Governance and Domestic Policymaking in Saudi Arabia: Transforming Society, Economics, Politics and Culture 9780755644377, 9780755644384, 9780755644414, 9780755644391

Table of contents :
Cover
Contents
List of illustrations
Acknowledgements
Contributors
Abbreviations
Introduction: Setting the scene: Governance and domestic policymaking in Saudi Arabia Mark C. Thompson and Neil Quilliam
PART 1 Making policy in Saudi Arabia
1 Is evidence used for policymaking in Saudi Arabia?: Lessons from an international research-policy partnership in labour policy Ammar A. Malik
2 How can Saudi Arabia better coordinate divergent economic reform agendas?: Lessons from the Scandinavian model of state–business relations Faris Al-Sulayman and Makio Yamada
3 King-makers or knaves?: The role of consultants in domestic policymaking and governance in Saudi Arabia David B. Jones
PART 2 Putting policies into practice
4 Beyond the glitter factor: Building defence capacity in King Salman’s Saudi Arabia D. B. Des Roches
5 Young people and vocational education choices in Saudi Arabia: Implications for aligning policy with aspirations Hanaa Almoaibed
6 Causes of obesity and public policy Wareed Alenaini
PART 3 Governance challenges: Managing energy and environmental policies
7 Energy Governance: Is the new meeting the old in Saudi Arabia’s energy industries? Jessica Obeid
8 In search of legitimacy: Environmental policymaking in Saudi Arabia Tobias Zumbrägel
9 Factoring climate action into Saudi Arabia’s economic diversification and stimulus measures: Politics, challenges and opportunities Aisha Al-Sarihi
10 Last man standing: Saudi Aramco and global climate action Jim Krane
Afterword Mark C. Thompson and Neil Quilliam
Index

Citation preview

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

ii

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA Transforming Society, Economics, Politics and Culture

Edited by Mark C. Thompson and Neil Quilliam

I.B. TAURIS Bloomsbury Publishing Plc 50 Bedford Square, London, WC1B 3DP, UK 1385 Broadway, New York, NY 10018, USA 29 Earlsfort Terrace, Dublin 2, Ireland BLOOMSBURY, I.B. TAURIS and the I.B. Tauris logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2022 Copyright © Mark C. Thompson and Neil Quilliam, 2022 Mark C. Thompson and Neil Quilliam have asserted their right under the Copyright, Designs and Patents Act, 1988, to be identified as Author of this work. For legal purposes the Acknowledgements on p. ix constitute an extension of this copyright page. Cover image © Waseem Obaidi/Bloomberg/Getty Images All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. Bloomsbury Publishing Plc does not have any control over, or responsibility for, any third-party websites referred to or in this book. All internet addresses given in this book were correct at the time of going to press. The author and publisher regret any inconvenience caused if addresses have changed or sites have ceased to exist, but can accept no responsibility for any such changes. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. ISBN: HB: 978-0-7556-4437-7 PB: 978-0-7556-4438-4 ePDF: 978-0-7556-4439-1 eBook: 978-0-7556-4440-7 Typeset by Integra Software Services Pvt. Ltd. To find out more about our authors and books visit www.bloomsbury.com and sign up for our newsletters.

CONTENTS List of illustrations  vii Acknowledgements ix Contributors  xi Abbreviations  xvii

Introduction: Setting the scene: Governance and domestic policymaking in Saudi Arabia  Mark C. Thompson and Neil Quilliam  1

PART 1  MAKING POLICY IN SAUDI ARABIA  15 1 Is evidence used for policymaking in Saudi Arabia?: Lessons from an international research-policy partnership in labour policy  Ammar A. Malik  17 2 How can Saudi Arabia better coordinate divergent economic reform agendas?: Lessons from the Scandinavian model of state–business relations  Faris Al-Sulayman and Makio Yamada  41 3 King-makers or knaves?: The role of consultants in domestic policymaking and governance in Saudi Arabia  David B. Jones  65

PART 2  PUTTING POLICIES INTO PRACTICE  91 4 Beyond the glitter factor: Building defence capacity in King Salman’s Saudi Arabia  D. B. Des Roches  93 5 Young people and vocational education choices in Saudi Arabia: Implications for aligning policy with aspirations  Hanaa Almoaibed  115

6 Causes of obesity and public policy  Wareed Alenaini  145

PART 3  GOVERNANCE CHALLENGES: MANAGING ENERGY AND ENVIRONMENTAL POLICIES  167 7 Energy Governance: Is the new meeting the old in Saudi Arabia’s energy industries?  Jessica Obeid  169 8 In search of legitimacy: Environmental policymaking in Saudi Arabia  Tobias Zumbrägel  197 9 Factoring climate action into Saudi Arabia’s economic diversification and stimulus measures: Politics, challenges and opportunities  Aisha Al-Sarihi  225 10 Last man standing: Saudi Aramco and global climate action  Jim Krane  257

Afterword  Mark C. Thompson and Neil Quilliam  291 Index  297

vi

CONTENTS

LIST OF ILLUSTRATIONS Figures 1.1 SPDI in action  20 1.2 Sample SPDI application – Education in Pakistan  21 1.3 EPoD–HRDF engagement structure overview  22 1.4 EPoD–HRDF collaboration at a glance  23 1.5 Public to private employment  24 1.6 Women’s labour force participation in Saudi Arabia  25 1.7 Oil exports per capita  26 1.8 Oil exports per capita  27 1.9 Oil exports per capita  28 1.10 Oil exports per capita  28 1.11 Saudi Arabia’s story of female unemployment  29 1.12 Where men and women work  29 6.1 Age-adjusted prevalence of type 2 diabetes in non-Pima Mexicans, Mexican Pima Indians and US-based Pima Indians. Data presented as ± 95 confidence interval, US; United States of America. Adjusted from Leslie O. Schulz et al. 2006  152 6.2 Systemic approach roadmap to tackling obesity for policymakers and check list comparison with the Quality of Life Vision Realisation Program. Based on current publicly available data on the Quality of Life Program  158 9.1 Vertical, horizontal and diagonal orientations of climate policy integration  235 9.2 A conceptual framework illustrating the interaction between climate policy regime and political-economy regime  239

10.1 Major oil producers ranked by post-tax break-even costs for new oil production (assuming a 10 per cent rate of return) through 2030  259 10.2 Saudi carbon emissions growth has outpaced its population growth as a share of the global total  262 10.3 Emissions intensity of global oil production by source, 2017. Note that the emissions intensity of the top 10 per cent of barrels produced (including high-carbon sources like Canada’s oil sands and Venezuelan extra-heavy) is more than four times that of the lowest 10 per cent, when all pre-combustion emissions are tallied. Saudi Arabia’s oil is among the lowest  266 10.4 Respondents in countries with high per capita levels of carbon emissions exhibited less concern with climate change than counterparts in developing countries  271 10.5 Saudi Aramco’s return on capital employed dwarfs that of its higher-cost competitors  274 10.6 Internal rates of return for renewable energy projects range between 5 and 9 per cent while those for onshore oil investments in the United States averaged 33 per cent  274

Table 10.1 Differentiating among crude oil types by upstream carbon emissions could result in lower taxes for less carbon-intensive producers, like Saudi Arabia, compared with high-carbon producers like Venezuela. Final prices are based on average oil price of $60/barrel. This table also analyses tax effects on crude oil produced by firms that deliberately sequester carbon during the production process, as proposed by Occidental Petroleum in its Permian Basin operations. Tax assumptions include differentiation among crude grades by upstream emissions and reductions for GHG offsets  268

viii

list of illustrations

ACKNOWLEDGEMENTS The editors would like to thank the Gulf Research Center, organizers of the 9th Gulf Research Meeting at the University of Cambridge, 2019, for their support and assistance. We would also like to thank all participants, both paper presenters and listening participants, for their valuable input during our workshop ‘Domestic Policy Making and Governance in Saudi Arabia’, upon which this edited book is based.

x

CONTRIBUTORS Dr Wareed Alenaini is a lecturer at King Abdulaziz University in Saudi and a researcher at the Research Center of Optimal Health in the UK. Wareed is a young scientist, finished her master’s degree at Imperial College and her PhD from the University of Westminster in obesity and optimal health. Her extensive experience is in population research in a niche scientific field of obesity and optimal health through her PhD with the UK Biobank, the largest population health research resource for identifying and phenotyping quantitative measurements of health status. Through her research, Alenaini discovered a prominent role for environmental factors in improving adults’ health span. She is experienced in early prevention and detection of obesity in highly vulnerable populations through her work with a nationwide maternal nutrition project in India. In addition, Dr Alenaini led a scientific project on identifying early biomarkers for obesity and diabetes prevention in collaboration with the European Medicine Innovation Diabetes Research on patient stratification. Dr Hanaa Almoaibed is Research Fellow with the King Faisal Center for Research and Islamic Studies and Associate Fellow with the Chatham House Middle East North Africa Programme. Her PhD research at University College London’s Institute of Education titled ‘Choosing a Career in Saudi Arabia: The Role of Structure and Agency in Young People’s Perceptions of Technical and Vocational Education’ focused on education-to-work transitions and career decision-making. She has worked on developing youth programmes in Saudi Arabia in several capacities since 2005, and has held several management, training, research and consulting positions in the areas of youth, education, curriculum and corporate responsibility throughout her career. She holds a BA from the University of Washington and an MSc from the London School of Economics. Faris Al-Sulayman is Research Fellow at the King Faisal Center for Research and Islamic Studies (KFCRIS), a non-resident scholar at the Middle East Institute’s Energy and Economics Program, and a PhD

candidate at the London School of Economics, where his research focuses on the political economies and energy transitions of the Arab Gulf states. Before joining KFCRIS, he was a GCC Analyst at Arabia Monitor in London, and Research Assistant at the Woodrow Wilson International Center for Scholars in Washington D.C. Al-Sulayman is also Co-Founder and Executive Director at Haala Energy, a solar installer and developer working at the commercial and industrial scale in Saudi Arabia. David Jones is Founder and CEO at The Talent Enterprise. With a background in labour market economics, David is a senior advisor to policymakers and organizational leaders on their most pressing human capital priorities. With over thirty years of work experience, David leads business growth and expansion efforts across global markets at The Talent Enterprise, along with leading key client relationships. He heads The Talent Enterprise’s research and innovation efforts to identify future human capital priorities. David was previously Chief Consulting Officer at Aon Hewitt MENA. Prior to this, he held senior HR leadership and  consulting roles at Emirates Group, Dubai Civil Aviation and KPMG. David is a regular keynote speaker at conferences across the world and a frequent commentator in the regional press. David has co-authored three books, including his latest edited volume The Future of Labour Market Reform in the GCC by Gerlach Press, best-selling Unlocking the Paradox of Plenty and award-winning Game Changers by Motivate Books. He has a forthcoming volume The Future of Talent Assessments and has also contributed to additional books on ‘Employment and Career Motivation’ in the Gulf States by Gerlach, The Political Economy of Wasta by Springer and Policy Making in the GCC by I.B. Tauris. Dr Jim Krane is the Wallace S. Wilson Fellow for Energy Studies at Rice University’s Baker Institute for Public Policy. He specializes in energy geopolitics, with a focus on oil-exporting countries in the Middle East and the challenges they face from energy subsidies, internal demand, and climate change. His scholarly articles have been published in Nature Energy, Energy Policy, Energy Journal, MRS Energy and Sustainability, and the Bulletin of the Atomic Scientists. In a prior career Jim spent nearly twenty years as a journalist, six of them in the Middle East. He is the author of two books. His acclaimed 2009 volume City of Gold: Dubai and the Dream of Capitalism is widely recognized as the seminal work on the iconoclastic city-state, while his 2019 book Energy Kingdoms: Oil xii

CONTRIBUTORS

and Political Survival in the Persian Gulf is the definitive study of energy demand in the region. Jim’s research and reporting have taken him from New York to Iraq and then across the Middle East and beyond – from North Africa to Afghanistan, Iran and Pakistan. He was a long-time correspondent for the Associated Press and has written for myriad other publications including the Washington Post, Wall Street Journal and Financial Times. He is the winner of several journalism awards, including the 2003 AP Managing Editors Deadline Reporting Award, for coverage of Saddam Hussein’s capture in Iraq. Jim earned a bachelor’s degree from City College of New York and a master’s from Columbia University prior to receiving his PhD from Cambridge University. Dr Ammar A. Malik is Senior Research Fellow at the Harvard Kennedy School and Senior Research Scientist at AidData, a research lab at William & Mary. He leads research-policy collaborations by deploying evidence-based insights and training to improve public policies and leadership around the world. His research has appeared in leading academic journals, including Environmental Modelling and Software, Science and Public Policy, Journal of Transport Geography and the Journal of Artificial Societies and Social Simulation. Currently, he is Non-Resident Fellow at the Urban Institute, Research Fellow at the Center for Economic Research in Pakistan and Fellow at the Consortium for Development Policy Research. He has completed research projects in over twenty countries across Asia and Africa. Dr Malik obtained his PhD in Public Policy from George Mason University, MA in Public Affairs from Institut d’Etudes Politiques (Sciences Po) Paris, MA in Public Policy from the Lee Kuan Yew School of Public Policy at the National University of Singapore and BA in Economics and Mathematics from the Lahore University of Management Sciences. Jessica Obeid is an independent energy consultant working on policies and strategies for the power sector in the Middle East. She previously served as Resident Fellow in the Energy, Environment and Resources Department at Chatham House, London and focused on energy diversification and the future of electricity utilities. Before that, she was Chief Energy Engineer at the United Nations Development Programme in Beirut, where she spent almost a decade working on the deployment and upscaling of renewable energy in developing countries, including technical assessment, design and procurement. She has published widely CONTRIBUTORS

xiii

and provides regular commentaries to leading media outlets. Jessica has been awarded the US State Department’s TechWomen fellowship and the UK Foreign and Commonwealth Office’s International Leaders fellowship. She holds a master’s degree in political sciences with emphasis on diplomacy and strategic negotiations, and a bachelor’s degree in electrical engineering. Dr Neil Quilliam is Associate Fellow in the Middle East and North Africa  (MENA) Programme at Chatham House. He is Managing Director of Azure Strategy. Previously, Neil was Senior Research Fellow and Director of Chatham House’s Future Dynamics in the Gulf project. He also directed its Syria and Its Neighbours policy initiative (2015–17). Before joining Chatham House in 2014, Neil served as Senior MENA Energy Adviser at the Foreign and Commonwealth Office (FCO), Senior Analyst at Control Risks, London, and Senior Programme Officer at the United Nations University, Amman. Neil has lived in Saudi Arabia, Jordan and the United Arab Emirates, and has travelled extensively around the MENA region, working on a variety of development, education and research projects. He has published a number of books and articles on international relations and political economy of Syria, Jordan, Iraq and the Gulf Cooperation Council states. Neil was the first recipient of the Prince of Wales and King Faisal Foundation Scholarship in 1998. He received his PhD in International Relations from the University of Durham in 1997. David B. Des Roches is Professor of Practice at the Near East South Asia Center for Strategic Studies (NESA) at National Defense University. He joined NESA in 2011 after serving the Office of the Secretary of Defense for Policy in numerous positions, including as Director of the Gulf and Arabian Peninsula, the DoD liaison to the Department of Homeland Security, Senior Country Director for Pakistan, NATO Operations Director (where he drafted the NATO comprehensive approach directive), Deputy Director for Peacekeeping, and spokesman for the Defense Security Cooperation Agency. Prior to that, he served in the White House Office of National Drug Control Policy as an International Law Enforcement Analyst and Special Assistant for Strategy. He is Non-resident Academic Fellow at the Arab Gulf States Institute in Washington, Senior Non-resident Fellow at the Gulf International Forum, and Senior International Affairs Fellow at the National Council on US-Arab relations. xiv

CONTRIBUTORS

Dr Aisha Al-Sarihi is Non-resident Fellow at the Arab Gulf States Institute  in Washington. She previously served as a visiting scholar at Georgetown University’s Center for Contemporary Arab Studies; a visiting scholar at the Arab Gulf States Institute in Washington and a research officer at the London School of Economics and Political Science’s Middle East Centre. Al-Sarihi holds a PhD from the Centre for Environmental Policy at Imperial College London, and MSc and BSc, with distinction, in environmental science from Sultan Qaboos University. Her areas of research interest include environmental, energy, renewables and climate change policies, governance and politics, with a focus on the Arab region. Dr Mark C. Thompson is Senior Research Fellow and Head of the Socioeconomics Program at King Faisal Center for Research and Islamic Studies, Riyadh, Saudi Arabia. He was previously Assistant Professor of Middle East Studies at King Fahd University of Petroleum and Minerals (KFUPM), Dhahran, Saudi Arabia. Mark has lived and worked in Saudi Arabia since 2001 for diverse institutions such as Saudi Arabian Airlines, the Saudi Arabian National Guard and Prince Sultan University. Mark holds a PhD from the Institute of Arab & Islamic Studies, University of Exeter, UK. His principal research areas are Saudi socio-economic development and societal transformation, and he has published on topics such as Saudi youth issues and challenges facing Saudi women leaders in publications such as the Journal of Arabian Studies; Asian Affairs; Middle Eastern Studies; Middle East Policy; POMPES Studies, Chatham House, King Faisal Center for Research and Islamic Studies and Gulf Affairs. In addition, he published a book with I.B. Tauris – Saudi Arabia and the Path to Political Change: National Dialogue and Civil Society (2014). Mark is also the co-editor of the I.B. Tauris book entitled Policy-Making in the GCC: State, Citizens and Institutions (2017) with Dr Neil Quilliam from Chatham House based on their Gulf Research Meeting workshop in 2015 as well as providing chapters on Saudi Arabia for edited books such as Public Brain Power: Civil Society and Resource Management (2017). In October 2019 Mark published his Cambridge University Press book Being Young Male and Saudi: Identity and Politics in a Globalized Kingdom about societal issues and change from the perspective of young Saudi men. Dr Makio Yamada is Senior Adviser at King Faisal Center for Research and Islamic Studies (KFCRIS) in the Kingdom of Saudi Arabia. CONTRIBUTORS

xv

Between 2018 and 2020, he was Lecturer at Princeton University. He obtained his doctoral and master’s degrees from University of Oxford (St. Antony’s College). His publications include: ‘Can a Rentier State Evolve to a Production State?: An “Institutional Upgrading” Approach’ (British Journal of Middle Eastern Studies, 2020), ‘Can Saudi Arabia Move beyond “Production with Rentier Characteristics”? Human Capital Development in the Transitional Oil Economy’ (Middle East Journal, 2018), ‘Saudi Arabia’s Look-East Diplomacy: Ten Years On’ (Middle East Policy, 2015), ‘Gulf-Asia Relations as “Post-Rentier” Diversification?: The Case of the Petrochemical Industry in Saudi Arabia’ (Journal of Arabian Studies, 2011). Dr Tobias Zumbrägel is a researcher at the Center for Applied Research in Partnership with the Orient (CARPO) (Germany). He gained his PhD from the Friedrich-Alexander-University of Erlangen-Nuremberg (Germany). His PhD on environmental politics and political legitimacy in the GCC was awarded with the German Middle East Studies Association’s dissertation prize for best PhD in Middle Eastern studies. Zumbrägel studied History, Political Science and Middle East Studies in Cologne, Tuebingen (Germany) and Cairo (Egypt). His research focuses on questions of legitimacy, power and state authority in the Middle East with a special interest in environmentalism and digitalization.

xvi

CONTRIBUTORS

ABBREVIATIONS ADNOC

Abu Dhabi National Oil Company

ALMP

Active labour market policy

APSA

American Political Science Association

CARPO

 enter for Applied Research in Partnership with the C Orient

CAT

Climate Action Tracker

CCE

Circular Carbon Economy

CCS

Carbon capture and storage

CDSI

Central Department of Statistics and Information

CEDA

Council of Economic and Development Affairs

CIA

Central Intelligence Agency

CME

Coordinated market economies

CPI

Climate policy integration

DNA

Designated National Authority

ECRA

Electricity and Cogeneration Regulatory Authority

EOI

Expression of interest

EOR

Enhanced Oil Recovery

EPoD

Evidence for Policy Design

ETEC

Education and Training Evaluation Committee

FCO

Foreign and Commonwealth Office

FDI

Foreign direct investment

GAMI

General Authority for Military Industries

GCC

Gulf Cooperation Council

GDP

Gross domestic product

GPA

Grade point averages

HRDF

Human Resources Development Fund

IEA

International Energy Agency

IMF

International Monetary Fund

INDC

Intended Nationally Determined Contribution

­IOC

International oil companies

IPP

Independent power producer

IRENA

International Renewable Energy Agency

KACST

King Abdulaziz City for Science and Technology

KAPSARC King Abdullah Petroleum Studies and Research Center KAUST

King Abdullah University of Science and Technology

KFCRIS

King Faisal Center for Research and Islamic Studies

KFUPM

King Fahd University of Petroleum and Minerals

KPI

Key Performance Indicators

KSU

King Saud University

LCOE

Levelised electricity cost of electricity

LME

Liberal market economies

MEIM

Ministry of Energy, Industry and Mineral

MENA

Middle East and North Africa

MEP

Ministry of Economy and Planning

MERS

Middle East respiratory syndrome

MEWA

Ministry of Environment, Water and Agriculture

MoD

Ministry of Defense

MoE

Ministry of Education

MOEIMR

Ministry of Energy, Industry and Mineral Resources

MOHE

Ministry of Higher Education

xviii

Abbreviations

MOL

Ministry of Labour

MoU

Memoranda of Understanding

MOWE

Ministry of Water and Electricity

MPMR

Ministry of Petroleum and Mineral Resources

NCP

National Centre for Privatisation

NDC

Nationally Determined Contributions

NEEP

National Energy Efficiency Program

NOC

National oil companies

NREP

National Renewable Energy Program

NRGI

Natural Resource Governance Institute

NTP

National Transformation Program

OECD

 rganisation for Economic Cooperation and O Development

PIF

Public Investment Fund

PME

Presidency of Meteorology and Environment

PNUW

Princess Noura University for Women

PPA

Power Purchase Agreement

PPP

Purchasing power party

PSP

Private sector participation

­R&D

Research and development

REPDO

Renewable Energy Project Development Office

RFP

Request for proposals

RFQ

Request for qualifications

RSADF

Royal Saudi Air Defense Forces

RSAF

Royal Saudi Air Force

RSLF

Royal Saudi Land Forces

RST

Rentier state theory

Abbreviations

xix

SAMI

Saudi Arabian Military Industries

SANG

Saudi Arabia National Guard

SEC

Saudi Electricity Company

SEEC

Saudi for Energy Efficiency Center

SEEP

Saudi Energy Efficiency Program

SEPC

Sustainable Energy Procurement Company

SGBF

Saudi Green Building Forum

SME

Small and medium enterprises

SOE

State-owned enterprises

SPDI

Smart Policy Design and Implementation

SSB

Sugar-sweetened beverages

STEM

Science, technology, engineering, mathematics

SWOT

Strengths, weaknesses, opportunities and threats

TVET

The Vocational Educational and Training

TVTC

Technical and Vocational Training Corporation

UNESCO

 nited Nations Educational Scientific and Cultural U Organisation

UNFCCC

 nited Nations Framework Conventions for Climate U Change

VAT

Value-added tax

WHO

World Health Organization

WTO

World Trade Organization

xx

Abbreviations

INTRODUCTION Setting the scene: Governance and domestic policymaking in Saudi Arabia Mark C. Thompson and Neil Quilliam

Rationale and scope The following edited volume aims to reach a better and more balanced understanding of the contemporary processes of domestic policymaking and governance in Saudi Arabia. Comprehension of these two areas is particularly pertinent given the importance of the government’s economic diversification plans: Saudi Vision 2030 and the National Transformation Program (NTP) 2020, and revised NTP 2.0. Based on papers submitted for our workshop ‘Domestic Policy Making and Governance in Saudi Arabia’ at the 10th Annual Gulf Research Meeting, University of Cambridge, UK, in July 2019, this volume draws on the comparative experience of academics, researchers, policymakers and practitioners with knowledge and experience of domestic policymaking and governance in Saudi Arabia (and the Gulf region) as well as those with relevant expertise in policymaking and governance issues from a theoretical perspective. Indeed, one of the aims of this edited volume is to analyse the factors that either currently facilitate or constrain effective and viable domestic policymaking and governance in the Kingdom. Furthermore, the volume’s chapters seek ways in which to enhance, support and underpin a more effective way of both comprehending and

evaluating policymaking and governance in Saudi Arabia. Indeed, we believe that this edited volume contributes to the expansion of Saudi/Gulf Studies, and beyond, by bringing together chapters written by scholars and practitioners with first-hand knowledge and experience from a range of social, political, economic and cultural experiences linked to knowledge in the fields of domestic policymaking and governance. This edited volume aims to go far beyond the headlines and succinct stories that often describe the success, or failure, to date of Saudi Vision 2030 and the NTP 2020. Drawing upon a diverse portfolio of sectors, each author explores in considerable detail some of the challenges that leading institutions face not only in making and shaping tailored policies but also in the knotty issue of implementation. Additionally, our authors are able to draw upon intimate working knowledge of, and direct experience with, their case studies, and focus on labour markets, defence, health sectors, youth issues, energy and the environment. There are very few publications which focus exclusively on domestic policymaking and governance in Saudi Arabia, especially across different sectors. The focus of our publication is, therefore, new, and groundbreaking, and results from bringing together a group of practitioners, researchers and academics from across a range of disciplines, all of whom enjoy privileged access to the Kingdom. Therefore, we hope that this volume provides an important and relevant resource for Middle East/Gulf/ Saudi studies academics, the academic research community in North America, Europe and Asia; Saudi institutions and government ministries; international think tanks, such as Chatham House, Carnegie, Atlantic Council and Brookings as well as the policy community, especially in foreign and development ministries, in the North America, EU, Asia and the Gulf States. We also hope the book will also attract a more general readership interested in Saudi Arabia as well as constituting a useful resource for undergraduate and postgraduate students across the social sciences. Although this volume was conceived of, and its chapters drafted, before Covid-19 became a worldwide pandemic in early 2020 and oil prices crashed to all-time lows, following Moscow and Riyadh’s failure to reach agreement on extending production cuts in April of the same year, the books authors have sought to incorporate the immediate impacts into their analyses. Of course, the longer-term implications are still playing out as this volume goes into production, but the volume has captured and

2

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

evaluated the short-term effects on decision-making in the Kingdom. In some cases, it appears that ‘course correction’ may be underway and, in others, it is ‘business as usual’. Finally, this volume follows on from our successful 2017 hardback publication Policy Making in the GCC: State, Citizens and Institutions (I.B. Tauris), which was also released as a paperback in October 2019.

Understanding governance The term ‘governance’ specifically as related to domestic policymaking has increased in usage as evidence mounts on the critical role it plays in determining societal well-being. As Graham et al. (2003) argue governance is not synonymous with government and indeed, this confusion of terms can have unfortunate consequences. Rather governance is about how governments and other social organizations interact, how these relate to citizen concerns and aspirations, and how decisions are taken in an increasingly complex and interconnected world. Thus, governance as related to domestic policymaking is a process whereby societies, institutions and/or organizations make important decisions, determine whom they involve in the process and how they render account. Indeed, Bevir (2011) argues that governance poses dilemmas that require new governing strategies that span jurisdictions, link people across levels of government and civil society as well as mobilizing a variety of stakeholders. Furthermore, governance arrangements are often hybrid practices combining public–private sectors and individuals and institutions across different policy fields. In fact, effective governance is fundamental on all domestic levels, whether local, regional or national, but in today’s rapidly changing and developing socio-economic and sociocultural environments necessitates new ways of thinking and working together.

The importance of ‘low politics’ in understanding policymaking and governance in Saudi Arabia It is our strong belief that we cannot understand a state without studying its society or in the case of Saudi Arabia diverse societies sometimes with differing norms spread over a wide geographic area. However, much of

INTRODUCTION: SETTING THE SCENE

3

the literature, analysis and reportage on Saudi Arabia usually highlight areas of ‘high politics’ such as foreign policy and the succession while disregarding the less ‘glamorous’ area of ‘low politics’. Yet, young people are the key to Saudi Arabia’s future prosperity, and this necessitates studying the issues – many in the area of ‘low politics’ – that they believe are important such as employment, housing, healthcare and the rising cost of living. Indeed, the Kingdom’s demographics are vital to understanding challenges facing Saudi Arabia. At least 60 per cent of the total population is less than thirty years old. Moreover, improving educational standards, the widespread expression of public opinion online and growing demands for greater government transparency mostly transmitted through social media usage have raised expectations that the government – meant in the broadest sense – can be held accountable. At the same time, there is a growing expectation that citizens’ participation in decision-making processes is set to increase. The 2014 collapse in the oil price forced the Saudi government to confront the challenge of diversifying its economy away from oil and start imposing fiscal restraint. However, this presented a problematic task since Saudi nationals have become accustomed to government largesse.1 As Niblock and Malik discern, Saudi society became infused with ‘rentier’ practice so that it was not only the state whose actions and practices were influenced by the oil-dependent economy2 – the ‘rentier citizen’ has been as influential as the ruling elite. Accordingly, the role of the rentier citizen has manifested itself in societal demands addressed to the authorities to adhere to traditional obligations of rent distribution policies.3 The result, as Niblock and Malik also note, is that the Saudi government often has difficultly imposing its economic agendas on society.4 For that reason, rentier mentality, that is reward (through income or wealth) unrelated to work, is not simply embedded – it becomes reinforced over time.5 Certainly, post-2014 the economics of the rentier social contract, exacerbated by increased fiscal pressures, came under increasing strain as a result of oil price fluctuations thereby impacting on the Saudi government’s plans to tackle highly contentious issues such lack of viable employment opportunities and affordable housing. In 2016, in response to these challenges, (then Deputy) Crown Prince Mohammed bin Salman initiated a programme to transform the rentier nature of state–society relations by unveiling Saudi Vision 2030 in April6 and the (NTP) 2020 in June.7 Yet, these ambitious government initiatives 4

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

had three indirect consequences: first, they raised expectations to an unrealistic degree among Saudi Arabia’s predominantly young population whose views and aspirations frequently outpace the government’s programmes to influence and shape societal and national development; second, the initiatives shone a light on the existing social contract, prompting often well-educated young Saudis to reexamine the nature of the relationship between state and society; and third, they encouraged anticipation of greater government accountability and increased participation in decision-making processes – albeit outside government ones.8 That said the Saudi government understands the need to address these societal needs and concerns. As part of Saudi Vision 2030 (and the related (NTP) 2020) domestic institutions have been established to deal with domestic policymaking and governance issues. These include, among others, the Misk Foundation, the King Salman Youth Center, the Small and Medium Enterprises General Authority, and General Authority for Entertainment. Furthermore, most Saudi ministries have implemented e-government services and opened social media accounts to narrow the gap between government bureaucracy and the public. The advent of Covid-19 and the collapse of the oil price in early 2020 have had a profound impact not only on Saudi Arabia but also on the global economy. Furthermore, the ‘lockdown’ of so many countries has also led to collapse in global oil demand by approximately one-third, which has, on the one hand, compelled the Kingdom to draw down on foreign reserves to shore up the economy and, on the other hand, better positioned the country market share when recovery begins, as so many higher-cost producers, especially in the US shale sector, have gone bust. Naturally, both the shock of the pandemic and its consequences have forced Saudi decision-makers at all levels to evaluate the merits of Saudi Vision 2030 and the (NTP), particularly, at a time of great uncertainty. To the extent possible, given that the longer-term effects on both crises are still to be felt and understood, the following chapters have incorporated the initial impact of the crises into their analyses. The response of Saudi Arabia’s decision-makers will reveal just how far-reaching the changes that have taken place so far are genuine and a departure from previous policies. Commensurately, it will also reveal to what degree Saudi Arabia’s citizens have left behind them their very own rentier mentality. INTRODUCTION: SETTING THE SCENE

5

Chapter descriptions This book comprises three sections: Making Policy in Saudi Arabia, Putting Policies into Practice and Governance Challenges: Managing Energy and Environmental Policies. It aims to share with the reader the following: insights into the processes that make policy, which are never as clean and as succinct as one might imagine – irrespective of country or organization; the challenges, ways and means of ‘getting policy done’ in an ever-changing policy landscape; and finally, provide ongoing case studies that focus on energy and environment, which are critical to the Kingdom’s future. Part I examines the rudiments of policymaking in Saudi Arabia and approaches the subject from three distinctive, yet connected, angles: it assesses the prevalence of evidence-based policymaking, considers how often divergent economic reform agendas can be better aligned and, pertinently, evaluates the role played by consultants in shaping domestic policy. Chapter 1 argues that the public policy process in all contexts is strengthened by collecting on-the-ground evidence for producing timely analytics. It enables policymakers to access relevant scientific evidence, and the impact of this evidence improves public welfare. Therefore, the chapter considers what role universities, public policy academics and other research-based institutes can play in improving policy. The chapter draws upon findings taken from the Harvard Kennedy School of Government’s Evidence for Policy Design (EPoD) research programme, whose scholars have collaborated with the Saudi ministries of labour, social development and education. The author opines that while the Kingdom’s leadership has recognized the importance of cutting-edge social science research to inform social and economic policy reforms, the current policy-research ecosystem must be strengthened to enable locally produced research to drive policy innovation. In Chapter 2, Sulayman and Yamada explore how Saudi Arabia’s policymakers can overcome ‘reform dissonance’, whereby the Kingdom’s economic reform agenda lacks effective coordination and often produces policies that contradict one another and lead to suboptimal outcomes. The authors note that the liberalization agenda that shapes Saudi Vision 2030 and the (NTP) sometimes conflict with other economic reform agendas, especially those pertaining to statist job creation projects.

6

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

The second chapter assesses how the Saudi leadership can better coordinate the different reform agendas and pursue both goals, in this case, liberalization and state-led job creation, in a simultaneous and harmonious manner. The authors consider a number of options for doing so and argue that building a micro corporatist model, based on the Scandinavian model, but highly adapted to Saudi Arabia’s environment offers one pathway to aligning diverging agendas and leading to policy integrity. The third chapter in Part I addresses the knotty issue of consultants and the role that they play in domestic policymaking and governance in Saudi Arabia. Jones makes an important contribution to the debate, which has become ‘hot’ over the past few years, and is able to draw upon many years of direct and practical experience in this field. Jones sets out to produce a balance sheet of advantages and disadvantages that external consultants have brought to the Kingdom and, in doing so, assesses the impact that they have made to date on policy formulation and implementation. He argues that in spite of the ‘bad press’ that consultants attract – and details some of the reasons behind it – it is clear that consultants are key to both policymaking and governance for the following reasons: they provide a bridge between nationalization of the workforce and delivery of reform; serve to preserve the current power structures, while shaping the reform agenda; and they help preserve and protect the position of elites within the reform process itself. In short, Chapter 3 posits that consultants are a critical part of the overall reform agenda and serve important functions in not only shaping and informing policy but also preserving and giving further life to the political status quo. The second part of the book moves away from policy formulation and towards putting policies into practice. It is a common refrain among the policy-research community that designing policies is one thing, but putting them into practice is quite another. In fact, irrespective of country, implementing policy and producing the desired outcomes is arguably the hardest part of the policy cycle. In Chapter 4, David DesRoches examines the ongoing reforms within the Saudi defence industry and suggests that in spite of limited successes in this sector, total defence capacity-building offers significant rewards and is the sector where Saudi Vision 2030 can achieve success. The chapter highlights some of the shortcomings of the defence sector, many of which are well known, as the author argues, but, more importantly, it shines a spotlight on where the reform process is seeking to address these INTRODUCTION: SETTING THE SCENE

7

shortfalls. These areas include doctrine, organization, training, materiel, leadership and education, among others. The chapter emphasizes the role that the new General Authority for Military Industries (GAMI) and the new company Saudi Arabian Military Industries (SAMI) will play in helping the Kingdom not only develop its own defence industries but also implement standardization, which is critical to improving the efficiencies of the Saudi military. DesRoches asserts that the Saudi vision for defence reform is coherent, achievable and supported by leadership and resources. Chapter 5 tackles the ‘bread and butter’ issue of all reform agendas: education. Almoaibed interrogates the important subject of how and why young people in Saudi Arabia make vocational education choices. She notes that while reforms to the education system continuously strive to achieve development goals and economic prosperity, successful implementation is frustrated by a number of factors, including the scale of challenge, wide complexion of stakeholders with diverging agendas and, most importantly, limited education and employment opportunities. Although the Vocational Educational and Training (TVET) programme received a significant boost following the launch of Vision 2030, which was intended to stimulate economic growth and increase the number of young Saudi citizens in the workplace, it failed to attract its target audience and suffers from low enrolment. The fifth chapter not only evaluates the TVET programme but also assesses why so few young Saudis consider vocational training to provide an important pathway to employment. Based on the findings from her PhD, Almoaibed shows how trends that define the trajectory of TVET are based on structural factors that shape and influence the decision-making of Saudi youth when making decisions about their future. Moreover, the chapter highlights how the presentation of ‘choice’ itself to young Saudis is more illusionary than real, as aspirations themselves are often out of line with both education and labour market opportunities. The sixth chapter, ‘Causes of obesity and public policy’, highlights health policy. Based on data collected and analysed by the author, Chapter 6 not only challenges popular assumptions about obesity, notably within Saudi Arabia and elsewhere, but also argues that governments should take ownership, leadership and implement evidence-based policies to tackle the issue. Alenaini outlines some of the steps already taken by the Saudi government in tackling obesity through its Quality of Life programme, which complements 8

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Vision 2030. However, she also highlights some of its weaknesses in implementation and offers a number of practical recommendations to improve policy outcomes and these include, among others, adopting The Quality of Life Vision Realisation programme. Part III moves away from policy formulation and implementation and focuses on the key areas of energy and environment; time critical issues to not only Saudi Arabia’s economic future but also societal well-being. It includes four chapters that examine energy governance itself, notably the crossroads between hydrocarbons and renewables; the thorny issue of legitimacy and how environmental policy, especially among youth, may become a new pillar of support for the ruling family; and as corollary but distinct subject area, climate change governance, which is gaining in prominence as a global issue, but bearing down on the Gulf among its youthful populations; and finally, the role of Saudi Arabia as the final major oil producing country with a key dependency upon a commodity quickly going out of fashion. In Chapter 7, Jessica Obeid argues that while the current trend in governing the renewable energy sector appears to differ from that which has governed the Kingdom’s oil industry, it carries with it a number of shortcomings that require early attention. Indeed, Obeid identifies a number of key areas where improvements can be made in order to achieve better overall governance, encourage competition and most importantly of all, lead to sustainable development for the industry. Chapter 7 maps out the differing governance models employed to the oil and renewables industries and allows for an easy and instructive comparison. The author stresses that lessons have been learned and that the renewable energy industry has taken a path that supports auctions, open bids, public– private partnerships through independent power producers’ schemes and has attracted foreign direct investment to date. Nonetheless, she argues that the shortcomings alluded to above, including poorly defined strategy and action plans, procurement framework and focus on utilityscale energy models that restrict participation of the private sector, especially local small and medium enterprises (SMEs), will hamper the sector. The eighth chapter of the book, ‘In search of legitimacy: Environmental policymaking in Saudi Arabia’, considers the importance of political economy in shoring up the legitimacy of the ruling Al Saud family. It presupposes that in large part, the Kingdom’s oil wealth and the distributive policies of the ruling family have gone a long way to legitimizing the Al INTRODUCTION: SETTING THE SCENE

9

Saud’s rule soon after the country was established in 1932. Zumbrägel compares the importance of environmental policy under the reign of two kings: the late King Abdullah (2005–15) and King Salman (since 2015). He argues that an innovative approach to examining environmental policy reveals the emergence of a new strain of legitimation, until now, otherwise, untold. Nevertheless, it is just one more source of legitimacy that sits alongside other strands already long in existence, such as structural, performance, external, ideational-identitarian and religious legitimacy. Chapter 8 provides an incisive conclusion by suggesting that while environmental policy is fast becoming part of a wider political strategy to sustain the ruling family’s legitimacy, it has barely been adopted to respond to growing demands but rather to achieve the goal of elite cohesion and regime popularity. The ninth chapter builds upon the themes in Chapter 8 and interrogates climate change governance in Saudi Arabia. The author makes a strong case that the country’s response to the external impacts of climate change, including fossil fuel subsidy reforms, promotion of renewables and energy efficiency and enhanced climate adaptation could not only eliminate the impact of climate change but also create new economic opportunities. The chapter fills an important gap in the current literature and focuses on the alignment – or lack of alignment – between domestic climate action and the Kingdom’s economic diversification strategies. It reveals that those institutions charged with governing the country’s climate change agenda continue to face basic challenges, including poor data, no clear climate action plan, over-involvement of the Energy Ministry and, a common theme in this book, fragmented policy space comprising too many actors and institutions without a clear discernible mandate. The final chapter presents an alternative view and posits that Saudi Arabia’s carbon competitive advantage, being the world’s lowest-cost oil producer and having the lowest intensity of greenhouse gas emissions per barrel produced, means that Saudi Aramco will continue to be first among equals, alongside international oil companies (IOCs) and national oil companies (NOCs), and, as such, will continue to play not only a dominant role within the Kingdom itself, driving forward economic policy, but will also remain the ‘last man standing’ to Asian economies that are still dependent upon hydrocarbons to push for economic growth. Indeed, Saudi Arabia’s ability to take market share during the twin crises

10

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

of the coronavirus pandemic and collapse in oil price is a moot point, as it is much better positioned to rebound as and when global oil demand increases and it can do so at a much lower cost in spite of an increasing break-even price.

