Deputy Head and Senior Research Fellow, Middle East and North Africa Programme

Saudi Arabia's ambitious economic reform project promises to disrupt the traditional social contract in a number of ways, which is bound to have political ramifications for the country.

The then Saudi Defence Minister and Deputy Crown Prince, Mohammed bin Salman, arrives for a press conference in Riyadh, on 25 April 2016. Photo: FAYEZ NURELDINE/AFP/Getty Images.Mohammed bin Salman arrives for a press conference in Riyadh, on 25 April 2016. Photo: Getty Images.

Summary

  • It is now generally accepted that the rulers and citizens of Saudi Arabia must come to terms with a future in which oil resources play a far less significant role in the economy than has historically been the case. This is bound to change the implicit social contract between the government and its key constituencies.
  • Saudi Arabia has a long-term plan – as part of its wide-ranging Vision 2030 strategy – to reduce the economy’s reliance on oil and the state by boosting investment in the private sector. Vision 2030 essentially continues, in amplified and expanded form, policies that the country has had in place for some decades. These have had some successes in generating non-oil growth and encouraging some Saudis to work in the private sector, but implementation has repeatedly fallen short of the ambitious targets that have been set, with the result that the Saudi economy remains overwhelmingly dependent on oil-fuelled government spending.
  • Vision 2030 is prominently associated with King Salman’s son Mohammed bin Salman – or ‘MBS’ – newly promoted to crown prince as of June 2017. The strategy has helped to brand MBS as a figure of considerable influence both within Saudi Arabia and internationally. But if it is seen as unsuccessful, existing criticisms of his individual leadership style are likely to deepen among those who resent his rapid rise. Personality politics within the royal family could thus end up being a distraction from the fundamental need to implement economic diversification.
  • If the government’s ability to distribute largesse to the population is curtailed for the long term, it will need to focus on alternative sources of legitimacy. This could mean greater consultation and public involvement in decision-making, or, perhaps more likely, emphasizing the importance of royal rule as a bulwark against insecurity, terrorism and chaos, while maintaining or intensifying an authoritarian model of rule. 
  • Vision 2030 implies a degree of social liberalization to enable the growth of the entertainment and tourism industries, as well as extensive reforms to the education system, traditionally a stronghold of Saudi Arabia’s religious clerics. If followed through, this would transform relations between the state and its citizens, politically and socially as well as economically, and also the government’s partnership with the clerisy.
  • An effective renegotiation of the social contract will be critical if the government is to institutionalize and secure buy-in for the dramatic economic changes it wants to make. This means not only more effective strategic communication and consultation with the population, but also a greater focus on inclusive growth and social safety nets.
  • Currently, with multiple geopolitical threats afflicting the region, few people – at home or abroad – are calling on the new crown prince to adopt pursue political reforms. But just as economic diversification would have been more effective if more had been undertaken at an earlier stage, MBS has an opportunity to be ahead of the curve on political reform, rather than waiting for events to force it on to the policy agenda.