In June 2017, Mohammed bin Salman became crown prince of Saudi Arabia. A2 assesses that the new heir will have a positive domestic influence for foreign businesses, but will simultaneously increase regional instability.
In June 2017, King Salman appointed his son Mohammed bin Salman as heir to the Saudi throne. In doing so, the king effectively ended the career of Prince Mohammed bin Nayef, the previous crown prince, who was stripped of his heirship and his control of the interior ministry. Crown Prince Salman's elevation marks a further step in the 31-year-old's meteoric rise within the Saudi court and wider political establishment. The new crown prince, whose first political appointment was in 2009 as a special advisor to his father, has already accrued immense power and responsibility within the Saudi court. In command of the country's oil ministry and a government-level attempt to diversify the economy, Salman has also been closely involved with foreign policy. In particular, he has helped shape a combative doctrine against encroaching Iranian influence in Saudi Arabia's neighbouring states,: Qatar, Syria and Yemen. As the crown prince has the support of the octogenarian king, and appears to be being groomed for the throne, Salman now dominates the domestic and foreign policy of the kingdom, and his ideological and strategic objectives dictate the actions government's actions. In particular, Salman has conceived and begun implementation of the government's ambitious Vision 2030 programme, which aims to restructure the country's economic profile. Below, A2 assesses the impact this will have domestically with respect to both Saudi culture and the business environment as well foreign policy implications.
Crown Prince Salman has taken limited steps to curtail the religious fundamentalism that governs the Saudi legal and cultural landscape. In April 2016, Salman was instrumental in a government decision to strip the Mutawa the Saudi religious police of their powers to arrest individuals suspected of having breached the country's strict Islamic social laws. Salman also championed the creation of an entertainment authority, which has held several gender-segregated concerts and discussed reopening the kingdom's cinemas, currently forbidden by law. In February 2017, the authority even held a comic book convention in the western coastal city of Jeddah, where gender segregation was not enforced.
Although these steps are limited, they suggest that the crown prince intends to at least partially roll back Saudi's prohibitive cultural legislation, and reduce the influence that hardline Islam has over the legal system. This is a net-positive from a business perspective, as it creates a more favourable climate for foreign business staff within the country, and will ease Western criticisms of Saudi Arabia's human-rights record. The development of Saudi cultural infrastructure, and increased freedom for women, will incentive expatriates to deploy to the country, and allay some concerns many potential expatriates have about deploying to Saudi Arabia.
A2 advises human-resources managers to continue to brief staff on Saudi Arabia's ultra-conservative social laws before deployment in the country, and notes that personnel taking advantage of any relaxation in the prohibitive legal environment could still face harassment by conservative elements within society. This includes the capital Riyadh, although A2 notes that standards are marginally more relaxed in the coastal city of Jeddah.
The crown prince intends to at least partially roll back Saudi's prohibitive cultural legislation
Salman has also taken steps to shift the country away from its reliance on oil. According to the country's own statistics ministry, the petroleum sector accounts for around 64 per cent of government revenue, 74 per cent of exports, and 25 per cent of total GDP. The petroleum sector has allowed Saudi Arabia to amass a powerful sovereign wealth fund of around USD580 billion, but has also left the country exposed to fluctuations in global energy markets. Global oil prices have fallen dramatically since 2014, when the real oil price was over USD100 per barrel, to below USD50 per barrel in the current market. This led the IMF to lower its 2017 growth forecast for Saudi Arabia to 0.4 per cent.
Even if global oil demand increases as the International Energy Agency predicts the growth of U.S.-based shale oil producers and other alternate markets such as Iran will permanently undercut Riyadh's oil industry.
Salman has moved to rectify this structural weakness within the Saudi economy by advancing a new economic development plan called Vision 2030. The programme, which describes itself as a plan 'to reinforce and diversify the economics of [the Saudi] economy', sets out a National Transformation Programme (NTP). The NTP sets out specific goals, such as creating 450,000 nongovernmental jobs by 2020, encouraging private sector development, modernising domestic digital infrastructure and expanding total oil revenues to SAR530 billion (USD141 billion). Salman's steps to diversify the country's economic activity will therefore provide Saudi with additional insulation against further shocks to global energy markets.
However, Saudi Arabia has a secondary economic weakness. According to the country's own statistics, unemployment stands at 5.9 per cent as of Q4 2016. Although this figure is not high by global standards, it masks a major structural difference between female and male employment. The unemployment rate amongst Saudi women stands at 23.6 per cent as of Q4, and religious-cultural concerns over the role of women in the workforce mean that they face severe to making an economic contribution. This is despite the high levels of Saudi women with tertiary education. Furthermore, the government relies on expatriates to fill approximately 85 per cent of private sector roles, as there is a trend amongst Saudis to prefer well-paying government jobs. This complicates the crown prince's intention to diversify the economy, as such change will be reliant on expatriate communities in the short-term, and dependent on engaging the domestic workforce in the private sector over the long-term.
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