Summary of main themes Irrespective of sector, several themes are highlighted in the book that are common to all the case studies under review and these lend insight into the governance challenges that Saudi Arabia faces in bringing about transformational change. The themes include, among others, the following: the lack of capacity with middle management in most institutions to oversee and deliver tangible reforms. This is most obvious in ministries, the civil service, armed forces and the education sector; as a corollary, a general ‘talent’ problem is identified as a persistent challenge for all institutions – perhaps except for Saudi Aramco. However, the desire to fast-track talent creation is problematic and chapter contributors argue strongly that it will take at least one generation to address this structural problem. Another theme is the proliferation of new agencies tasked with delivering specific projects, but ones already being pursued by organizations established under previous patrons or ministers. Instead of creating ‘islands of efficiency’ the danger is that these are creating ‘silos of inefficiency’. The rapid rotation of ministers, deputy ministers and other leaders is cited as deterring progress in advancing better governance, as each change is accompanied by new policies and new pet projects. Finally, inefficiencies among institutions are highlighted as they have failed to streamline and align common procurement policies to assist governance procedures and combat corruption. The overarching theme that emerges from each chapter/case study is divergence within the reform agenda, whereby ministries, institutions and agencies are tasked with pursuing and implementing reforms that conflict with one another. In other words, while the Kingdom’s leadership sets the broad strategy, policies are rarely harmonized and, as a result, do not translate well into public policy. In spite of the challenges, which all countries and all institutions face continuously, there is consensus that Saudi Arabia is beginning to address the range of issues that it faces with a deep conviction in not only developing more robust governance systems within the country, but

INTRODUCTION: SETTING THE SCENE

11

ones that are more responsive to the changing needs of the population. Moreover, the demographic dividend that the country enjoys is considered to be instrumental in pushing through meaningful reforms, which had hitherto ground to a halt when oil prices started to rise. As such, while the goal of transforming Saudi Arabia is seen as a long-term multigenerational project, there is agreement among chapter contributors that the journey has begun in earnest and, while the pathway may not be linear, it is heading in one direction and the leadership, in its commitment, has past the point of no return. The challenge that Covid-19 has posed to the Saudi Arabia leadership is arguably unlike any other than it has faced before, as its impact could lead to a structural change in the global economy. At times of such uncertainty in the past, the Saudi leadership has shied away from pushing through reform, preferring to rest on the old formula between state and citizen; the response of the Kingdom’s new generation leaders and, in fact, its younger population will give a clear indication of both parties’ commitment to transformational change and appetite for a new era.

Notes 1 These issues were discussed at a Chatham House workshop where the

authors were participants: Middle East and North Africa Programme Workshop Summary, ‘The Social Contract in the GCC’, Chatham House, 11–12 January 2016: www.chathamhouse.org/sites/files/chathamhouse/ events/110416-GCC-Social-Contract-Workshop-Summary.pdf; see: www. chathamhouse.org/event/social-contract-in-gcc; www.chathamhouse.org/ about/structure/mena-programme/future-trends-gcc-project

2 Tim Niblock and Monica Malik, The Political Economy of Saudi Arabia (Abingdon: Routledge, 2007), 16.

3 John Peterson, The GCC States: Participation, Opposition and the Fraying of the Social Contract (London: LSE Kuwait Program on Development, Governance and Globalization in Gulf States, 2012), 75–9.

4 Niblock and Malik, The Political Economy of Saudi Arabia, 20. 5 Hazem Beblawi, ‘The Rentier State in the Arab World’, in Hazem Beblawi and Giacomo Luciani (eds) The Rentier State, (London: Routledge, 1990), 52.

6 See: Mark C. Thompson, ‘Re-evaluating the Saudi “Social Contract”: The

Perspective of Saudi Male Graduates’, in David Jones and Sofiane Sahraoui (eds) The Future of Labour Market Reform in the Gulf Region: Towards a

12

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Multi-Disciplinary, Evidence-Based and Practical Understanding (Berlin: Gerlach Press, 2018), 36–43.

7 See: http://vision2030.gov.sa/sites/default/files/NTP_En.pdf 8 Tagged ‘Young prince in a hurry’ by The Economist, the prince’s policies

are ambitious, but controversial. See: The Economist, 9 January 2016: www. economist.com/news/briefing/21685467-muhammad-bin-salman-gamblesintervention-abroad-and-radical-economic-change-home

INTRODUCTION: SETTING THE SCENE

13

14

PART ONE

MAKING POLICY IN SAUDI ARABIA

16

1 IS EVIDENCE USED FOR POLICYMAKING IN SAUDI ARABIA? Lessons from an international research-policy partnership in labour policy Ammar A. Malik

Introduction The public policy process – from agenda setting to problem identification and from solution design to implementation – is strengthened by rigorously collected, on-the-ground evidence for producing timely analytics. The quality of each country’s research-to-policy ecosystem, from scholarly outputs by university to policy debates by think tanks, determines how the extent to which government decision-making improves public welfare (Struyk 2007). It enables policymakers to access relevant scientific evidence and its impact on society in actionable ways. Besides universities and think tanks, private foundations, not-for-profit agencies, foreign donors and for-profit businesses all play critical roles in shaping this ecosystem, which is marked by the interaction of government and non-government entities. But in countries lacking robust home-grown research institutions, external actors could end up playing key roles in shaping the policy

agenda and influencing the policy development process. In low- and middle-income countries, international development partners (aka ‘donors’) provide governments much needed technical assistance and capacity-building services mainly through international and some local private contractors. In many high-income countries such as Saudi Arabia, but also across the Gulf Cooperation Council (GCC) where governments offer lucrative contracts and generous terms, major management consulting firms have increased foothold in public sector consulting. They typically customize and apply internationally tested, private sector– inspired solution models in response to policy challenges, coupled with very effective communication tools such as interactive data dashboards (Haque 2017). In this environment, what role can international universities and public policy academics play in improving public policymaking? Should they provide infrastructure and capacity-building support by establishing applied research centres? To what extent is there space for them to work directly with decision-makers? Or, should they focus on their narrow research goals, and restrict support to policy insights in academic publications? What incentives do governments have to engage with slowmoving academic projects, rather than rapid-response consulting service providers? In this chapter, I present insights from a major, multi-year research-policy collaboration between Harvard University economists and Saudi ministries of labour and social development, and education. This framing is thus set within these substantive areas, but lessons drawn from the engagement could apply to all sectors of public policy. Since 2014, Evidence for Policy Design (EPoD), a research programme at the Harvard Kennedy School, has undertaken a series of research projects in collaboration with the ministries of labour, social development and education. The engagement focused on optimizing the Saudi labour market by tapping into national human capital reserves and promoting citizen welfare, particularly that of women and youth. Harvard economists jointly identified priorities with policymakers, and help design, evaluate and re-design labour market policies. EPoD also offered customized capacity-building programmes, many focused on incorporating datainformed insights into policymaking, to support the mission of improving evidence-informed policymaking. This experience has produced not only academic articles, policy briefs and insights for decision-makers’ consideration, it has also accorded opportunities to reflect on the domestic policymaking process in 18

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Saudi Arabia, particularly the use of evidence in decision-making. The objective of this chapter is to highlight those lessons, situating them within the conceptual framework of evidence-based policy and making recommendations for improving the status quo. Because no single government agency in Saudi Arabia is fully responsible for improving the research-policy ecosystem, a nationwide approach is required to improve avenues for rigorous evidence to be utilized for crucial public decisions. In the absence of such an effort, the somewhat inefficient and risk-laden public policymaking environment will continue remaining a drain on public resources. This chapter, therefore, offers recommendations for Saudi policymakers to improve their country’s approach towards public decisions that would improve social welfare while creating institutionalized capacity for doing so into the future. The remainder of this chapter is organized as follows. After this introduction, Harvard’s Smart Policy Design and Implementation (SPDI) methodology and its application potential is introduced as a powerful tool for researchers and policymakers to engage in substantive and mutually beneficial conversations around the most pressing public policy challenges. The EPoD–Human Resources Development Fund (HRDF) engagement is then introduced, before delving into the broad strokes of Saudi Arabia’s labour and economic policy challenge and ways in which the Vision 2030 targets have set the country on the path of reforming existing systems. Key lessons from the engagement are then discussed, before introducing a series of conclusions and recommendations for senior government officials to contemplate and potentially implement.

Smart policy design and implementation The aforementioned engagement was based on Harvard’s SPDI frame­ work, a unique problem-driven and iterative approach for identifying and diagnosing policy problems, designing, testing and refining solution that creates evidence-based policies for greater social welfare. In the Saudi context, this is a unique engagement style which is directly opposed to solution-driven approaches of outside experts, particularly management consultants. By default, their diagnostics and solution expertise are based on international best practices and benchmarking based on their

Is evidence used for policymaking in Saudi Arabia?

19

extensive experience of dealing with similar problems in comparable countries around the world. In practice, as illustrated in Figure 1.1, SPDI is based on the belief that continuous self-learning and improvement is the only way to have positive impact on society. It must become the basis of researcherpolicymaker engagements, which would in turn bring value to both sides, i.e. robust academic contributions on the one hand, and highly impactful policy solutions on the other. The six stages of this methodology are all interconnected and are as follows: 1. Identify. Public, private and academic stakeholders combine

information on policy priorities with economic insights to identify a priority problem to address.

2. Diagnose. Use insights from economic theory and empirical

evidence to diagnose underlying market or policy failures.

FIGURE 1.1  SPDI in action (Source: epod.cid.harvard.edu.)

20

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

3. Design. Together, researchers and policymakers design

innovative solutions that are financially, administratively and politically feasible.

4. Implement. Support implementation and monitor to ensure

effective delivery.

5. Test. Rigorously test solution at scale to see what is working and

what needs attention for further improvement.

6. Refine. Use lessons learned at each stage to refine existing

designs and identify the next set of objectives and challenges.

To showcase this approach in action, the recent example of Pakistan’s education system is a useful case. Policymakers in the Punjab province identified the following problem statement: Pakistani schools are of low quality, on average, as evidenced by low learning levels and growth. To scope out this statement, researchers found that in 2016, standardized test scores in rural areas for grade 3 students was such that 72 per cent could not do two-digit subtraction and 85 per cent could not read a sentence in English. Following the SPDI steps, researchers and policymakers collaborated to put together the theory of change given below, focusing not just on apparent symptoms of the problem statement above, but going one step deeper to uncover its origins in deep-rooted issues. The underlying issue in education sector’s poor performance is not just quality of teaching, lack of facilities or even parents’ own educational attainment, but rather information failures due to which families are not able to optimize their decision regarding children’s school attendance. If it was not for this approach, researchers and policymakers could

FIGURE 1.2  Sample SPDI application – Education in Pakistan.

Is evidence used for policymaking in Saudi Arabia?

21

have misdiagnosed the problem altogether. In Saudi Arabia, the same approach was applied to a series of labour market challenges identified by policymakers and further refined through workshops, forming the basis of several follow-on research projects addressing individual research questions. With this approach in mind, Harvard and the Saudi Ministry of Labor and Social Development formed a multi-year partnership that operationalizes the SPDI approach. Researchers were thus embedded within the HRDF, which was charged with designing and implementing labour market programmes based on the Ministry’s policy guidance. Because sound public decision-making requires appropriate matching between demand and supply of policy analytics which is delivered to stakeholders in the correct format, this engagement was based on a threepronged approach including policy-research engagement producing evidence, capacity-building to foster demand for analytics and policy dissemination to get the right information into the hands of the right decision-makers in the right format. The intersection of this three-part structure is such that the joint identification of problems with policymakers requires them to understand the value of evidence which in turn depends on availability and analysis of empirical data. This is achieved by having them take courses as part of the executive education, enrolment into which depends on potential recipients appreciating the value of taking them. A series of symposia, workshops and policy briefs enables policy dialogue between researchers and policymakers, based on economic theory and rigorous data analytics. This major engagement has, for the first time, brought some of the world’s foremost universities and economists to work on Saudi Arabia’s

FIGURE 1.3  EPoD–HRDF engagement structure overview.

22

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

FIGURE 1.4  EPoD–HRDF collaboration at a glance.

labour policy challenges. They have not only engaged with policymakers but also undertaken data analysis on programmatic information obtained by HRDF and lead fieldwork. This is now seeing Saudi Arabia’s economic policies being debated at prominent economics conferences and analysis appearing in top journals, i.e. Saudi Arabia is now firmly on the map of the world’s premium economic policy forums.

Saudi labour market policy Since 2011, the Saudi government has been making efforts to bolster Saudi citizens’ employment in the private sector in realization of the limits to public sector employment. But the underlying idea of Saudization, i.e. encouraging private companies to replace expatriates with citizens, has featured in policy discussions since the 1980s. For example, the Fifth Development Plan (1995–2000) aimed to create 319,500 Saudi jobs, but in reality during this period the number of expatriate workers increased by over 58,000 (Looney 2004). This failure was simply reflective of the underlying economic reality that hiring expatriate for the same jobs was more economical for private companies, whose quest for profits and efficiency compelled them to de-prioritize citizens in their workforces. Many large private businesses have also lobbied for years to remove such conditions, citing lack of requisite skill sets among citizen workforce and costs of hiring them as main reasons (Leber 2019). But during the last decade, starting with King Abdullah’s US$98 billion economic package announced in the aftermath of the Arab Is evidence used for policymaking in Saudi Arabia?

23

Spring, the Nitaqat programme reversed this trend for the upcoming decade. As an implementing arm of the MLSD, HRDF has been at the forefront of efforts to work with both the demand and supply sides of the labour market to create more private sector jobs for Saudi citizens including trainings and subsidies, focused on individuals and firms respectively. Through its sixth thematic area, the Saudi (NTP) outlined several specific key performance indicators (KPIs) and identified MLSD and HRDF as key agencies responsible for achieving them. Prominent among them is the desire to increase women’s labour force participation, besides improving working conditions for expatriate workers and attracting suitable global talent to work, which goes hand in hand with other objectives related to improving the quality of life in the Kingdom. Studies within this engagement directly addressed several of the twenty-four programmes designed to achieve these NTP targets. For example, the NTP’s focus on creating an effective National Employment Portal and improving Saudi workers’ soft and technical skills were key motivations for studies on the HRDF-managed Taqat platform. In order to improve women jobseekers’ matching with potential employers and to overcome the information asymmetry preventing them from applying to the right sectors and occupations, tens of thousands logging into the

FIGURE 1.5  Public to private employment.1

24

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

system were offered information (through pop-ups) on which sectors and occupations are in high or low demand in any given month. This enabled women to apply for the most in-demand sectors, significantly increasing their chances of getting call-backs for well-paying jobs. But in reality, the current state of the Saudi private enterprise economy is such that they are under tremendous pressure to grow and become more competitive, but the Saudi dependence on oil is hampering progress. The labour market statistics from the Saudi government, released for Q4 2020,  indicate that despite the economic impact of Covid-19, unemployment rates fell to 12.6 per cent down from 14.9 per cent in Q3 2020. Female labour force participation improved in recent years, but because women are in generally less qualified and less experienced than men, they are struggling to get jobs and as a result, female unemployment rates remain above 24 per cent. Employing more women has, therefore, been a key focus of many HRDF programmes, and, given pressure to increase Saudi employment, will likely continue as a priority area for the foreseeable future. In recent years, due to the government’s focused efforts supporting female employment, thousands have entered the labour force by registering their intent to work. Because of frictions in the labour market, in part due to women’s lack of work experience and skills gaps, they often

FIGURE 1.6  Women’s labour force participation in Saudi Arabia.2

Is evidence used for policymaking in Saudi Arabia?

25

remain unemployed (i.e. looking for jobs) for several months. Ironically, this situation saw the female unemployment rate soar to around 30 per cent in 2019, which was an unprecedented level but because it was also accompanied by higher labour force participation rate for women (12 per cent in 2008 to 32.1 per cent in Q2 2020), this could be interpreted as a positive sign as more women intended to work despite the greater care duties created by the pandemic. For government agencies, the top priority to correct this situation should be removal of fixed costs/barriers to hiring female including gender-segregated office spaces that require upfront investments, setting up of women-friendly and local law-compliant HR policies for women, and offering childcare services or subsidies besides thinking about women-friendly transport services that could help remove mobility restrictions. The prevalent economic and labour market situation cannot be fully understood without also understanding how the Saudi exchequer is facing unprecedented challenges, which will continue reducing the government’s likelihood of hiring more public sector workers. A simple look at the country’s fiscal balance, which depends heavily on oil revenues, shows that per capita oil exports have been declining and this is worsened by volatile oil prices. This means that the government’s ability to stimulate the economy or directly hire public sector workers (with good benefits) will continue dwindling in the foreseeable future.

FIGURE 1.7  Oil exports per capita.3

26

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

FIGURE 1.8  Oil exports per capita.

Vision 2030 targets are, therefore, clearly articulating a vision where the Saudi private sector would be the key driver of economic productivity and job growth. The slump in the global oil market did not help the Saudi exchequer, despite attempts at boosting government revenues through taxation. Whether the government is able to continue pushing more taxes through to businesses and citizens is an open question – and likely to remain contentious in the medium to long term. The conundrum is that while the private sector needs stimulation and job growth, imposing sales and income taxes onto their customers would do the opposite by reducing their ability to spend and therefore slumping private sector growth. Since 2017, various measures have attempted to target taxation to sectors that would not be hurt as much as others, specific targeting and avoiding spillovers into other sectors of the economy are hard to achieve in any environment. As of July 2019, 1.4 million Saudis worked in the public sector whereas only 1.7 million worked in the private sector as almost 80 per cent of all private sector jobs were held by expatriate workers. After a peak of 1.97 million total workers across the private sector in Q4 2017, the private sector’s employment of all workers (Saudis and expats, total) declined despite government’s Saudization targets, and in 2019 stood at 1.94m (General Authority of Statistics 2018). But despite understanding that Is evidence used for policymaking in Saudi Arabia?

27

FIGURE 1.9  Oil exports per capita.4

FIGURE 1.10  Oil exports per capita.5

most new jobs should be created by the private sector, in the first half of 2019, the Saudi government added 200,000 jobs. The graphs above indicate the storyline that is consistently being reported within and outside the Kingdom, i.e. the Saudi labour market 28

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

has three parts of the labour force: expats, male Saudis and female Saudis. In theory, these three might be considered substitutes such that one type of worker could simply replace the other, but in reality they are governed by highly different circumstances which render substitutability to be problematic. Not unlike other countries, there is clear evidence of sectoral segregation by gender whereby women are dominating sectors like teaching and men are mostly working in public administration. But in the case of non-Saudis, it is obvious that most women work as domestic

FIGURE 1.11  Saudi Arabia’s story of female unemployment.6

FIGURE 1.12  Where men and women work.7

Is evidence used for policymaking in Saudi Arabia?

29

helpers and the majority of men work in construction and other lowskilled jobs. This is just another facet of the inefficiency of the labour market whereby different categories of workers are not good substitutes to one another. It also points to the need to do reskilling to break these barriers.

Discussion In this context, the HRDP–EPoD engagement was conceived as a major support to Saudi policymakers’ effort to pursue innovative programmes on the supply and demand side of the labour market. On the demand side, programmes that target or benefit firms in the form of subsidies and incentives for hiring more employees were conceived, whereas on the supply side, a series of interventions including unemployment benefits, training and on-the-job training initiatives were introduced to support Saudi jobseekers. EPoD created a research secretariat with staff members in Cambridge and Riyadh supporting a major background research effort in which all HRDF and other labour policy programmes were enlisted, data sets coded and documented, and conceptual frameworks outlined, all intended to attract top international talent into the Saudi research arena. The resulting collaborations, both one-year pilots and two- to three-year full activities, featured a policy partner, international academic and, in most cases, a local academic partner along with Saudi or Arabicspeaking research assistant in Riyadh. This configuration was designed to facilitate fruitful interactions between policymakers on the one hand and researchers on the other, none of whom had ever undertaken this kind of research in Saudi Arabia. Since 2014, three rounds of requests for proposals, many training programmes and other interventions have taken place, and the following key lessons were learnt that could be of relevance to not only other ministries in Saudi Arabia but also other government agencies in the GCC region. None of the following is intended to be a normative judgement on any individual or institution, or an attempt to criticize an institutional set-up, but rather a reflection of the application of the SPDI framework in a country where most researchers had no history of operating and no social or professional network. It is therefore safe to assume that in such an environment the likelihood of successful policy 30

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

impact or lack therefore can be well attributed to the strength of the tool and methodology rather than other factors. For research managers engaged in support the policy-research process and dealing with government stakeholders’ and researchers’ varying expectations, the following points are simply a reflection on five years’ worth of research across twenty-four distinct studies involving researchers in twenty-seven different institutions in Saudi Arabia and abroad.

Mismatches in timelines There exists a fundamental inconsistency between timelines and related expectations of rigour between policymakers and researchers. Just as private companies often complain about the pace at which government processes function, in this case government officials are under immense pressure to deliver programmes in timely ways. With a Saudi-wide emphasis on government performance measured through KPIs and benchmarks, having real-time analytics to design, improve and implement programmes is of immense value. In the aftermath of the Covid-19 crisis for instance, based on directives of the senior most levels of government, several HRDF programmes were ramped up within a matter of days to the tune of over US$5 billion. But academics are often unable to meet with this pace of action given that their knowledge production cycle requires more careful analysis planning accompanied with deep theoretical thinking and detailed data analyses. Given the absence of democratic institutions like parliament, or public consultations, policies can be introduced fairly quickly and within days after a royal decree is issued. This pace of progress can be matched only in the private sector. In contrast, academic research, particularly rigorous impact evaluations of programmes jointly designed with policymakers, requires two to three years to offer mature policy lessons. This is because researchers often spend considerable amount of time reading literature, analysing descriptive data, hypothesizing, consulting, testing, scaling-up and then undertaking analysis which is carefully written. Academic-style writing is often circumspect rather than prescriptive or even conclusion, making it difficult for government officials in a fast-paced environment to make use of it in the short term. In the HRDF–EPoD engagement, therefore, there is always the challenge of matching academic and policy timelines in Saudi Arabia’s Is evidence used for policymaking in Saudi Arabia?

31

fast-paced policy environment, i.e. how can policy-relevant insights be derived during slower-moving research projects? One solution to this issue has been attempted by the engagement’s secretariat, i.e. even as the various research project steps are being rolled out there are concrete steps that can be undertaken to provide real-time analytics. The key is timeliness of the analysis, i.e. if the ministry is contemplating a major new training programme for jobseekers, even light evidence on what has worked in other countries would be of enormous value. Researchers deeply embedded in this line of work would find it easy to provide such analytic support, but as a practical matter, finding such matching is not easy.

Challenges in data sharing Perhaps the most visible and frustrating challenge for many researchers has been the lack of open sharing of microdata, which is in turn symptomatic of the nature of researcher–policymaker engagement. This is due to policymakers’ lack of prior experience organizing microdata for sharing, but also not having clear guidelines or data sharing protocols with the government’s operating manuals, which makes data sharing highly risky. Further, data sharing requires several conditions which depend on policymakers’ perception of the value addition from the engagement. These include but are not limited to: trust in researchers’ ability to deliver useful analytics in timely ways, security of personally identifiable information and clarity of data sharing protocols, if any exist within the organization. In this collaboration, data sharing success was seen in some projects that set up high-frequency sharing arrangements on millions of data points every month, such as users’ behaviours on the Taqat platform. This was achieved because both sides agreed with clear terms and conditions of data sharing and expected outcomes that were beneficial for policy decisions. Ultimately, policymakers recognized that administrative data is a unique entity in that the more it is used, the better it gets. This happened when the researchers’ analytic vantage point was so unique to the policymakers’ that the research-policy engagement helped HRDF improve their system of data governance, ranging from basics of what and how to store data, when to share and with whom. In Saudi Arabia, while the government’s data collection infrastructure is robust in some sectors, and is particularly strong when it comes to

32

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

census data collection, data sharing protocols for policy research remain underdeveloped or non-existent, making the process of obtaining data frustrating, long-drawn and uncertain. This becomes a major discouragement for top international academics, who have greater burdens on time and high global demand – many simply walk away from working in such difficult environments. Government officials, even when they see the benefits of sharing with visiting researchers, do not want to overcommit to anything they believe is either unnecessary or harmful to their perception of the national interest. But these issues are hardly unique to the Saudi context as similar issues are faced by empirical social scientists undertaking applied policy research around the world, but particularly in places where data sharing is not institutionalized, or prioritized. In order to take out uncertainty in data sharing, the government must introduce clear data sharing policies and practices, particularly at the level of ministries and departments dealing with key nationallevel priorities such as education, labour and health. Like in other industrialized economies, data sets should be classified as being publicly available, available upon request and not shareable with even researchers. This classification system should be introduced and publicly available for all concerned, thus giving certainty to all parties interested. The public benefit of data sharing must also be clearly established and articulated, based on a strong commitment to transparency in data sharing and generating meaningful outcomes.

Misaligned incentives Academics’ interest in top journal publications is inherently inconsistent with any sensitives government agencies might have with certain policy subjects, such as regional disparities or expat worker levies. This is particularly true for political scientists, who, by definition, are investigating politically sensitive topics that are expected to be critical of existing governance systems in ways that could stir resentment towards status quo. It is, therefore, imperative for policymakers and academics to set clear data sharing expectations at the outset, however daunting it may seem. Having early clarity on the objectives, publication and dissemination plan for any study involving researchers and policymakers would go a long way in this regard.

Is evidence used for policymaking in Saudi Arabia?

33

While this also relates to the point about timelines, policymakers do not have incentives to contribute to the body of knowledge of a given subject or to spend consider time undertaking theory-building studies. But this is the exact role of researchers, particularly since they are seeking top academic publications where breaking new theoretical or methodological ground is necessary for success. While these two priorities may seem impossible to reconcile, during the course of long-standing research-policy and capacity-building engagements, there are always opportunities for researchers to demonstrate utility to policymakers and vice versa. For example, government departments are often required to outline their programmes’ policy impact or justify their investments in maintaining administrative data sets, often to assess whether or not to continue such spending in future years’ budgets. In the case of this collaboration, these have proven to be critical moments for research staff to step up, offering robust support to their policy partners in the form of data analysis, slide decks or even talking points for presentations to senior leaders. Such favours help build a relationship of trust and mutual utility, which is in the long term objectively healthy for the researcher–policymaker relationship. Ultimately, like all other relationships, having some quick wins or results to show for partners can make a major difference regardless of what form it takes.

Lacking local capacity In Saudi Arabia, despite massive public investments in building university research capacities, there is an acute lack of strong institutions conducting policy research, either in university departments or independently. While science, engineering and particularly energy policy have received major government investments and to good effect, there remains a lack of robust social science and public policy focus, including leadership training. For example, Saudi Arabia needs its first public policy graduate school so that all ministries’ personnel needs could be trained in-house and within the country, based on case studies and data sets that are applicable to the local context. This can be achieved only through institutionalized training and education universities or departments, which are functions that existing universities and government training institutions are not providing. But more than public investments in new institutions, the incentives of local academics must be aligned to create policy-relevant research projects, i.e. there must be career track benefits to those deciding to 34

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

engage in policy-research collaborations that should be seen favourably by academic hiring and promotion committees. While it is understandable that traditional university jobs for academics only reward good teaching, professors engaged in these institutions are also the cream of the Saudi talent pool and must be utilized for fulfilment of national strategic priorities. Hence local universities must also be encouraged to establish and support home-grown policy-oriented research institutions (with or without partnership with global think tanks) that could work in close proximity with government agencies on ongoing policy debates. Effective policy research cannot be organized by international academics only, without support from local partners who are well versed with the culture, know how to work with government officials and can help troubleshoot some of the logistical challenges associated with research of this variety. Local institutions must organize policy conferences, by invitation-only dialogues, social media debates and TV programmes in which salient policy topics at the national and regional levels would be debated based on evidence crated through research. Currently, there are no such avenues for open dialogue, even though the Arab tribal decisionmaking culture and governance traditions of the Shura are in line with this recommendation.

Conclusions and recommendations A primary objective of Vision 2030 is to increase the global competi­ tiveness of Saudi Arabia on a variety of fronts, including transforming the economy and developing a twenty-first-century workforce. A key labour policy objective is to increase women’s labour force participation, which in theory could also bolster productivity of the workforce overall given that Saudi female’s rate of higher education acquisition is high and bringing more of them into the labour market will likely improve firm-level productivity. Largely through HRDF’s various programmes supported in part by the EPoD research engagement, between 2017 and 2020 women’s share in the labour market has increased from 21.2 per cent to 24 per cent and their economic participation rate from 17 per cent to 25 per cent. But in order for these and other reforms to be successful, there is a need for institutionalizing research-policy engagements that bring cutting-edge analytics to public decision-making. In advanced economies, Is evidence used for policymaking in Saudi Arabia?

35

in-house capacity to undertake rigorous original research at universities, think tanks with ability to effectively transmit findings to policymakers, and decision-makers’ capacity and willingness to engage with evidence results in improved public decision-making. Without any of these elements being present, countries will either remain dependent on outside help (donors, or consultants) or continue making poor decisions that could have been avoided with proper pre-analyses. For Saudi Arabia to progress to an advance stage of policy decisionmaking that improves social welfare for the vast majority of Saudis, the following set of activities must be undertaken initially with support from outside entities but in ways that would ultimately make their support redundant through the creation of personality-independent research institutions.

Strengthening research ecosystem Needs assessments should be undertaken to identify systemic con­ straints on academic output, including but not limited to universities’ professional advancement and incentive structures, government data sharing policies and procedures, and availability of research funding. There are massive variations across universities by type of funding, location and ranking or areas of expertise, which can be further explored by undertaking this exercise. Often this boils down to incentives at universities, i.e. assistant professors have little or no incentives to raise grants, undertake international standard research or creating policy institutions that will ensure lasting impact. Because employer universities do not value these attributes, employees stop investing in them which completes a vicious circle.

Training policy analysts Translating rigorous academic research into policy insights requires timely analytics to support decision-making. Policy analysts play a key role in supporting research and evidence use by senior policymakers, but their capacity must be built in order to use economic theory, data and evidence to analyse policy problems and potential solutions, and to convey research evidence to policymakers in meaningful ways. Policymakers always do not have the capacity or time to undertake their

36

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

own analysis, particularly in time-sensitive situations, so rely on analysts both within and sometimes outside their departments to provide rich analytics. Multilayered training programmes must be established where graduates would emerge as ‘champions of evidence’ within government and provide key linkages to the social science research community, enabling collaborative research-policy engagement to solve pressing policy challenges. Further, analysts should be trained in (1) policy writing and communications, including how to use data visualization to communicate empirical information to policy and general audiences; (2) research project planning; (3) project and research team management; and (4) human subject protection and compliance with international research code of conduct.

Improve policymakers’ capacity to undertake evidence-based policymaking Evidence-based policy reform requires intensive collaboration between senior policymakers, policy analysts and researchers over extended time horizons to diagnose and solve policy problems. Ultimately, demand for evidence from senior policymakers is fundamental to a strong researchpolicy ecosystem. Policymakers play critical roles both in commissioning evidence and in using evidence to inform decisions about policy design and implementation. Often senior officials are simply unable to understand regression results, or able to ask hard questions related to the statistical significance of findings being presented. Similarly, they may not have experience in asking the correct research or policy questions or create incentives for researchers to pursue topics that may be of interest to the public decision-making process. Having said this, policymakers are often well aware of their governance system’s shortcomings and have a deep understanding of underlying causes behind problems they are facing in day-to-day operations. Through the application of SPDI or other such frameworks in workshops curated by university faculty and professional conveners, policymakers’ capacity to systematically improve their understanding of these problems could be enhanced. These workshops could also become conduits for bringing together seasoned international experts, local academics and policymakers to form teams to undertake research-policy collaborations.

Is evidence used for policymaking in Saudi Arabia?

37

Investing in the nexus between rigorous empirical research and evidence-based policy has the potential to transform policy across a range of areas – from education to labour markets to economic policy, with long-term and significant dividends for Saudi citizens. A primary challenge in seeing this through would be in the leadership’s willingness to invest precious government resources into undertaking this effort, and to identify and build a singular public entity or department responsible and capacitated to undertake these reforms. How and when this team is able to coordinate with traditional line ministries, particularly higher education and labour, would be the make or break of this agenda.

Notes 1 ‘Labor Force Survey Q4 2018’, General Authority of Statistics, Government of Saudi Arabia.

2 Labor Force Surveys 2008 and 2018, General Authority of Statistics,

Government of Saudi Arabia. Figure adapted from Evidence for Policy Design (2019).

3 Graph obtained with permission from presentation by Ricardo Haussman (2019) at EPoD–HRDF policy symposium held in Cambridge, MA.

4 Figure obtained with permission from Ricardo Haussman (2019) from presentation delivered at the EPoD–HRDF policy symposium.

5 Ibid. 6 Ibid. 7 Ibid.

References Evidence for Policy Design. (2019). ‘The Labor Market in Saudi Arabia: Background, Areas of Progress, and Insights for the Future’, Harvard Kennedy School, https://epod.cid.harvard.edu/sites/default/files/2019-08/ EPD_Report_Digital.pdf General Authority of Statistics. (2018). ‘Labor Force Survey’. https://www.stats. gov.sa/en/34 General Authority of Statistics. (2017). ‘Labor Force Survey’. General Authority of Statistics. (2016). ‘Labor Force Survey’.

38

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Haque, N. ul (2017). Looking Back: How Pakistan Became an Asian Tiger by 2050. https://www.amazon.com/Looking-Back-Pakistan-Became-Asianebook/dp/B06X94135J Leber, A. (2019). ‘Resisting Rentierism: Labor Market Reforms in Saudi Arabia. Middle East Policy Science’, in Steffen Hertog (ed.), The Politics of Rentier States in the Gulf. London: London School of Economics and Political Science. http://eprints.lse.ac.uk/101386/1/Hertog_what_wou Looney, R. (2004). ‘Saudization and Sound Economic Reforms: Are the Two Compatible?’ Strategic Insights 3, no. 2. https://www.hsdl. org/?view&did=444343 Struyk, R. J. (2007). Managing Think Tanks: Practical Guidance for Maturing Organizations. 2nd edn. Washington, DC: Urban Institute Press. https:// www.amazon.com/Managing-Think-Tanks-Practical-Organizations/ dp/9639719005

Is evidence used for policymaking in Saudi Arabia?

39

40

2 HOW CAN SAUDI ARABIA BETTER COORDINATE DIVERGENT ECONOMIC REFORM AGENDAS? Lessons from the Scandinavian model of state–business relations Faris Al-Sulayman and Makio Yamada

This chapter introduces the concept of ‘reform dissonance’ to describe the lack of effective coordination between different economic reform agendas in Saudi Arabia, and explores how it might be overcome by drawing lessons from the historical formation of Danish state–business relations. Responding to the two underlying pressures – fiscal pressures brought about by lower oil prices since late 2014 and labour market pressures, particularly the persisting youth unemployment problem – the current Saudi leadership embarked on a new set of economic reform initiatives aimed at transforming the oil-dependent Saudi economy into a ‘knowledge-based’ economy that relies on the private sector as the main engine of growth and employment. The new blueprints for these development initiatives such as the Vision 2030 and several of its Realization Programs, such as the National Transformation and

Fiscal Balance Programs, advocate a liberalization agenda that includes privatization, financial deregulation and the lifting of subsidies.1 The liberalization agenda, however, often conflicts with other economic reform agendas that are being pursued in tandem. The statist job creation agenda, aiming to respond to unemployment challenges, is one such agenda. Due to population growth and lower oil prices, the state’s distributive umbrella is no longer capable of supporting all citizens through public sector employment, the traditional form of rentier patronage.2 As such, the Saudi leadership has engaged in a concerted effort to create job opportunities outside the public sector. Theoretically, the liberalization and statist job creation agendas can go hand in hand – a stronger private sector that is empowered by appropriate policy interventions can create jobs for Saudi youth. In reality, however, these two agendas often conflict. In particular, labour localization efforts using quotas have constrained the growth of the private sector, whose business models are largely reliant on the use of low-cost foreign labour. With private sector growth remaining sluggish, state-owned enterprises (SOEs) and state-sponsored ‘national champions’ are often deployed and nurtured in nascent non-oil sectors as a shortcut solution to the job creation problem. This strategy, however, risks creating a vicious cycle, further inhibiting private sector growth by crowding out private firms, especially small- and mediumsized enterprises (SMEs). This strategy also inhibits the development of the state’s regulatory capacity that is required for ensuring and managing productive market competition and formulating and implementing effective human capital and labour market policies. Can Saudi Arabia coordinate these different economic reform agendas and pursue both goals simultaneously and in a harmonious manner? This chapter will address this question in two steps. First, it will outline the phenomenon of reform dissonance, examining how the liberalization and statist job creation agendas emerged in response to different sets of pressures on the Saudi rentier state. It will then highlight particular reform dissonance problems such as the distorting effect of public sector entitlements, the mismatch between the pace of human capital development and labour localization requirements, and the crowding-out effect. Second, it will explore successful institutional models elsewhere in order to extract insights that may shed light on the Saudi reform initiatives. Although the rentier state does have some specificities, reform dissonance itself is a challenge facing many other 42

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

countries. The chapter will engage in what we call ‘deep benchmarking’ – examining the political-economy conditions behind the genesis of foreign models and carefully assessing the Saudizability of such models by comparing these conditions with those existing in today’s Saudi Arabia. In particular, a Scandinavian (Danish) model of state–business relations, where welfare states and productive economies co-exist, will be analysed.

