The ‘change’ in Saudi Arabia

Through economic and social reforms, Muhammad bin Salman wants to make Saudi Arabia a modern country by 2030

The Saudi crown prince, Muhammad bin Salman — MBS for short — is practically ruling the roost and making far-reaching decisions for his country. He has recently announced the floating of shares for Aramco, the largest oil company in Saudi Arabia.

Though the proposal had been there for long, the formal announcement came a few weeks ago. Aramco is expected to be listed in the stock exchange of Riyadh, the capital of the Kingdom of Saudi Arabia (KSA). It is the official oil company of the Saudi government. Major investors are now eyeing the prospects of investment in it. Reports say initially the company planned to sell just one or two percent of its shares at par with the current value of the company.

With over 65,000 employees and over US$300b in revenues, international financial institutions and independent assessors put the net income of Aramco at around US$100b.

The crown prince not has only announced economic measures, he has also embarked on a journey of social reform. In the first week of October this year, the Saudi government announced that unmarried tourist couples will be now able to book and live in hotel rooms in Saudi Arabia.

It appears that the Saudi crown prince is trying to convey a message to the world that even after the brutal murder of Saudi-American journalist, Jamal Khashoggi, in Turkey, the KSA is mending its ways. With a new visa policy, the Saudi government has not only allowed unmarried couples to stay together in hotels but it has also lifted the ban on single women renting a room alone. Prior to the new visa policy, no single woman — married or unmarried — could book or stay in a hotel on her own.

The outlook of the Saudi state has been medieval, to say the least. Married couples were required to produce marriage certificates or any other documents to prove that their relationship was legal. Now, single Saudi women will also be able to rent hotel rooms; but not unmarried Saudi couples. One wonders why a country that presents itself as an epitome of social justice, should apply one rule to foreigners and another to its citizens.

Another interesting announcement was related to the dress code for tourists. It is no longer obligatory for women visiting Saudi Arabia to cover themselves up from head to toe. The government has, however, advised the tourists to observe decency and apply good judgment while selecting their attire. Anyway, the good news is that women tourists are being left alone. Still, the Saudi government has not announced any easing of curbs on alcoholic drinks, without which an uptick in tourism is hardly likely.

For Saudi women, another pleasing change is their freedom to travel abroad without being accompanied by a male relative. They are also not required to get their permission. This is by far the most far-reaching decision as it will facilitate thousands of women who were dependent on their male guardians for crossing the border. This flurry of announcements is perhaps an attempt by MBS to tell the world that the KSA is no longer the hardliner state that it used to be.

The world community, especially some Western powers, had voiced serious concerns regarding human rights violations by Saudi Arabia, when within the Saudi consulate in Istanbul a dissident journalist, Jamal Khashoggi, was killed and his body was dismembered. Initially, the Saudi government denied the charge, but when the Turkish government presented some incontrovertible evidence, including the voice recording of the victim’s last minutes, the Saudi government was compelled to admit the facts. The MBS declared then that the murderers were not working at his behest.

The recent social changes are also being reflected in economic terms. Aramco will not enter an international market any time soon, and it will confine itself to the Saudi share market. Economic and social changes of this nature are not easy to introduce and sustain. Any investment in Aramco will entail tremendous perils as political and strategic situation directly impacts Aramco. If a company is privately owned, the investors feel relatively safe but Aramco is part of the Saudi state and whenever there is a crisis at the state level it will directly affect Aramco. Oil production by Aramco is regulated by the state and the company is not independent in its decision making, especially when the Saudi government has to take into account the Organisation of the Petroleum Exporting Countries (OPEC).

The first five members, including Saudi Arabia, had founded the OPEC in Baghdad in 1960. Today, it has 14 members with its headquarters in Vienna since 1965. OPEC accounts for around 45 per cent of the total oil production in the world, so the Saudi government cannot overlook its importance. Similarly, there are strategic issues, like attacks on the largest oil installations of Aramco in September this year. That temporarily paralysed the oil production at the company.

The changes introduced at Aramco depend to a great extent on its president, Amin Hassan al-Nasser, who himself is a professional engineer and has been heading the company since 2015. Prior to this he had worked in various departments of the company for over 25 years. He has led the company to new heights, especially in terms of new economic and financial reforms which have benefited Aramco greatly, making it one of the most modern and state-of-the-art companies in the world. All this has contributed to the Saudi economy in positive ways.

It is pertinent to mention that this company was initially established in 1933 when Saudi Arabia and California’s Standard Oil Company signed an agreement to explore oil fields in the Arabian Peninsula. After the 1973 oil crisis, the Saudi government gradually purchased all shares of the company so that in 1980 it became an entirely Saudi property, ending all American company stakes.

40 years later, the Saudi government is allowing shareholding in the company ownership. The KSA now holds the second largest oil reserves after Venezuela. It is also the second largest oil producer after the USA.

Aramco is a highly profitable company. In the first half of 2019 its profits reached US$47b, which is twice those of Apple, which reported a profit of US$21b. Through economic and social reforms, MBS want to make Saudi Arabia a modern country by 2030. He wants to have an economy which is not solely dependent on oil. He has also initiated work on some solar energy plans. Now, that the Saudi government has softened its visa policy for around 50 countries, one may hope that countries, such as Pakistan, which never tire of boasting their allegiance to the Saudi crown, may also get some crumbs in the shape of new job opportunities.

The writer can be reached at [email protected]

The ‘change’ in Saudi Arabia: Floating Aramco shares under MBS rule