdullah bin Abdul Aziz al-Saud is reasserting his reformist agenda after a period when ambitious plans for political and economic change were stymied by conservative resistance from within the ranks of al-Saud princes.
While a few of the estimated 7,000 al-Saud princes – most notably global investor Prince Alwaleed bin Talal – have promoted an accelerated economic opening up and political modernization, many others prefer a slower pace of change, despite the wake-up call from a murderous campaign against western and other targets by underground Jihadists (Islamist ultra-radicals).
Soon after his half-brother King Fahd's death in July, former crown prince Abdullah – a relatively dynamic figure in the Saudi context, defying his 82 years – announced his intention to remain chairman of the Supreme Economic Council (SEC) policy-making body. His more conservative half-brother Prince Sultan bin Abdul Aziz al-Saud was expected to take this job, but the new crown prince sultan is deputy chair instead.
Meanwhile, the SEC membership was reshuffled to include more Abdullah allies, such as labour minister Ghazi Algosaibi and state minister Abdul Aziz al-Khuwaiter, and its portfolio was expanded to encompass the slow-moving privatization programme.
Already, Saudi Arabian General Investment Authority (Sagia) governor Amr Abdullah al-Dabbagh is consulting government departments about incentives to attract more international investors and, hopefully, with them jobs. Ideas include offering projects 15-year exemptions from income tax and a five-year grace period before incomers have to "Saudi-ize" their staff.
Dabbagh is keen to move on reforms after his predecessor – a respected, younger liberal member of the ruling family – stood down, reputedly due to his frustration at the slow pace of change.
"For an older man rooted in the Bedouin culture and security establishment, Abdullah has shown an impressive understanding of the need to reform in a globalized economy, in a country where the majority is young people, and some of them are very frustrated," says a senior western diplomat. "He probably knows he hasn't got long to impose the sort of real change that will help underpin the monarchy and allow all Saudis to enjoy the fruits of the oil price boom."
The $60–70 per barrel oil prices have made Saudi Arabia, once again, very rich indeed. The Saudi Stock Exchange (SSE) is booming, with the benchmark Tadawul All-Share Index rising by more than 70% this year, with average daily turnover of $2 billion plus.
Crisis, what crisis?
The problem, like so much in Saudi society and the economy, is that not everyone can join the party. Only nationals of Saudi Arabia's partners in the six-nation Gulf Cooperation Council can invest – and they hold less than 5% of the market. Ditto for real estate, where Saudi property owners get ever richer, while those excluded from the boom get angrier.
The Jihadist campaign to undermine al-Saud rule by local cells, linked to Saudi-born renegade Osama bin Laden's al-Qaeda, has found a willing pool of recruits – who have also gone in their hundreds to fight with the insurgency in Iraq. Many feel rejected by a system which offers much but is prey to mass unemployment, now generally estimated at 20–30%. There are other social balances to resolve: more than half of all university graduates are women, but less than 10% of Saudi women are in paid jobs.
As a senior member of the appointed Majlis Ash-Shura (Consultative
Council), Ihsan Ali Bu-Hulaiga puts it, "We have no choice in this country but to reform. We need to improve our performance. That's due to the opening up movement which is sweeping the globe ... We need to compete; we need to outperform the others."
Following municipal elections earlier this year, it is now expected that towards the end of this decade, half the Majlis Ash-Shura will be elected.
Further concerns have been raised with the recent publication of an apparently well-documented study, Twilight in the desert: the coming Saudi oil shock and the world economy, where author Matt Simmons claims that Saudi Aramco's much-vaunted oil reserves – especially from its biggest fields, the key to world oil stocks – are dangerously over-stated.
The Saudis have launched a campaign to rubbish the Houston-based investment banker's claims –"We are not taking this lying down," one Saudi adviser told Emerging Markets – but the doubts Simmons raised have added to a feeling among the Kingdom's friends that the new regime must move quickly to show change is possible across a range of sectors.
The funds that could help to stimulate this are potentially available. Bu-Hulaiga points out that a staggering $700-800 billion-worth of Saudi capital is invested abroad. Since September 11, 2001, increasing amounts of this capital have been pulled out of the United States and other western jurisdictions, and have been looking for a home. More IPOs are planned on the SSE; real estate developments are sprouting up to soak up funds; the Islamic financing industry is enjoying huge growth.
But what Saudi Arabia really needs is to create more productive jobs that can soak up unemployment as well as easy money. "Without tackling the real demands of its restless youth, Saudi Arabia cannot have stability," says the diplomat. "Sixty dollar oil helps, but creating a sustainable base for enduring stability is Abdullah's real challenge." At least he has made a good start.