Reform dissonance: The Saudi rentier state facing dual pressures Decline in the fiscal capacity of the state following the fall in oil prices in late 2014 and challenges of youth unemployment have been two of the dominant underlying pressures driving economic policy in Saudi Arabia in recent years. In decades past, issues of unemployment were addressed through public sector hiring, but with increasingly limited resources relative to the size of population, these old mechanisms are becoming less viable, requiring a shift to a post-distributive policy environment in the Kingdom. These trends have also formed the backdrop against which significant domestic political change has taken place since 2015 with a leadership that is attempting to undertake a series of transformational economic reform programmes, most notably Vision 2030, and the numerous Realization Programs under its umbrella. Vision 2030, the long-term blueprint, provides an overarching framework for the diversification of the Saudi economy away from oil, and is organized by thematic area: a vibrant society, thriving economy and ambitious nation. The more granular National Transformation Program, which is one of the more notable Realization Programs, has a shorter timeline, and includes ninety-six strategic objectives and a range of key performance indicators (KPIs) to measure progress. These changes taken together have precipitated the early stages of transformation in the social contracts between the state and the various constituencies in the Kingdom. The most obvious example, as described in nearly three decades of rentier state literature, is the exchange of government employment and other welfare benefits for political acquiescence between Saudi leadership and citizens. Central to this social

COORDINATED SAUDI REFORM AGENDAS

43

contract was the absence of both taxation and meaningful representation.3 But fiscal constraints have now forced the introduction of a variety of new non-income taxes and fees and the partial lifting of some energy subsidies, representing the first small changes to an important variable in the long-standing social contract. One fruitful way to deconstruct this changing policy landscape is to start with identifying the underlying pressures confronting the state and then explore how they have driven policymakers to respond with certain policy initiatives. Two pressures are evident as the dominant forces shaping economic policy. The first pressure is the decline in oil prices that began in the latter half of 2014 and persisted until 2021 following the Covid-19 pandemic and the ensuing global recession; this brought about fiscal deficits on a larger and more troubling scale than those seen in the last two decades (the deficit figure of 14.8 per cent of GDP in 2015 was the highest recorded since 1991).4 This pressure is, however, not unique to Saudi Arabia, with other Gulf Cooperation Council (GCC) states facing similar fiscal pressures. The second pressure emerges as a result of the demographic trends that are bringing large numbers of young people into the labour market. This kind of demographic pressure is quantitatively different in the case of the Kingdom from its GCC peers, as the sheer number of young people seeking to enter the labour market every year is far larger. According to the estimate made by the Saudi General Authority for Statistics (GaStat), 58 per cent of the population (around 12 million) is under the age of thirty.5 A very large percentage of youth, as high as 40.5 per cent (ages 15–24), are unemployed according to the estimate made by a recent IMF report.6 It is the confluence of these two pressures that threatens the long-term fiscal health of the state. The size of the current public sector wage bill in the Kingdom (46 per cent of total expenditure in 2018)7 is indicative of how the state handled large numbers of entrants into the labour market in previous decades – by offering public sector employment as a form of patronage.8 In the current climate, however, these two pressures have brought about the rise of two different and often-conflicting economic agendas, with the fiscal situation prompting a liberal economic response from the state, with a lighter burden of responsibilities towards its citizens, and the unemployment pressures prompting what we call a job creation agenda, using a mixture of new and traditional forms of rentier statist economic policy. 44

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

The conflict between the liberalization and statist job creation agendas As a response to the fiscal pressures described above, the Saudi state has rolled out a number of new economic liberalization policies intended to alleviate the pressure on the state resulting from its role as the economy’s main provider of employment by promoting private sector growth and attracting foreign direct investment (FDI). This part of the reform package has been largely met with a positive response from the global investment community, which is eager to gain greater access to what is seen as a largely untapped emerging-market economy.9 In particular, the privatization elements of the agenda, perhaps the most recognizable of the Vision 2030 economic initiatives, have attracted wide interest from global investors. The government has outlined plans to offload state assets in several sectors including healthcare, education and infrastructure (especially the power and water sectors and airports), though this element has seen slower in implementation than some of the other policy areas. The IPO of a small portion of shares in Saudi Aramco in 2019 was perhaps the most visible element of this plan. Another group of policies is focused on budget rationalisation. This includes cuts in state expenditure, particularly in education, healthcare and infrastructure, and some early attempts to reduce public sector benefits and freeze the growth of public sector compensation. The Saudi state has also implemented limited subsidy reform measures, by raising some electricity tariffs and announcing a linking of fuel prices to an international ‘reference price’ (although the reference mechanism has not been disclosed).10 The introduction of the Citizens Account Program in 2017 a direct cash allowance for low-income households aimed to mitigate the effect of these changes. On the revenue side, the roll-out of a variety of excise and sin taxes in 2017 and a value-added tax (VAT) in January 2018 form part of a larger policy focus on indirect or non-income taxation. In response to the economic crisis brought on by the Covid-19 virus, the state announced an increase in VAT to 15 per cent starting in the second half of 2020, but has decided to also significantly reduce fuel prices. More broadly, efforts have been made to improve the investment climate through financial deregulation and legal reforms. This involves efforts to liberalize equity markets to promote investment and the opening of a wider range of industries to greater foreign ownership. A new bankruptcy law has also been introduced.11 COORDINATED SAUDI REFORM AGENDAS

45

Although these reforms have been well received by global investors, the response from the local private sector has been rather lukewarm.12 Local businesses are undoubtedly interested in the privatization opportunities, but energy subsidy reform, along with a host of new taxes and levies, has significantly increased the price of doing business, particularly for energy-intensive industries where the dominant business model has been one which relies on very low-cost inputs.13 Moreover, this has come at a time when the state has curtailed capital expenditures, which in years past has been the most important factor underlying private sector growth. It also opened the door to greater competition with foreign capital. Emerging as a result of the strong demographic pressures in the labour market, the state has also simultaneously continued to maintain a series of policies that have been grouped here under the umbrella of the statist job creation agenda. These policies have a common statist theme, and have traditionally been viewed with scepticism from the private sector, which historically has prioritized the reduction of labour costs. The cornerstone of this agenda is the ongoing effort of the Ministry of Human Resources and Social Development (previously the Ministry of Labour and Social Development) to increase the number of Saudis working in the private sector. For this purpose, the ministry has introduced a range of programmes including the Nitaqat and Taqat Programs, which require or incentivize the private sector to recruit larger numbers of workers locally according to a set of rules and regulations.

The distorting effect of public sector entitlements The first, and most prominent, example of reform dissonance is the state’s attempt to encourage the growth of private sector employment while maintaining above-market price levels of public sector pay, benefits and bonuses, which continue to have a distorting effect on the labour market. This feature of public sector employment, which is endemic to the distributional structure of the rentier state, forms arguably the most significant challenges to the agenda of economic reform. A specific example of this conflict was the announcement by the government, in January 2018 – five days after increases in utility prices and the introduction of VAT – of a series of cash allowances to government employees and members of the armed services.14 The selective mitigation of these new economic conditions for public sector employees reinforced 46

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

the wage disparity between employees in the public and private sectors. In a deeper sense, however, the government’s move revealed that even in an era of liberalization, the reflexive reaction of the state, when faced with rising unemployment and its implicit political costs, is to rely on older instruments of patronage. It is worth noting that at the early phase of the reform, an attempt was made to curtail and cut back on some elements of public sector employee benefits; the first attempt came in late 2016 in the midst of the low oil price environment and large anticipated budget deficits (the average annual oil price in 2016 was the lowest since 2005). However, these cuts were reversed in April of 2017 following a substantial recovery in the oil price.15 This was an indication of the rigidity and political sensitivity of the social contract between the state and public sector employees, and, more broadly, the sticky nature of wages (which are slow to adjust to changes in labour market conditions). It made it clear that a direct attempt to curtail Saudi public sector wages was not deemed to be politically feasible at the time. With a return to lower oil prices in 2020 once again, the government also launched another attempt to curtail some of the additional allowances that had been announced since 2017.16 In the private sector, the state has undertaken a number of policy initiatives aimed at facilitating labour localization by narrowing the wage gap between local and foreign labour. Foreign labour fees, which were first applied in 2013 at a rate of SAR 200 (USD 53) per foreign employee per month, have began to increase as of 1 January 2018;17 the amount as of 2020 is SAR600 (USD160). These changes have had a significant impact on businesses operational costs. In order to make further serious progress in narrowing the wage gap, the fees collected from the private sector through the levies on foreign workers and their dependents could be redirected and used to directly support private sector Saudi employment, in a system similar to Kuwait’s private sector wage support programme (Da‘am ‘Amala).18 This would be an example of how the two sets of policy approaches – the foreign labour levy and a potential wage support programme – could be calibrated to balance each other in a way that both contributes to Saudization goals and supports what is currently an anaemic local private sector. Efforts in this direction have been made by the HRDF, with a new wage support programme rolled out in 2019 focused on supporting jobseekers looking for training and employment in the private sector. The programme provides support for up to 30 per cent of the salary of a newly employed Saudi COORDINATED SAUDI REFORM AGENDAS

47

man or woman for the period of one year, with support decreasing to 20 per cent and then 10 per cent in the subsequent two years. The programme is being rolled out in multiple phases, with the first phase targeting jobs in engineering, financial services and medical services, with a variety of other conditions jobs seekers and private sector entities need to fulfil in order to qualify for support. As of April 2020, 51,000 Saudi workers were registered in the programme. However, it remains unclear at this stage how large the programme will eventually be, and to what extent private sector firms and jobseekers will be able to take advantage of the programme in large enough numbers to change overall labour market conditions.19

Mismatch between the pace of human capital development and labour localization requirements The second type of the conflict is a mismatch between the pace of human capital development and labour localization requirements. A frequently cited example involves the skills gap between young Saudis graduating from public education and what employers require from employees in the labour market. Though the Saudi state’s education budget has been one of the world’s largest in terms of its proportion to GDP (Saudi Arabia spent 7 per cent in 2019 compared to 5–6 per cent for Germany and the UK and 3 per cent for Japan),20 educational outcomes in STEM (science, technology, engineering, mathematics) subjects remain lacklustre. For instance, in 2015, Saudi Arabia ranked third lowest of forty-five countries that were tested for fourth-grade math scores; its scores declined between the last two global studies of adolescent math and science skills, and Saudi Arabia was the only country that had lower scores in both the fourthgrade and eighth-grade categories compared with the test conducted in 2011.21 What this suggests is that varying outcomes are not necessarily a result of expenditures, but may be influenced by different structural factors in the sector and broader political-economy conditions. The Ministry of Education in Saudi Arabia has long been one of the main venues for patronage politics, and much of the education spending goes towards paying for a large wage bill. While the Education Ministry has been working on improving students’ STEM performances, the Labour Ministry has been setting its own regulations for the private sector to replace skilled foreign

48

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

workers with Saudi ones. The country’s industry-specific licensing and regulatory regimes are often known for their complexity, setting requirements for companies to have certain numbers of employees with particular sets of qualifications. A case in point involves the renewable energy sector, where regulations to manage small- and medium-sized solar systems that feed into the electric grid have been developed in recent years. Installers as well as consultants in this field have to comply with a set of specific human resource requirements, detailing the types of degrees engineers need to have, the numbers of projects they must have undertaken and the years of experience they must have accrued. Businesses often struggle to meet these qualifications with local workers, particularly in a new industry. This mismatch then forces them to look abroad for qualified talent, creating a tension with the labour localization demands.22

The crowding-out effect Another kind of conflict, which has manifested in a variety of industries and on different scales, emerges from the growth of SOEs and state-run initiatives. A perception that they are having a ‘crowding-out’ effect on investment from the local private sector, and SMEs in particular, has been on the rise. SOEs’ directly tackling opportunities in certain strategic industries, often through cooperation with foreign joint venture partners, can be viewed as an attempt to bypass elements of the liberalization agenda, and use statist policy as a shortcut tool in the job creation agenda. It also derives from the state’s eagerness to spur rapid growth in industries that have been neglected in the past by creating ‘national champions’. For example, the state-owned Public Investment Fund (PIF) states the goals for its domestic portfolio is to ‘be an important catalyst for the Kingdom’s economic transformation and for the launch and development of new sectors, including (but are not limited to) industrial and manufacturing, entertainment, and waste management’.23 Since 2016, the PIF has launched thirty new companies in ten different sectors.24 This crowding-out effect may contribute to a rather insidious cycle that slows down the project of building the state’s regulatory capacity, including its capacity to deal with the mismatch problem discussed above; shortterm improvement in key indices, and employment numbers, further disincentivizes important investments in capacity-building.

COORDINATED SAUDI REFORM AGENDAS

49

Can reform dissonance be replaced by ‘reform resonance’?: A Scandinavian model The question now is: how can Saudi Arabia find a solution to this coordination problem, and replace this reform dissonance with ‘reform resonance’? This has been a pressing question for policymakers in the Kingdom, but it is in fact a policy challenge that has faced policymakers in many countries, both in the developing world and in the OECD. The widespread nature of this challenge, regardless of the form and degree of development, derives from a structural shift in the economy caused by technological advancements, which require new kinds of human capital and adaptive forms of labour policy. The challenge has created growing domestic inequalities in a number of OECD economies, with workers in traditional industrial sectors enjoying less job-protection, and jobseekers who do not have access to opportunities for apt training and re-training remaining unprepared for new types of jobs. As suggested by the Varieties of Capitalism scholarship, how governments in OECD economies address the problem of skills and employment largely rests on institutional configurations that were established in the course of their initial industrial growth – configurations, which were critical in propelling their transition from a ‘developing county’ status.25 Thus, referring to how these institutional configurations emerged historically and how they have helped build state capacity should shed light on how policy coordination can be achieved. In particular, two distinctive models for state–society relations that are considered to be conducive to state effectiveness – Scandinavian and East Asian models – are identified by Evans, Huber and Stephens (2017). These authors argue that ‘neoliberal fantasies’ – a blind appreciation of the role played by market forces in economic growth – have faded and research on development and well-being now places a greater emphasis on how services and public goods are ‘co-produced’ by the state and society.26 Among the two models, this chapter will discuss the Scandinavian model in particular and lessons that can be derived from that model for Saudi Arabia. There are a number of good reasons to think that the Scandinavian model would provide useful insights for reform initiatives in Saudi Arabia. First, as Huber and Stephens (2001) claim, Scandinavian

50

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

welfare states have traditionally been embedded in productive institutions, enjoying a virtuous cycle of quality investment ensuring the fiscal sustainability necessary for generous social policy.27 Second, as Thelen (2014) argues, these countries have been more successful in maintaining egalitarian capitalism compared to other OECD economies: they have adapted, rather than adopted, marketization, defending principles of ‘social solidarity’ and empowering vulnerable segments of the national workforce.28 The Scandinavian experience, therefore, appears to offer useful lessons for the Saudi case in many of its policy tasks such as balancing entitlements and productivity; achieving a transition to a knowledge-based economy from the low-cost production model; maintaining equality while unleashing market forces; and empowering the local workforce without slowing private sector growth. In fact, following a period when the old model had suffered from severe fiscal distress caused by the stagflation in the 1970s, Scandinavian countries have shifted away from their old welfare model based on ‘passive’ policies distributing benefits to the citizenry, towards a model with active labour market policy (ALMP) aimed at making entitlements and productivity compatible with one another. ALMP represents a type of intervention that encourages unemployed workers to renew their skills and keep up with structural shifts in the economy. The unemployed in these countries are eligible to receive training programmes provided by private firms to increase and expand their skills set. This human capital-oriented welfare model – also called flexicurity, combining the elements of security and flexibility – is founded upon high levels of cooperation by private firms with the state, and a willingness of these firms to contribute to collective benefits; the cost of these training programmes is often half funded by the state, but the other half is shouldered by the private sector in the case of Denmark, for instance. Leaving training to private firms is indeed an effective approach to the mismatch of jobseekers’ skills and those required in the labour market. Although providing opportunities for apt job-oriented education and training is an essential part of surviving the structural shift in the economy, it is much easier said than done. Indeed, this skills mismatch is considered to be one of the ‘market failure’ problems: unlike in the past when industrial requirements were simpler in terms of technology and skills, identifying rapidly changing ‘tastes and technologies’ in the market and feeding them into education curricula in a timely manner are increasingly difficult today.29 COORDINATED SAUDI REFORM AGENDAS

51

Nevertheless, why do private firms in Scandinavian countries accept such high burdens? Although such collectivist long-term thinking may be wise in itself, it is certainly not an easily attainable state of affairs, given the assumption that firms tend to operate to maximize their individual short-term profits. Martin and Swank (2012) argue that the ALMP-based welfare model rests upon the state–business relationship they refer to as ‘macrocorporatism’, in which private firms are widely and deeply organized, and such organized businesses are brought on board in the policymaking arena as social partners. These social partners help reform the welfare state in response to the shifting economic landscape through collectively articulating a wide range of interests and engaging in policy implementation. Due to their continued participation in the policymaking process, they also build a high capacity for research based on formal study groups and informal networks.30 According to Martin and Swank, despite their short-term costs, private firms are incentivized to join such a macrocorporatist system because in return they are granted access to information and are able to exert influence on the design of labour programmes; and broadly they have an intrinsic desire to curb the growth of the welfare state. They also have access to an extensive labour pool to fill in workforce gaps when their employees are on leave for upskilling (referred to as the ‘job rotation’ system). These benefits are also communicated to individual firms by employers’ organizations which serve to help their member firms recognize the collective benefits of investing in reskilling and cooperating to build up capacities to expand the skilled labour pool.31

The origins of macrocorporatism: The case of Denmark The idea that the state and organized social partners could co-produce public goods and develop regulatory capacity is appealing to policymakers interested in reform. However, particularly in relation to its replicability in other countries, the question still remains: How did such high levels of organization of business interests, which is costly itself, occur in the first place? How did employers’ organizations in Scandinavian countries overcome the collective action problem inherent in making such coordination happen? In fact, the macrocorporatist state–society relationship did not emerge all of a sudden in the 1980s; its roots were embedded in the 52

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

socio-economic history of the country. Martin and Swank trace the origins of macrocorporatism to the late nineteenth century when these countries saw the rise of early capitalism. During that period, employers in emerging industries also suffered from the skills mismatch problem of that time. They were in need of the state’s support on this front, but the policymaking arena then was largely formed of old privileged agricultural interests which still employed the majority of the workforce.32 Thus, to counter them politically, they needed to form effective lobbying groups. Nevertheless, the need itself did not automatically facilitate organization since the collective action problem continued to hinder such bottom-up efforts to organize. Martin and Swank argue that what catalysed the required organization was politics. In particular, political competition in the emerging electoral system played a large role, where party leaders began to organize their constituencies with the aim of expanding their support base.33 Taking Denmark as an example, they show that the Danish Right Party, a party representing industrialists, developed employers’ organizations as social partners for the first time and delegated certain policymaking powers to these partners. Organization was thus facilitated in a top-down, as well as a bottom-up, manner. The party built these institutional arrangements in order to mobilize the support of the working class. Because of the rise of socialist movements at the time, its leaders were afraid that, without building these institutional arrangements, a formidable electoral competitor representing workers’ voices would grow. In this manner, employers’ organizations began to serve as major platforms for facilitating cooperation between industrialists and workers.34 Nevertheless, such highly coordinative institutions did not emerge in other economies which also experienced a rise in the popularity of socialist ideologies. According to Martin and Swank, the design of the electoral system played a role in this divergence. In Denmark, its multiparty system with proportionate representation made coalition formation a norm, where industrial employers tended to support a single party representing their interests. Nevertheless, in countries with a majoritarian two-party system, both parties try to attract the median voter and the electoral change brings radical policy reversals. In such systems, employers dispersed between the parties, and the parties did not face a strong incentive to organize them.35 How applicable is the social partners model to contemporary Saudi Arabia?: Power of politics COORDINATED SAUDI REFORM AGENDAS

53

The above suggests that the creation of the macrocorporatist state– business relationship in Denmark (and Scandinavian countries more broadly) was path-dependent. How applicable, then, is the social partners model to contemporary Saudi Arabia, which has substantively different political, economic and social conditions? Can today’s Saudi policymakers facilitate a similar outcome of private sector organization and bring similarly organized businesses on board as social partners for the creation and implementation of policies? Such organization has been largely absent in the Kingdom due to its highly distributional state–society relationship:36 even the chambers of commerce in the commercially vibrant Hejaz region are to a large degree reliant on patronage networks and only equipped with weak formal institutions.37 As discussed in the first half of this chapter, such a distributional system was also constructed in response to the political challenge posed by socialism, particularly the variety embraced by the populist distributive state in Egypt under Nasser.38 Nasser, the revolutionary army leader who toppled Muhammad Ali’s dynasty, engaged in a political alliance with peasants who had long been excluded from the patronage networks under colonial capitalism (many of them sought security in the modern army).39 Nasser’s distributive socialist state proclaimed the pursuit of social equity as its primary aim and condemned liberalism as corrupt and controlled by foreign imperialists.40 Nasser also inherited the distributional institutions formed during the Second World War, most notably the Middle East Supply Centre, which had been established by the Allies to simultaneously achieve two wartime goals in the region: building economic self-reliance and maintaining stability. These two goals were essential for the Allies, who needed to divert their shipping capacity away from the region to global battlefields, while sufficiently supporting the welfare of local populations so as to prevent agents of the Axis powers, or radical nationalists, from gaining a foothold.41 Reflecting the Keynesian interventionist economic vision of its builders, the Centre, according to Vitalis and Heydemann (2000), revised the crony-capitalist order that had been dominant in the region before the war, paving the way for populist distributive systems after decolonization,42 while shifting the dominant vision of Arab nationalism from elitist liberalism to distributional justice.43 While neither sharing peasant politics nor wartime colonial mobilization, the Al Saud regime, nonetheless, faced the formidable

54

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Nasserist challenge to its ruling legitimacy at that time, and faced pressures to compete in building a distributive state for its survival. Thus, the Saudi state came to use its increasing oil rents to co-opt citizens by employing them in the public sector and making them financially reliant on the state. Such divergent responses to this socialist challenge from Saudi Arabia on the one hand, and the Scandinavian states on the other, may be explained by the different political-economy legacies carried forward from the previous period. The early modern Scandinavian states already witnessed a certain level of industrial growth that had created significant class division in their society. Thus, the political management of inter-class relations became the focus of their ruling coalition’s attempt to contain socialist forces. On the other hand, the Saudi state in the mid-century faced high distributional demands from a yet underindustrialized workforce. What the above implies, however, is that a perception of political threats by the ruling regime plays a large role in shaping its policy response. In the Saudi context, as long as the state maintains a highenough distributive capacity to co-opt the population, the state is likely to continue being wary of the possibility that an organization of business actors will bring about the kind of collective action that eventually transforms into political bargaining power. Nevertheless, in the context of the declining distributive capacity of the state, rulers’ calculus in relation to this type of organization may also shift. Such a shift may happen when the political risk brought by economic failure is perceived to be greater than the risk of at least partly allowing associational life and bringing organized businesses into the policymaking arena, for instance. Although such a scenario remains hypothetical, it merits further study by referring to historical cases looking at how shifting threat perceptions may open up different policy options.

Can clientelistic forces be overcome? Another potential barrier is the state’s actual capacity to facilitate such organization and cooperation. As a result of the decades-old distributional state–society relationship, rent-seeking behaviours are now rife in Saudi society, where ‘reverse clientelism’ – social actors’ exploitation of patronage to pursue their own individual interests – is widespread. In such a context, the state’s efforts to organize may be exposed to a wide

COORDINATED SAUDI REFORM AGENDAS

55

range of individualistic attempts to exploit such opportunities and seek patronage. The risk may be particularly high where private firms operate on ‘regulatory rents’, such as licences and market exclusivity. Welldesigned facilitation of collective action would be required to prevent these ‘façade social partners’ from dominating the policymaking arena with a veneer of coordination legitimacy. Here, an interesting observation is made by Pritchett, Sen and Werker (2018) that the nature of ‘deals’ struck between the state and businesses though their political settlements is dependent upon how businesses make profits, particularly whether they do so through capturing rents or competition.44 This suggests that to make the nature of the state– business deals conducive to effective policymaking, the regime needs to have competitive and productive constituencies that are strong enough to check rent-seeking constituencies. To recall the Danish case, there were already bottom-up efforts to form lobbying groups among emerging industrialists, and these industrialists lived in a different economic space from the old agricultural economic interests. In the case of Saudi Arabia, the structural problem may be that its private sector largely represents businesses which have been dependent on the distribution of oil rents (such as construction and finance) to the degree that rent-seeking has been deeply ingrained even in their political behaviour.45 If this is true, it would not be easy to expect that the state’s efforts to organize will lead to effective coordination. Thus, organization may require a preparatory step: the empowerment of competitive and productive constituencies, from which publicoriented social partners can emerge. This would require the creation of the right kinds of spaces which offer a level-playing field free of patronage. Practically, such spaces can be created at the micro level (at the sector level for example) rather than in the form of unrealistic wholesale reform. A chicken-and-egg caveat may be posed here that the creation of such spaces should require a certain minimum threshold of regulatory capacity first; but the two elements are mutually incrementally constitutive. The emergence of a few such spaces will generate a modest incentive to develop regulatory capacity, and a positive feedback loop will ensue. However, the continuing absence of such spaces is only conducive to the perpetuation of the kind of red tape that benefits rent-seeking and crony-capitalist behaviour, and the reproduction of associated negative feedback loops.

56

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Conclusion The reform dissonance between the liberalization and statist job creation agendas described in this chapter has slowed the economic transition outlined in the Vision 2030 document. If the conflicts between these two agendas persist without mediation, the country’s reform potential will be greatly constrained. For the state to ‘crowd in’, rather than ‘crowd out’, competitive private sector players, its strategy will need to shift from being a direct player in the economy to undertaking a facilitative role. In particular, the state’s regulatory capacity has to be developed, so that regulations are managed in a clear and predictable manner and clearly communicated to private firms. Only under such conditions can competing social interests be balanced in the interest of the public, and effective human capital and labour market policies can be formulated and implemented. Without such regulatory capacity, liberalization programmes are liable to exploitation by clientelistic players, and likely to result in little more than a change of venue for rent-seeking, from inside to outside the state. Moreover, the dominance of such clientelistic players produces negative feedback loops that continue to hinder the state’s effort to build regulatory capacity and shift its role to that of a facilitator. To some degree, the reform dissonance described here reflects the fact that even a highly centralized decision-making structure is subject to some competition between governing (rather than ruling) elites and entities who have different approaches to reform. The initiative to build ecosystems for sustainable private sector growth, thus, requires a cohort of productive private sector players – not ones who profit from regulatory rents – to form alliances with public-minded bureaucrats and support them in their continuing struggle against forces promoting the older forms of patronage politics. The incremental creation of spaces for such competitive players would form a first step towards such development.

Policy proposals: Building a ‘microcorporatist’ model While the Scandinavian macrocorporatist model appears to be one of the ideal state–society relationships in this light, it is, nevertheless, a model which emerged from a particular time and set of electoral conditions. It is, thus, unrealistic to assume that the model as a whole is transferrable

COORDINATED SAUDI REFORM AGENDAS

57

to today’s Saudi Arabia, where the regime’s threat perception of not organizing still appears to be lower than its perception of a threat arising from organizing; and where rent-seeking constituencies remain dominant, implying that even the state’s effort to organize certain areas of the economy continues to have a high chance of being exploited by façade social partners. Thus, it will be more practical for today’s Saudi Arabia to target the creation of a microcorporatist model as an initial step. Developing this model starts with creating micro-spaces where firms compete with each other and raise their collective productivity, rather than winners being picked through patronage. These competitive-productive constituencies can then be brought on board as ‘micro social partners’ to inform policymaking, and help implement policies. State agencies they work with may vary depending on the nature of sectors and policies. For the space-making side, a variety of state institutions that create and regulate economic opportunities would be relevant actors. For the micro-organization side, given that decades-old chambers of commerce are often represented by big businesses, new entities that can collect and articulate the voices of competitive young businesses, such as the General Authority for SMEs (Monsha’at), may be best positioned to take on this task. These entities can bring in competitive businesses into the policy-making and policy-coordination arenas as social partners. Such an organized public–private partnership will help the state build its capacity to regulate in accordance with the needs of competitive private sector players while, ideally, limiting the space for patronage in the economy in the long run. Embarking on such a first step has become particularly urgent as the Kingdom’s fiscal situation deteriorates further due to the economic repercussions of the Covid-19 pandemic.46 The simultaneous challenges of a contracting economy – resulting in lower private sector growth and hiring – and greater fiscal constraint – resulting in reduced opportunities for state hiring – are likely to exacerbate the unemployment problem further; and these challenges may remain for years to come. The recommendations outlined in this chapter will be all the more relevant in such circumstances.

Notes 1 These documents are viewable at the Saudi Vision 2030 website, https:// vision2030.gov.sa

58

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

2 Rentier state theory assumes that the state distributes oil income through

public sector employment in exchange with political support or silence (Luciani 1987); the National Transformation Program 2020 aimed to bring down the unemployment rate among Saudis from 11.6 per cent to 9 per cent and increase the labour localization rate in the private sector from 19 per cent to 24 per cent. At the end of 2020, the Saudi unemployment rate was 12.6 per cent and the labour localization rate in the private sector was 21.7 per cent (General Authority for Statistics, Kingdom of Saudi Arabia, ‘Labor Market Statistics Q4, 2020’).

3 Luciani (1987: 73–6). 4 Ahmed Feteha, ‘Saudis Risk Draining Financial Assets in 5 Years, IMF Says’, Bloomberg, 21 October 2015; Saudi Arabian Monetary Agency, Fifty Second Annual Report, 2016.

5 Saudi Arabia General Authority for Statistics, ‘Population by Single Age, Nationality (Saudi/Non-Saudi) and Gender, Mid-Year 2018’.

6 International Monetary Fund (2017: 7). 7 ‘Saudi Arabia’s 2019 Budget Report, Medium Term Outlook and Insights, MoF Figures, Strategic Gears Consulting’, p.18.

8 Luciani (1987). 9 F. Brinley Bruton, ‘“Davos in the Desert” Offers Glimpse of Changing Saudi Arabia’, NBC, 24 October 2017.

10 Fiscal Balance Program 2018 Update, Ministry of Finance; ‘Jadaan Says

Measures to Boost Saudi Public Finances: Transcript’, Bloomberg, 11 May 2020.

11 Baker McKenzie, ‘Saudi Arabia Issues Its First Developed Bankruptcy Law’, 5 March 2018, http://www.bakermckenzie.com/en/insight/ publications/2018/03/saudi-arabia-first-developed-bankruptcy-law

12 Kinninmont (2017: 27). 13 Vivian Nereim, ‘Anger at Rising Prices Hits a New Target in Saudi Arabia: Milk’, Bloomberg, 3 July 2018.

14 Alaa Shahine and Vivian Nereim, ‘Royal Handouts Cheer Saudis but Show Struggle to Revamp Economy’, Bloomberg, 7 January 2018.

15 ‘Saudi Arabia Restores Perks to State Employees, Boosting Markets’, Reuters, 23 April 2017.

16 ‘Saudi Arabia Triples VAT, Cuts State Allowances Amid Crisis (2)’,

Bloomberg BNA News, news.bloombergtax.com/daily-tax-reportinternational/saudi-arabia-triples-vat-cuts-state-allowances-as-crisis-bites

17 Sara Khoja and Ahmed Almazed, ‘KSA: New Fees Applicable for Foreign Employees & Dependents’, Clyde & Co., 9 January 2018,

COORDINATED SAUDI REFORM AGENDAS

59

www.clydeco.com/insight/article/ksa-fees-applicable-for-foreignemployees-a-new-development-and-a-recap

18 Steffen Hertog, ‘Mohammed Bin Salman Isn’t Wonky Enough’, Foreign Policy, 14 March 2018.

19 HRDF, ‘Employment Subsidy Program for Upskilling’, www.hrdf.org.sa/ Program/484/_Employment_Subsidy_Program_for_Upskilling

20 OECD, ‘Education GPS–Saudi Arabia–Overview of the Education System

(EAG 2018)’, gpseducation.oecd.org/CountryProfile?primaryCountry=SAU &treshold=10&topic=EO. World Bank Data Catalogue, UNESCO Institute for Statistics.

21 Mullis et al. (2015: 15). 22 The HRDF’s Tamheer programme (‫ )ريهمت جمانرب‬is one of the labour ministry’s latest efforts to address the skills mismatch: it subsidizes job training for Saudi employees for up to six months (HRDF Tamheer programme, https://hrdf.org.sa/Program/433/TAMHEER?bc=264)

23 Public Investment Fund (2018: 14). 24 ‘PIF - ​Public Investment Fund’. Accessed 12 February 2021. https://www.pif. gov.sa/en/MediaCenter/Pages/NewsDetails.aspx?NewsID=63

25 In the Varieties of Capitalism literature, both Scandinavian and East Asian

economies tend to be counted as coordinated market economies (CMEs). CMEs are prone to protect workers more and provide greater opportunities for training than liberal market economies (LMEs) in which laying-off and self-help are the norms (Hall and Soskice 2001).

26 Evans, Huber and Stephens (2017: 380–1). 27 Huber and Stephens (2001: 1). 28 Thelen (2014: 198–200). 29 Booth and Snower (1996: 1–3). 30 Martin and Swank (2012: 170–1). 31 Ibid., 182–6. 32 Ibid., 28–9. 33 Ibid., 35. 34 Ibid., 68. 35 Ibid., 37. 36 Gulf merchants had greater opportunities for informal organization before

the rise of the oil industry and the subsequent rentierization-fragmentation of their communities (Bishara et al.: 212).

60

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

37 Kraetzschmar (2015: 186–7). 38 Hertog (2018: 76–9). 39 Choueiri (2000: 175). 40 Ibid., 173. 41 Vitalis and Heydemann (2000: 116). 42 Ibid., 111–12. 43 Ibid., 133. 44 Pritchett, Sen and Werker (2018: 350). 45 Hertog (2011); Kraetzschmar (2015). 46 Owing to the new borrowing strategies, the decline in the country’s foreign

reserves almost stopped following the decline by one-third from SR 2.7 trillion in mid-2014 to SR1.8 trillion in mid-2017; as of March 2020, SR1.7 trillion remained (although this was the lowest level after 2001) (‘SAMA Foreign Assets Close to SR2 Trillion’, Saudi Gazette, 25 July 2017; ‘Painful Steps Ahead to Fight Economic Downturn–Al-Jadaan’, Saudi Gazette, 2 May 2020). Nevertheless, public debt has continued to grow: it was projected at the beginning of the fiscal year 2020 that the amount of debt will reach SR0.75 trillion by the end of the year, but, because of the expenditures in relation to the Covid-19 pandemic, this projection has been revised to SR0.85 trillion and it is now expected to reach SR0.93 trillion in 2021 (‘Saudi Expects Wider 2020 Budget Deficit of $50 Billion – Finance Minister’, Saudi Gazette, 31 October 2019; ‘King Salman Approves SR990bn Budget for 2021’, Saudi Gazette, 15 December 2020).

References Baker, M. (2018, 5 March). ‘Saudi Arabia Issues Its First Developed Bankruptcy Law’. Retrieved from http://www.bakermckenzie.com/en/insight/ publications/2018/03/saudi-arabia-first-developed-bankruptcy-law Bishara, F. A., Haykel, B., Hertog, S., Holes, C. and Onley, J. (2016). ‘The Economic Transformation of the Gulf ’, in J. E. Peterson (ed.), The Emergence of the Gulf States: Studies in Modern History. London: Bloomsbury. Booth, A. and Snower, D. J. (eds). (1996). Acquiring Skills: Market Failures, Their Symptoms and Policy Responses. Cambridge: Cambridge University Press. Bruton, F. B. (2017, 24 October). ‘“Davos in the Desert” Offers Glimpse of Changing Saudi Arabia’. Retrieved from https://www.nbcnews.com/news/ world/davos-desert-offers-glimpse-changing-saudi-arabia-n813636

COORDINATED SAUDI REFORM AGENDAS

61

Choueiri, Y. M. (2000). Arab Nationalism: A History – Nation and State in the Arab World. Oxford: Blackwell. Evans, P., Huber, E. and Stephens, J. D. (2017). ‘The Political Foundations of State Effectiveness’, in Miguel A. Centeno, Atul Kohli, and Deborah J. Yashar (eds), States in the Developing World. Cambridge: Cambridge University Press. Feteha, A. (2015, 21 October). ‘Saudis Risk Draining Financial Assets in Five Years, Says IMF’. Retrieved from https://www.bloomberg.com/news/ articles/2015-10-21/saudis-risk-draining-financial-assets-in-five-years-imfsays Fiscal Balance Program. (2018). Update, Ministry of Finance; ‘Jadaan Says Measures to Boost Saudi Public Finances: Transcript’, Bloomberg (11 May 2020). Grønmo, L. S., Lindquist, M., Arora, A. and Mullis, I. V. (2015). ‘TIMSS 2015 Mathematics Framework’, Timss: 11–27. Hall, P. and Soskice, D. (eds). (2001). Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press. Hertog, S. (2011). ‘The Evolution of Rent Recycling during Two Booms in the Gulf Arab States: Business Dynamism and Social Stagnation’, in Bessma Momani and Matteo Legrenzi (eds), Shifting Geo-Economic Power of the Gulf: Oil, Finance and Institutions. London: Routledge. Hertog, S. (2018). ‘Challenges to the Saudi Distributional State in the Age of Austerity’, in Madawi Al-Rasheed (ed.), Salman’s Legacy: The Dilemmas of a New Era in Saudi Arabia. London: Hurst & Co. Hertog, S. (2018, 14 March). ‘Mohammed bin Salman Isn’t Wonky Enough’. Retrieved from https://foreignpolicy.com/2018/03/14/mohammad-binsalman-isnt-wonky-enough/ Huber, E. and Stephens, J. D. (2001). Development and Crisis of the Welfare State: Parties and Policies in Global Markets. Chicago: Chicago University Press. HRDF. (n.d.). ‘Employment Subsidy Program for Upskilling’. www.hrdf.org.sa/ Program/484/_Employment_Subsidy_Program_for_Upskilling International Monetary Fund. (0217). IMF Country Report No. 17/316 (2017), 7. Khoja, S. (2018, January 10). ‘KSA: New Fees Applicable for Foreign Employees & Dependents – Employment and HR - Saudi Arabia’. Retrieved from https://www.mondaq.com/saudiarabia/contract-ofemployment/662418/ksa-new-fees-applicable-for-foreign-employeesdependants Kinninmont, J. and Royal Institute of International Affairs. (2017). Vision 2030 and Saudi Arabia’s Social Contract Austerity and Transformation. https:// www.chathamhouse.org/publication/vision-2030-and-saudi-arabias-socialcontract-austerity-and-transformation Kraetzschmar, H. J. (2015). ‘Associational Life under Authoritarianism: The Saudi Chamber of Commerce and Industry Elections’, Journal of Arabian Studies 5, no. 2.

62

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Luciani, G. (1987). ‘Allocation vs. Production States: A Theoretical Framework’, in Hazem Beblawi and Giacomo Luciani (eds), The Rentier State. London: Croom Helm. Martin, C. J. and Swank, D. (2012). The Political Construction of Business Interests: Coordination, Growth, and Equality. Cambridge: Cambridge University Press. Nereim, V. (2018, July). ‘Anger at Rising Prices Hits a New Target in Saudi Arabia: Milk’. Retrieved from https://www.bloomberg.com/news/ articles/2018-07-03/in-saudi-arabia-anger-at-rising-prices-hits-a-newtarget-milk OECD. (2018). ‘Education GPS–Saudi Arabia–Overview of the Education System (EAG 2018)’. gpseducation.oecd.org/CountryProfile?primaryCoun try=SAU&treshold=10&topic=EO. World Bank Data Catalogue, UNESCO Institute for Statistics Pritchett, L., Sen, K and Werker, E. (eds) (2018). Deals and Development: The Political Dynamics of Growth Episodes. Oxford: Oxford University Press. Public Investment Fund Program. (2018–2020). Accessed at https://www.pif. gov.sa/en/PIFContentProgram/PIF%20Program_EN.pdf Saudi Arabia General Authority for Statistics. ‘Population by Single Age, Nationality (Saudi/Non-Saudi) and Gender, Mid-Year 2018’. ‘Saudi Arabia’s 2019 Budget Report, Medium Term Outlook and Insights, MoF figures, Strategic Gears Consulting’, (2019), 18. ‘Saudi Arabia Restores Perks to State Employees, Boosting Markets’ (2017, 22 April). Reuters. Retrieved from https://www.reuters.com/article/us-saudieconomy-idUSKBN17O0NL ‘Saudi Arabia Triples VAT, Cuts State Allowances Amid Crisis (2)’. (n.d.). Bloomberg Law. Retrieved from https://news.bloomberglaw.com/daily-taxreport-international/saudi-arabia-triples-vat-cuts-state-allowances-as-crisisbites?context=article-related Shahine, N. V. (2018, January 7). ‘Royal Handouts Cheer Saudis but Show Struggle to Revamp Economy’. Bloomberg. https://www.bloomberg.com/ news/articles/2018-01-06/saudis-get-extra-pay-after-price-surge-sparkedpublic-complaints Thelen, K. (2014). Varieties of Liberalization and the New Politics of Social Solidarity. Cambridge: Cambridge University Press. Vitalis, R. and Heydemann, S. (2000). ‘War, Keynesianism, and Colonialism: Explaining State-Market Relations in the Postwar Middle East’, in S. Heydemann (ed.), War, Institutions, and Social Change in the Middle East. Berkeley: University of California Press.

COORDINATED SAUDI REFORM AGENDAS

63

64

3 KING-MAKERS OR KNAVES? The role of consultants in domestic policymaking and governance in Saudi Arabia David B. Jones

Introduction This chapter will analyse the general role and relative influence of consultants in Saudi Arabia in terms of their impact on domestic policymaking and governance relating to major public sector initiatives and projects. The role of consultants in public sector policymaking and governance within the Kingdom is arguably particularly pervasive by international standards. Consultants are contracted in traditional projects from strategy, PR, HR, financial and technical roles, and they are also embedded as expert ‘advisors’ in the provision of basic social and civil services, military capability, technological and information resources and within a wide range of other government functions. The chapter will highlight the dynamic structure and hierarchy of public sector consulting work within Saudi Arabia, particularly during times of rapid government reform in the Kingdom. It will illustrate how consultants can provide the responsiveness, productivity and expertise often lacking elsewhere within government human resources structures, as well as delve into the governance challenges and precarious role of

foreign consultants operating on contractual arrangements within the public sector in the Kingdom, during a critical period in the deployment of initiatives related to the Vision 2030 and National Transformation Program. These most recent reforms are associated with the accession in 2015 of King Salman and, in particular, the policy agenda associated with his son Mohammed, first as deputy crown prince and then subsequently as crown prince. A conclusion will also draw upon relevant academic literature and reputable journalism to seek to conduct up-to-date analysis of the rapidly evolving role of consultants, extract meaning, learning and understanding from this specific chapter to the wider field of study of domestic policymaking and governance in the Kingdom of Saudi Arabia.

Background to the role of consultants and the National Transformation Program After the annus horriblis of 2018, the National Transformation Program (NTP) is at a critical juncture. Officially announced at the end of 2016, the strategy and its associated projects have certainly made progress on many fronts, although the NTP has been beset with a growing range of external and internal challenges, many of which came to the fore in 2018. By 2018, the Kingdom had become increasingly entangled in a series of distracting, damaging and expensive military and diplomatic issues across the Middle East region, chiefly with Yemen, Syria and Qatar. That year also saw in the United States a high-profile legal action by a group of 9/11 victim’s families against the Saudi government for alleged complicity in the infamous attacks of 2001, along with the renewal of a wide-ranging investigation into Saudi support for terrorist funding by the US Congress. The killing of Jamal Khashoggi in the Saudi Embassy at Istanbul dominated international headlines from the end of 2018 onwards. Internally within the Kingdom, the detention of high-profile members of the political and commercial elite at the Ritz-Carlton hotel shook commercial confidence, particularly within the private sector. Moreover, the increasing complications with the planned IPO of Saudi Aramco become more apparent as the year progressed. This economic 66

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

centrepiece of the NTP was ultimately unable to achieve a flotation on an international stock market, as originally intended, largely because standard financial records expected by international investors were ultimately unavailable and failed to meet initial estimations in terms of valuations. With the global price of oil for 2018 averaging below the breakeven price required to balance the funding of the Saudi state budget, the International Monetary Fund (IMF) reduced economic growth forecasts for 2019 GDP growth to 1.8 per cent (IMF 2019). Local economic forecasts of growth and activity also remained anaemic, with unemployment, inflation and government debt levels having actually increased in 2018 even according to official government figures (Jadwa Research 2019). In parallel to mediocre general economic conditions, the growth of the consulting market in the Gulf Cooperation Council (GCC), including Saudi Arabia, has continued to expand rapidly in recent years and was predicted to continue to do so with doubledigit increases over the next five years (Source for Consulting 2019), accelerating ahead as the fastest growing global market for consulting services with an estimated total market size of USD2.8 billion per year. While the details of the specific projects are not available within the public domain and are often subject to confidentiality clauses, it is nonetheless clear that Saudi Arabia represents the largest single consulting market within the GCC as a whole. At the same time, in most other parts of the world, the reputation and the role of consulting firms are on the wane. The head of the IMF has told emerging countries to stop using global consultancy firms to write and execute their economic, social and political development strategies (Belger 2019). The fund’s managing director Christine Lagarde singled out inefficient spending on consultants for criticism at an event about funding the sustainable development goals at the World Economic Forum in Davos, Switzerland, at the beginning of 2019. Lagarde said developing and emerging-market economies had to develop more incountry capability, raise more revenue themselves domestically and cut the risk of white elephant projects and corruption. She argued the private sector had a key role to play if poorer countries were to ever achieve the seventeen development goals set by the United Nations. But she warned: ‘I’m looking around to see whether there are any of the McKinseys and Boston Consulting Groups present here today, and if there are please listen to me.’ King-makers or knaves?

67

I see many, many low-income countries and emerging-market economies spend millions of dollars commissioning consultants to build their strategic plans. I would recommend some saving be made by taking the 17 principles, the actionable items, and start with that. From there, the consultants can actually do their job of putting it into reality. But don’t reinvent it – it’s right there. So much is wasted. That’s part of the inefficient spending that can actually be saved. (Belger 2019)

The comments may spark controversy not only in the consultancy industry but also among critics of the governance and ethics of the IMF itself. While the IMF itself has a tarnished reputation and uses a plethora of consultants in its own right in many parts of the world (Craig, 2005 and Perkins, 2004) and is noted for its heavy-handed promotion of freemarket reforms in indebted countries over the past few decades. The sight of a senior IMF figure now urging developing countries to cut down on their use of imported private sector expertise may certainly be a cause for some criticism; it clearly shows that there is a major shift in the perceived role of consultants in relation to public sector policymaking and reform. Most recently, within Saudi Arabia specifically, recent reports (Saudi Gazette 2019) have shared that a Royal Order had been issued ‘banning the provision of consultancy services contracts to foreign firms’. The article also highlighted an estimated current value of SAR12 billion for the total value of contracting contracts awarded by government ministries, quoting the source as the General Auditing Bureau (Saudi Gazette 2019). Nonetheless, the increased use of consultants working in the Kingdom remains persistent and pervasive. This growing prevalence and preference for employing consultants is highly visible in Riyadh in particular, where most government institutions are based, as evidenced by the pervasive presence of legions of black-suited young professionals on board flights to and from Riyadh, and the rising price of tickets and business hotels in the city. The question is, why has this increased in the last few years and what pressures and tensions does this lend to Saudi public sector governance practices? First, the use of technical consultants and contractors to support the building of a new generation of major infrastructure projects in the Kingdom, from Jeddah airport, Riyadh domestic airport terminal, a series of new industrial, financial, residential and tourism projects and of course the Riyadh Metro. The latter in particular has led to an increase

68

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

in the prevalence of Italian, audible on Riyadh flights, as the major contractor is from Italy. Second, Saudi Arabia currently has the third largest military spending of all countries globally, second only to the United States and China (Belfer Centre 2019) and significantly above Russia, the United Kingdom, France and India. Saudi Arabia stands out amidst this list of countries not just because of the sheer scale of its military expenditure but also because all the other nations are established military powers with extensive conventional weapons capability and experience, and they are all nuclear military powers. This enormous budget includes increases in purchases of military equipment and materiel directly, along with consulting related to installation, maintenance, training, supplies and related expertise and outsourced direct operations and support services. In the case of the Saudi military this has involved large, ongoing contracts for Booz Allen, among others (Forsythe 2018). Clearly this involves a high and increased use of consultants and advisors embedded within the public sector military services. Indeed, across the military, Pollock (2019: 35) states that the majority of ‘personnel manning repair depots were often foreigners’, noting that foreign consultants and outsourced services were and remain prevalent across all strategic and operational functions of the Saudi military. Third, the increase in the prevalence of consultants within the Kingdom has grown and is forecast to continue to grow inversely to the decline in the numbers of resident expatriate employees, ‘permanently’ employed in Saudi Arabia within the terms of the kafala system of sponsorship of resident expatriate employment. As part of the increased focus on accelerating the Saudization of the workforce, initially as part of the NTP and then subsequently increased from the recent economic downturn, the semi-permanent presence of expatriate experts with resident status (along with that of their families) has declined dramatically. Just as the demand for goods and services related to the growth in consulting (hotels, transportation, restaurants, etc.) has increased, those related to expatriate residents has declined (supermarkets, education, domestic products, car ownership, etc.). While in May 2019, plans to extend a ‘green card’ resident status for select categories of expatriates were announced, this is expected to be apply to relatively low numbers of migrant residents who meet strict qualifying criteria. In sum, resident status expatriation is declining, not only in Saudi Arabia but also in other GCC states. Estimates suggest that 1.9 million net expatriate residents have left the King-makers or knaves?

69

Kingdom since 2017 (Jadwa Research 2019). Given that the official rate of unemployment also increased slightly or stayed the same over this period, it is logical to surmise that the use of consultants increased to some extent to fill this productivity gap in the labour market. Fourth, and arguably most importantly, is the increased role of consultants caused directly by the demand created for public sector reform directly by the NTP itself. During the heady days of the NTP’s rapid formulation and the subsequent first round of generating a hierarchy of cascading action plans and key performance indicators, international consulting organizations were key to establishing the framework of the NTP structure, along with the very language and culture surrounding it. Initially, without the usual government procurement restrictions for competitive bidding processes, full written technical and financial proposals, project bid bonds and performance bonds, etc., the NTP and its various implementation plans were formulated in an informal influence network. This network was determined by the wasta of the principals of the ostensibly competing firms and their respective ministerial sponsors at the time. Dynamic and informal discussions centred around a series of workshops, brainstorming meetings and conferences held at the Al Khozama hotel and adjacent conference centre and office buildings, centrally located on Olaya Street, Riyadh. This informal ‘consulting services souq’ allowed McKinsey and the Boston Consulting Group in particular to establish leading roles in rapidly developing, and then subsequently project managing the NTP. Each took a lead role in facilitating the ‘discussion streams’, effectively translating the overall aims behind the plan into an actionable set of measurable deliverables and goals. The discussions during the day were transcribed by their respective global support centres, typically located in the Philippines, overnight, so that an impressively detailed and exhaustive PowerPoint deck was ready for sign off the next morning in Riyadh. In addition, while being paid for this advisory work, through such a process, the firms were able to divide the lion’s share of the subsequent significant implementation consulting projects over the subsequent several years among themselves, as they each acted as poachers and gamekeepers to their client, the executive branch of the Saudi government, represented primarily by the crown prince as the main force behind the NTP. The potential governance risks and ethical challenges which flow from this approach are manifest. Each one collaborated to alternate between 70

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

taking the role of strategic advisor/programme manager and subject matter expert/project specialist. In the former, booking senior advisory time with ministers and in the latter, booking larger numbers of junior consultants to report progress on projects and manage a further hierarchy of consultants to deliver against their specifications. Hence the growth within Saudi Arabia for a multibillion dollar consulting market, one of the biggest and fastest growing in the world. A recent New York Times article stated that ‘the expansion is clear enough in the lobby of the RitzCarlton hotel in Riyadh on a weekday morning. There, a former Western diplomat quipped, you can watch the consultants departing for their jobs “like bats leaving a cave”’ (Forsythe et al. 2018). Moreover, the same New York Times article (Forsythe 2018) references Calvert Jones and her research evaluating the work of management consultants in the region, focused largely on their role in the United Arab Emirates (Calvert Jones 2014), in a phenomenon which she calls ‘the black box of authoritarian governance’. The opacity in governance, lack of clear information and accountability associated with the use of consultants are often a key element in their attraction for governmental policymakers around the world, including within Saudi Arabia. From an optimistic perspective, she says that ‘experts might improve the daily lives of citizens in fundamental ways’, although her conclusions are not likely to make it into recruiting videos for consulting companies seeking idealistic college graduates. ‘In the beginning, the best of them want to help, want to do real research, provide data and expert opinions’, but after initially speaking their minds, they gradually stop providing truly objective advice. ‘They engage in the art of not speaking truth to power. They self-censor, exaggerate successes and downplay their own misgivings due to the incentive structures they face.’ External experts might even reduce, rather than encourage, domestic reform according to Jones, partly because consultants are often unwilling to be honest with the ruling elite, as they are always in a precarious contractual position. The issue is becoming increasingly relevant, she said, as ‘the number of experts circulating around the world continues to grow’. The acceleration in the pervasiveness and the influence of consultants directly and indirectly related to the NTP and its aims raised some concerns at the time. Apart from the reaction of existing, largely Saudi civil servants, many of whom felt sidelined by this process, concerns were also raised about the effectiveness and efficiency of such an approach. ‘One economics professor says ‘the consultants told him (the Crown King-makers or knaves?

71

Prince) a development plan that can’t be done on the timetable given. It took South Korea 30 years to develop. Why should Saudi think we can do it in 15?’ (Belfer Centre 2019). Furthermore, Mazzucato (2018b) argues that overusing private sector organizations within public sector policymaking and governance can lead to duplication of efforts, shadow structures for parallel decision-making and a lack of clear accountability. She argues, ‘outsourcing is intensely inefficient’ and can often lead to a ‘new market bureaucracy’ being established within existing state structures. Furthermore, quoting Karl Polanyi, Mazzucato argues that markets are increasingly deeply embedded in the social and political institutions of the state. This is also true of the consulting market within Saudi Arabia. A recent article (Fathallah 2019) provides a perfect summary of how the Saudi government leadership has mixed up strategy (the domain of management consultants) with public policy (the domain of government civil servants): In government, strategies are plans of action with preset outputs, outcomes, and indicators. Saudi Vision 2030 is full of these: government restructuring, privatization, national transformation, and the like. Policies, by contrast, are principles of action, a guide to making decisions and achieving outcomes. For example, Saudi oil policy is to keep the global oil markets balanced. This guiding policy dictates how Saudi Arabia should control exports, set prices, and invest in oil projects. Based on this policy, Saudi Arabia formulates and implements strategies such as consolidating upstream and downstream activities through ARAMCO or increasing access to markets in Asia. With the possible exception of the country’s oil policy, most of what is perceived as Saudi government policy actually consists of strategy documents that lack a grounding in sound policy principles. Foreign – largely Western – consultancies write these documents, which the Saudi government then delegates to ministerial bureaucracies for topdown implementation. These ministerial bureaucracies often employ further consultants to assist with the implementation, despite having adequate quality and quantity of public sector employees and civil service expertise (Jones and Punshi 2013). Without a sustainable and accountable ongoing reform process that is implemented consistently over the long term, governance 72

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

challenges are bound to arise. For instance, an OECD study in the area of human resources management practices specifically in the Middle East found that ‘all of the countries are wrestling with a set of intractable HRM issues that are perceived as barriers to improved governance both inside and outside the HRM area’ (OECD 2010).

Discussion Why are consultants increasingly at the core of public sector reform efforts, a phenomenon not only prevalent in Saudi Arabia in particular but also in the rest of the GCC states and emerging markets globally? There are many individual elements and possible explanations and contributory factors to consider, particularly in regard to policymaking and governance. One key aspect is the structure of the labour market within the Kingdom. The talent landscape is segmented between very different roles, obligations, rights and remuneration for the employment status of Saudi and non-Saudi workers. Arguably, the kafala system of sponsored expatriate migration which evolved from chattel slavery (extant as late as the mid-twentieth century in the Kingdom), forms the labour market context in which foreign consultants operate within Saudi Arabia. Kindly or cruel, ancient or contemporary formal structures of exclusive sponsorship and employment restrictions continue to exist only because they are supported by a cultural and legal acceptance of labour delivered with no rights afforded to the non-Saudi worker, whether termed a consultant, an expert, a labourer, an advisor, a driver, an economic migrant, a domestic servant, a professional or a peon. While the contractual and non-contractual terms and conditions may vary wildly between these categories of largely non-Saudi employees, the essence of their legal status within the Kingdom does not. Moreover, while the rates for consultants are typically higher than for expatriate employees, consultants lack even the most minimal employment ‘rights’ afforded to their permanently and directly employed counterparts because their status is mediated by a project contract with their direct employer, the consulting firm, not the client. In such cases, as there is often no need for long contractual notice periods, residence visa fees, accrual of ‘end of service’ benefits, paid leave, etc., the employment of consultants can begin to appear relatively attractive compared to the alternatives. King-makers or knaves?

73

Unlike traditional employment contracts, consulting contracts are often short term and define performance-based ‘deliverables’. Payments are based on the agreed achievement of deliverables. Even when this is agreed, payment cycles can be long and unpredictable. In addition, in dynamic projects where the original scope of work can change rapidly, agreement can be difficult to achieve, often involving significant re-work and significant difficulties in particular with receiving final payments. This precarious position of consultants is also due to the perception that consultants are acting as a proxy for permanent employees and their work can be expected to be as flexible as that of staff members, while their contractual terms and conditions are often not constructed to support this approach. Moreover, local contract law is opaque to say the least and the reputation of the Kingdom to consistently and objectively apply the rule of law has suffered recently. This is particularly so for government consulting projects, the majority of which are associated with the most recent reform programme, as it is commonly held within the industry that there are no clear or consistently available channels for arbitration or recourse for dealing with basic breaches of contract issues. This risky context in which the growing consulting industry operates typically leads to an increase in pricing, a front-loading of project pricing structures and a generally more confrontational relationship between consultant and client than typically found in other geographies. With limited, expensive or no available vehicles of risk mitigation, such as commercial project finance mechanisms or insurance products, recognized collection agencies etc., this field represents a significant moral hazard to all involved in the formulation and delivery of policies and governance structures within the Kingdom. Anecdotal evidence and the personal experience of the author, their peers, their clients and contacts suggest that there is often a significant suspicion, frustration and dissatisfaction between consultant and clients in the Kingdom. The lack of trust can lead to a byzantine bureaucratic structure to the management of many consulting projects. In many cases, the government department or employees will hire one consulting organization to act as the ‘programme manager’ for a range of other providers who divide the scope between them, along of course with the core advisory firm, that personally advise the minister and their under-secretaries. This delivery structure has to be placed within the broader ‘administrative archaeology’ phenomenon (Jones 2015), whereby successive reform agendas in the Kingdom create a wave of 74

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

new institutions, initiatives and accountabilities, without any dissolution or disbandment of the existing institutions, their budgets, their accountabilities or their employees. The successive sedimentary layers of institutions and interlocking accountabilities add a unique degree of public sector governance challenges. Apart from the enormity of the inefficiency concerned, this encourages a low-trust environment and the prevalence of open-ended bid bonds, performance bonds and negative mutual reputations, low expectations and an optimization mindset in project delivery, rather than a maximization of return for both parties. This begs the question as to why this apparently dysfunctional role of consultants within the formulation and delivery of public sector policies and services, along with the governance of the projects concerned, is projected not only to continue but also to grow. First, there are the risk management advantages from using consultants from the government’s perspective. The moral hazard dimension is clearly loaded in the government’s favour, with all commercial and contractual terms being stated to the advantage of the government, with a lack of notice required to terminate, performance bonds and bid bonds being the industry norm in the Kingdom, long-stated payment terms, liquidated damages clauses, etc., as well as the jurisdictional advantages and the lack of availability or transparency in any potential dispute resolution. More generally and more importantly, using external consultants offers deniability and distancing advantages to ruling elites within the policymaking and governance process. Particularly in regard to a new generation of Saudi leaders who aim to be in power for many decades, the selective use of the ‘other’ provides long-term advantages when it comes to maintaining reform, conducting effectiveness evaluations and demonstrating effective executive action when it comes to the ongoing, cyclical nature of Saudi policymaking and governance. The distance and deniability offered by consultants are compelling in many circumstances. Moreover, such clients would often describe how employing consultants for specific priority or sensitive tasks provides an effective ‘insurance policy’ against the potential risks of failure. Using consultants, either with a strong international brand name behind them, or with a strong local relevance and reputation means that project principals are unlikely to be criticized directly for the policymaking recommended and any governance reforms implemented. In a recent article in the Arab News (2019), Mohamed Al-Sulami provides an example of how blaming the ‘other’ for negative outcomes King-makers or knaves?

75

can provide a useful safety valve for local elites. He proposes in regard to the current perception of Saudi Arabia in regard to the case of Jamal Khashoggi, detention of female driving advocates and other civil rights protestors, the humanitarian impact of the war in Yemen and the growth in the use capital punishment within the Kingdom, etc., that: In the West, the perception of Saudi Arabia has been generally negative, except in relatively brief phases. It is presented in the West through the stereotypical lens of oil wealth, camels, deserts and religious extremism. In fact, Saudi Arabia has challenged and overcome these orientalist stereotypes by making progress in various fields. There has been a heavy reliance on foreign PR firms. In most cases, these firms know little about Saudi Arabia, are particularly ignorant of its civilizational and deep-rooted history, and their primary concern is to profit from and to sustain the contracts signed with the Kingdom, rather than benefiting the Saudi people and its image overseas. Considering the commercial nature of the exchange described in consulting contracts, such writing either indicates a degree of naivete in trying to blame consultants for acting in their financial interest or reveals a subjective, inverse ‘occidentalism’ to counter the ‘orientalism’ referred to above and well established elsewhere in the Gulf Studies literature. Such views are also supportive of the new nationalism thesis, related to nationalization, discussed below. Second, there is the talent dimension to using consultants. While undoubtedly, the education levels and experience among Saudi nationals, especially the majority of the younger population, mean their work is globally competitive. However, the positivity and productivity levels among the local population across the GCC in general, and Saudi Arabia specifically, are among the lowest in the world (Jones 2015). Using consultants, particularly for designing and implementing rapid reform programmes and far-reaching policy reviews, means that government clients within the Kingdom can benefit from the flexibility, rapid outputs and bandwidth offered by consultants. Their capability to rapidly mobilize strategic expertise through senior consultants and operational resources through large numbers of analysts is highly valued by such clients. In addition, the ability to rapidly demobilize and disband teams of consultants is also highly valued in the public sector, particularly because the costs of hiring permanent Saudi employees continue to rise, 76

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

as reflected in the growing public sector expenditure in the Kingdom, the majority of which reflects public sector wage payments. The perceived value is reflected not only in the relative size and growth of the demand for consulting services but also in the fees charged. Moreover, the delivery-based costing model is also attractive, as it allows policymakers to circumvent the relatively inefficient and sclerotic working practices of the Saudi public sector, which is bedevilled by short working hours, high absence levels, low productivity and dizzying hierarchical structures, built to accommodate a saturated level of employment of Saudi nationals. Paying for outcomes, rather than standard public sector working days of 7.30 am–2.30 pm, means that timelines can be crunched, albeit with large temporary workforces deployed for intensive periods of delivery in a manner which would otherwise not be possible. Viewed through a governance lens, this shifts the level of scrutiny from the overall government or institution level to the project or programme management level. This could also be viewed as a major advantage in an environment of limited scrutiny on public sector expenditure, efficiency or equity. Third, there are the rent-seeking advantages of the use of consultants, which provides elites with the opportunity to peddle influence or indirect access to super-normal project profitability. According to the Corruption Perception Index (2018), Saudi Arabia ranks 58th out of 180 nations included in the study, scoring 49 out of 100 points in the Index, a reasonably good position, particularly compared to other non-GCC Arab states and other economies internationally which remain largely reliant on the extractive industries. Despite some specific infamous examples, for instance the Al Yamamah arms deal scandal between the UK and Saudi Arabia, the author’s experience of working in the consulting industry within Saudi Arabia for more than two decades is that direct and obvious corrupt practices are very rare. Nonetheless, the kafala employment sponsorship system, along with the business registration requirements for a 51 per cent ownership by a Saudi national, means that there are high barriers to entry to this market, which thereby reduces competitive pricing and practices to a large degree. For instance, it is common practice for locally registered organizations to ‘farm out’ RFPs to international organizations, and expect a high percentage of the resulting fees in return for providing contract management services and entry visa services, PRO facilities and access to public sector RFPs, etc., often only released within the Kingdom, in Arabic. It remains to be seen, whether the announced ‘ban’ on foreign consultants (Saudi Gazette King-makers or knaves?

77

2019) will serve to extend such practices. Informal networks and wasta influence the consulting industry, just as much as any other industries within the Kingdom. Many of the larger international consultants do typically register their operations as a local partnership within the Kingdom and do directly employ large numbers of Saudi consultants, where their linguistic and cultural skills add to their professional productivity. However, in many cases, this is supplemented by large numbers of consultants permanently based elsewhere. For instance, an article in the Wall Street Journal (Said, Scheck and Hope 2018) reported on the outcome of such a network of influence within the Kingdom. The network grew, and fell, around the career trajectory of HE Adel Fakieh, from Governor of Jeddah, to Minister of Labour to Minister of State for Economy and Planning, along with his subsequent detention and later release from the Ritz-Carlton campaign for anti-corruption, initiated at the end of 2017. Mr Fakieh brought to Riyadh a network of close advisors from his Jeddah associates, including contacts from Elixir Consulting. One co-founder was a member of staff at both the Ministry for Labour and, subsequently, the Ministry for Economy and Planning, who was responsible for awarding contracts. The other co-founder, Mr Hani Khoja, ran the operations of Elixir Consulting, which was subject to a buy-out from McKinsey and Company, which resulted in Mr Khoja becoming a partner. He was later detained in 2017, along with Mr Fakieh, in the Ritz-Carlton as part of the anti-corruption campaign. McKinsey have released statements which dissociate themselves from Mr Khoja, along with statements that he was terminated from his position as a partner with their firm. This example is exceptional in that it made it to the public domain in respected international newspaper publications, although it also serves to illustrate the potential role of rent-seeking in the outsourcing of policymaking and its implications for governance within Saudi Arabia specifically. A further report from The Telegraph (Boland 2019) states that the company had faced repeated questions over its ethics in 2018 when a report in the New York Times (Forsythe 2018) linked a study by McKinsey to a crackdown in Saudi Arabia. It claimed that the consultancy had released a report into how the Saudi public had responded to austerity measures, in which it had named a number of Twitter users who had been vocal in their dislike of the measures. One was reportedly later arrested and detained as a result. McKinsey were reported to have been ‘horrified’ by the case (Kolhatkar 78

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

2018), although they continue to work within Saudi Arabia and other ‘authoritarian regimes’, as well as being associated with other public sector governance scandals, e.g. in South Africa. Indeed, Calvert Jones (2019) advises ‘consultants to heal thyself ’ and simply not work for repressive regimes or in unethical circumstances. While in some cases this is specifically precluded by international sanctions, overall this is a somewhat simplistic recommendation, as it is possible to advise governments, even with the worst human rights records and minimal governance structures, at a certain level, without compromising ethical business codes of conduct or governance guidelines more generally. Finally, there are also budgetary constraints within the public sector which also provide motives for supporting the use of consultants. Permanent increases to establishment costs and headcount are extremely difficult to achieve in the current fiscal climate and are prioritized exclusively for the employment of Saudi nationals. In addition, at a time when despite initial efforts in the early days of the NTP, to reduce the cost of benefits for all public sector employees, after less than a year, government employees continued to receive their transportation allowances and 1,000 SAR per month stipend. This was initially intended as a temporary additional allowance to offset the rising cost of living once fuel subsidies were removed for Saudi nationals, although this has now been established for quite some time as an additional element of the disproportionate remuneration for Saudi national public sector employees. In addition, the provision of significantly longer public holidays for government employees, than previously provided, all in turn go towards making the relative cost-efficiencies and productivity premium more attractive for the outsourcing of major elements of public sector policymaking and governance to consultants. Altogether these separate elements can be woven into the fabric of an overarching expatriate hypothesis. Just as we have seen, attempts to renew or refresh the approach towards greater Saudization of the Kingdom’s workforce, the ‘Nationalisation 2.0’ phenomenon as described by (Jones and Punshi 2013), increased reliance on consultants throughout the Saudi labour market, including within the public sector, could also, in turn, represent the transition to a new model of using outsourced foreign labour. In other words, ‘Expatriation 2.0’ as a different form of using foreign labour to support local Saudi talent, characterized by less direct employment of resident expatriates and more outsourcing to consultants through project contracts. Extending the use of consultants effectively King-makers or knaves?

79

allows the continuation of all of the benefits of expatriation (productivity, flexibility, expertise, etc.), albeit with the added benefits of short-term tenures and enforceable, competitive contractual stipulations on the nationalization quotas among the project team, at the cost of higher overall budgets, ostensibly on a temporary basis. Indeed, Jadwa Research (2019) claimed that the Saudi General Authority for Statistics indicated a decline in the total number of resident expatriates of 1.9 million workers of all categories in a two-and-half-year period since the beginning of 2017. This represented a large and rapid change in the social, economic and workforce composition within the Kingdom, where estimates of total population were estimated at somewhat less than 30 million (Jadwa Research 2018). However, in the longer term, the impact on the domestic economy needs further study. For instance, does consultant-heavy expatriation 2.0 limit knowledge transfer to local populations? This is the long-term aim of nationalization policies after all. Does it only stimulate the economies of major cities, where consultants spend on hotels, airfares, restaurants, etc., while depressing housing, car ownership, supermarket and other retail expenditure across the Kingdom, that were previously more reliant on resident expatriates? Moreover, such a transition towards a new model of expatriation also supports the broader labour market nationalization agenda and the increasingly nationalist propaganda which supports it, both in Saudi Arabia specifically and in the GCC more broadly as the resident population and social structures become more localized as a result. According to Calvert Jones (2017), any role of consultants or other para-state actors towards policy reforms and broader culture change, which in part or whole are aimed at building an increased sense of citizenship and shared identity among the Saudi population, needs to consider national, civil, political and economic dimensions. The role of consultants impacts each of these elements. While her case study is about the UAE specifically, she argues that the approach ‘confronts additional challenges that are broadly similar to those facing a range of other state leaders’ in the region, where its ‘leaders generally operate in an environment that lacks the common constraints on elite action arising from a tight budget or powerful parliament’. There is an established literature on social groups who are excluded from the nationalist agenda, e.g. bidun, expatriates, although arguably, the over-reliance on consultants also disenfranchises the ‘local’ population and represents 80

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

a form of continuation of the traditional approaches to expatriation by other means, prevalent within the Kingdom over the last seventy-five years or more. Based on her research in the UAE, Jones argues that the new vision of citizenship 2.0 is intended to promote a ‘loyal bourgeois’ identity among the local population, and arguably this is similar in Saudi Arabia. She argues that national development initiatives, nationalization of the workplace and the growth of nationalist propaganda are a deliberate and dedicated approach to social reform among elites. Such an approach has advantages in that, ‘if adult citizens take on new jobs, responsibilities, and lifestyles willingly, then ruling elites do not have to undertake painful structural reforms – and risk their own necks, politically – to make them do so’ (Jones 2017). Many of the NTP projects are aimed at promoting good citizenship – promoting social contribution, directly relating to and covering Jones’s civic dimension of the new model of national identity. In her study, Jones also found heightened patriotic and nationalistic attitudes along with enhanced levels of tolerance and civic responsibility, along with more interest in personal political participation for themselves, without a similar level of interest in extending these rights to others in society generally. On the economic dimension, in her study, Emirati respondents did not show any significant decrease in the interest in or expectations of access to personal public sector employment. In other words, an unexpectedly heightened culture of entitlement was created by patterns of policymaking and governance in the patterns of reform she observed in the UAE. Thus, ‘entitled loyalists’ were created as part of the unintended consequences of promoting national development in tandem with greater nationalism in the UAE. It remains to be seen how much this could apply to the situation in Saudi Arabia and more research is obviously required in this case. Moreover, in her study, Jones observed that promoting nationalism was also viewed by policymakers as a means of boosting self-esteem among the local population. Elites want to boost the confidence of their citizens to act independently within the prescribed scope of reform and its dimensions. She also discovered that through triggering status consciousness and dampening intrinsic incentives, nationalism can lead to unintended ‘crowding out’ effects in terms of discounting the role of the ‘other’ in society and potentially dismissing ‘best practices’ from elsewhere. This perspective is supported by the examples provided from King-makers or knaves?

81

around the world by Hobsbawm and Ranger (1983), in their classic work, the invention of tradition, where they argue that governing elites present citizens with new social, cultural and political norms as a form of high and low policy reforms, which, in order to motivate and endorse them, are described as ‘traditional’ and reflective of authentic cultural identity, often in a manner which strengthen their own perceptions and position of legitimacy. The question remains, how is the presence of legions of black-suited consultants in the offices, restaurants, hotels and airports of Riyadh perceived by the public sector employees and subjects of the social transformation plans in general? Policymaking, governance models and reform cannot be formulated or implemented in isolation. Recent efforts to privatize government services and potentially prepare some organizations for flotation on international stock markets have been impacted by a difference in international standards of governance with Saudi practices (Financial Times 2019). Arguably, major consultantled reform programmes create considerable long-term governance challenges through bypassing state institutions, creating a growing public policy crisis and further weakening government institutions and their accountability. According to Fathallah (2019), when effectiveness is trumped by speed and efficiency of delivering the initiative, not the related government services, then long-term sustainability of public sector services, their role in society and their oversight are all adversely affected. The clarity of ownership between the state, the royal family and the organization is opaque, to say the least, in many cases to the extent that it is not entirely clear who exactly owns what and where financial flows move from and to within the Kingdom. The lack of income tax, corporate tax or capital gains tax means that there is no need for audited financial reports and the accounting and disclosure rules which support them in the private sector. This lack of reporting is also mirrored in the public sector where state finances are not subject to the scrutiny typical in other more representative political systems. This means that it is difficult to measure the impact or progress of reform or to conduct audits where records simply do not exist. Many large public sector employers cannot validate their headcount or financial assets, and therefore cannot reconcile their financial accounts accordingly. This limits the potential to leverage these assets on international markets with global standards of governance. It also makes policymaking and 82

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

reform more difficult to achieve when it is difficult to tell with any detail where you are starting from and heading towards in any meaningful sense, or to differentiate the governance interests or roles of the royal family, the national population and the state, in a way that is prevalent elsewhere. History can provide useful insights into parallel process and recurring cultural memes and social and economic reform tropes. For instance, much has been written about the pervasive influence of a previous generation of advisors into the GCC as a whole during the crackdown on the Muslim Brotherhood in Nasser’s Egypt during the 1950s and 1960s. Many highly qualified professionals migrated to the GCC as a result and took up socially and economically influential positions as teachers, doctors, lawyers, accountants and policymakers and administrators in the public sector across the region. Their previously pivotal and pervasive influence was rapidly curtailed after heightened concerns about religious extremism and regional tensions began to rise from the late 1970s onwards within the Kingdom. This experience serves as a salient illustration to show how the position of the other, the influence of the outsider and the openness to globalization can be limited, precarious and change rapidly, during periods of changing policy priorities. It may well also be the case for the current position of foreign consultants within Saudi Arabia and the potential disruption to public sector policymaking and governance which would accrue as a result. With an increased reliance on foreign consultants, as the more culturally acceptable form of ‘expatriation 2.0’, there is the potential that Saudi civil servants and public sector functionaries could feel excluded from the reform process and underestimated and unappreciated as a result. At best, this could encourage a continuation of passivity and apathy regarding the active commitment required to make such initiatives a success. At worst, it may encourage resistance to the changes demanded. Calvert Jones (2017) herself argues that instead of loyal bourgeois mindset, the current nexus of nationalism and nationalization is not only potentially hazardous in terms of inter-state relations but also general perceptions of the ‘other’, it has also misfired to a certain extent and created more of an ‘entitled loyalist’ mindset. She states that ‘The armies of foreign experts that ruling elites have recruited to assist in social engineering, in the UAE and elsewhere in the Gulf, play a complex role’ and ‘they quickly discover that they must operate in a precarious environment, marked by intense rivalry and high turnover. King-makers or knaves?

83

Many experts respond by praising the nation, its citizens, and its rulers’, concluding that ‘Thus for several reasons, foreign experts tend to enable an atmosphere in which youth receive lavish praise couched in nationalistic themes’. Such a process is described as increasing the ‘perils of pride’ among the local population. If the attraction for elites is towards establishing a ‘loyal bourgeois’ mindset, then many expatriate management consultants and domain experts can fit this archetype and accelerate the production of activities and programmes to support the perceived impact and momentum behind the implementation of the NTP agenda. Jones’s work suggests that this has actually led to promoting privileged patriots in the case of the UAE and arguably this may prove to be the case in Saudi Arabia also. The question remains whether nationalist ‘crowding out’ effects are generalizable across the GCC, albeit with similar social, economic and cultural models. The author replicated the results in the UAE with statistically similar results within the Hashemite Kingdom of Jordan, although in the case of Saudi Arabia, more research is required. More research is also required on expatriation as a facet of globalized labour markets. In the Gulf Studies literature there is a focus on nationalization of local labour markets and the policy prognostications aiming to achieve this in the past several decades. Expatriation is the other side of the coin of nationalization, although the concomitant changes to the participation of foreign workers in the Saudi labour market have not received the same attention, either from researchers or from policymakers. In particular, new and evolving forms of expatriation, arguably including the growth in consulting, require further study. They also require more frequent study, as by their very nature, employment patterns and practices for expatriates in general, and consultants in particular, tend to be dynamic and flexible to meet the needs of private sector employers and macroeconomic imperatives, typically beyond the longer time horizons of public sector policymakers. Finally, at the time of writing, the impact of the global Covid-19 pandemic demonstrated the flexibility offered by the use of consultants by policymakers, particularly in terms of governance in regard to their projects and service provision. The most immediate impact was in the further worsening of payment cycles for consultants. As government budgets tightened, all project payments were centralized under the Ministry of Finance, and this has resulted in an effective freeze in payments since the commencement of the pandemic. At the same time, 84

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

consultants have been under pressure to continue service provision and continuity or suffer claims of a breach in contract, despite the general freeze in client payments. Such actions have served to reveal the extent of the moral dilemma faced by consultants in Saudi Arabia, along with the locus of power within the governance structures of their contractual, legal and social relations with their clients, subject to governance practices within the Kingdom. To gain deeper insights, recent events and their impact on the role of consultants must be placed in a broader historical context. For decades migrant workers in general have constituted the backbone of Gulf economic and social structures. For Saudi Arabia specifically, while expatriates remain a significant minority in terms of the total population, they remain the majority of the overall active private sector workforce within the Kingdom according to the latest available figures (Jadwa 2019b). The coronavirus, along with the economic crisis due to unexpectedly low oil prices combined with unplanned increases in government expenditure, unleashed domestic criticism of the longterm reliance on all forms of foreign labour, including consultants. The coronavirus highlighted the complex situation facing all categories of migrant workers in Saudi Arabia, who seem to have been hit hardest by the direct impact of infection, along with the indirect economic impact. With volatile oil prices, lockdown provisions and health hazards due to the pandemic, many jobs will likely be shed, particularly in the private sector, where the majority of expatriates are employed. In Saudi Arabia specifically, Oxford Economics (2020) predicted that nearly 1.5m expatriates could lose their jobs, with the total resident Saudi population declining by 4 per cent as a result. As elsewhere in the world, the global pandemic accentuated preexisting patterns of social differences in terms of relative privilege, as well as accelerating pre-existing trends which were previously apparent over a longer timeframe. The relatively precarious position of the expatriate workforce in general may continue to act as an economic and social pressure release valve as likely waves of job losses, cost controls and new working practices come into play in the months and years ahead, particularly in the private sector compared to the more sclerotic working practices in the public sector. Consultants in particular offer greater flexibility. The objectives of their projects themselves are often catalysts for reform and their employment and even their residency status within the Kingdom often afford the maximum responsiveness to unexpected King-makers or knaves?

85

shocks, such as the pandemic. Such patterns of employment are therefore not subject to the same governance structures and employment protection as resident employees, typically subject only to an overarching service contract. As a result, the Kingdom’s historical high reliance on migrant workers is undergoing a profound transition, and a growing divide has emerged between these workers and local populations. For instance, the unanticipated announcement in May 2019 of income tax for expatriate workers being legislated fundamentally changes the preexisting, decades-long social contract for expatriates working within the Kingdom, particularly for the professionals and consultants who are most likely to exceed the potential zero-rated allowances. Such rapid and far-reaching changes in governance pertaining to foreign labour may prove to represent a new chapter in the model of expatriation within the Kingdom beyond the growth in the employment of consultants. Such patterns of ‘expatriation 2.0’, as highlighted above, may prove to be a transitory phase, with an acceleration of a stakeholder social contract for those expatriate consultants who remain, or it may represent a beginning of the end of the over-reliance on such foreign labour altogether. At this juncture it is not possible to be more certain and this important subject deserves further and more frequent research going forward.

Conclusion Controlling the modernization agenda and parameters of reform within the domestic realm of policymaking and governance is clearly a priority within Saudi Arabia. While there are many potential dimensions and explanations to consider with regard to this priority, it is clear that consultants are key to both policymaking and governance within the reform process. They provide the productive bridge between nationalization of the workforce and delivery of reform; they serve to preserve the power structures while delivering the modernization associated with reform, while at the same time preserving and protecting the position of elites within the reform process, allowing them to control the pace of reform and without risking the potential of creating permanent alternative power centres. The challenge for policymakers comes from the connection with globalization and its associations with perceptions of modernization, even within a fairly closed and regulated economy and society such as Saudi Arabia, particularly with the growing 86

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

linkage of nationalization and nationalism as a means of promoting a particular form of national identity and citizenship. As Mazzucato proposes, twenty-first-century global policymaking and public sector governance increasingly represent the ‘socialization of risk and privatization of rewards’ (2018), and this could also be said to be true in this chapter in regard to the role of consultants in terms of policymaking and governance within Saudi Arabia. Placed in the context of the larger reform process underway in the Kingdom at the time, several of the senior stakeholders remain under detention, as far as it can be known, since the detentions of November 2017 at the Riyadh Ritz-Carlton. This chapter examined the perceived role and value of global consulting companies, local practitioners and the public sector employees themselves. It also highlighted the governance implications for dynamic public sector reform and the relative priorities placed on public relations, promoting perceptions of progress and the provision of services to Saudi citizens, in particular the implications of the ‘administrative archaeology’ associated with newly created public sector bodies competing for accountability with sedimentary layers of persisting institutions. This is highlighted by Fathallah (2019), who states: the policymaking process has become similar to micromanaging a business – the Vision Strategic Management Office has even formed a ‘delivery unit’ to intervene as needed to ensure implementation when bureaucracies and ministries do not. Rather than being handed policies, government functionaries, whether at the central or local level, have to achieve specific outcomes of which they have little knowledge and, more importantly, no say in formulating. For example, in the case of King Salman Park and Green Riyadh, rather than the city’s development authority and municipal government designing and enacting a clear national urban development policy, the delivery unit bypassed these two bureaucracies and established separate, almost independent bodies to oversee the projects under the umbrella of Vision 2030. This phenomenon matters for Saudi Arabia. A far-reaching and ambitious reform programme relies on the capacity of public institutions for its effective, impactful and sustainable implementation. Public sector institutions are sustained by consistent and clear governance and King-makers or knaves?

87

policymaking practices. In this context, the pervasive and influential role of consultants in formulating and implementing Vision 2030 initiatives, while clearly having advantages in terms of efficiency (among others), arguably has distinct disadvantages over the long term in regard to the evaluated effectiveness of public sector reform within the Kingdom. Finally, a deeper understanding of a unique approach to policymaking and governance in the Kingdom, particularly within such an authoritarian, centralized and traditional society without the oversight afforded by other state structures prevalent elsewhere, should be considered. At a macrolevel, within Saudi Arabia there is a more opaque and indeterminate line to be drawn between the public and private sector, given the power and pervasiveness of the eponymous elite within the Kingdom. The analysis within this chapter seeks to illustrate the growing ‘socialisation of risk and the privatisation of rewards’ within contemporary policymaking and governance structures in Saudi Arabia, with particular focus on the increased role of consultants as a new form of expatriation. More research and analysis are required to further this understanding.

References Al-Sulami, M. (2019). Arab News, ‘How to Change the Perception of Saudi Arabia in the West’, opinion article, Page 10, Head of the International Institute for Iranian Studies (Rasanah), 7 May 2019. Belfer Center Paper. (April 2019). ‘Profile of a Prince: Promise and Peril in Mohammed bin Salman’s Vision 2030’, Karen Elliot House. Belger, T. (2019). ‘Yahoo Finance Article’. https://finance.yahoo.com/news/imfchief-tells-poor-countries-cut-use-global-consultancy-firms-101311535. html?soc_src=social-sh&soc_trk=tw, accessed 25 January 2019. Boland, H. (2019). ‘McKinsey Marks Digital Shift with Change of Headquarters’. www.digitaledition.telegraph.co.uk, accessed 27 August 2019. Craig, D. (2005). Rip-Off: The Scandalous Inside Story of the Management Consulting Money Machine. London: The Original Book Company. Fathallah, H. (2019). ‘Challenges of Public Policy Making in Saudi Arabia’. https://carnegieendowment.org/sada/79188, accessed 27 May 2019. Financial Times. (2019). ‘Saudi Aramco Battles Oil Ministry over Use of Company Funds’. www.financialtimes.com, accessed 20 June 2019. Forsythe, M. et al. (2018). ‘Consulting Firms Keep Lucrative Saudi Alliance, Shaping Crown Prince’s Vision’. https://www.nytimes.com/2018/11/04/ world/middleeast/mckinsey-bcg-booz-allen-saudi-khashoggi.html, accessed 5 November 2018.

88

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Hertog, S., Luciani, G. and Valeri, M. (eds). (2013). Business Politics in the Middle East. London: Hurst and Company. Hobsbawm, E. and Ranger, T. (eds). (1983). The Invention of Tradition. Cambridge: Cambridge University Press. International Monetary Fund, World Economic Outlook Update (January 2019). https://www.imf.org/en/Publications/WEO/Issues/2019/01/11weoupdate-january-2019 Jadwa Research. (2018). ‘Saudi Arabia’s 2019 Budget’, 19 December 2018, https://www.jadwa.com/en/research/economic-research/budget-reports, accessed 22 December 2018. Jadwa Research. (2019). ‘Saudi Labor Market Update – Q2 2019’, https://www. jadwa.com/en/research/economic-research/labormarketupdateQ22019, accessed 19 September 2019. Jones, C. W. (2017). Bedouins into Bourgeois: Remaking Citizens for Globalisation. Cambridge: Cambridge University Press. Jones, C. W. (2014), ‘Outsourcing the Nation: Networks of Foreign Experts in the Arabian Peninsula’, presented at the American Political Science Association (APSA), Annual Meeting, Washington, DC, 30 August 2014. Jones, C. W. (2019). ‘All the King’s Consultants: The Perils of Advising Authoritarians’. https://www.foreignaffairs.com/articles/persiangulf/2019-04-16/all-kings-consultants, accessed 7 July 2019. Jones, D. B. (2015). ‘Key Drivers for Employee Engagement and Productivity of GCC Nationals and Expatriates: A Longitudinal Study 2010–2012’, in A. Kropf and M. A. Ramady (eds), Employment and Career Motivation in the Arab Gulf States: The Rentier Mentality Revisited. Berlin: Gerlach Press, pp. 122–58. Jones, D. B. and Punshi, R. (2013). Unlocking the Paradox of Plenty: A Review of the Talent Landscape in the Arab World. Dubai, UAE: Motivate Publishing. Jones, D. B. and Sahraoui, S. (eds). (2018). The Future of Labour Market Reform in the Gulf Region: Towards a Multi-Disciplinary, Evidence-Based and Practical Understanding. Berlin: Gerlach Press. Kapiszewski, A. (2001). Nationals and Expatriates: Population and Labour Dilemmas of the GCC States. London: Ithaca Press. Kolhatkar, S. (2018). ‘McKinsey’s Work for Saudi Arabia Highlights Its History of Unsavory Entanglements’. https://www.newyorker.com/news/news-desk/ mckinseys-work-for-saudi-arabia-highlights-its-history-of-unsavoryentanglements, accessed 5 November 2018. Mariana, M. (2018). The Value of Everything: Making and Taking in the Global Economy. London: Allen Lane. Mariana, M. (2018). The Entrepreneurial State: Debunking Public vs Private Sector Myths. London: Penguin Random House. Niblock, T. and Malik, M. (2007). The Political Economy of Saudi Arabia. London: Routledge. Organisation for Economic Cooperation and Development (2010). ‘Progress in Public Management in the Middle East and North Africa’, OECD.

King-makers or knaves?

89

Oxford Economics. (2020). GCC Expatriate Exodus – From a Trickle to a Deluge. Working Paper, https://www.oxfordeconomics.com, accessed 2 June 2020. Perkins, J. (2004). Confessions of an Economic Hitman. New York: Berret – Koehler Publishers. Saudi Gazette. (n.d.). ‘No Government Contracts to Foreign Consultancy Firms’. www.saudigazette.com.sa, accessed 9 September 2019. Source for Consulting. (2019). ‘The GCC Consulting Market in 2019’. www. reports.sourceglobalresearch.com, accessed 8 May 2019. Source for Consulting. (n.d.) ‘Perceptions of Consulting in the GCC in 2019’. www.reports.sourceglobalresearch.com, accessed 8 May 2019. Thompson, M. C. and Quilliam, N. (2017). Policy Making in the GCC: State, Citizens and Institutions. London: I.B. Tauris. www.transparency.org/ corruptionperceptionindex, accessed 15 May 2019. Said, S., Scheck, J. and Hope, B. (2018). ‘Former McKinsey Executive Imprisoned by Saudis’, Wall Street Journal. https://www.wsj.com/articles/ former-mckinsey-executive-imprisoned-by-saudis-11545998438, accessed 18 March 2019.

90

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

PART TWO

PUTTING POLICIES INTO PRACTICE

92

4 BEYOND THE GLITTER FACTOR: BUILDING DEFENCE CAPACITY IN KING SALMAN’S SAUDI ARABIA D. B. Des Roches

Saudi Arabia spends enormous amounts of money on its security infrastructure, but does not get a commensurate return on its investment. The Saudi leadership knows this will become more of a constraint on the Saudi state as the population rises and oil revenues lag while expectations elevate among an ever-growing population. There is a significant body of literature laying out the shortcomings of the Saudis in this regard: some of the analysis does not seem to have the Kingdom’s best interests at heart. The Saudis are well aware of their shortcomings. Both their disappointing performance in the various Yemen wars and the reform impetus of Vision 2030 have spurred a significant and unprecedented defence reform effort in the Kingdom. An examination of the criticisms of past Saudi efforts, together with an examination of ongoing reforms in the context of total defence capacitybuilding, will show that this effort is unprecedented both in its ambition and in its potential to build effective defence capacity.

Comments do not reflect views or endorsement of any agency.

Underperformance and overspending: A cottage industry? There has been a significant amount written on the failure of the Saudis to turn an immense amount of defence spending into commensurate defence capacity.1 There is no doubt that Saudi Arabia has spent a huge amount of money on building up its various defence and security bodies. There is also no doubt that Saudi Arabia has yet to achieve its security ambitions. The Kingdom is still challenged to protect itself from external attack and to effectively project force into unstable neighbouring states. There are numerous unmet internal security challenges within the Kingdom, and the Saudis struggle to reach the full operational potential of many of their weapons systems – which have been purchased at great expense. Some of the writing on the Saudi (and other Arab state) defence failings does not come from a place of love. However, a survey of the literature shows analysts generally draw on three reasons for Saudi defence underperformance.

Inefficiency by design: Coup-proofing A number of analysts have noted that the Saudi security infrastructure is deliberately designed to inhibit efficiency, since efficient military/security organizations have the ability to overthrow their government. This is particularly resonant with the Saudis: much of Arab political history in the 1950s and 1960s was essentially a series of coups with interstitial periods between these coups. During this period, coup plotters started to emerge from more specialized units (such as air forces, which produced the Asa’ad regime in Syria) than from general ground units, as was the case at the start of the era. This trend, taken together with the defection of several Saudi Air Force pilots to Nasser2 during the 1960s,3 led some to posit that Arab militaries in general, and Saudi Arabia in particular, had set up redundant security infrastructure in order to ‘coup-proof ’ their armed forces. ‘Coup-proofing’ meant the establishment of multiple units, often with the same mission and similar capabilities, simply to counterbalance each other and thus ensure that one unit is unable to take over power and replace the existing regime.4 94

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Coup-proofing also explains why, in many instances, the most capable and most expensive military forces in a country may not be used in combat.5 For example, during the 1973 war the most effective Syrian armoured unit remained on duty in Damascus to protect the Asa’ad regime. The most commonly cited example of coup-proofing in Saudi Arabia is the establishment and continued support of the Saudi Arabia National Guard (SANG), a separate army which has its own established US training mission and has most of the capabilities of the regular army, including artillery, armour and a helicopter branch.6 The SANG is easily portrayed as a regime protection force as well as a counterbalance to the regular armed forces: its historic tribal recruiting base is seen as a potential strength in countering overseas educated military elites who may be inclined to revolt.7

Armed forces as a source of patronage Another explanation for inefficient Saudi armed forces is that they were built not to be efficient but rather to dispense patronage among various groups in order to keep them quiescent and supportive of the ruling state. In this telling, the various Saudi security services were allocated to descendants of Abdul Aziz as a way of establishing power centres which would maintain a family equilibrium – so Abdullah was awarded the National Guard, Sultan was awarded the Ministry of Defense and Nayaf was awarded the Ministry of the Interior. These three princes maintained control over their respective forces for decades. In the course of this, they developed overlapping and redundant capabilities: for example, all three ministries have both helicopter wings and special forces units. The patronage associated with a ministry did not just yield a power base: it was also associated with the opportunity for financial gain. Saudi security budgeting in the past has been extremely opaque, and generally services applied in isolation to the royal court for money to buy new equipment. This created the opportunity for corruption and graft. In some instances (most notably the British Aerospace–al-Yamamah deal) the amount of money at stake was in the billions of dollars.8 Presumably, this was viewed as the price of keeping peace among senior royals, but it clearly detracted from the development of military efficiency.

Beyond the glitter factor

95

Cultural shortcomings as a source of military inefficiency This explanation is perhaps the most controversial, but is also a more universal explanation. A number of analysts have argued that the nature of Arab culture – with an emphasis on the collective rather than individual and an extreme reluctance of senior leaders to acknowledge any shortfalls in front of subordinates – inhibits the development of a culture of critical thinking which is required for any effective military organization.9 Some militaries, such as the Chinese, used self-evaluation and criticism as a tool to transform almost instantly from being considered ethnically unsuitable for warfare to becoming effective fighters. The idea of self-examination, delegating power and authority to subordinates, and holding individuals accountable for actions, has been absent in much of the Saudi security services, but it should be noted that many of these criticisms apply to quite a few hierarchical organizations around the world as well.10

Equipment as the be-all/end-all: The glitter factor One of the more common analyses of Saudi shortfalls in developing effective security institutions is the criticism that Saudis tend to focus on equipment acquisition, and neglect other elements essential to building effective security institutions. Instead of focusing on training and developing effective doctrine, Saudi Arabia – along with many other developing countries – is accused of seeking to build stockpiles of the latest and most advanced weapons, regardless of their actual abilities to effectively deploy these weapons. This tendency has been labelled the ‘glitter factor’ by Anthony Cordesman and has been taken up by many others.11 It is much decried, particularly in the US government – which sees not a concerted, missiondriven acquisition strategy, but rather a sort of status contest in which Arab states seek just to get the latest and most exciting weapons. As one (to remain unnamed) US official said, ‘They watch Game of Thrones on Sunday and on Monday ask to buy dragons.’ In this telling, the Saudis are particularly at fault because they are one of the few states which has both large numbers of security forces and substantial money. Some, particularly on the left, have found fault with 96

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

weapons-selling nations for seeking to exploit this mindset. However, it should be noted that – at least in the case of the United States – the dynamic is the opposite. In general, the Saudis seek to buy more American weapons than the United States is willing to sell.12 In those instances where the United States flatly refuses to sell equipment – as with surface-to-surface missiles or armed drones – the Saudis have tended to find other vendors, such as the Chinese.13 In any event, a focus on weapons acquisition in the absence of other strong defence institutions, especially a merit-based personnel system, will tend to spend a lot of money for relatively little return. This appears to have been the case in the Saudi security establishment.

How to build defence capacity? Western military analysts and thinkers are in agreement that defence capacity-building is a rather holistic exercise which requires the development and maintenance of a number of systems simultaneously. It is complex and expensive. In this chapter, I will introduce the military model of defence capacity-building, and then note elements that the Saudis have focused on. The United States uses a rather clumsy acronym DOTMLPF to describe the basic elements of capacity-building.14 None of these elements alone is sufficient to build effective military capacity; they all must be taken together. Of course, a strength in one facet can offset a weakness in another. In this chapter I will simply introduce these and apply a few elements to the ongoing Saudi defence reform initiative. The elements of DOTMLPF are doctrine, organization, training, materiel, leadership and education, personnel and facilities. Critics of the Saudi military generally argue that the Saudi forces have focused on materiel – that is, equipment – to the detriment of the other elements. Under King Salman, a number of reforms are underway towards addressing these shortfalls. Some are part of Vision 2030; others are reforms separate from that overall programme but which will contribute to meeting Vision 2030 goals. I will address various reforms in the context of the elements of DOTMLPF. Military capacity-building is a holistic exercise: while the elements of capacity-building are separated for analytical purposes, they often affect Beyond the glitter factor

97

each other and are very difficult to disaggregate in practice. I will address each of them separately for purposes of this discussion, while recognizing that, for example, organization has a great effect on doctrine.

Doctrine Doctrine refers to the intellectual concept of how a military organization plans to fight. Doctrine organizes principles, concepts and tactics into a coherent and shared whole – for example, the German armed forces of the Second World War developed a doctrine which emphasizsed combined arms, speed and the use of airpower in close support of the advance. The famous Blitzkrieg tactics, for example, were a key part of this German doctrine.15 Doctrine is underdeveloped in the Saudi military tradition. Rather than develop modern indigenous doctrine, the Saudi armed forces have tended to simply translate existing Western (mostly American) military doctrine and seek to implement that.16 This approach is on a case-by-case basis: in the past, Saudi armed services (such as the Land Forces and the Navy) operated independently and developed their own doctrine and acquisition plans in isolation from the other services. In some instances, this has led to incompatible doctrine: for example, the Royal Saudi Air Defense Forces are a separate service and have not in the past linked up their (mostly defensive) doctrine with the (mostly offensive) doctrine required of the Royal Saudi Air Force to simultaneously attack missile launch sites while defeating missiles.17 The recent establishment of a Saudi Ministry of Defense (MoD) as a functional and manned organization will go a long way towards addressing this problem. Current plans are for the new Joint Forces Command to command all expeditionary and combat forces while in combat. Of necessity, this command would have to develop a common concept of fighting – that is, a baseline doctrine for the various Saudi services. The source of such doctrine is less important than the requirement it be common. The newly empowered Saudi MoD will contain within it a section dedicated to strategy, policy and operations which will also have oversight for the development of a comprehensive set of doctrine applicable to all the armed services. In theory, a shared doctrinal outlook – if effective and if properly implemented – would go a great distance towards reforming Saudi shortfalls in capacity defence capacity. 98

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Of course, resistance is to be expected from military services which are used to autonomous operations. The American experience is instructive: even though the Department of Defense was unified and established in 1947, most observers feel true ‘jointness’ did not occur until after the passage of the Goldwater-Nichols Defense Reform Act in 1986.18 The Saudis will no doubt experience significant organizational resistance and delays, as is the case in most bureaucratic reforms.

Organization Organization is the defence capacity element most closely related to the coup-proofing explanation of Saudi military inefficiency. There are a number of overlapping military organizations within Saudi Arabia, and there are some military organizations whose missions appear to leave important threats unanswered. The most obvious instance of organizational redundancy is the existence of two land armies, the Royal Saudi Land Forces (RSLF) in the MoD, and the Saudi Arabia National Guard (SANG) in its own ministry. There are differences between the two forces: the RSLF is more of a highintensity warfighting force with greater numbers of armour, aviation and artillery, while the SANG is often described as more of an internal security force. The SANG has, however, also had the additional mission of being the base force of the GCC’s Peninsula Shield force, and has deployed to Bahrain on a GCC Mission.19 The SANG has historically been organized on a tribal basis, and was originally viewed along the lines of British colonial levies – tribal forces which receive a stipend in exchange for occasional military service. Indeed, the SANG retains a rather large tribal militia element – the fauj – which remains true to this tradition. These tribal ties were badly shaken when dissident low-level members of the SANG, dissatisfied with the perceived un-Islamic drift of the Kingdom, occupied the Mecca Grand Mosque in 1979.20 Both the SANG and the MoD land force, the RSLF, have roughly comparable capabilities. Indeed, both organizations have separate American training missions, which were until recently headed by major generals (the Americans have since consolidated their three Saudi training missions under one general, with each mission headed by a colonel). The SANG also has a decades-long arrangement with an American-manned Beyond the glitter factor

99

training firm, Vinnell Arabia Corporation, which mostly hires retired US military personnel as trainers and advisors.21 The SANG had long been led by then-prince Abdullah; after his ascension to the throne it passed to his son Mutaib. The RSLF, as part of the Ministry of Defense, fell under the command of Prince (later Crown Prince) Sultan. Thus, different branches of the family had an armed force under their command, which presumably were loyal to them. The November 2017 dismissal and subsequent confinement (albeit in the Riyadh Ritz-Carlton) of Mutaib was thus a surprise to many observers.22 Now that both the SANG and the RSLF are not associated with different branches of the royal family, it is not unreasonable to expect that their organizations be combined to enhance efficiency and reduce costs. Some expected this to occur immediately after the November 2017 arrests. However, it appears that this organizational change may be delayed or not occur at all. The fighting in Yemen has shown that there are some tactical advantages from having one force (the SANG) primarily dedicated to border defence and internal security operations. None the less, there are signs that the SANG is being brought more closely into the functional umbrella of the MoD, if not under the command of the Ministry. SANG officers now participate fully in the educational institutions of the MoD, to include as Staff College and War College instructors, and it appears that the Vision 2030 defence reforms will merge SANG procurement and acquisition processes and MoD processes. Another area where organization may become significant is in dealing with consolidating services which have different missions but similar roles. The best example of this is the maintenance of a separate Royal Saudi Air Defense Forces (RSADF) and Royal Saudi Air Force (RSAF). The Air Defense Forces operate ground-based air defence weapons, such as the Patriot missile, while the RSAF has a traditional airplane-based air superiority mission set. In most Western countries, the air defence forces are usually subordinated to the air force (oddly, the United States is an exception: they are part of the army). Having the air defence forces combined with the air forces generally allows for a smooth and common air defence strategy: if a missile or hostile airplane attacks, unity of command allows for air- and ground-based defence assets to engage while simultaneous attacks are made against the point of origin. With separate services, there 100

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

is limited common doctrine or intelligence, and procedures may vary on responsibilities and coordination. Reportedly, the Saudi MoD has commissioned a study which examines combining the two services. Whether or not this occurs will depend on many conditions extraneous to military conditions, but the fact the question is being asked is a good sign. Again, the development of a stronger MoD with more functionality along with the unified military Joint Force Command augurs well for future organizational improvements.

Training With rare exceptions (such as RSADF crews and some RSAF pilots), most outside observers are dismissive of the quality of Saudi training throughout the security services.23 Training in general often seems to be confined to what is needed to operate specific types of equipment, such as training a pilot to fly his aircraft or an infantryman to operate his rifle. There are two sorts of military training: individual and collective. Collective training, to be effective, needs to be challenging, unpredictable and evaluated. Training of this sort is minimal in the Kingdom. In part, this is because effective collective training is very expensive; in part this is because conducting evaluated collective exercises exposes a commander to criticism and the possibility of failure. Training is to be a major feature of Saudi defence reform: senior leaders are very aware of what needs to be done. However, few nations effectively conduct the sort of training that modern military excellence requires. For Saudi Arabia to join their ranks will require sustained emphasis over a period of many years. Again harkening to the American experience, it is an article of faith that American collective military training was greatly enhanced by the establishment of service-wide, challenging national-level training and evaluation centres and exercises, such as the US Air Force Red Flag exercises at Nellis Air Force Base in Nevada, and the Army’s National Training Center in California’s desert. Both of these innovations occurred in the 1970s as the US military sought to reform itself in the wake of the Vietnam debacle. The Saudis are seeking to develop this objective training and evaluation capability as a critical step towards building a credible military force. Beyond the glitter factor

101

The biggest challenge to reform in this area is probably cultural. For a unit to reap the full benefit of any training event, it is essential that a timely, frank and thorough review be conducted – one that discusses error without regard to rank. This is difficult in Western culture, and may be unattainable in the Kingdom.24

Materiel Materiel refers to equipment. This element ties in most closely with the ‘glitter factor’ criticism of Arab military capacity. There is no doubt that the Saudis have purchased large amounts of very expensive military equipment. However, even with this tremendous outlay, the Saudis have not grown defence capacity as they wish. In part this is due to organizational failures. The different services have different acquisition and procurement branches: thus there are a plethora of different service rifles, communications systems and vehicles. These differences are not trivial: each of these requires a pipeline of spare parts and mechanics which have to deploy to combat. Maintaining separate supply systems for similar weapons can easily overwhelm even the most advanced logistic system. In part this is due to corruption. While the exact amount paid in bribes in the al Yamamah–British Aerospace fighter procurement remains unknown, it is safe to say that it will rank among the top ten bribes in history by dollar amount.25 Finally, in part (as in every other country in the world), some procurement decisions are made due to political reasons rather than military considerations. The Saudis are very wary of past American attempts to influence their policy by restricting weapons transfers, and have sought to diversify their sources of supply simply to show they have options which they could exercise in extremis.26 Materiel reform, particularly in acquisition, will be a major focus of the Saudi defence reform. Past procedure allowed individual services to formulate their requirements, get pro forma approval from the undermanned MoD and then approach the royal court for funding. If they received funding, they bought their equipment. There was little emphasis on commonality or analysis of mission requirements. Under the evolving MoD structure, major weapons purchases are to be evaluated and consolidated at the ministry level. To further vet 102

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

requirements, the Kingdom has established a General Authority for Military Industries (GAMI) which will provide independent vetting of procurement requests and requirements, and will seek to implement standardization where it is helpful (e.g. adopting a standard pistol).27 GAMI also has a strong, non-military mandate under Vision 2030: it is the body charged with ensuring that weapons purchases meet local production requirements, which aim to have 50 per cent of defence purchases (by value) produced in the Kingdom by 2030.28 In order to meet the domestic spending requirements, the Kingdom has chartered a new company, Saudi Arabian Military Industries (SAMI), which will serve as a commercial entity for the purposes of establishing local production.29 It is probable that these measures will increase, rather than decrease, materiel costs, at least in the short term. There are many barriers to the development of competitively priced weapons manufacturing industry in Saudi Arabia. However, the requirement for local production will be a strong impetus towards standardization of military equipment. The Kingdom will be challenged to set up a robust defence industry from a minimal base: it will not be eager to dilute scarce managerial skills by producing redundant or extraneous articles. Given both the financial control that Saudi Arabia has over its materiel purchases and the strong political drivers towards materiel reform laid out in Vision 2030, this is the area where the Kingdom is most likely to meet with success. As with any country which imports a majority of its materiel, logistics is a vulnerability for Saudi Arabia. Spare parts are mostly imported: training Saudis to maintain airplanes and complex weapons systems is extremely expensive, and the lack of a non-commissioned officer system (which performs most maintenance tasks in Western armed forces) is a drag on Saudi efforts to maintain their expensive equipment. Given these limitations, the Kingdom is very reliant upon contracted civilian logistic support. This is extremely expensive, and is also limited. Contractors – especially Western contractors – are generally unwilling to relocate to remote tactical locations, and are less likely to deploy to combat zones. The upgraded MoD is expected to have a robust logistics section which should simplify, standardize and provide oversight for logistic tasks which are now executed by services in isolation. This should Beyond the glitter factor

103

lead to improvement; similarly, command emphasis on logistics as a key operating system should also lead to substantial improvements. Implementing modern, deployable military logistics will continue to be a significant challenge for the Saudi military. However, this is also the case for many of the other commercial and social challenges in Vision 2030.

Leadership and education There is no shortage of inspired leaders in the Saudi armed forces. However, as with other militaries, it is not clear that there is a systemic way to identify and develop gifted leaders while at the same time minimizing or eliminating undesirable leadership traits. All militaries struggle with this problem. Until relatively recently, there was no indication that leadership skills played any role in promoting officers or assigning them posts. This appears to have changed. In February 2018, the crown prince removed the armed forces chief of staff along with the commanders of the RSADF and the RSLF.30 The commander of the Saudi Navy had been removed a few months earlier. There is little doubt these removals were prompted by poor military performance in the Yemen war. The removal of such senior leaders is extraordinary: these actions indicate the Saudis seek to impose individual accountability for senior leaders as a step towards improving leadership. The Saudis are also seeking to establish leadership courses for officers. For the most part, this has involved importing Western experts. Leadership is a major component of the newly enhanced Saudi professional military education institutions. However, it will be sometime (and require some personnel reform, such as moving towards a merit-based promotion system) to build a true culture of leadership. The major thrust of change is the establishment of a Saudi National Defense University. The Saudis have long had a staff college (which educates mid-career officers) and a war college (which educates senior officers). In modern military educational systems, officers must complete these courses to advance in rank. The colleges themselves should be teaching critical thinking, senior leadership and modern aspects of military science.

104

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

While these institutions have been around for decades, they generally have not received the emphasis their importance warrants. Instead of instructors developing modern curricula, Saudis have either translated Western courses, or sought to outsource instruction. The Saudis have determined that they will consolidate both colleges into a National Defense University, and then reform their university organization into a modern structure, with a provost and empowered faculty which will develop curricula based upon Saudi requirements and considerations, informed by foreign best practices. The Near East South Asia Center of the US National Defense University has partnered with the Saudis to help in developing faculty and curriculum, and is poised to serve as a key partner in modernizing the Saudi professional military education system.

Personnel Developing an effective Saudi military capacity will require profound personnel reform. Currently, the Saudi armed forces do not operate a merit-based promotion system, have a nearly non-existent noncommissioned officer development system and have a professional military education system which is in need of improvement. The reformed MoD will include a personnel directorate which is expected to establish promotion and selection policies. There are murmurs that the Saudis are – due to financial pressures – considering selective promotions based on merit and retirement for non-selected officers. Western militaries struggle with these issues, however, and there is no guarantee that the Saudis will meet with success. At the same time, the Saudis are considering developing a professional non-commissioned officer corps. This would be a first in the Arab world: generally, non-commissioned officers and other enlisted ranks are expected only to obey the orders of officers, not to think critically and develop problem-solving skills. Developing a professional noncommissioned officer corps will take decades, and will probably not be possible if the social changes laid out in Vision 2030 do not succeed. However, if the Saudis are successful, they will achieve a manifold increase in military efficiency.

Beyond the glitter factor

105

Facilities This is one area where the Kingdom is in a very well-established position. The Saudis have a number of large, modern military facilities situated around the Kingdom, and they have the ability to build more if needed. The Saudis also have a world-class domestic construction industry and long-standing partnerships with other military construction entities, such as the United States Army Corps of Engineers. Large-scale construction projects have generally been centralized at the ministry level due to the costs involved: this trend can be expected to reinforce itself. If reform truly takes root, the challenge changes into deciding which facilities have outlived their utility and should be retired. This is a complex and difficult problem for established militaries, but ultimately increases the effectiveness of the force. However, such a requirement appears to be far in the future.

Coronavirus and oil shocks: Will reform survive? The coronavirus and the subsequent economic disruption caused by the pandemic may delay or even derail the process of defence reform. As with much of the expansive Vision 2030 programme, the defence reform effort is greatly dependent upon (rather expensive) Western consultants. The operating model was produced by the Boston Consulting Group and Booz Allen Hamilton, and other firms involved in the reform effort include such consulting powerhouses as PriceWaterhouseCoopers, McKinsey and others. Prominent defence officials, such as the former NATO commander and US National Security Advisor General James Jones, are also working on various aspects of the defence reform project. These advisors do not come cheap: Riyadh is landlocked and has horrendous traffic as well as none of the attractions associated with Dubai or Bahrain. Western experts must be paid a significant premium to work in the Kingdom, and their living support package (housing, cars, travel) are also expensive.31 As Saudi revenues decline, it is reasonable to expect that these contracts will be examined closely. However, as expensive as they are, they are relatively small compared to most of the big arms

106

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

deals, and are aimed at identifying and fostering efficiencies in the Saudi defence establishment. The recent tripling of the Saudi Value Added Tax (VAT) from 5 per cent to 15 per cent will hit these consultancies hard: it amounts to a 10 per cent reduction in expected profits on an already finely calibrated contract.32 Because most of these consultancies have posted a performance bond (usually 5 per cent of the contract value) and hope to land further contracts, they will be unlikely to just forfeit their bond and walk away. However, they will be on guard going forward and probably demand more for their services. At the same time, the MoD does not have many people who are knowledgeable of defence issues but not closely aligned with one military service. Those who the MoD can recruit are either defence neophytes or may be easily dismissed as parochial. There has been no indication of any flagging in the royal family’s desire to reform the MoD. While various weapons purchases may be delayed or cancelled, the reform effort is likely to continue to be seen as an effort to economize, and thus will continue in spite of worsening economic conditions or service opposition.

So what will happen? Predicting the future is tempting but rarely goes well for a political scientist. The broad Saudi military reform effort is, based on past observations of other militaries, unlikely to achieve all of its goals. However, Saudi Arabia is in the midst of a governmental and modernizing event that is without precedent in its history. The military, as one of the foundations of the Saudi state, will be both a key driver and a key testbed for these reforms. The Saudi military has the advantages of having strong leadership, a clear agenda and pathway for reform. The Saudi military also enjoys freedom from some of the financial constraints which may prevail in other parts of government. The Saudi military has a number of eager partners in its transformation effort. The Trump administration made no secret of its desire to see the Saudis play a more robust role in their defence; the Biden administration will welcome reform as a necessary modernization as well as a way to remain engaged with a key partner in an area which does not carry

Beyond the glitter factor

107

the negative human rights baggage of measures such as supporting the Saudi war in Yemen. The British have partnered with the Americans in facilitating MoD reform, and there is no shortage of defence companies offering experienced senior military leaders as mentors and advisors. Both the United States and Britain have offered experienced senior officials as mentors in the ministry: the Saudis will probably welcome the lack of a profit motive in this offer. Reform is always difficult, but the Saudi vision for defence reform is coherent, achievable and supported by leadership and resources. Success is not guaranteed but – in the absence of reform – mediocrity is. So long as the focus does not waver, there is a fighting chance of success.

Notes 1 E.g. Pieter D. Wezeman, ‘Saudi Arabia, Armaments, and Conflict in

the Middle East’, Stockholm International Peace Research Institute Backgrounder, 14 December 2018, https://www.sipri.org/commentary/ topical-backgrounder/2018/saudi-arabia-armaments-and-conflict-middleeast (accessed 12 May 2019).

2 Joseph Kechichian, Succession in Saudi Arabia (London: Palgrave Macmillan, 2002), 103.

3 The standard US government reference on Saudi Arabia noted an air force coup attempt in 1969. James D. Rudolph, ‘Government and Politics’, in Richard. F. Nyrop (ed.), Saudi Arabia: A Country Study (Washington, DC: Government Printing Office, 1984), 230.

4 A detailed discussion of ‘coup-proofing’ may be found in Florence Gaub, Guardians of the Arab State (London: Hurst, 2017), 19–28.

5 Ulrich Pilster and Tobias Böhmelt, ‘Coup Proofing and Military

Effectiveness in Interstate Wars, 1967–99’, Conflict Management and Peace Science 28, no. 4 (2011): 331–50.

6 See Anthony Cordesman and Obaid, Nawaf, ‘Saudi Military Forces and Development: Challenges & Reform’, 30 May 2004, https://csis-prod. s3.amazonaws.com/s3fs-public/legacy_files/files/media/csis/pubs/ saudimilforces.pdf (accessed 10 May 2019), esp. 23.

7 Ibid. 8 Ben Russell and Nigel Morris, ‘Court Condemns Blair for Halting Saudi

Arms Inquiry’, The Independent, 11 April 2008, https://www.independent. co.uk/news/uk/politics/court-condemns-blair-for-halting-saudi-arms-

108

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

inquiry-807793.html (accessed 10 May 2019). This article contains a useful timeline of the weapons deal and the frustrated corruption inquiry. There is discussion of re-opening the inquiry following recent Saudi anti-corruption measures.

9 See virtually anything written by Kenneth Pollack. A succinct recounting

of this view is Norvell B. DeAtkine, ‘Why Arabs Lose Wars’, Middle East Quarterly 6, no. 4 (December 1999), https://www.meforum.org/441/whyarabs-lose-wars (accessed 10 May 2019).

10 The regnant discussion of these factors at the moment is Kenneth Pollack,

Armies of Sand (New York: Oxford University Press). Culture and the issues surrounding discussing culture are addressed at some length on pages 362–93. Pollack identifies several Arab cultural characteristics which he argues detract from military effectiveness, such as deference to authority and passivity. In his defence, he also singles out personal courage as a cultural value.

11 Anthony Cordesman, ‘Military Spending: The Other Side of Saudi Security’, https://csis-prod.s3.amazonaws.com/s3fs-public/publication/180315_ Saudi_Military_Spending.pdf (accessed 10 May 2019).

12 I am aware this assertion is counterintuitive to most and contrary to

generations of received wisdom. However, it is common knowledge to those who work in the field. Sales are often denied for reasons of technology transfer. See Christopher Blanchard, ‘Saudi Arabia: Background and US Relations’, Congressional Research Service Report RL 33533 (21 September 2019), https://fas.org/sgp/crs/mideast/RL33533.pdf (accessed 10 May 2019) esp. pages 2, 23, 33. See also the debate about the United States modifying the Missile Technology Control Regime, which has impeded American sales of armed drones (and thus ceded the field to the Chinese); e.g. Paul J. Kerr, ‘U.S.-Proposed Missile Technology Control Regime Changes’, Congressional Research Service Report IF11069 (9 May 2020), https://fas. org/sgp/crs/nuke/IF11069.pdf (accessed 12 June 2020).

13 Dominic Dudley, ‘How China Is Fueling the Arms Race in Drones in the

Middle East’, Forbes Online, 17 December 2018, https://www.forbes.com/ sites/dominicdudley/2018/12/17/china-fueling-drones-arms-race-middleeast/#5db602864bb4 (accessed 10 May 2019).

14 The Joint Staff, Department of Defense Dictionary of Military and Associated Terms (Joint Publication 1-02), p. 324. https://fas.org/irp/doddir/dod/ jp1_02.pdf (accessed 10 May 2019).

15 F. H. Hinsley, British Intelligence in the Second World War, 3 vols. (London: HMSO, 1979), 245–8.

16 Most of the observations put forward here are based on field observations

drawn from extensive interactions with Saudi military forces from 2011 to present.

Beyond the glitter factor

109

17 In part, this may be a bureaucratic defence to preserve independence as a

service and avoid incorporation into the air force, as is the case in countries such as Britain and Bahrain.

18 E.g. Robert G. Angevine, ‘Time to Revive Joint Concept Development

and Experimentation’, War on the Rocks, 23 January 2020, https:// warontherocks.com/2020/01/time-to-revive-joint-concept-developmentand-experimentation/ (accessed 12 June 2020).

19 Nawaf Obaid, ‘A Saudi Arabian Defense Doctrine’, Harvard Kennedy

School Belfer Center, May 2014, 30–1. https://www.belfercenter.org/sites/ default/files/legacy/files/Saudi%20Strategic%20Doctrine%20-%20web.pdf (accessed 10 May 2019).

20 See Yaroslav Trofimov, The Siege of Mecca (New York: Anchor, 2018). 21 See Vinnell’s website https://www.vinnellarabia.com/ABOUTUS/ (accessed 10 May 2019).

22 Including me. One observer at the time predicted an uprising over the

replacement of Mutaib: this has yet to occur. Michael Horton, ‘Will Backlash against Prince Purge Begin within Military?’ The American Conservative, 10 November 2017, https://www.theamericanconservative. com/articles/will-backlash-to-crusading-prince-begin-within-saudimilitary-salman-mbs/ (accessed 10 May 2019).

23 This is not a phenomenon unique to observers of the Saudi forces. US

Army personnel who served at the National Training Center have described the ‘Observer Controller effect’ whereby soldiers who have served several rotations as exercise observer controllers tend to view all training units as hopelessly inept.

24 See, e.g., Pollack, 378–81. 25 See, e.g., David Leigh and Rob Evans, ‘The BAE Files: The Al Yamamah Deal’, The Guardian, 7 June 2007, https://www.theguardian.com/ world/2007/jun/07/bae15 (accessed 12 June 2020).

26 Ray Rounds, ‘The Case against Arms Embargos, even for Saudi Arabia’,

War on the Rocks, 16 April 2019, https://warontherocks.com/2019/04/thecase-against-arms-embargos-even-for-saudi-arabia/ (accessed 24 October 2019).

27 ‘Al-Owhali: GAMI to Support Local Manufacturers’, Saudi Gazette, 24

March 2019, https://www.theamericanconservative.com/articles/willbacklash-to-crusading-prince-begin-within-saudi-military-salman-mbs/ (accessed 10 May 2019).

28 Vision 2030 lays out the Saudi goal for 50 per cent of defence purchases to

be produced domestically. They also want to become exporters of weapons. See Vision 2030, p. 48, https://vision2030.gov.sa/download/file/fid/417 (accessed 10 May 2019).

110

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

29 The then-head of SAMI laid out his organization’s goals and organizations

in Jill Aitoro, ‘Head of Saudi Arabia’s Defense Industry Umbrella Org Talks Vision 2030’, Defense News, 27 August 2018, https://www.defensenews.com/ interviews/2018/08/27/head-of-saudi-arabias-defense-industry-umbrellaorg-talks-vision-2030/ (accessed 10 May 2019).

30 Mohammed Tawfeeq, ‘Saudi Arabia Replaces Military Commanders

in Late-Night Reshuffle’, CNN, 27 February 2018, https://www.cnn. com/2018/02/27/middleeast/saudi-military-posts-intl/index.html (accessed 10 May 2019).

31 Natasha Turak, ‘“Dramatic and Risky” – and a Shot at Dubai? Saudi

Arabia Issues Bold Business Ultimatum to Pull Regional HQ Offices into the Kingdom’, CNBC.com, 16 February 2021, https://www.cnbc. com/2021/02/16/targeting-dubai-saudi-arabias-ultimatum-to-pull-hqoffices-to-kingdom.html

32 The VAT increase also sets back any effort at GCC economic integration,

as was noted by Karen Young, ‘Have Taxes Killed GCC Economic Integration?’ Al Monitor, 15 May 2020, https://www.al-monitor.com/pulse/ originals/2020/05/tax-hikes-kill-gulf-gcc-economic-integration-saudiarabia.html (accessed 12 June 2020).

References Angevine, R. G. (2020). ‘Time to Revive Joint Concept Development and Experimentation’, War on the Rocks, 23 January. https://warontherocks. com/2020/01/time-to-revive-joint-concept-development-andexperimentation/ (accessed 12 June 2020). Blanchard, C. (2019). ‘Saudi Arabia: Background and US Relations’, Congressional Research Service Report RL 33533 (21 September). https://fas.org/sgp/crs/mideast/RL33533.pdf (accessed 10 May 2019). Cordesman, A. (n.d.). ‘Military Spending: The Other Side of Saudi Security’. https://csis-prod.s3.amazonaws.com/s3fs-public/publication/180315_Saudi_ Military_Spending.pdf (accessed 10 May 2019). Cordesman, A. and Obaid, N. (2004). ‘Saudi Military Forces and Development: Challenges & Reform’, 30 May. https://csis-prod.s3.amazonaws.com/s3fspublic/legacy_files/files/media/csis/pubs/saudimilforces.pdf (accessed 10 May 2019). DeAtkine, N. (1999). ‘Why Arabs Lose Wars’, Middle East Quarterly 6, no. 4 (December). https://www.meforum.org/441/why-arabs-lose-wars (accessed 10 May 2019). Dudley, D. (2018). ‘How China Is Fueling the Arms Race in Drones in the Middle East’, Forbes Online, 17 December. https://www.forbes.com/sites/ dominicdudley/2018/12/17/china-fueling-drones-arms-race-middleeast/#5db602864bb4 (accessed 10 May 2019). Beyond the glitter factor

111

Gaub, F. (2017). Guardians of the Arab State. London: Hurst. Hinsley, F. H. (1979). British Intelligence in the Second World War. London: HMSO. Horton, M. (2017). ‘Will Backlash against Prince Purge Begin within Military?’ The American Conservative, 10 November. https://www. theamericanconservative.com/articles/will-backlash-to-crusadingprince-begin-within-saudi-military-salman-mbs/ (accessed 10 May 2019). The Joint Staff, Department of Defense Dictionary of Military and Associated Terms (Joint Publication 1-02), p. 324. https://fas.org/irp/doddir/dod/jp1_02. pdf (accessed 10 May 2019). Kechichian, J. (2002). Succession in Saudi Arabia. London: Palgrave Macmillan, p. 103. Kerr, P. (2020). ‘U.S.-Proposed Missile Technology Control Regime Changes’, Congressional Research Service Report IF11069,” (9 May). https://fas.org/ sgp/crs/nuke/IF11069.pdf (accessed 12 June 2020). Leigh, D. and Evans, R. (2007). ‘The BAE Files: The Al Yamamah Deal’, The Guardian, 7 June. https://www.theguardian.com/world/2007/jun/07/bae15 (accessed 12 June 2020). Obaid, N. (2014). ‘A Saudi Arabian Defense Doctrine’, Harvard Kennedy School Belfer Center, May. https://www.belfercenter.org/sites/default/files/legacy/ files/Saudi%20Strategic%20Doctrine%20-%20web.pdf (accessed 10 May 2019). Pilster, U. and Böhmelt, T. (2011). ‘Coup Proofing and Military Effectiveness in Interstate Wars, 1967–99’, Conflict Management and Peace Science 28, no. 4: 331–50. Pollack, K. (2019). Armies of Sand. New York: Oxford University Press. Rudolph, J. (1984). ‘Government and Politics’, in R. F. Nyrop (ed.), Saudi Arabia: A Country Study. Washington, DC: Government Printing Office. Russell, B. and Morris, N. (2008). ‘Court Condemns Blair for Halting Saudi Arms Inquiry’, The Independent, 11 April. https://www.independent. co.uk/news/uk/politics/court-condemns-blair-for-halting-saudi-armsinquiry-807793.html (accessed 10 May 2019). Roberts, D. (2021). ‘Lifting the Protection Curse: The Rise of New Military Powers in the Middle East’, Survival 63, no. 2: 139–54. Rounds, R. (2009). ‘The Case against Arms Embargos, Even for Saudi Arabia’, War on the Rocks, 16 April. https://warontherocks.com/2019/04/the-case-againstarms-embargos-even-for-saudi-arabia/ (accessed 24 October 2019). Tawfeeq, M. (2018). ‘Saudi Arabia Replaces Military Commanders in Late-Night Reshuffle’, CNN, 27 February. https://www.cnn.com/2018/02/27/middleeast/ saudi-military-posts-intl/index.html (accessed 10 May 2019). Trofimov, Y. (2018). The Siege of Mecca. New York: Anchor. Wezeman, P. (2018). ‘Saudi Arabia, Armaments, and Conflict in the Middle East’, Stockholm International Peace Research Institute Backgrounder, 14 December. https://www.sipri.org/commentary/topical-

112

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

backgrounder/2018/saudi-arabia-armaments-and-conflict-middle-east (accessed 12 May 2019). Young, K. (2020). ‘Have Taxes Killed GCC Economic Integration?’ Al Monitor, 15 May. https://www.al-monitor.com/pulse/originals/2020/05/tax-hikes-killgulf-gcc-economic-integration-saudi-arabia.html (accessed 12 June 2020).

Beyond the glitter factor

113

114

5 YOUNG PEOPLE AND VOCATIONAL EDUCATION CHOICES IN SAUDI ARABIA Implications for aligning policy with aspirations Hanaa Almoaibed

Introduction Saudi Arabia’s ‘Vision 2030’ reform strategy, launched in April 2016, marked an escalation of economic and structural changes. These reforms are part of a long history of policy interventions in the country,1 but mark a watershed moment in the course of economic and social policy. High youth unemployment, a growing young population, volatile oil prices and an increasingly unstable geopolitical scene2 are cited as reasons for embarking on efforts to diversify the economy, lower public spending bills through privatizing institutions and reduce dependency on internal foreign labour through policies that bolster existing Saudization3 plans. Historically, education has been a top priority for the Saudi government. This priority remains high, and includes increased expenditures on technical and vocational education and training (TVET) as part of the national strategy4 to lower unemployment and achieve higher economic diversification,5 all while falling in line with the global push towards a ‘knowledge economy’.6

At its launch, the National Transformation Program, the executive plan of Vision 2030, dedicated a strategic objective and several key performance indicators to TVET. ‘Raising Saudis’ skill levels to match labour market needs’ is an objective that stems from the Vision to ‘provide citizens with knowledge and skills to meet the future needs of the labour market’. This aims to increase the number of Saudi students enrolled in TVET from 104,432 students to 950,000 by the year 2020, and raise the percentage of high school graduates continuing education in TVET from 7 per cent to 12.5 per cent by 2020, aiming for 90 per cent of graduates to enter the workforce within six months of graduation. These efforts were motivated by existing participation statistics in 2015 that indicated that TVET was relatively unpopular among young people, as less than 10 per cent of both jobseekers and employed Saudis held intermediate technical or vocational certificates,7 with attrition rates estimated at as high as 65 per cent.8 As young people encounter choices in times of life transitions, they are often met with uncertainty, change and pressure.9 For many, academic and career transitional periods highlight aspirations, opportunities and limitations related to individual choices as well as social constraints.10 Saudi Arabia’s youth population dominates its demographic profile as 46.4 per cent of Saudis are under the age of fifteen, bringing youth transitions to the forefront of national concerns. With this strikingly young population, the unemployment rate for Saudi males between twenty and twenty-four years old is officially estimated at 45 per cent.11, 12 While young Saudis’ career choices, including those related to TVET, are available in the form of participation rates and post-secondary enrolments, information about how and why individuals ‘choose’ different paths, what barriers they may encounter and how dispositions are formulated is scarce. Despite education and labour market incentives and reforms13 to encourage TVET enrolment, young Saudis have not responded according to government expectations, and the processes through which their decisions are made remain vague. This chapter presents findings from a qualitative study that examines the narratives that emerged from young Saudis’ discussions about their experiences of educational and career transitions. The findings, collected through interviews between 2016 and 2017, highlight how young people—the target recipients of vocational education—view TVET. The aim of the chapter is to present the potential benefits of incorporating young people’s voices into policy. The narratives highlight ways that TVET falls short in achieving many of its promised goals, i.e. lower youth 116

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

unemployment and higher levels of Saudization. The chapter will begin with a short review of educational context and policymaking. It will then present the theoretical literature on to career transitions through which the collected data was analysed. It will then present an overview of the sample and research settings. Next, four narratives that emerged from thematic qualitative analysis of the data will be presented, concluding with implications of such narratives for education and labour policy in Saudi Arabia.

The supply and demand of TVET in Saudi Arabia TVET policymaking in Saudi Arabia The economic development plans outlined in the Ministry of Economy and Planning’s five-year economic plans between 1970 and 2019 outline policy goals for all sectors of the Kingdom including education. The introduction of Vision 2030 in 2016 was intended to make governance more efficient, essentially replacing these documents with 13 Vision Realization Programs (VLPs). These plans were devised by the Saudi Council of Economic and Development Affairs (CEDA) to achieve the ninety-six strategic objectives of Vision 2030. CEDA sets and defines national priorities along with the Council of Ministers, and a strategy committee defines the programmes and execution mechanism to achieve designed national priorities. The VLP pertaining to education, including general, higher and TVET, is the ‘Human Capital Development Program’. This is one of the VLPs with the least information. It does not outline specific programmes or KPIs, in contrast with many of the other VLPs. It does, however, set out the aim to: Improve the outputs of the education and training system at all stages from early education to continuous education and provide training to reach the international levels through education, rehabilitation and training programs that keep abreast of modern times and requirements and are in line with the needs of development and local and global labor market in partnership with all relevant parties locally and internationally.

YOUTH AND TVET IN SAUDI ARABIA

117

The ‘Human Capital Development Program’ also refers to training students and teachers and developing vocational paths, but provides little detail beyond broad statements. Four main bodies are arguably responsible for education and training in Saudi Arabia: the Ministry of Education (MoE), the Technical and Vocational Training Corporation (TVTC), Tatweer Education Holding and the Education and Training Evaluation Committee (ETEC). Education policy is set at the ministerial level by the MoE, yet vocational training is governed by the TVTC, founded in 1980 (under the name GOTVET) to serve as an umbrella organization to manage and govern all TVET institutes. The legal framework and bylaws of TVTC are outlined in the archives of the Bureau of Experts at the Council of Ministers. The MoE and TVTC intersect at the Board of Directors of TVTC, since a royal decree in 2016 appointed the Minister of Education as the chairman of the TVTC board. Third, Tatweer Education Holding, a private company, was established in 2012 to circumvent bureaucratic obstacles to reform and change within the MoE and to implement and deliver education reforms more efficiently, now incorporating Vision 2030 aims. Tatweer is involved in training through collaborative initiatives between MoE and TVTC such as Maher, a series of workshops in secondary schools designed to introduce vocational and technical skills with a goal of increasing demand for training over academic institutions. Finally, the Education and Training Evaluation Commission (ETEC), renamed in 2018 to include evaluation of training as well as educational institutes acts as an accreditation, evaluation and assessment authority for both private and public sector institutes. The branch responsible for training evaluation and accreditation, called Masar, is a regulatory body tasked with a mission of aligning training institutions and programmes to be ‘in line with international best practices’, setting institutional performance standards by the Commission’s Board of Directors to fill the needs of the labour market. As a semi-governmental entity, TVTC is caught between bureaucratic bottlenecks at the level of the MoE and the ETEC, and its own governance structure. TVTC is responsible for delivering Vision 2030 goals which are often dependent on the cooperation of the MoE. The difficulty in overcoming these bottlenecks can be attributed to an over-reliance on strategy documents ‘that lack a grounding in sound policy principles’, written by consultants and delivered to ministries for top-down 118

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

implementation.14 As pressure to expand training through the Vision 2030 KPIs mounts, the TVTC continues to expand training facilities to absorb more young people at the post-secondary level. The lack of policy vision, however, means that the training programmes do not necessarily respond to market needs, that the quality of provision takes a backseat to the quantity of training programmes and the number of graduates completing courses, and that little effort is made to re-envision educationto-work transition pathways to be more equitable and inclusive. Instead, the TVTC institutes continue to offer training qualifications that are viewed by employers as inadequate and by trainees as a ‘dead end’ track. This point will be further discussed in the data findings and analysis.

The supply side of TVET Initial TVET is primarily a post-secondary track in Saudi Arabia, although the specialized ‘secondary industrial institutes’ offer training at the secondary level to around 2–3 per cent of the secondary school population. Students can pursue TVET through three main TVTC channels: specialized secondary industrial institutes, in a tertiary public or private TVET institute,15 or through on-the-job training or private sector partnership.16, 17 The vision of the TVTC is to produce graduates with ‘the quality and efficiency required by the labour market’ and by extension to ‘achieve global leadership that ensures independence and self-sufficiency’.18 This vision draws a distinct link between training future employees and economic growth. There are four categories of training institutes at the tertiary level managed by TVTC: 1. ‘Colleges of technology’ which are the technical and vocational

colleges that offer courses to young men and women in specialized public tertiary facilities.

2. ‘International colleges of excellence’, which were launched in

2013, are training institutes established in cooperation with international colleges from countries around the world.

3. Private training programmes, which are for-profit privately

owned training institutes licensed through the TVTC.19

4. Strategic partnership institutes, which are established as joint

ventures between an international training institute, and usually YOUTH AND TVET IN SAUDI ARABIA

119

a collaboration between a foreign company and a local Saudi partner. Students can also attend community colleges within universities which offer two-year diplomas in ‘applied courses’, but students generally must pay for these programmes rather than receive a bursary which is most often the case in TVTC institutes. TVET qualifications are traditionally distinguishable from academic ones in the length of the course, which is typically two years, resulting in a diploma rather than a bachelor’s degree qualification. Students can train in 350 different industries such as IT, electricity, mechanics, construction, welding, engineering, administration, law, travel, hospitality, safety, geology, petroleum and gas, self-development, diving, fishing, sewing, beauty, design and more. The language of education policy around the world tends to regard education as a functional investment for generating economic growth both for the individual and on a social level.20 This neoliberal human capital approach assesses people based on their ability to produce, and utilizes them for this purpose: humans are a resource, and education is a means to develop humans as more productive resources.21 In line with this global trend, Saudi labour market reforms have been designed to upskill Saudis for positions that will lead to economic growth, while the education system is continuously criticized for not producing the necessary skills to satisfy labour market needs. When Saudi labour market policies do not automatically stimulate growth, the education sector is often listed as one of the culprits. It is important that empirical research be conducted to explore how norms, discourse and policies influence action in the labour market and the relationship between education and employment and economic growth. To what extent do structural institutions limit or facilitate individual action? In 2015, the Saudi budget prioritized investment in ‘Human Resources Development’,22 expanding programmes that ‘enhance sustainable and strong economic development and employment opportunities for Saudi nationals’, earmarking USD 57.9 billion towards education, representing 25 per cent of total budget appropriations, and USD 6.5 million on new TVET projects. The governance of education and labour markets, however, remain separate and the content of education reforms is opaque at best. The United Nations International Centre for Technical

120

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

and Vocational Education and Training (UNEVOC) defines TVET as ‘Education that provides individuals with relevant skills to the world of work, contributes to their social well-being and that of their families, communities and their societies’.23 It has therefore been assumed that investing in technical and vocational skills promotes work opportunities and thus, more economic prosperity. As countries strive to remain competitive in the contemporary global marketplace, many governments are using education as a mechanism to achieve a competitive edge to deal with global economic shifts and pressures.24 In the traditional Saudi secondary school structure, the first year of secondary is considered a foundation year, and then students are asked to choose either a scientific or literary track within general secondary. Male students have an additional choice of moving to an industrial, commercial or agricultural (vocational) track, which are only offered in certain specialized secondary schools. Choice of track is voluntary, and while it may be based on the advice of teachers, administrators and parents, there are no attainment requirements for choosing tracks. Students are allowed to change a track only once. At the end of the three years of the secondary school, students sit school administered examinations (that were centralized and issued from the MoE until 2007)25 to obtain a secondary diploma that is necessary to apply to state universities and colleges. Despite the standard national curriculum, the application of education policies and procedures is reportedly far from uniform, due to several factors such as staggered implementation of reforms as well as individual school quality and integrity. Centralized testing at the end of secondary school was replaced with school-level capstone tests, at which point the MoE began administering a standardized test called QIYAS to add a filtration level for universities.26 Secondary scores were questioned by universities in fear of overt leniency, grade inflation and wasta.27 In a 2013 a report by the National Centre for Assessment published the results of a study that showed that the best results on standardized tests were in the schools of the three main urban centres: Riyadh, the Western Province and the Eastern Province.28 The study also reported that students in private schools performed better than public ones.29 The study questioned these variations considering that the standardized secondary tests claim to provide a baseline to measure school performance as well as the performance of individual students. It also raised the important question

YOUTH AND TVET IN SAUDI ARABIA

121

about the lower chances for students with poorer scores in regions that did not make the top 200 of getting into tertiary education.

The demand side of TVET Despite many efforts, there are obstacles to engaging young people in the labour market at expected levels and across sectors and industries. The large public sector contributes to shaping the ‘general expectations regarding salaries and work conditions’30 and some citizens may prefer to choose unemployment while they wait for a government position. The ambiguity of the value of educational qualifications in the Saudi labour market influences the way young people’s career aspirations are formulated. Young prospective Saudi employees who graduate from Saudi colleges and universities are characterized as lacking sufficient ‘labour market literacy’. Müller and Shavit show that in cases where the educational outcomes do not meet employer expectations, as is the case in Saudi Arabia, companies adjust their recruitment and training policies to the output of the labour market rather than relying on the education system to produce the needed knowledge for their operations.31 The relationship between qualifications and employment in Saudi Arabia is dominated by an ‘organizational space’ where the majority of skills for work are developed on the job rather than in a classroom. This has led to a seemingly binary reaction by young Saudis: they either aspire to the highest possible academic education and enter the labour market on the higher end of the salary scales (as classified by the Ministry of Civil Service), or they enter the labour market after completing secondary school and forfeit post-secondary qualifications. Students tend to believe that their inability to access more competitive education can signal the poor work habits of TVET students, a sentiment that Saudi employers believe to be true.32 Young people thus navigate through the qualifications system to get through the ‘gates’ of private sector firms, such as by entering the labour market directly out of secondary school. Furthermore, social networks provide a safety net to capture those who fail to access employment and education opportunities through institutional routes. Participants who lacked access to a strong social network and lacked wasta were much less sure of their futures, their opportunities or their ability to succeed, and resented the way social relationships appear to eclipse individual merit. 122

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Decision-making in the transition field Although limited, empirical studies on education transitions indicate that the choices youth make while negotiating their way along their transition pathways are not only economically driven, and are influenced by institutional and social structures. Post-secondary choices are not just about choosing one ‘better’ option over another ‘inferior’ one, but ‘a complex interaction between stakeholders, using widely different and unequally distributed resources [and] consist of negotiations, alliances, struggle, and conflict’.33 In contemporary literature pertaining to young people’s education-to-work decision-making processes, the question of choice takes centre stage. Foskett and Hemsley-Brown question the process of career decision-making as one ‘of choice or chance?’, and the title of Diane Reay’s 2001 article about choice asks us to consider whether young people are faced with ‘Choices of Degrees or Degrees of Choice’.34 The expansion and increased availability of and access to further and higher education opportunities in the twentieth century35 have led to a series of debates and studies that strive to explain the ways young people navigate through opportunities of education and work, and the relationship between the two.36 The large volume of literature that examines the uncertainty that young people encounter in times of life transitions37 highlights how examining academic transitions empirically can shed light on aspirations, opportunities and limitations related to individual choices as well as social constraints.38 The theory of Careership, developed by Hodkinson et al.39 in their empirical study of young people in a training scheme in the UK in the 1990s, situates individual decision-making within a context that views decisions as pragmatic, combining rationality, serendipity and socially constructed opportunities and limitations. Pragmatically rational choices are defined as being both conscious and subconscious. They are not irrational choices, so they do not contradict the idea that individuals make choices that benefit them, but they are not purely technically rational because they are ‘bound’ by the social norms that govern how youth define what may be beneficial choices. They are not made by an individual, but often involve several people and serendipitous encounters. Pragmatically rational decisions lie within young people’s ‘horizons for action’, which are framed by the identity of the decisionmaker. Each individual’s ‘horizon for action’ is influenced by external opportunities such as job opportunities, as well as one’s own subjective YOUTH AND TVET IN SAUDI ARABIA

123

perceptions, which are formulated through an internalization of beliefs, values and dispositions in the form of what Pierre Bourdieu refers to as habitus: ‘systems of durable, transposable dispositions’.40

Study design Locally generated research tends to produce statistical data that provides opaque insights about trends and patterns rather than stories and interpretations. Rigorous qualitative social research can provide an alternative to the realist functionalist approach that dominates policy research about youth employment and education, but which has fallen short in explaining why education and labour trends do not meet policy goals. On the premise that a gap in understanding of youth transitions into education and employment is in large part due to taken-for-granted assumptions about the impact of identity, attitude and experience of young Saudis41 this study places young people at the centre of enquiry. The sample consisted of a total of 152 students, interviewed in 18 focus groups and 16 individual interviews via WhatsApp. This included young people in Saudi Arabia who are enrolled in initial TVET or secondary students at a transitional stage where TVET becomes an option. The three main sites of research were male TVET institutes, secondary schools and WhatsApp. The interviews were designed to remove students from a group setting among their peers (which gave an overview of transition experiences) and give individuals space to discuss their personal experiences. Additionally, we collected 149 worksheets and pro formas from the interviews and focus groups that serve as an additional source of data about gender, age, financial background, city of origin and family education. The diversity of the sample represented gender, city of origin, socioeconomic status, attainment and religious affiliation. Overall, the biodata questionnaires showed that the majority of students’ parents were either educated to tertiary school or secondary school at least, with 20 per cent reporting their father were educated to general secondary and 20 per cent reporting that their fathers held bachelor’s degrees. Twenty-six per cent of the students reported that their mothers were educated to secondary level, and 20 per cent reported that their mothers were educated to diploma level. On the questionnaires, 6 per cent of the students reported that their fathers could not read or write, and 3 per cent reported that their 124

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

mothers could not read or write. Some reported that their parents had very basic literacy skills, and only 9 per cent of the students reported that their fathers and 9 per cent of their mothers held graduate certifications. Forty-one per cent of the students reported that their fathers worked for the government in military, administration or education, and the majority, slightly over 64 per cent, reported that their mothers were homemakers. Seventeen per cent reported that their mothers worked in public education. Only twelve of the students (9 per cent) reported that their fathers held middle-level diplomas, most probably from a technical college. These data points tended to vary according to location and type of school, where the inner-city school and public school in the suburbs had lower levels of education, and the private school students’ parents had higher levels of education. The highest number of working mothers was in the predominantly Shia neighbourhood.

Narratives of TVET transitions The findings from the focus groups and interviews revealed some of the complexities of education transitions in KSA and illuminated the contradictions, uncertainty, optimism and apprehensiveness that young people associate with their futures. Aspirations and educational choice were rarely based on an individual’s preference alone but were related to the social meanings attributed to both types of education. The social meanings attached to types of education, specializations and access to employment are interpreted by individuals in different ways depending on social factors such as social relationships, financial resources and gender. Throughout their descriptions of transition expectations and experiences, four main narratives emerged that will be explored further in the sections to follow: a. The narrative of TVET as a ‘last resort’ route for people who

failed to get into something else.

b. The narrative of TVET as a ‘career stopper’ that will limit future

employment opportunities.

c. The narrative of TVET as a ‘second chance’ after experiencing

barriers.

d. The narrative of TVET as a ‘welcome alternative’ to academic

institutes.

YOUTH AND TVET IN SAUDI ARABIA

125

The narratives suggest that the status of TVET in Saudi Arabia is complex and influenced by external factors that were not directly related to the inherent nature of TVET, but indicative of its place within the prevailing institutional and social structures. This raises questions about what influences perceptions and opinions of TVET, and how this goes on to shape the way young people navigate through the available pathways.

The last resort All of the participants expressed a desire to pursue post-secondary education, but most would either only apply to TVET institutes or accept an offer once they were rejected from other destinations. At some point during their description of TVET, almost all the participants shared a view that TVET is secondary to academic education in status. They consider post-secondary pathways such as attending universities, applying for scholarships to study language or academic studies abroad or on-the-job training in prestigious companies before they think of public or private technical colleges or institutes. TVET was described as a forced opportunity and a last resort; ‘you may be obliged to resort to a technical college’ (Faisal, M, 24, Private Technical Institute). The last-resort narrative emerged through descriptions of encounters along the education-to-work pathway where young people chose TVET as a result of obstacles elsewhere, running out of time, or out of a fear of being stigmatized. Stigma was discussed frequently, and fuelled this narrative, as students appeared to be very concerned with the way educational institutes and specializations are viewed externally. TVET students were quick to point out the reasons why they ‘ended up’ in TVET, framed in language that indicated they could not succeed elsewhere. In Faisal’s description of how he became a TVET student, he recalls that his initial perception of TVET was a deterrent for him: I used to see a technician as something low/little. I used to say no I don’t want to be a technician I want to be an engineer or something, or study for a bachelor’s degree and stuff. (Faisal, M, 24, Private Technical Institute)

Most students believe that circumstances from an earlier stage in their education leads to limited futures that could include TVET. These

126

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

circumstances are attributed to a lack of guidance and advice from their family and teachers, with occasional confessions of negligence that led to poor academic attainment. When students found themselves with limited opportunities due to their grades or a rigid system, they eventually stopped exploring additional opportunities because Saudi tertiary institutes do not allow students to apply more than five years after graduating from secondary school.42 Students appeared to adopt a ‘waitand-see’ approach and apply to programmes of choice over several years. However, as Farid notes, this approach has an ‘expiry date’: At a certain age you don’t have the luxury of trying for more things, because, I’m over 24 and in about another year my high school diploma won’t be accepted by universities. Universities will say we won’t accept you or waitlist you. (Farid, M, 24, Private Technical College)

The students accepted only a limited responsibility for running out of time, and instead recounted the shortcomings in careers guidance throughout their schooling. Khalifa, for instance, explains that lack of guidance and an envisioned future beyond secondary drove this, ‘there wasn’t guidance before, we were lost in secondary, and we were in a hurry, we just wanted to graduate and sit around’ (Khalifa, M, 19, Public Technical College). Rami (M, 19, Public Technical College) was very candid about his negligence in secondary school, but attributed his poor academic performance to a lack of guidance, and little follow-up from teachers. He had a kind of freedom to idle through secondary, with little to no restrictions, and still pass. He discusses how this contributed to a mismatch of expectations and actual challenges, even in a college that he was not keen about to begin with: Maybe when we were in secondary … we just wanted to graduate and leave, and they would give you grades, but then you would get into college and stuff, and I mean, when I got here it became very difficult to study, because in secondary everything was easy, you get by right away, but here, no, the grade you get on your exam is the one that is reported. (Rami, M, 19, Public Technical College)

Rami’s account of secondary school being ‘easy’ leads to many questions about his academic abilities, grading techniques and school pressures and

YOUTH AND TVET IN SAUDI ARABIA

127

requirements. His description of his experience in secondary indicates that his grades were negotiable, unlike the finality of grades at the tertiary level. The participants’ perception of what is better is mostly related to how society views TVET specializations. Difficult specializations that require many years of preparation and high attainment such as medicine and engineering are viewed positively, in contrast to specializations offered in technical colleges which are inevitably inferior if they are available to those with lower grade point averages (GPA) and can be obtained in fewer years. Latifa notes that society values a bachelor’s degree, and therefore, students often strive for programmes that are appreciated by others: If there is something high you have to choose the higher one … [people] say ‘what are you doing you have a bachelor’s [degree] and you’re applying for a diploma’, society likes Bachelor’s [Degree]. (Latifa, F, 25, Public Technical College, Administration)

Bader, on the other hand, notes that ‘most people, if you tell them you study in the technical college they think you are a failure, or that it is not that great a place’ (Bader, M, 19, Public Technical College). The students feel that the view from the outside is negative, and many people think of technical colleges as the easier option, even if the students themselves disagree with this opinion. Rashed notes that no matter what he thinks, society will label him as a failure: There’s a saying, they say that everything that is cheap must be poor quality, so they say if you can get in easily it must be simple, since the others have more GPA restrictions it must be better.

(Rashed, M, 22, Public Technical College)

The way students describe others’ viewpoints of TVET signals that many fear it is impossible to overcome the associated stigma of going into a technical college. This narrative illustrates the rejection of TVET: the students would choose every opportunity presented to them over pursuing TVET. Younger students hoped for other options and believed they would be able to access them. Older students reminisced about their rejection of TVET in retrospect. The narrative reinforces the idea that education and training hold meanings that are contextually generated, as a result of both available opportunities and the social perception of those who pursue them.

128

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

The dead end The narrative of TVET as a ‘career limiting’ choice is similar to the narrative of the ‘last-resort’ one, but with a focus on the permanence of a career destination, and a resulting fear of uncertainty towards unemployment or career stagnation. This narrative emerged from the sentiments of young men and women before or during TVET, articulating the uncertainty about the currency of their certifications and the opportunities and jobs available to a TVET certificate holder. Throughout focus group discussions, many of the participants associated technical training with a limited and disappointing future employment outlook that signalled their failure. While a few TVET specializations were valued more than others, namely administration and different computing fields, students believed that there was a limited future in technical and vocational fields and that TVET meant that social status would be compromised and limited at best. Nabeel’s opinion that ‘half the specializations have no future’ is shared by several other students (Nabeel, M, 18, Secondary Industrial Institute). Fayez, for instance, notes that his training in the private technical institute he attended was sponsored by a coveted multinational company that would employ him upon graduation, but he quit the position and opted for a less reputable and more volatile local company in order to avoid becoming a welder: ‘I got a job in a [local company] as a mechanic, and I accepted it and I had to leave the [multinational company] because of the welding position’ (Fayez, M, 24, Private Technical Institute). This is further stressed by another male student in his early 20s in a private technical college: Social perceptions about a job … it has to be a government job. Sometimes if someone is a mechanic or an electrician or something they look at them as a ‘low level’, but if they are in government or in a higher level they look at them differently, or if they are a doctor or, or … The fear that the vocational college certification had little currency in the labour market was echoed by many students. They believed that they may not achieve future goals just because they were enrolled in TVET, or because TVET was the only thing they could access. One young man in his early 20s in a private college explains that in his view, the acceptance YOUTH AND TVET IN SAUDI ARABIA

129

of a vocational position signals that the applicant was not able to get a better position elsewhere, ‘If you seek alternative jobs [to Aramco or Sabic] you will be 40 years old and not even making 12,000 or 10,000 riyals … because they are aware that Aramco and Sabic did not hire you.’ This sentiment indicates that students not only described TVET as something negative, but they also view it as deterministic.

The second chance Some of the students who had encountered challenges while navigating their school-to-work transitions described TVET as a place for second chances. While this narrative began similarly to the ‘last resort’ one, other circumstances and ‘turning points’ led students to develop a newfound appreciation for TVET. This narrative emerged through analysing discussions with students that were enrolled in TVET institutes, and was most often framed as a juxtaposed view of perception versus reality. Many of these students had already experienced setbacks in their transition pathways and were able to put those experiences into perspective. Encountering setbacks can lead young people to contemplate a dissonance between their own optimism and a less positive reality early in their life, helping them put things into perspective and look towards a better future.43 The narrative of second chance was dominated by a sentiment that the negative status of TVET was unfairly attributed to the related fields by a society and labour market that did not understand it or realize its value. Saud (M, 22, Public Technical Institute) discusses his experience in leaving the technical college after one semester to find employment. Saud was one of the first in his family and circle of friends to enrol in a postsecondary course, and he reluctantly enrolled in the college then quickly and voluntarily dropped out to take a job at a call centre. Two years into his job Saud decided to go back to the college because he felt that ‘a job without a certification is not worth anything’. He re-entered the technical college to broaden his future choices, ‘I want to get my certification so that I can get the job that I have in mind, not the one that just accepts me.’ Saud believed that the certification would open more employment and job progression doors for him. His experience in the labour market helped him realize a value to post-secondary training. He regretted leaving the college and believed that choice had limited his opportunities

130

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

within the employment field. Saud believed TVET was a pathway to a second chance at finding more meaningful employment. Fahad (M, 26, Private Technical College) provides another illustrative example of this perception, I was employed in an administration job for three years, and I realized that my secondary certificate at this time isn’t enough. My preferences were for steel and welding and stuff like that. I had a friend that studied here [at this institute]. He advised me to come, and I left my administrative job and applied here. I risked my salary and I risked the distance, but I said it’s in order to develop (I come from a different city) but now I am settled here. I risked my salary and my job. It was a very comfortable job, but I didn’t see any development. One has to develop in something that they love and that society needs, so you have to risk something. Rigid admissions requirements and restrictions often made it difficult for students to change their minds or go back into education once certain choices were made. TVET has been described as one area where more choices are available for exploration or change. Mubarak, a twenty-eightyear-old married father, for instance, began his career in an administrative role in the military sector and realized that he would not progress in that industry. He later pursued an entry-level position in an industrial company because he knew he would have the opportunity to be trained on the job. He believed that the training would provide him with a better future for his family. Mubarak expressed regret in the time he lost and great hope in his future in the technical field: I see that the industrial sector, the technical one, its future job opportunities will be comfortable because there isn’t a company that works without them, all companies need production for instance, they all need welding, every company needs electrical, so there are many opportunities. (M, 28, Private Technical College)

Students discussed TVET as a second chance when they develop a newfound appreciation for TVET after experiencing it and found it more in line with their idea of learning. These students may not have considered TVET otherwise and enter TVET reluctantly by recommendation of

YOUTH AND TVET IN SAUDI ARABIA

131

trusted relatives or friends, bringing with them low expectations. They talked about society’s nickname for technical colleges as: ‘the parental satisfaction college’, meaning that going to the college will make parents happy that their children are not sitting at home without a valuable contribution to the household. To illustrate this idea, Nasser (M, 20, Public Vocational College) also discusses how his view changed once he enrolled: People outside the college, friends would say it is the parental satisfaction college, to make your mom and dad happy, they put that idea out there. I got here, and wasn’t very comfortable with my specialization. But when I started studying I figured that what they say outside the college, it’s for people that have heard it from others not from people that have studied here. But once you study … I mean now I know a lot and I used to have a really negative view. Once enrolled in TVET many students find that they held misconceptions about the training and had wished they had known about it in the past. As long as they were able to envision a future that exceeds their expectations of their future without a TVET certification, many young people describe TVET as a welcome alternative rather than a last resort or a career stopper. The second chance narrative emerged very strongly in the accounts of young women enrolled in VET colleges accounts of their experiences. Most had attended university first, and felt that the specializations that were offered to them were not of value in the labour market. They believed themselves to be more employable with a VET qualification, despite most of them stating that they did not intend to seek employment anyway.

The welcome alternative Some students in my sample had an appreciation for the teaching style in TVET institutes, the specializations offered, or had positive experiences of TVET, or a combination of these factors. The narrative of ‘welcome alternative’ emerged in the accounts of a small minority of the sample where TVET fell well within their view of what was acceptable and desirable and was preferred to either general secondary or universities. Some students saw TVET institutes as places where their personal 132

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

strengths were more recognized. Advocates for TVET would often highlight the respect and patience that they got in technical training settings: The teachers’ treatment of and attention to students makes them perform their duties more than they have to, they teach us the curriculum and they present things to us in any way so we can understand as much as possible. (Baraa, M, 16, Secondary Industrial Institute)

Some of the students I interviewed chose the TVET route because of the specific specializations they wanted to pursue, sometimes to enhance family businesses. These students were able to articulate their optimism about TVET, as Hisham notes: ‘ever since I was in intermediate school I planned to come here, I didn’t want general secondary’ (Hisham, M, 18, Secondary Industrial Institute). Similarly, Hashim (M, 21, Public Technical College) explains that the vocational college was the only place that would allow him to continue education in a field he was passionate about: Since beginning secondary I worked in a phone shop and I like electronics so I started looking and they said in the college you can specialize in technical assistance and computer so it is close to that so I said ok let me go there I didn’t even apply to universities or other colleges. Saeed also expressed a passion for his specialization and was intentionally in the technical college to enhance his skill and perfect his craft: Because of the networks specialization, I mean, I looked around, and whenever I looked anywhere else the specializations were either medicine or … engineering, but here there was networks. (Saeed, M, Public Technical College)

While the majority of the sample described TVET negatively, this group of students deliberately enrolled in TVET and welcomed a future shaped by this choice. These students had experiences in their lives in which they were exposed to TVET specializations which appeared to influence their appreciation for the fields. While the reasons for this perception were varied, most of the students advocated for TVET for reasons that were

YOUTH AND TVET IN SAUDI ARABIA

133

related to how TVET made them feel more valued, and how contrary to dominant societal perception, the experience of TVET was positive and encouraging.

Implications for policy direction To date, education reform in Saudi Arabia has focused mainly on curriculum and teacher training. Very little is known about education policy, and efforts to align economic development goals with education goals are thus unproductive at best. For TVET, a focus on physical expansion and programme variability is important, but little is known about aspirations and access. Investing in new buildings, more colleges and new specializations will not reap the intended benefits if students do not want to attend these colleges, or worse, do not intend to work in a technical or vocational field. This study has shown that many young men view TVET as a last resort, and many turn to their ‘wasta’ to find jobs elsewhere. Although the statistics of employment within the field are not clearly reported, this data suggests that TVET is used as a proxy to signal an ability to ‘please’ one’s parents, but the certification is not valued for the skills it signifies. The data has suggested that enrolling in TVET has the opposite effect, signalling poor work ethic and low employability. The value of the TVET certification must therefore be enhanced through a stronger tie between TVET institutes and industry. Outside of specialized polytechnics and semi-governmental TVET institutes such as the Saudi Petroleum Services Polytechnic, students complain of obsolete curricula and a difficulty in finding meaningful work. The data also suggests that those who see TVET as a second chance and have a strong desire to pursue a career in an industry related to TVET have labour market experience. However, state-sponsored TVET is only available for five years from graduating from secondary school. My data has shown that the most serious interest in a career in TVET is after this phase, and students then end up paying for TVET instruction, yet those who received bursaries at a younger age tend to work in other industries. Widening the age of participation opportunities would allow for a more realistic alignment of aspirations and opportunities. Secondary schools are comprehensive in nature, and despite the availability of different tracks (science, literature, commercial), there are few restrictions on choice. Only 2 per cent of Saud secondary students are 134

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

enrolled in a Secondary Industrial Institute, and the majority of TVET is pursued at the tertiary level. The open and comprehensive nature of secondary school does not prepare young people for the rigid and segmented labour market and students are often shocked by the limited availability of opportunities. The data suggests that a lack of careers guidance has significantly impacted the mismatch between their optimistic aspirations and the difficult labour market. Career guidance that focuses on psychometric abilities further compartmentalizes opportunities, rather than allowing for more open navigation of a tertiary pathway. Finally, the filtration system of centralized tests at the end of secondary to access secondary schools cannot continue to act as the final ‘judge and jury’ of university admissions. As mentioned, the unequal access to resources throughout secondary school significantly impacts the scores on these tests, and students are often unaware of their academic standing. Additional routes back into education could be immensely beneficial, loosening the rigidity of the tertiary system rather than creating more rigid boundaries. The data suggests that the stigma attached to failure leads young people to make myopic decisions that often leave them with fewer opportunities. Instead, reducing the ‘finality’ of failure by increasing opportunities could significantly help young people make better choices about their employment opportunities.

Conclusion This chapter has suggested that despite a policy directive to utilize TVET as a means to ‘enhance skill levels’, the structure of TVET does not satisfy the aspirations of young people or that of employers. TVET certifications continue to lack a desirable amount of currency in the labour market, thus perpetuating their status as inferior to academic qualifications. Although many young Saudis may prefer TVET to academic education, potentially leading to lower unemployment rates and higher skill provision for companies, the current structure perpetuates a stigmatized view of TVET within society. As young people’s aspirations are centred on fulfilling traditional social roles, TVET can be successful in the Saudi context only if policy goals focus on excellence of curriculum and provision and provide wider opportunities for TVET graduates in furthering both their education and their careers. Absent this alignment, students will continue to view a decision to pursue TVET as an unpragmatic choice, not because YOUTH AND TVET IN SAUDI ARABIA

135

of their mindset or the inherent character of technical and vocational jobs, but because of the limited opportunities associated with related employment. In light of the Covid-19 pandemic, additional challenges must be considered. The only way TVET will survive social distancing measures is to focus on excellence of technical and vocational provision through enhancing the curriculum and delivery mechanism of education for the world of work. As instruction moves online and distance and digital learning platforms dominate, the impacts on TVET will further perpetuate a substandard quality unless TVET is seen as essential. Concerns about trainers’ skills for remote training, the time needed to prepare online training and most importantly access to the internet and required equipment all contribute to a fear of a declining TVET industry while social distancing measures are in place.44 The danger of rapidresponse measures is a further de-valuation of TVET qualifications. For instance, TVTC offered free online short-course training online during the Covid-19 lockdown, a measure that further emphasizes the marginal role of TVTC as something that is easy to obtain, requires little effort and can be achieved with little training. As businesses focus on survival, apprenticeships and on-the-job training will be considered an unwelcome a distraction. While distance learning may prove somewhat successful, it is those who have the least resources that tend to enrol in TVET, and accessibility will inevitably pose a serious impediment. If training continues to be viewed as a procedural nuisance and bureaucratic necessity, the TVET sector will inevitably suffer. However, if viewed as an essential pathway to equipping students with skills necessary for the continuation and improvement of industry, especially those that will be essential to future economic growth and recovery, then government entities, businesses and training centres would see positive returns on taking proper steps to ensure the quality of TVET is at the front and centre of debates about TVET continuity and reforms.

Notes 1 Council of Economic and Development Affairs, ‘National Transformation Program’, ed. Vision 2030 (Riyadh 2016).

2 Some of the geopolitical issues that are referred to are the Arab Spring that

began in 2011, instability of oil markets, the war between Saudi Arabia and

136

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Yemen, increasing sectarian differences and the related political tensions between Saudi Arabia and Iran. The Economist, ‘Young Prince in a Hurry’, The Economist, 9 January 2016.

3 Saudization is the government policy to increase the number of Saudi

nationals in the workforce. In 1994 Shura Council Resolution No. 50 required companies with 20 employees or more to increase nationals in their company by 5 per cent annually. In 2002 the requirement changed to 30 per cent of employees in these companies. In 2004 a labour law issued by royal decree required employers’ workforces to comprise 75 per cent Saudis. Exceptions can be made depending on circumstances through the Ministry of Labour. Ghada Fayad et al., ‘Saudi Arabia: Selected Issues’, in Selected Issues (Washington, DC: ‘IMF eLibrary’, 2012), 3131.

4 ‘Military and security services has been allocated 25 per cent of the budget, the largest among all allocations. Education is allocated the second biggest share, at 23 per cent of total spending, followed by the health and social affairs with 13 per cent.’ Jadwa, ‘Saudi Arabia’s 2016 Fiscal Budget–Jadwa’, Saudi-US Relations Information Service, 29 December 2015.

5 Ministry of Economy and Planning (MEP), ‘Achievements of the

Development Plans Facts and Figures’. Riyadh, Saudi Arabia, 2013.

6 M. Al-Ohali and Alaqil, ‘Higher Education in Saudi Arabia 1998–2008

towards Building a Knowledge Society’, in Bechir Lamine (ed.), Towards an Arab Higher Education Space: International Challenges and Societal Responsibilities, (Beirut: United Nations Educational Scientific and Cultural Organisation (UNESCO), 2009); Stephen J. Ball, ‘Big Policies/Small World: An Introduction to International Perspectives in Education Policy’, Comparative Education 34, no. 2 (1998); Ministry of Economy and Planning (MEP), ‘Achievements of the Development Plans Facts and Figures’.

7 ‘Saudi Economic Report 2014’ (Riyadh: Ministry of Economy and Planning, 2015).

8 AlYaum, ‘Trainee Drop Out a Clear Trend in Technical Colleges’,

AlYaum, 15 December 2010; as updated drop-out rates are unclear, the Saudi Consultative Council’s economic committee has requested more transparent reporting in future reports. Abdulsalam M. AlBlewi, ‘Alshura Requests Tvtc Addresses Student Drop Out Rates from Colleges and Institutes’, Riyadh, 13 April 2014. The Consultative Council, also known as the Shura Council or Majlis al-shura, is a unicameral council with 150 seats; members are appointed by the monarch to serve four-year terms. Central Intelligence Agency (CIA), ‘World Factbook: Saudi Arabia’, https://www. cia.gov/library/publications/the-world-factbook/geos/sa.html

9 Paul Ryan, ‘The School-to-Work Transition: A Cross-National Perspective’, Journal of Economic Literature 39, no. 1 (2001).

YOUTH AND TVET IN SAUDI ARABIA

137

10 Karen Evans and Helena Helve, ‘Introduction’, in Karen Evans and Helena Helve (eds), Youth and Work Transitions in Changing Social Landscapes (London: Tufnell Press, 2013).

11 Central Department of Statistics and Information (CDSI), ‘Labour Force Survey 2015 (First Half)’ (Riyadh: Central Department of Statistics and Information, 2015).

12 The overall unemployment rate for Saudis is 11.6 per cent (38.8 per cent

of whom are males and 61.2 per cent females). The highest unemployment bracket for all Saudis is between twenty-five and twenty-nine years old estimated at 37.7 per cent.

13 Human Resources Development Fund (HRDF), The Guide Book (Riyadh: Ministry of Labour, 2011); Ministry of Labour (MOL), ‘Daleel Nitaqaat’ (Riyadh: Ministry of Labour, 2013).

14 F. Fathallah, ‘Challenges of Public Policymaking in Saudi Arabia’ Carnegie Endowment for International Peace, 2019.

15 Although outside the TVTC management, there are also four semi-

governmental colleges specializing in technical and industrial fields run by the Saudi Royal Commission for Jubail and Yanbu. Established in 1975, the Royal Commission is independent of all Saudi ministries and has its own budget, established to manage industrial cities to grow the energy sector Royal Commission for Jubail and Yanbu, ‘Foundation’, https://www.rcjy.gov. sa/en-US/AboutUs/Pages/Foundation.aspx

16 TVET can also be pursued through other training programmes under the

TVTC such as training in prisons, and through non-TVET institutes in the military sector or through technical colleges that are administered through the Royal Commission of Jubail and Yanbu.

17 TVTC governs technical and vocational training in Saudi Arabia through

259 institutes across the Kingdom. TVTC, ‘Annual Report’ (Riyadh: Technical and Vocational Training Corporation, 2014), 1919, and oversees the 950 institutes in the private sector Fatima Muhammad, ‘TVTC in Trouble: 94 per cent School Grads Prefer University’, Saudi Gazette, 25 February 2016. As of 2014 total enrolment was 77,388 students across these entities, and the total graduates in 2014 was 28,797. The 2014 annual report cited an increase of enrolments of students graduating from secondary schools of 26.4 per cent (p. 19) and an increase in graduates from the institutes by 15 per cent from the previous year (p. 20). Although these are improvements, the numbers indicate that only 37 per cent of enrolled students tend to finish their course.

18 Technical and Vocational Training Corporation (TVTC), ‘Annual Report’. 19 These institutions have expanded significantly since 2017 and are highly

coveted but data from this research suggest that they are difficult to access. One student noted that you need the ‘father of all wastas’ to get into them.

138

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

20 Nicholas H. Foskett and Jane Hemsley-Brown, ‘Invisibility, Perceptions

and Image: Mapping the Career Choice Landscape’ (https://doi. org/10.1080/13596749900200060); Rosemary Preston and Caroline Dyer, ‘Human Capital, Social Capital and Lifelong Learning: An Editorial Introduction’, Compare: A Journal of Comparative and International Education 33, no. 4 (2003); Murray Saunders, ‘From “Organisms” to “Boundaries”: The Uneven Development of Theory Narratives in Education, Learning and Work Connections’, Journal of Education and Work 19, no. 1 (2006); Kristoffer Chelsom Vogt, ‘From Job-Seekers to Self-Searchers: Changing Contexts and Understandings of School-to-Work Transitions’, YOUNG Editorial Group 26, no. 45 (2018).

21 Alan France, Understanding Youth in the Global Economic Crisis (Bristol:

Policy Press, 2016); Chris Peers, ‘What Is “Human” in Human Capital Theory? Marking a Transition from Industrial to Postindustrial Education’, Open Review of Educational Research 2, no. 1 (2015).

22 Ministry of Finance, ‘Recent Economic Developments and Highlights of Fiscal Years 2014 & 2015’, news release, 2014.

23 United Nations International Centre for Technical and Vocational

Education and Training (UNEVOC), ‘Promoting Learning for the World of Work’, International Center for Technical and Vocational Education and Training, United Nations Educational Scientific and Cultural Organization, http://www.unevoc.unesco.org/go.php

24 Marcus Powell, Skill Formation and Globalization (Aldershot: Ashgate, 2005). 25 Aisha AlAmudi, ‘Delegating Secondary Tests to Schools Coincides with Development and Serves Interests of Students’, AlRiyadh 2007.

26 Abdulla Al-Subaihi, ‘Centralized Tests’ (2016). Accessed 04/04/2019. https://www.qiyas.sa/ar/Media/Articles/Pages/Centraltests.aspx

27 The long-standing kinship ties and tribal allegiances form the foundation

of a system of reciprocal support and favours known as wastas. The literal translation of wasta is a ‘mediator’ or ‘middleman’, and refers to the use of connections to obtain a goal. Access to wasta enhances power, social status and sometimes financial wealth, but is not contingent on these, nor does using a wasta guarantee that the recipient of the favour will obtain any of this; Martyn Egan and Paul Tabar, ‘Bourdieu in Beirut: Wasta, the State and Social Reproduction in Lebanon’, Middle East Critique 25, no. 3 (2016). J. M. Abalkhail and B. Allan, ‘“Wasta” and Women’s Careers in the Arab Gulf States’, Gender in Management 31, no. 3 (2016).

28 Ibrahim Al-Baez, ‘Qiyas Results Expose Weaknesses of Education Offices’, (2013), https://www.qiyas.sa/ar/Media/Articles/Pages/ Measurementresultsshow.aspx

29 The Eastern Province was the best performing region and 21 per cent of its schools were considered in the top 200 performing schools. Other regions YOUTH AND TVET IN SAUDI ARABIA

139

did not make the top 200 list at all, such as the Southern or Northern Region.

30 Steffen Hertog, ‘Rent Distribution, Labour Markets and Development in

High Rent Countries’, in LSE Kuwait Programme Paper Series (The London School of Economics and Political Science, 2016).

31 A. Baqadir, F. Patrick, and G. Burns, ‘Addressing the Skills Gap in Saudi

Arabia: Does Vocational Education Address the Needs of Private Sector Employers?’ Journal of Vocational Education and Training 63, no. 4 (2011); Walter Müller and Yossi Shavit, (eds), From School to Work: A Comparative Study of Educational Qualifications and Occupational Destinations (Oxford: Clarendon Press, 1998).

32 Steffen Hertog, ‘A Comparative Assessment of Labor Market

Nationalization Policies in the GCC’, in National Employment, Migration and Education in the GCC. The Gulf Region: Economic Development and Diversification (Berlin: Gerlach Press, 2012).

33 Phil Hodkinson, Andrew C. Sparkes and Heather Hodkinson, Triumphs

and Tears: Young Poeople, Markets and the Transition from School to Work (London: David Fulton Publishers, 1996).

34 Nicholas H. Foskett and Jane Hemsley-Brown, Choosing Futures: Young

People’s Decision-Making in Education, Training and Career Markets (London: Routledge, 2011); Diane Reay, Gill Crozier and David James, White Middle-Class Identities and Urban Schooling. Identity Studies in the Social Sciences (Basingstoke: Palgrave Macmillan, 2011).

35 Simon McGrath, Education and Development (Abingdon: Routledge, 2018);

I. Schoon and M. Lyons-Amos, ‘A Socio-ecological Model of Agency: The Role of Structure and Agency in Shaping Education and Employment Transitions in England’, Journal of Longitudinal and Lifecourse Studies 8, no. 1 (2017): 35–56.

36 Ulrich Beck, Reflexive Modernization: Politics, Tradition and Aesthetics in

Modern Social Order, ed. Anthony Giddens and Scott Lash (Cambridge: Polity Press, 1994); Andy Furlong, Young People and Social Change: New Perspectives, ed. Fred Cartmel, 2nd edn (Maidenhead: Open University Press 2007); Anthony Giddens, Modernity and Self-Identity: Self and Society in the Late Modern Age (Cambridge: Polity Press, 1991); David Raffe, ‘Pathways Linking Education and Work: A Review of Concepts, Research, and Policy Debates’, Journal of Youth Studies 6, no. 1 (2003); Ken Roberts, ‘Opportunity Structures Then and Now’, Journal of Education and Work 22, no. 5 (2009); Karen Evans, ‘Concepts of Bounded Agency in Education, Work, and the Personal Lives of Young Adults’, International Journal of Psychology 42, no. 2 (2007).

37 Paul Ryan, ‘The School-to-Work Transition: A Cross-National Perspective’, Journal of Economic Literature 39, no. 1 (2001): 34–92.

140

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

38 Helena Helve and Karen Evans (eds), Youth and Work Transitions in Changing Social Landscapes (London: Tufnell Press, 2013).

39 Hodkinson, Sparkes and Hodkinson, Triumphs and Tears: Young People, Markets and the Transition from School to Work.

40 Pierre Bourdieu, Outline of a Theory of Practice, ed. Richard Nice (Cambridge: Cambridge University Press, 1977).

41 Saleh Al Andas, ‘Attitudes of Freshmen in Saudi Technical Colleges toward Vocational-Technical Education’ (Thesis, Ohio State University, 2002).

42 King Saud University (KSU), ‘Deanship of Admission and Registration’, King Saud University, https://dar.ksu.edu.sa/en/AdmFaqs

43 M. Franceschelli, and Avril Keating, ‘Imagining the Future in the Neoliberal Era: Young People’s Optimism and Their Faith in Hard Work’, Young 26, no. 4S (2018): 1–17.

44 International Labour Organisation (ILO), ILO-UNESCO-WBG Joint Survey on Technical and Vocational Education and Training (TVET) and Skills Development during the time of COVID-19.

References Abalkhail, J. M. and Allan, B. (2016). ‘“Wasta” and Women’s Careers in the Arab Gulf States’, Gender in Management 31, no. 3: 162–80. Al-Baez, I. (2013). ‘Qiyas Results Expose Weaknesses of Education Offices’, https://www.qiyas.sa/ar/Media/Articles/Pages/Measurementresultsshow. aspx Al-Ohali, M. and Alaqil. (2009). ‘Higher Education in Saudi Arabia 1998-2008 towards Building a Knowledge Society’, in B. Lamine (ed.), Towards an Arab Higher Education Space: International Challenges and Societal Responsibilities Beirut: United Nations Educational Scientific and Cultural Organisation (UNESCO). Al-Subaihi, A. (2016). ‘Centralized Tests’. https://www.qiyas.sa/ar/Media/ Articles/Pages/Centraltests.aspx Al Andas, S. (2002). ‘Attitudes of Freshmen in Saudi Technical Colleges toward Vocational-Technical Education’. Thesis, Ohio State University. AlAmudi, A. (2007). ‘Delegating Secondary Tests to Schools Coincides with Development and Serves Interests of Students’, AlRiyadh. AlBlewi, A. M. (2014). ‘Alshura Requests Tvtc Addresses Student Drop Out Rates from Colleges and Institutes’, Riyadh, 13 April 2014. AlYaum. (2010). ‘Trainee Drop Out a Clear Trend in Technical Colleges’, AlYaum, 15 December 2010. Ball, S. J. (1998). ‘Big Policies/Small World: An Introduction to International Perspectives in Education Policy’, Comparative Education 34, no. 2: 119–30.

YOUTH AND TVET IN SAUDI ARABIA

141

Baqadir, A., Patrick, F. and Burns, G. (2011). ‘Addressing the Skills Gap in Saudi Arabia: Does Vocational Education Address the Needs of Private Sector Employers?’ Journal of Vocational Education and Training 63, no. 4: 551–61. Beck, U. (1994). Reflexive Modernization: Politics, Tradition and Aesthetics in Modern Social Order. [In English] Edited by A. Giddens and S. Lash. Cambridge: Polity Press. Bourdieu, P. (1977). Outline of a Theory of Practice. [In English and French] Edited by R. Nice. Cambridge: Cambridge University Press. Central Department of Statistics and Information (CDSI). (2015). ‘Labour Force Survey 2015 (First Half)’. Riyadh: Central Department of Statistics and Information. Central Intelligence Agency (CIA). (n.d.). ‘World Factbook: Saudi Arabia’. https://www.cia.gov/library/publications/the-world-factbook/geos/sa.html Council of Economic and Development Affairs. (2016). ‘Kingdom of Saudi Arabia Vision 2030’. Edited by Council of Economic and Development Affairs. Riyadh. Council of Economic and Development Affairs. (2016). ‘National Transformation Program’. Edited by Vision 2030. Riyadh. Economist, The. (2016). ‘Young Prince in a Hurry’, The Economist, 9 January 2016. Egan, M. and Tabar, P. (2016). ‘Bourdieu in Beirut: Wasta, the State and Social Reproduction in Lebanon’. [In English] Middle East Critique 25, no. 3 (2016): 249–70. Evans, K. (2007). ‘Concepts of Bounded Agency in Education, Work, and the Personal Lives of Young Adults’, International Journal of Psychology 42, no. 2 (2007/4/01): 85–93. Evans, K. and Helve, H. (2013). ‘Introduction’, Chap. 1 in Karen Evans and Helena Helve (eds), Youth and Work Transitions in Changing Social Landscapes. London: Tufnell Press. Fayad, G., Raissi, M., Rasmussen, T. and Westelius, N. (2012). ‘Saudi Arabia: Selected Issues’, in Selected Issues. Washington, DC: IMF eLibrary. Foskett, N. and Hemsley-Brown, J. (2006). ‘Invisibility, Perceptions and Image: Mapping the Career Choice Landscape’. https://doi. org/10.1080/13596749900200060 Foskett, N. and Hemsley-Brown, J. (2011). Choosing Futures: Young People’s Decision-Making in Education, Training and Career Markets. London: Routledge. France, A. (2016). Understanding Youth in the Global Economic Crisis. [In English] Bristol: Policy Press. Furlong, A. (2007). Young People and Social Change: New Perspectives. [In English] Edited by F. Cartmel. 2nd edn. Maidenhead: Open University Press. Giddens, A. (1991). Modernity and Self-Identity: Self and Society in the Late Modern Age. [In English] Cambridge: Polity Press. Helve, H. and Evans, K., (eds) (2013). Youth and Work Transitions in Changing Social Landscapes. London: Tufnell Press.

142

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Hertog, S. (2012). ‘A Comparative Assessment of Labor Market Nationalization Policies in the GCC’, Chap. 4 in S. Hertog (ed.), National Employment, Migration and Education in the GCC. The Gulf Region: Economic Development and Diversification. Berlin: Gerlach Press. Hertog, S. (2016). ‘Rent Distribution, Labour Markets and Development in High Rent Countries’, in LSE Kuwait Programme Paper Series. The London School of Economics and Political Science. Hodkinson, P., Sparkes, A. C. and Hodkinson, H. (1996). Triumphs and Tears: Young People, Markets and the Transition from School to Work. London: David Fulton Publishers. Human Resources Development Fund (HRDF). (2011). ‘The Guide Book’. Riyadh: Ministry of Labour. Jadwa. (2015). ‘Saudi Arabia’s 2016 Fiscal Budget–Jadwa’, Saudi-US Relations Information Service, 29 December 2015. King Saud University (KSU). (n.d.). ‘Deanship of Admission and Registration’, King Saud University. https://dar.ksu.edu.sa/en/AdmFaqs McGrath, Simon. (2018). Education and Development. Abingdon: Routledge. Ministry of Economy and Planning (MEP). (2013). Achievements of the Development Plans Facts and Figures. Riyadh, Saudi Arabia. Ministry of Economy and Planning (MEP). (2015). ‘Saudi Economic Report 2014’. Riyadh: Ministry of Economy and Planning. Ministry of Finance. (2014). ‘Recent Economic Developments and Highlights of Fiscal Years 2014 & 2015’, news release. Ministry of Higher Education (MOHE). “The Current Status of Higher Education in the Kingdom of Saudi Arabia.” Edited by General Department for Planning & Statistics, 158. Riyadh: Deputyship for planning and information, 2011. Ministry of Labour (MOL). (2013). Daleel Nitaqaat. Riyadh: Ministry of Labour, p. 162. Muhammad, F. (2016). ‘TVTC in Trouble: 94% School Grads Prefer University’, Saudi Gazette, 25 February. Müller, W. and Shavit, Y. (1998). From School to Work: A Comparative Study of Educational Qualifications and Occupational Destinations. Edited by Y. Shavit and W. Müller. [In English] Oxford: Clarendon Press. Peers, C. (2015). ‘What Is “Human” in Human Capital Theory? Marking a Transition from Industrial to Postindustrial Education’, Open Review of Educational Research 2, no. 1: 55–77. Powell, M. (2005). Skill Formation and Globalization. Aldershot: Ashgate. Preston, R. and Dyer, C. (2003). ‘Human Capital, Social Capital and Lifelong Learning: An Editorial Introduction’, Compare: A Journal of Comparative and International Education 33, no. 4: 429–36. Raffe, D. (2003). ‘Pathways Linking Education and Work: A Review of Concepts, Research, and Policy Debates’, Journal of Youth Studies 6, no. 1: 3–19. Reay, D., Crozier, G. and James, D. (2011). White Middle-Class Identities and Urban Schooling. Identity Studies in the Social Sciences. Basingstoke: Palgrave Macmillan.

YOUTH AND TVET IN SAUDI ARABIA

143

Reay, D., Davies, J., David, M. and Ball, S. J. (2001). ‘Choices of Degree or Degrees of Choice? Class, “Race” and the Higher Education Choice Process’, Sociology 35, no. 4: 855–74. Roberts, K. (2009). ‘Opportunity Structures Then and Now’, Journal of Education and Work 22, no. 5: 355–68. Royal Commission for Jubail and Yanbu. (n.d.). ‘Foundation’. https://www.rcjy. gov.sa/en-US/AboutUs/Pages/Foundation.aspx Ryan, P. (2001). ‘The School-to-Work Transition: A Cross-National Perspective’, Journal of Economic Literature 39, no. 1: 34–92. Saunders, M. (2006). ‘From “Organisms” to “Boundaries”: The Uneven Development of Theory Narratives in Education, Learning and Work Connections’, Journal of Education and Work 19, no. 1: 1–27. Schoon, I. and Lyons-Amos, M. (2017). ‘A Socio-ecological Model of Agency: The Role of Structure and Agency in Shaping Education and Employment Transitions in England’ [In English], Journal of Longitudinal and Lifecourse Studies 8, no. 1: 35–56. Technical and Vocational Training Corporation (TVTC). (2014). ‘Annual Report’. Riyadh: Technical and Vocational Training Corporation. United Nations Educational, Scientific and Cultural Organisation. (2007). ‘Saudi Arabia’, in World Data on Education. International Bureau of Education. United Nations International Centre for Technical and Vocational Education and Training (UNEVOC). (n.d.). ‘Promoting Learning for the World of Work’. International Center for Technical and Vocational Education and Training, United Nations Educational Scientific and Cultural Organization. http://www.unevoc.unesco.org/go.php Vogt, K. (2018). ‘From Job-Seekers to Self-Searchers: Changing Contexts and Understandings of School-to-Work Transitions’, YOUNG Editorial Group 26, no. 45: 185–335.

144

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

6 CAUSES OF OBESITY AND PUBLIC POLICY Wareed Alenaini

Introduction Obesity is considered a global public health concern in developed and developing countries. The rise in obesity has massive health consequences as it increases the risk of global death causes, such as heart disease, T2D and certain forms of cancer (TGMC 2016). These consequences are reflected in life expectancy: overweight and its related conditions will reduce life expectancy by an average of 2.7 years by 2050 across many countries including Organisation for Economic Cooperation and Development (OECD) and G20 countries (OECD 2019). Importantly, obesity has a tremendous impact on ‘health span’, or healthy life expectancy, which uses disease disability weights to calculate the number of years lived in perfect health. Obesity and related conditions will reduce Saudi lifespan by 3.6 years between 2020 and 2050 (OECD 2019). Hence, increasing health span by six years in 2030 is the Saudi health Vision 2030 (Vision 2030 2016). In addition to health-related repercussions, obesity comes with a substantial economic burden, which negatively affects global GDP. An equivalent of about $311 billion is spent every year on obesity and related complications in purchasing power party (PPP), and leads to premature death as well as social and emotional costs (OECD 2014 – Lindhjem et al. 2012). Through the combined effects of obesity on life expectancy, health span and health expenditure, it is estimated that average GDP will be lowered by 3.3 per cent in developing countries between 2020 and 2050. In an analysis which included forty-six countries, obesity and overweight

complications will cost a total of $5.3 trillion PPP in 2020–50. This is similar to the average annual GDP of Germany or Japan. Obesity is predicted to lower the GDP of Saudi by 4.5 per cent on average between 2020 and 2050. Over and above the economic costs, obesity has a direct and enormous impact on individual well-being, self-esteem and psychological health. It is, therefore, crucial to invest in obesity prevention in order to reduce its burden on individuals and society. In 2018, the World Health Organization (WHO) published data showing that 2.4 billion adults were estimated to be overweight (Body Mass Index ≥25 kg/m2) or obese (Body Mass Index ≥30 kg/m2) globally (WHO 2018). By 2030, it is estimated that more than half of the world adult population (3.3 billion people) will be obese or overweight. Thus, the obesity-associated burden is expected to rise in the forthcoming years. In many countries and regions, in particular in the Gulf Cooperation Countries (GCC), the number of adults who are overweight or obese is exceeding those who are of normal weight. The adverse health consequences of obesity represent more significant risks for public health than even hunger or malnutrition. Obesity remains a preventable condition; thus, governments need to adopt proactive policies to tackle obesity. High global obesity figures are mirrored in Saudi, where 2013 census data estimated that 59 per cent of Saudis are overweight or obese (57.5 per cent males and 61.5 per cent females) (MoH 2013). The problem of obesity is remarkably complex and systemic. For such an issue to be clearly understood, an in-depth analytical assessment of its causes are essential, along with open access to data regarding obesity-related risk factors, including consumption habits (i.e. what people usually buy from markets and how frequently), eating habits (i.e. Do people eat at home or outside? Do they cook at home or count on other forms of food preparation? Why?) and food systems (i.e. agriculture trade agreements, sugar quotas and use of pesticide schemes). There seems to be a high likelihood that these essential data are available to the relevant ministries and authorities as the government is actively formulating rules and laws for consumers, such as a tax on carbonated beverages and energy drinks. However, the lack of open access to these data stifles the creation of further policy solutions by those studying obesity from outside the realm of the government. Obesity in Saudi accelerated dramatically after the discovery of oil, which enabled a rapid transformation of Saudi from mostly rural 146

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

areas to advanced urban cities. This transformation contributed to the creation of an obesogenic environment which allowed easily accessible and affordable calorie-dense foods, i.e. through the rapid increase of fast-food outlets, fast-food advertisements and increased portion size that enabled unhealthy eating habits. Between 1961 and 2013, the availability of calories per capita in Saudi nearly doubled from 1717 to 3255 (FAOSTAT 2013). This is accompanied by a very limited rate of physical activity, with almost 83 per cent of Saudis identifying as physically inactive (72 per cent of men and 91 per cent of women) (GAT 2018). Many factors possibly contribute to the alarming proportion of Saudi women being physically inactive. Women’s fitness centres or gyms were only legally introduced in summer 2016 as an independent licensed business after the announcement of Vision 2030. In 2018, women entered football stadiums for the first time to watch and support the men’s football league. February 2020 finally marked the launch of a football league for women. These policies were aimed at increasing the participation and presence of women in all parts of Saudi culture including sports. In their first women’s powerlifting league participation in 2019, two Saudi women won a total of twelve medals in a regional contest among twelve countries. Reported reasons for not practising physical activity by Saudis include a lack of time (41 per cent) and lack of desire (36 per cent) (GAT 2018). The warm climate characterized by extreme heat an average of 45°C, with the exception of the Asir province, remains an essential barrier which doubtlessly increases the lack of desire to practice physical activity. Only 10 per cent of Saudis reported lack of facilities in the neighbourhood despite relatively few green parks and sports lanes, and very few (0.4 per cent) reported financial costs. Only 2.2 per cent of Saudis perform cycling as type of exercise; individuals instead prefer to use cars or public transportation to go everywhere (GAT 2018). The remarkable obesity rates, affecting almost all community categories, indicate that this condition is beyond solely the individuals’ responsibility or power of will to combat. Rather, obesity is an environmentally influenced condition in which establishing a healthfriendly environment and infrastructure can create major opportunities for obesity prevention. Hence, government power translated to policymaking, whether via top-down or bottom-up approaches, will have a significant impact in empowering longer and healthier population lives. Tackling obesity starts with a comprehensive and clear understanding of its causes. The causes of obesity differ between population groups and Causes of obesity and public policy

147

across the course of a person’s life. Indeed, the multifactorial condition of obesity is inherently unsuited to a ‘one size fits all’ approach and the complexity of the aetiology of obesity illustrates why this disorder requires systematic efforts to treat it. The variability of these causes is an essential feature in that it necessitates a broad spectrum of innovative solutions and tools.

Causes of obesity The transdisciplinary nature of the causes of obesity shows that obesity is the tip of the iceberg of a confluence of environmental, epigenetic and genetic factors. An in-depth, analytical understanding of the causes of obesity is an essential foundation from which to tackle this issue at the policy level. At first glance, the cause of obesity seems simple; energy intake exceeds energy expenditure. Nevertheless, this simplistic view, which is widely held to be true, hides massive complexities inherent in how we acquire and use energy (Prentice et al. 2003; Virtue et al. 2010). Thus, the factors associated with the development of obesity are complex and multifaceted. Although there are many reasons why an individual may become obese, it is now generally accepted by healthcare and other professionals that the current prevalence of obesity is primarily due to people’s inherent biological susceptibility to a changing environment that includes dietary abundance and sedentary elements. Obesity is increasingly being recognized by medical societies and healthcare professionals as a disease that is caused by a transdisciplinary network of health inequalities, genetic influence and social factors. Thus, treatment must come from all angles. Indeed, the multifactorial nature of obesity is inherently unsuited to a ‘one size fits all’ approach, and the complexity of the aetiology of obesity points to why this disorder is hard to treat. The specific causes of obesity differ between population groups and across the course of a person’s life, with the accumulation of excess fat being the result of a variety of causal pathways. Studies indicate that obesity represents a disorder of energy homoeostasis. Homoeostasis, as defined by the Oxford Dictionary, is the process by which the body reacts to changes in order to keep balanced conditions inside the body. For example, in an average weight non-obese individual, homoeostasis is functioning normally ‘in a balanced way’ which 148

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

results in well-maintained body weight, with population studies showing a greater than 99.5 per cent agreement between an individual’s energy intake to energy expenditure. With balanced energy-control, obesity may be a consequence of regular and relatively small, cumulative variations (~100 calories/day) (González-Muniesa et al. 2017). These variations come from different sources such environmental factors (i.e. living environment, opportunities for physical activity, access to and availability of food and drink), psychological factors (i.e. stress, emotional eating, depression, sleep disorders), development (i.e. early life conditions, parental health and the parents’ pre-conception habits), socio-economic drivers (i.e. education level and income), along with genetic make-up and epigenetic stimulus. It has been demonstrated that obesity and metabolic disorders in later life are associated with issues that occurred in the early stages of life, sometimes as early as conception.

Epigenetic causes of obesity A complex chain of factors may have led to an individual becoming obese, including epigenetic factors. Epigenetic factors are referred to as the changes that affect deoxyribonucleic acid (DNA) expression without changing DNA sequence. These changes alter some of the gene expressions, which in return changes gene function in a complicated biological framework outside the scope of this chapter. A related example of such occurs in early life reprogramming when the foetus is in the mother’s womb. Changes to the foetus during this period showed a possible correlation with developing obesity in later life. Studies have shown that maternal malnourishment (where the mother is deficient in essential nutrients such as protein) may cause the development of foetal malnutrition (where the foetus lacks essential nutrients during this critical development period). Foetal malnutrition, in turn, appears to have a correlation with the development of obesity and related disorders such as T2D and heart disease. Evidence of the impact of early life programming on health came from historically documented famine and feast periods. A prominent pattern was established from the Dutch Hunger Winter (the Netherlands, 1944–5) (Schulz et al. 2010). Offspring exposed to the famine during pregnancy had risk of adverse metabolic health (i.e. increased blood pressure, arterial stiffness, impaired glucose tolerance and high obesity Causes of obesity and public policy

149

risk compared to offspring who were not exposed to the famine). Data from the longer-duration Leningrad famine (Saint Petersburg, 1941–4) revealed a different story. Offspring exposed to the Leningrad famine during pregnancy did not present significant adverse metabolic health outcomes later in life (i.e. no increase in blood pressure or lipid profile, and no impaired glucose tolerance). The variations in metabolic health outcomes between the two famines could be attributed to the fact that the offspring from the Dutch Hunger Winter were only exposed to the famine during a portion of the period of pregnancy, but were well nourished before and after the pregnancy, as the Dutch Hunger Winter lasted less than a year. In contrast, after the four-year-long Leningrad famine, food remained scarce, so the offspring from the Leningrad famine were born into a nutritionally deprived environment that matched their experiences during pregnancy. Such exposure relates to the ‘Predictive Adaptive Response’ model (Fleming et al. 2018; Godfrey et al. 2007). In this model, the individual’s regular ability for adaptation becomes maladaptive when exposed to an opposite pattern or environment. Examples can be observed in populations who experience a transition between rural and urban areas, or from developing to developed countries. Thus, intervention targeting an isolated point in time or population category (i.e. parents or children) is less likely to be an effective and sustainable solution to a chronic global public health crisis. Rather, creating an ecosystem in which individuals are empowered to enjoy healthy lives via concentrated systemic efforts will be the most effective policy measures.

Genetic causes of obesity While genetic factors do have an effect on developing obesity, this effect is largely limited and controlled by many other significant contributing factors. It was noticed by chance in 1949 that T2D mice who had a mutation in a certain gene, despite similarity at birth with non-genetically mutated mice, had a fourfold predisposition to excessive eating and rapid weight gain compared to non-genetically muted mice. The gene was later discovered in the 1990s by Friedman et al. to be responsible for leptin hormone production (Zhang et al. 1994). Leptin is produced by fat tissues and plays an important role in appetite regulation via brain and endocrine signalling. Leptin discovery revolutionized the science of obesity and led to fat being recognized as an endocrine organ. 150

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

In human studies, leptin deficiency or resistance causes uncontrolled food intake and severe weight gain (i.e. rare congenital cases of leptin deficiency or lipoatrophy, a condition where there is lack of fat tissue to produce leptin) (Friedman et al. 1998). Leptin as a supplement reduced food intake and encouraged weight loss in some but not all individuals with obesity. This is likely because not all individuals with obesity are characterized with leptin hormone disorders. In childhood obesity, the most potent risk factor for developing obesity remains parental obesity; with the risk of obesity four times higher if one parent is obese and ten times higher if both parents are obese, compared to normal weight parents. Moreover, adoptee and adopted twin studies suggested high hereditability. High genetic hereditability is usually translated as relatively small clinical significance and changes in BMI (~ 0.3–0.5 kg/m2) (67, 68). The most studied gene of obesity, the FTO gene, only has an impact on BMI variations between 0.1 and 0.4 kg/m2 (Younget et al. 2016). Certain genotypes are not the only determinates of the risk of obesity. Yet, it is crucial to consider the contribution of gene–gene interaction, gene–environment interaction and gene–behavioural interaction. All of which may change the genetic impact either by weakening or strengthening an individual’s susceptibility to obesity. Interestingly, studies on the incidence of pet obesity with their owners demonstrated a strong correlation between pet and owner weight. This pattern appears to show a strong environmental bias in the estimation of genetic heritability. The Pima Indians are a subgroup of Native Americans who live in Southern Arizona in the United States. Pima Indians exhibit a higher prevalence of obesity and T2D than the general US population, and one of the highest prevalence the world (75 per cent and 64 per cent in women and men, respectively) (Dabelea et al. 1999; Knowler et al. 1978). The incidence of T2D in Pima Indians over a ten-year period was found to be nineteen times higher than that of white Americans. Interestingly, a separate group of Pima Indians who live in semi-rural areas of Mexico make up only one-fifth of the prevalence of T2D in the whole Pima Indian subgroup as compared to the group in the United States (T2D prevalence: 6.9 per cent in Mexican Pima Indian, 38 per cent in US Pima Indian and 2.6 per cent in white Americans) (Schulz et al. [2006]). This example demonstrates that even in populations genetically susceptible to developing obesity-associated diseases, the environment has a noticeable impact on obesity and related disease development (Figure 6.1). Causes of obesity and public policy

151

FIGURE 6.1  Age-adjusted prevalence of type 2 diabetes in non-Pima Mexicans, Mexican Pima Indians and US-based Pima Indians. Data presented as ± 95 confidence interval, US; United States of America. Adjusted from Leslie O. Schulz et al. 2006.

Environmental causes of obesity Determining environmental inputs is a highly complex endeavour. Food consumption, energy intake and physical activity are key environmental factors. When researchers investigated the relationship between adherence to healthy diet and genetic predisposition to obesity, they found that after following a healthy diet, weight loss was stronger in the group that was genetically highly predisposed to obesity. This demonstrated that environmental factors may diminish the effect of a strong genetic predisposition towards obesity. Environmental factors are a determinant of an individuals’ overall health trajectory. These factors include but are not limited to: what we eat (i.e. macronutrients vs micronutrients, cooking methods, etc.) and drink, how many hours we spend on static entertainment (i.e. watching TV), and whether we exercise and what type of exercises we do (i.e. cardio, resistance training). A UK Biobank study of almost 10,000 individuals demonstrated that the longer the duration an individual engaged in activities such as watching TV, the higher the amount of internal and ectopic fat he/she accumulated (Alenaini 2019). Internal and ectopic fat are the types of fat that accumulate inside the abdomen and organs such as the liver, and which even in very little amounts can be harmful to health (Alenaini 2019). The author also demonstrated that small day-today events can significantly alter fat accumulation and the development of obesity (Alenaini 2019). For example, a fast walking pace (four miles per hour or 100 steps per minute) correlates with less internal and ectopic fat accumulation compared with a slower walking pace (Alenaini 2019). As the most practised type of exercise in Saudi is walking (51 per cent of men; 82 per cent of women) (GAT 2018), focusing on increasing public awareness of walking habits may go a long way in proactively preserving health in Saudi. Building an environment that promotes health and the prevention of obesity is challenging. It requires transdisciplinary efforts to be made by governments, decision- and policymakers, stakeholders and academics. Policy efforts can be viewed as a rallying call and initiator of a healthfriendly ecosystem. Policy efforts ranging from taxation on unhealthy goods, increasing public awareness of the causes of obesity and its prevention, enforcing corporate engagement with these policies, and providing stakeholders with incentives to comply through waivers and health rebate schemes are all needed. Essential to the implementation Causes of obesity and public policy

153

of governmental efforts to build a health-friendly environment is an in-depth understating of the issue and a systematic approach with intersectional interventions. For instance, cutting smoking efforts showed good results worldwide, in particular in Saudi Arabia. However, people who quit smoking tend to develop excess eating habits and weight gain; hence, governments must ensure the availability, accessibility and affordability of healthy eating alternatives for effective and sustainable health outcomes. An essential step for comprehensive strategic planning is establishing an assessment at the country level of the prevalence of obesity, its associated risk factors, as well as trends in healthy eating and physical activity, and of related infrastructure and systems such as school-based health education and transport. A detailed report on the results and information gathered from the assessments could serve as a rallying call for all involved parties. If such efforts included the appropriate targets and the related key performance indicators, it could serve as the source for shaping national and local priorities towards tailored approaches and strategies. All data must be open to the public, which would allow for enormous value added from independent assessment and monitoring for policy interventions by NGOs, academics and civil society organizations. In contrast, as an example, currently the Decision Support Unit in the royal court is a recently established semiindependent government centre that focuses on collecting and analysing data on reform and policy plans. Almost all of their data are private and not publicly available. The Saudi government is starting to realize the importance of open data. There is a push to regulate and support this objective, with the government working towards creating well-established open data. The General Authority of Statistics has been restructured (https://www. stats.gov.sa/en), and now there is also the Saudi Data and Artificial Intelligence Authority formed in 2019 by the Saudi Health Council (https://sdaia.gov.sa). Finally, other semi-governmental or civil society organizations such as Sharik (https://sharikhealth.com), which is a registered civil society organization for data collection, have been created. Forming newly established open data initiatives, whether private, public, social or charitable in nature, is essential for harnessing an open data environment.

154

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Government fiscal policies regarding obesity Public awareness campaigns Public awareness has various platforms. Primary schools are one of the most effective platforms. This could be through curriculum enhancement, the promotion of a variety of sports and handcraft activities, cooking and integrated physical activity contests and parent engagement in seasonal seminars on the benefits of healthy eating and physical activity. Governmental efforts to increase the awareness level among children help to reinforce healthy cultural attitudes. It also restores healthy habits as the norm. Other platforms where the government can promote obesity prevention and awareness include targeted media campaigns via social media and in public spaces such as shopping malls and mosques.

Stakeholder engagement Government initiatives to engage stakeholders can be described as the carrot and stick approach. The government can design and provide schemes for subsidies or tax rebates for companies which provide incentives/facilities for its employees to lead a healthier lifestyle (i.e. gym memberships, wellness activities, etc.). Also, the government can incentivize healthy products through subsidies or tax rebates for marketing and selling healthy products. A systematic governmental approach to prevent obesity must include collaborations with local ministries and authorities and include a variety of additional tools: i.e. bans on advertising and sugary food promotions (i.e. buy one, get one free) and sponsorships, prohibiting sales to minors, and clear warning labels; and strengthening health norms (i.e. promoting health influencers) and educating consumers (i.e. awareness campaigns in public places). The Quality of Life programme is a nationwide programme that aims to improve individuals’ lifestyles through building and maintaining healthy cultural and environmental habits.

Causes of obesity and public policy

155

A systematic approach to tackling obesity for policymakers The following steps demonstrate a systematic process to help policy- and decision-makers set up an evidence-based systems approach to tackle obesity. The key stages are described below:

Pre-system preparation Pre-system efforts prepare the environment for change. This element involves building a deep understanding of the causes of obesity and communicates them to society and all parties involved. Efforts ensure securing the engagement of high-ranked leaders and stakeholders in the policy, with a clear and nationwide agenda. A key element is collecting comprehensive national data and running local surveys for understanding and identifying gaps and needs in the context of obesity.

Ground assessment The ground assessment stage involves an in-depth assessment and understanding of the elements required for a systematic approach and implementation. The ground assessment provides detailed information on policy-related resources and capabilities. For example, in planning a public awareness campaign to increase levels of physical activity, a thorough ground assessment of related information including current social media capabilities, manpower, network coverage and the popularity and demographics of social media platforms. All of these assessments help facilitate targeted policy delivery.

Identify causes of obesity and effort linkages After the causes of obesity are thoroughly understood and comprehensive ground assessments have been undertaken, all involved parties (i.e. council representatives, researchers, stakeholders, policy- and decisionmakers) come together to map out the actions currently taken to overcome obesity. A key element is to identify linkages between the different causes of obesity in order to recognize mutual benefits of tackling them from different angles by all relevant parties. 156

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Identifying opportunities to disturb the system Dynamic monitoring for interventions is an ongoing essential process for identifying opportunities to disturb the system in the areas and population categories of highest impact. The health benefits of walking are well known. Yet, walking is not comprehensively performed by the Saudis as a form of exercise. According to the General Authority for Statistics, 56 per cent of Saudis practice walking as exercise for 150 minutes or more per week (GAS 2018). Creating a national walking campaign under a cohesive theme related to Saudi community values and ethics is an opportunity to boost the cause. An example is creating a national digital campaign to Mecca (Mecca is Islam’s holiest city) called ‘A virtual Walk to Holy Mecca’, where an individual’s steps are tracked and added to a virtual path to Holy Mecca. This creates an engaging way to increase walking as exercise which can be done indoors to remove the climate barrier, for example through utilising the newly made and air-conditioned walking lanes in shopping malls, such as in the Red Sea Mall in Jeddah.

Grouping around key indicators Once key priority indicators are identified, systematic efforts from all engaged parties must be grouped around them. Saudi has one of the highest national consumption rates of sugary beverages and energy drinks (Popkin et al. 2016) and planning an effective policy to tackle obesity requires parallel, intersectional and targeted efforts. For example, in high school areas where the priority is to decrease sugary beverage and energy drink consumption, governments provide certain incentives for companies to provide low-sugar bottled juice at affordable prices. Additionally, designing certain rebates for companies which advertise and sell healthier products in identified targeted areas would be a complementary policy.

Keeping systemic approach thinking It is essential to keep in mind systemic approach thinking. It ensures this complex system is capable of dealing with changes. With every emerging priority or identified intervention, practising systemic approach thinking ensures these identified efforts are in alignment and serving the whole Causes of obesity and public policy

157

system. Systemic thinking allows flexibility for the system to deal with changes or failures which might have a negative impact. Covid-19 is an example of changes to the system that demand systemic approach thinking in each intervention in order to effectively overcome it.

Maintain a feedback loop Maintaining a feedback loop involves collecting data across all efforts and drawing meaningful conclusions. These are used to inform the existing policy circle, and better shape the following circle decisions. It also allows for the early detection of intervention failure and identifying the reasons behind such failure. Making all data publicly available (anonymously) allows researchers to create innovative solutions and increase public awareness and a public sense of good governance. We demonstrate below a direct comparison between the proposed systemic approach suggested in this chapter and ‘The Quality of Life’ publicly available policy aimed at tackling obesity rates in Saudi. A graphical illustration of the comparison is presented in Figure 6.2. Key

FIGURE 6.2  Systemic approach roadmap to tackling obesity for policymakers and check list comparison with the Quality of Life Vision Realisation Program. Based on current publicly available data on the Quality of Life Program.

158

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

difference between the approaches as seen in the integrated map is the lack of an effective feedback loop.

Case study Case study of first public policy to tackle obesity on sugary beverages and flavoured drinks The sugar-sweetened beverages (SSB) tax is an added-value tax designed to reduce consumption of drinks with added sugar. Drinks covered under a soda tax often include carbonated soft drinks, sports drinks and energy drinks. The SSB tax is the first Saudi added-value tax on drinks to reduce sugar consumption in order to achieve the National Transformation Indicator of stabilizing obesity rates and participating in enhancing non-oil revenues. The Saudi SSB added-value tax is the largest SSB tax of its kind worldwide (Backholer et al. 2017), with up to 100 per cent increase of retail or volume price. Most taxes on SSBs are set volumetrically (i.e. with a constant rate per unit volume), and few countries worldwide use a rate proportional to sugar content such as in the UK. The volumetric model, despite criticisms of poorly targeting the actual harm from SSBs, is popular due to ease of calculation and direct implementation. The sugar content model of the SSB tax is regarded as the best-fit policy model for targeting health problems, but it requires a sophisticated, phased approach in implementation. This consists of discussions between governments and various stakeholders (i.e. media outlets and trading authorities) which allow proper time for market and infrastructure adaptation (i.e. outsourcing accountants, public awareness campaigns). The latter model requires a longer timeline for policy implementation, such as that seen in the UK with the Sugar Drinks Industry Levy, commonly known as SDIL. Saudi implemented SSB taxes using the volumetric model for direct and quick implantation. Health authorities including the Ministry of Health and Saudi Food and Drugs Association did not have a documented contribution to the SSB tax policymaking process. The SSB tax was introduced by royal decree in 2017. It was rolled out just fifteen days post-newspaper announcement by the Authority of Zakat and Tax (an entity under the Ministry of Finance). The rapid timeline for the policy, including first announcement and consequent implementation, a primary benefit of top-down policy approaches, Causes of obesity and public policy

159

displayed effective governmental and industry capabilities in policy execution. However, an opportunity for creating public awareness and engagement with the policy, i.e. an effective social media campaign, was not possible with such a short timeline. The lack of public engagement or stakeholder participation in the formulation of the SSB tax might have weakened the public engagement with the policy. The SSB tax was introduced specifically on carbonated beverages and energy drinks. All flavoured drinks that contain carbonated elements (fizziness) and energy drinks are taxed at their retail price or shelf value (an increase by 50 per cent for flavoured carbonated beverages, and 100 per cent for energy drinks). This includes, but is not limited to, fizzy sugary drinks such as Pepsi and Coca-Cola. This taxation model excludes sugary non-carbonated drinks such as milkshakes and flavoured juices, which may contain large amounts of sugar harmful to consume in a single serving. Some stakeholders focus on this line of sugary, non-carbonated products as a non-taxed alternative to gain consumer attraction. As supplementary policy tools, the SSB tax regulation also banned the advertisement of energy drinks and their sales in government institutions, schools, health and athletic clubs. Additionally, it required the separation of energy drinks from other items in designated refrigerators and restricted energy drink companies from sponsoring cultural, social or athletic events in Saudi Arabia (Alsukait et al. 2020). Different countries use different SSB added-value tax calculations. For example, in the UK, SSB tax calculations are based on sugar content. A sugar content of 8 grams per 100 litres or lower is priced at 18 pence per litre. More than 8 grams of sugar per 100 litres is priced at 24 pence per litre (added 20 per cent SSB tax). Such a method ultimately aims to reform the sugary drinks industry via incentivizing the production of reduced sugar content products, or reducing sugar in currently highsugar products, to avoid paying the SSB added-value tax. The SSB taxation policy has proven successful. The SSB market witnessed a significant reduction of 30 per cent (Alsukait et al. 2020). This was an expected short-term impact due to the size of the tax at 100 per cent price added. Yet further research is needed for observing the policy’s impact on long-term health. It is noteworthy that a reduction in consumption power is not equal to a reduction in sugar consumption. The consumer may stop buying a carbonated sugary drink (the taxed category) and instead buy a sugary milkshake or sweet-flavoured coffee.

160

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

The key is in ensuring availability and accessibility of healthy alternatives through attractive rebates and incentive schemes for manufacturers of healthy alternatives. One of the taxation objectives of the SSB tax is raising revenue for various government expenditures, while exercising taxation on harmful goods, with the aim of reducing unhealthy food consumption and promoting healthy options. Saudi Arabia is one of the largest SSB consumers worldwide, as such, effective SSB taxation promises a winwin situation which will lead to significant long-term health gains. Additionally, revenues generated by this tax could be spent on efforts to improve healthcare systems, encourage healthier diets, increase physical activity or build capacity for effective tax administration. Figures from the United States estimated that over a period of ten years, a tax on sugary drinks of 1 cent per ounce would result in more than US$ 17 billion (SR 63.8 billion) in healthcare cost savings (Rudd Center for Food Policy & Obesity). Mexico started investing its SSB tax revenue in a programme that installed water fountains in schools. Saudi Arabia could look to this example for further ideas on how to create the largest policy impact on its obesity reduction agenda. SSB revenues can also be invested into community enhancement and charitable causes. All SSB revenue in Saudi is currently collected by the General Authority of Zakat & Tax (www.gazt.gov.sa/en). Zakat is one of the Five Pillars of Islam, which is payment made annually under Islamic law on certain kinds of property and used for charitable and religious purposes. The General Authority of Zakat & Tax generally invests its revenue in charitable actions, infrastructure projects and causes that follow the Islamic law for Zakat. SSB taxation is a tool to empower societies to make healthier choices. This tool has a limited impact if implemented alone and therefore should be part of a robust network of policies. This includes, but is not limited to, corporate social participation programmes for employees, support schemes for engaged stakeholders and by providing certain incentives and rebate systems for the production of healthy alternatives. Additionally, SSB policy formulation must involve academics, media, business leaders, NGOs and stakeholders (as seen with the UK SDIL). Large-scale public awareness campaign and advertisement restrictions are supportive tools ensuring public understanding of the policy aims and outcomes to help smooth the way for the sustainable roll-out of policy.

Causes of obesity and public policy

161

Recommendations 1. Ensure an active channel for engaging stakeholders, NGOs and

scientists in taxation design and formulation.

2. Utilize a systemic taxation approach, including price and non-

price measures, and fully engaging stakeholders and avoiding a one-way (price to consumer) implementation characterized by the government simply increasing the price of harmful goods while leaving the consumer uneducated or/and stakeholder unengaged.

3. Ensure availability and accessibility of health alternatives through

attractive rebates and incentive schemes for manufactures on health alternatives. This is a key element in executing effective obesity policies.

4. Strengthen efforts to create a balanced top-down approach. For

example, encouraging proposals and report consultations from independent bodies and NGOs.

5. Provide sufficient time for public awareness and public

engagements campaigns before policy implementation.

6. Reform SSB model to allow for sugary drinks industry

recalibration.

7. Publish detailed SSB revenue usage to reinforce public

engagement.

8. Practice comprehensive open access and transparency with data

collection, sharing and open data feedback pipelines. A current obstacle is the lack of data transparency in collecting and sharing.

Conclusion The number of individuals with obesity is increasing globally with immense health problems and economic repercussions already occurring and expected to occur in the coming years. Tackling obesity is, thus, counted as one of the top priorities in the field of public health. By setting key performance indicators through the Vision Realization Program, the Saudi government has been committed to tackling obesity 162

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

by putting a range of efforts in place, including taxation on sugary beverages and energy drinks and compulsory calories labelling for fastfood products. Given that obesity has many different, but interlinked, causes, no single, isolated intervention is likely to be effective in preventing obesity. Rather, a systemic approach that involves all stakeholders (e.g. consumers, producers, researchers, policymakers) in the obesity prevention agenda is required to produce effective and sustainable outcomes. Such a systemic approach enables all stakeholders to engage in concerted efforts in various forms of policy action including planning, aligning, executing and monitoring.

Acknowledgements Many thanks to the Research Centre for Optimal Health at the University of Westminster for their academic support. Special acknowledgement to Dr Nathan Price and Mudhar Al-Rabieah for their meaningful discussions.

References Alenaini, W. (2019). ‘Phenotyping Ethnic Differences in Body Fat Depots’, PhD Thesis, University of Westminster. Alsukait, R. et al. (2020). ‘Sugary Drink Excise Tax Policy Process and Implementation: Case Study from Saudi Arabia’, Food Policy. https://www. sciencedirect.com/science/article/abs/pii/S0306919219306116 Backholer, K., Blake, M. and Vandevijvere, S. Public Health Nutr., Dabelea et al. (1999). ‘Birth Weight, Type 2 Diabetes, and Insulin Resistance in Pima Indian Children and Young Adults’ [In English], Diabetes Care 22. Backholer, K. et al. (2017). ‘Sugar-Sweetened Beverage Taxation: An Update on the Year That Was 2017’, Public Health Nutrition. Dietary Guidelines. (2015). Dietary Guidelines for Americans 2015–2020. Health.GOV. Accessed online from https://health.gov/dietaryguidelines/2015/ resources/2015-2020_Dietary_Guidelines.pdf FAOSTAT. (2013). http://www.fao.org/faostat/en/#data/FBS/report Fleming, T. et al. (2018). ‘Origins of Lifetime Health around the Time of Conception: Causes and Consequences’, The Lancet. https://pubmed.ncbi. nlm.nih.gov/29673874// Friedman, J. et al. (1998). ‘Leptin and the Regulation of Body Weight in Mammals’, Nature. https://www.nature.com/articles/27376 Causes of obesity and public policy

163

General Authority for Statistics. (2018). ‘Household Sport Practice Survey 2018’, Accessed online from https://www.stats.gov.sa/sites/default/files/household_ sport_practice_survey_2018_ar.pdf Godfrey, K. et al. (2007). ‘Fetal Programming and Adult Health’, Public Health Nutrition. https://www.cambridge.org/core/journals/public-health-nutrition/ article/fetal-programming-and-adult-health/3BB0394BBC80F4DC3B348EC D8EBC460D González-Muniesa, P. et al. (2017). ‘Obesity’, Nature Reviews Disease Primers. https://www.nature.com/articles/nrdp201734 Hoong et al. (2021). ‘Obesity Is Associated with Poor Covid-19 Outcomes: A Systematic Review and Meta-Analysis’, Hormone and Metabolic Research. https://pubmed.ncbi.nlm.nih.gov/33395706/ Knowler, W. et al. (1978). ‘Diabetes Incidence and Prevalence in Pima Indians: A 19-Fold Greater Incidence than in Rochester, Minnesota’, American Journal of Epidemiology. https://pubmed.ncbi.nlm.nih.gov/736028/ Lindhjem, H. et al. (2012). ‘Working Party on National Environmental Policies: Meta-analysis of Stated Preference VSL Studies: Further Model Sensitivity and Benefit Transfer Issues’, OECD Publishing, Paris. http://www.oecd. org/officialdocuments/publicdisplaydocumentpdf/?cote=ENV/EPOC/ WPNEP201010/FINAL&doclanguage=en (accessed 19 June 2020). Ministry of Health. (2013). Survey of Health Information in the Kingdom of Saudi Arabia. ‘The Cost of Air Pollution: Health Impacts of Road Transport’, OECD Publishing, Paris. https://doi.org/10.1787/9789264210448-en Organisation for Economic Cooperation and Development (OECD). (2019). The Heavy Burden of Obesity. Accessed online from https://doi. org/10.1787/67450d67-en Popkin, B. et al. (2016). ‘Sweetening of the Global Diet, Particularly Beverages: Patterns, Trends, and Policy Responses’, Lancet Diabetes Endocrinol. https:// www.ncbi.nlm.nih.gov/pmc/articles/PMC4733620/ Prentice, A. et al. (2003). ‘Fast Foods, Energy Density and Obesity: A Possible Mechanistic Link’, Obesity Reviews. https://pubmed.ncbi.nlm.nih. gov/14649369// Rudd Center for Food Policy & Obesity. (n.d.). Revenue Calculator for SugarSweetened Beverage Taxes. Schulz, L. et al. (2006). ‘Effects of Traditional and Western Environments on Prevalence of Type 2 Diabetes in Pima Indians in Mexico and the U.S.’, Diabetes Care. https://diabetesjournals.org/care/article/29/8/1866/28611/ Effects-of-Traditional-and-Western-Environments-on Schulz, L. et al. (2010). ‘The Dutch Hunger Winter and the Developmental Origins of Health and Disease’, Proceedings of the National Academy of Sciences. The Global BMI Mortality Collaboration TGMC. (2016). ‘Body-Mass Index and All-Cause Mortality: Individual-Participant-Data Meta-analysis of 239 Prospective Studies in Four Continents’, The Lancet. https://pubmed.ncbi. nlm.nih.gov/27423262/

164

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Virtue, S. et al. (2010). ‘Adipose Tissue Expandability, Lipotoxicity and the Metabolic Syndrome–an Allostatic Perspective’, Biochim Biophys Acta. https://pubmed.ncbi.nlm.nih.gov/20056169/ Saudi Vision 2030 [WWW Document]. 2016. https://vision2030.gov.sa/en/ node/161 World Health Organization. (2018). ‘Obesity and Overweight’, Facts sheet. Young, A. et al. (2016). ‘Multiple Novel Gene-by-Environment Interactions Modify the Effect of FTO Variants on Body Mass Index’, Nature Communications. https://www.nature.com/articles/ncomms12724 Zhang, Y. et al. (1994). ‘Positional Cloning of the Mouse Obese Gene and Its Human Homologue’, Nature. https://www.nature.com/articles/372425a0 Zhou, Y. et al. (2021). ‘Obesity and Diabetes as High-Risk Factors for Severe Coronavirus Disease 2019 (Covid-19)’, Diabetes and Metabolism Research and Reviews. https://pubmed.ncbi.nlm.nih.gov/32588943/

Causes of obesity and public policy

165

166

PART THREE

GOVERNANCE CHALLENGES: MANAGING ENERGY AND ENVIRONMENTAL POLICIES

168

7 ENERGY GOVERNANCE Is the new meeting the old in Saudi Arabia’s energy industries? Jessica Obeid

Introduction Saudi Arabia’s oil exports have generated tremendous revenues for the Kingdom and have constantly supported its policy of major public spending. Economies with excess revenues are expected to implement sustainable development measures with relative ease. Yet, scholars  note that most hydrocarbon-rich economies struggle to achieve sustainable development, in spite of accumulated wealth, and that a direct correlation  exists between sustainable development and good governance. This chapter suggests that while renewable energy in Saudi Arabia seems to be following a different trend in governance than its oil industry – sometimes characterized as practising poor governance – there is room for improvement in order to achieve good governance and enhanced competition, which are both necessary for the sustainable development of the industry and to meet the Kingdom’s ambitious goals. Political stability in Saudi Arabia has benefited its oil industry. But monopoly, direct negotiations of contract and lack of data have restricted competition and private sector participation. According to the Natural

Resource Governance Institute’s oil and gas governance ranking, the Kingdom ranked 69 out of 89 country assessments, placing Saudi Arabia in the poor oil governance category. In contrast, the renewable energy industry is endorsing public auctions (in part), promoting public–private partnership through independent power producer schemes and creating a more open market environment. The chapter provides an overview of the governance within the oil industry, and examines trends in renewable energy. The analysis considers factors, such as regulations, private sector participation, national governance indicators and sectoral indicators to draw a conclusion on whether governance of the alternative energy sector is decoupling from the oil industry’s, and identifies potential risks that shall be mitigated.

Defining governance The concept of governance is widely used and emphasized when making reference to how countries are managed. However, its reference lacks precision, and its definition lacks consensus. The World Bank defines public sector governance as the ‘manner in which power is exercised in the management of a country’s resources for development’.1 Meanwhile, the United Nations Development Programme defines it as the ‘exercise of economic, political and administrative authority to manage a country’s affairs’, through mechanisms, processes and institutions. In the context of natural resources, governance describes the decisionmaking process, power sharing and accountability, and the set of actions aiming to mitigate the challenges.2 The definitions are many but they revolve around what the government and other key actors do, to steer and guide3 a certain area. The aim of this chapter is, however, not to define governance, but to identify its context and dimensions related to natural resources, enabling an analytical approach and comparative analysis between the oil and gas and renewable energy industries. Therefore this chapter focuses on overall governance in the Saudi Kingdom, and the sets of regulations, policies, institutions and instruments; such as contracts and energy models, managing the renewable energy sector in Saudi Arabia, and how they compare to the oil and gas industry. 170

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

National governance indicators The most comprehensive national governance indicators are the World Bank Group’s Worldwide Governance Indicators assessing 215 countries for six dimensions of governance: 1. Government effectiveness index 2. Rule of law index 3. Control of corruption index 4. Regulatory quality index 5. Political stability index 6. Voice and accountability index

The aggregate indexes scores range between –2.5 for a weak and 2.5 for a strong index. Overall, governance indicators in the Kingdom have improved, but still rank low, and highlights a weak overall governance, which requires urgent actions. The government effectiveness index, which assesses the perception of quality of the public services, and the degree of independence from political pressure, along with the credibility of government commitments, has improved across the years, moving from an average of –0.09 between the period 1996 to 2017, reaching an all-time high of 0.25 in years 2016 and 2017.4 The rule of law index assesses the perception of the quality of law enforcement, police and courts, contracts’ enforcement, among others. The index in Saudi Arabia averaged 0.08, with a maximum of 0.34 in 2016, and dropped back to 0.1 in 2017. The control of corruption index, accounting for petty and grand forms of corruption, and state capture by elites and private interests, has significantly improved switching from a minimum of –0.31 in 2011 to a new high of 0.36 in 2017. The regulatory quality index, which captures the government’s ability to develop and implement adequate policies and regulations enabling the private sector development, has followed inconsistent trends; averaging at a score of 0.01, with a maximum of 0.16 in 2009, and a drop to 0.08 in 2016.

Energy Governance

171

The political stability index includes the absence of violence and terrorism and measures the perception of the likelihood that the government will be destabilized. The index is the average of other indexes from the Economist Intelligence Unit, the World Economic Forum and the Political Risk Services, among others. Saudi Arabia’s score has almost constantly been negatively, with a low score of –0.62 in 2017. The Voice and Accountability Index captures the perception of the extent to which citizens can contribute in decision-making, select their government and hold it accountable. The index scores for the Kingdom have historically been very low, recorded at –1.68 in 2017.

A drive for economic diversification Saudi Arabia sits on the throne of oil exporters. Hydrocarbons have granted it distinctive influence and made it the world’s swing producer. The Kingdom is home for 17 per cent of the world’s proven petroleum reserves and 4 per cent of total natural gas reserves. Saudi’s proven crude oil reserves are the second largest in the world, following Venezuela, with 258.6 billion barrels, according to OPEC 2020 Saudi Arabia facts and figures. The oil exports are a key contributor to the national economy; constituting approximately 70 per cent of the total export revenues, as per OPEC data. The revenues from oil have historically financed the Kingdom’s public spending; enhanced economic activity and created employment opportunities, and placed the Kingdom among the twenty largest economies in the world. A heavy reliance on oil means that fluctuations in the oil market impact the Saudi economy. A slowdown in oil demand and lower prices translate into a reduction in gross domestic product (GDP) and economic activity. This will be the case as the world passes through the global energy transition and was most recently experienced in 2020–1 when Covid-19 restrictions destroyed global demand. It pushed the Kingdom to cut government spending and hike VAT from 5 per cent to 15 per cent as of July 2020. JP Morgan expected the Saudi economy to contract 3.7 per cent in 2020.5 By mid-March 2021 oil price reached $67 up from $27 per barrel in April 2020.6 IMF projects Saudi Arabia’s real GDP to grow by 2.9 per cent in 2021.7 Saudi Arabia has long been in pursuit of economic diversification and reducing its dependence on oil, and is best captured by its ambitious 172

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Vision 2030. It was launched in 2016 and comprises ninety-six strategic objectives, with the aim of growing non-oil sectors and transitioning away from oil. The National Transformation Program (NTP) delivery plan was issued as vision realization programmes in order to establish the required infrastructure for the Vision’s implementation, drive government’s flexibility and enhance coordination and planning. The Covid-19 pandemic may have catalysed the process further and increased political will for diversification. As part of its diversification plans, Saudi Arabia is aiming for energy diversification, with targets of 3.45 gigawatts (GW) by 2020 and 27.3 GW by 2024 – a ramp-up from a previous target of 9.5 GW by 2023 – and 60 GW by 2030, in addition to nuclear energy. In March 2021, the 2030 target was revised to 50 per cent renewable energy. Economies that have significant revenues and low levels of debt are expected to achieve sustainable development measures, especially in the capital-intensive energy sector, considering their ability to fund measures and attract investments; such as securing financing for renewable energy systems. Yet, scholars note that most hydrocarbon-rich economies struggle to achieve sustainable development,8, 9 and that there is a direct correlation between sustainable development and good governance.10, 11 Good governance, at national and sectoral levels, is a major enabler to any transition to a sustainable model.

Growing need for energy diversification Energy sustainability has emerged, in the modern economy, as one of the key factors of ensuring a sustainable economic development.12 But the concept of energy sustainability is easier defined than implemented, especially in hydrocarbon-rich economies, where fossil fuels dominate the energy mix, and energy consumption is high and tariff is cheap. Electricity consumption in Saudi Arabia has been increasing at a significant rate, driven by key factors such as the population growth, climate change and temperature increase leading to a higher cooling demand, and, mostly, the electricity and fuel subsidies resulting in low electricity tariffs.

Energy Governance

173

The low electricity tariffs have led to a wasteful increase in electricity consumption. The peak electricity demand has been increasing at a significant rate averaging at 6.3 per cent annually between 2005 and 2016,13 compared to an annual average of non-OECD countries of 5.5 per cent, and leading to a race to increase installed electricity generation capacity, which has averaged 7.7 per cent for the period between 2005 and 2016,14 compared to a global average rate of 4 per cent. The increase in peak demand has significantly dropped from 2017 onwards; however, the growth rate for power generation capacity has not slowed down. The total installed power generation capacity in Saudi Arabia was greater than 85 GW in 2018; an 84 per cent increase from the 2008 generation capacity of 46 GW. The Saudi Electricity Company announced in 2019 that the rate of electricity demand is forecast to drop by 1.5 per cent. This would not undermine the fact that the electricity demand would still require significant investments, and significant fossil fuel consumption and investments. The increase in electricity demand has led to an increase in the domestic demand of fossil fuels, oil and natural gas; source for almost the entirety of electricity demand in Saudi Arabia. The Kingdom is witnessing a growing share of natural gas in power generation. Despite being the dominant source of power generation in the Middle East, the share of natural gas in power generation in Saudi Arabia is among the lowest in the region, but has been increasing in recent years. In fact, according to the Electricity and Cogeneration Regulatory Authority (ECRA) reports, the share of natural gas for electricity generation in the Kingdom increased from 45 per cent in 2008 to 53 per cent in 2017. Saudi Arabia’s natural gas production is limited, and the Kingdom is aiming to increase production levels and planning investments in gas estimated at $150 billion. Yet, the increasing electricity consumption would equate to an increase in domestic fossil fuel demand, including natural gas. Saudi Arabia’s obvious strategy is to reduce domestic demand for fossil fuels, freeing them for exports, especially that the Kingdom will be among the last standing oil producers considering the low production cost and continuous efforts to lower the industry’s emissions. The electricity and fuel subsidies have also placed tremendous pressure on the state’s budget and decreased the attractiveness of renewable energy. The 2020 pandemic lockdown has highlighted the unsustainability 174

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

of the subsidies and the electricity consumption which is largely due to households’ consumption. As oil prices dropped into unchartered territories in Q1 2020, Saudi Arabia found itself in a large budget deficit and therefore, decided to cut $13.3 billion, equivalent to 5 per cent of budget spending. The pressure on the state budget and the relatively low oil prices should trigger subsidy elimination, thus increasing demand for renewable energy. The need to reduce the power generation cost on the state budget and the domestic reliance on fossil fuels in order to increase the returns from fuel exports should drive the Kingdom to double down efforts to diversify the energy mix and invest in alternative energy; nuclear and renewable energy.

Fragile oil and gas industry governance Saudi Arabia’s domestic energy demand is met through its oil and gas production. The main stakeholder in the energy industry and the key foundation of the Saudi national economy is Saudi Aramco, the national oil company. Saudi Aramco is the biggest oil producer globally, and as per Fitch, the rating agency, Aramco is ahead of regional peers such as Abu Dhabi National Oil Company (ADNOC) and major oil companies such as Total, BP and Royal Dutch Shell. Political stability in Saudi Arabia has benefited Aramco, and subsequently, the Saudi oil industry. The company was the world’s first to hit a $2 trillion valuation upon its public trading in December 2019. Yet, despite its large capacity and expanded operations, Saudi Aramco ‘isn’t free to make decisions’.15 Scholars expect more trans­ parent operations due to the public trading, but note concerns over the absence of an independent auditor.16 Moreover, the monopoly, concessions and direct negotiations of contracts and lack of data and information dissemination have restricted competition and private sector participation. The Natural Resource Governance Institute (NRGI) measures the quality of governance in the oil, gas and mining industry through its Resource Governance Index, the most comprehensive index dedicated to resource governance. The index measures the resource governance

Energy Governance

175

quality in 81 countries through 89 country assessments, and over 10,000 supporting documents. The Resource Governance Index highlights poor governance in Saudi Arabia’s oil and gas industry with a score of 36 out of a 100 total points, thus ranking the Kingdom at 69 out of 89 country assessments. The poor performance is mostly caused by the poor scores on the ‘value realization’ reflecting the weak local impact and governance of the stateowned oil enterprise; where Saudi Arabia scored 23 over 100, and on the management of revenues; where the Kingdom scored 24 over 100.17 Saudi Arabia’s rank on the local impact governance is last in the index driven by a weak governance of the PIF; its sovereign wealth fund, and the absence of fiscal rules. The governance of Saudi Aramco further drives the score down, due to concerns over the state-owned company’s transparency on its finances and operations. The Kingdom also grants concessional rights of the major oil exploration and extraction projects to the company, limiting the participation of foreign companies. Foreign investment is forbidden in the upstream oil sector in Saudi Arabia; driven by the strong national ownership sentiment.18 It is, however, acceptable in the natural gas industry. However, the governance index does not find clear criteria for Saudi Aramco’s selection of service providers and licensing in the gas industry; direct negotiations are assumed to take place. The Resource Governance Index report concludes that the Saudi oil and gas industry faces governance challenges which create an impediment to the Kingdom’s long-term plans, despite accumulated skills and experience in the industry, and an enabling environment of a significant score of 60 over 100.

Significant renewable energy potential The geographic location of Saudi Arabia bestows it with large amounts of natural resources, both renewable and non-renewable. In addition to its tremendous petroleum reserves, Saudi Arabia has high solar and wind energy potential. The direct solar normal irradiation averages at more than 2,300 kWh per square metre.19 Contrary to common perceptions, some areas in the Kingdom have wind speed above the

176

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

standard economic viability speed of 7 metres per second. These areas are located in the northeast, central regions and the mountains of the western region. Therefore, Saudi Arabia ranks as the sixth country with the highest potential of solar energy generation, and thirteenth in wind energy potential. The installed renewable energy capacity stood at 397 MW in 2020,20 less than 1 per cent of the total electricity generation capacity. Implementation has been lagging behind targets. In 2017, the total installed renewable energy capacity was of 142 MW.21 In November 2019, an additional 300 MW, the first utility-scale solar photovoltaic farm, was commissioned in Sakaka. By April 2021, the Kingdom had tendered 3.37 GW through its Renewable Energy Project Development Office (REPDO), segregated as follows: 700 MW in round one launched in 2017 and which included Sakaka PV already connected to the grid, and 400 MW wind farm under construction, 1.47 GW in round two comprising six solar PV projects launched in August 2019, and round three of 1.2 GW of four solar PV projects launched in April 2020, in addition to 1.5 GW directly awarded by PIF. Out of REPDO’s tendered 3.37 GW, 2.17 GW has been awarded but not expected to be commissioned before 2022 for the wind farms and 2023 for the rest. The renewable energy capacity installed and planned remains at modest levels compared to the Kingdom’s targets and goals; a case common to most of the Middle Eastern countries. The high renewable energy potential, along with vast lands and falling costs of renewable energy technologies, has the ability to displace fossil fuel used for power generation, and attract investments into the Kingdom in a post-pandemic era where investors will seek more sustainable, long-term investments such as low-carbon technologies. Saudi Arabia also aims to become a major electricity exporter, which will also be necessary for the large integration of renewable energy. Two major drivers facilitate this goal: (1) Saudi geographic location occupying 80 per cent of the Arabian peninsula, and sharing borders with eight countries – Jordan, Iraq, Kuwait, Qatar, Bahrain, UAE, Oman and Yemen. (2) the Gulf Cooperation Council interconnection power grid; linking the electricity grid in Gulf countries, as well as plans to connect to Egypt, Jordan and Iraq. In the Saudization process, the government is seeking to localize part of the renewable energy content, across the value chain, in terms of research and development (R&D), and manufacturing among Energy Governance

177

others. Competition with cheap labour is high on the manufacturing side of key components, such as the solar photovoltaic panels and inverters. However, assembly of technologies, i.e. solar modules, and manufacturing of other system components in electrical and civil works, such as mounting structures and cables, would create vast opportunities for localization and job creation.

Inconsistent renewable energy plans Saudi Arabia has had many updates to its renewable energy targets. The latest were as listed in the previous section on economic diversification. The aim to increase the renewable energy share of the total energy mix to 3.45 GW by 2020, and 9.5 GW by 202322 is equivalent to 4 per cent and 10 per cent of the total installed energy capacity, respectively, and estimated at an investment cost of approximately 16 billion USD. Official documentation and media reports refer to the target renewables share as 4 and 10 per cent of the total energy production.23, 24 However, solar energy has a much lower capacity factor compared to conventional plants, thus, the planned installed capacity would result in much lower percentage of electricity production, and the percentage figures thus only make sense, as a share of the installed power generation capacity of 85 GW by 2020. In 2019, the Kingdom increased the interim target from 9.5 GW in 2023 to 27.3 GW by 2024. This plan should enable the Kingdom to reach 60 GW in 2030; segregated into 40 GW of solar energy, 16 GW of wind energy, in addition to other renewable resources technologies; including waste to energy. In March 2021, Saudi Arabia re-defined its 2030 renewable energy target to 50 per cent of the total power generation. This target is commended for defining the expected energy mix. The timeline is, however, ambitious as the Kingdom would have to halt planned thermal capacity, convert and retire some plants and double down on renewable energy, in less than a decade. Until the 2021 pandemic, which may be a catalyst for more diversification efforts, plans had started with delays and inconsistencies. Early 2017, then-Energy Minister Khalid al-Falih announced at an energy summit in Abu Dhabi that the Kingdom would launch renewable energy projects of an investment cost ranging between 30 and 50 billion

178

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

USD,25 which was later drastically updated downward to 16 billion USD for the same period. In April 2017, the Saudi government announced its plan to launch 1 GW of renewable energy tenders by the end of that year, but ended up tendering a total of 700 MW, which were not awarded and signed until the beginning of 2018 and 2019. The year 2018 should have witnessed the launch of tenders of a total capacity of 4.1 GW renewable energy capacity, of which 3.3 GW should have been solar and 800 MW wind energy.26 But that didn’t see the light. Instead, in spring 2018, the Kingdom went bigger; announcing a massive plan to deploy 200 GW of solar energy generation by 2030, in collaboration with SoftBank.27 The plan aimed at launching as a first step to two solar projects of 3 GW and 4.2 GW generation capacities. The SoftBank vision was abandoned, and the targets were rolled back to 60 GW by 2030. The implementation has so far also lagged behind. The tendering picked up in 2019 and 2020 with rounds 2 and 3 hinting at more focus on the sector. The contract awards, however, remained slow; the award of REPDO’s round 2 and PIF 1.5 GW of a total of 2.97 GW took place in April 2021. The Kingdom will need to build on the 2021 momentum to increase renewable energy deployment. While the execution of renewable energy plans has so far been slow, and the Kingdom’s brand remains linked to fossil fuels, the Kingdom has had a renewable energy champion: ACWA Power, the power, water and renewable energy company. With operations in eleven countries and a $10.57 billion renewable energy portfolio by end of 201928 and growing, the PIF-backed company, owned by a number of Saudi government institutions, businesses and the International Finance Corporation, has become a Saudi landmark in renewable energy. A common trend in the Middle East is launching renewable energy projects without accounting for the final energy mix and grid enhancements, nor reducing the race for thermal power generation capacity, which hinders renewable energy integration and meeting diversification targets. This situation was witnessed in Jordan, creating bottlenecks for renewables in 2019, despite major efforts since 2012. Saudi Arabia had been on the same track until 2020. In March of that year, the Saudi Council of Ministers approved the establishment of a supreme committee for the optimal energy mix in power generation and to enable and supervise the renewable energy production and manufacturing.

Energy Governance

179

The threat of competing agendas The transition towards sustainable development requires significant changes in the governance systems, in addition to changes in the government policy.29 Within the changes in governance, the major challenge is building the necessary capacity for adaptation and change.30 Current global challenges requires focused efforts on energy transition, such as climate change, and, in doing so, showcased the importance of the local governance, and the role of non-state actors. Engaging a wide range of actors is a key priority in reaching a sustainable transition, mitigating climate change, building resilience and deploying renewable energy. The current governance system in Saudi Arabia relies on a centralized, bureaucratic system, in a top-bottom model; the influence of local and non-state actors on decision-making is limited. However, the complexity of energy transition requires a multidimensional approach, involving different decision-making levels in a multi-level governance system;31 and promoting different renewable energy systems; centralized utility-scale farms and decentralized small-scale generation. Whereas empowering local governance actors does not necessarily lead to a widespread implementation of decentralized renewable energy systems,32 local actors do play an important role as policy enablers. In 2016, Saudi Arabia established a mega-ministry, Ministry of Energy, Industry and Mineral Resources (MEIM), to implement Vision 2030, and it formed part of a wider reshuffle and restructure by King Salman. The ministry became responsible for managing oil and gas, power generation and distribution, mining and industrial development, as well as renewable energy. It was expected that a mega-ministry would gain efficiencies in implementing Vision 2030, as it would lower bureaucratic hurdles, facilitate communication and overcome fragmentation of the wider sector. Another major government reshuffle took place at the end of August 2019, dividing MEIM into an energy ministry and a stand-alone Ministry of Industry and Mineral Resources, as industrialists had complained that their sector had been neglected compared to energy. The Ministry of Energy oversees the Kingdom’s National Renewable Energy Program (NREP), a long-term, strategic initiative launched under Vision 2030 and the King Salman Renewable Energy Initiative, which aims to increase renewable energy deployment in Saudi Arabia. As per its mandates, the programme sets out a specific road map to 180

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

diversify energy sources, stimulate a sustainable economic development, through the establishment of a renewable energy industry, and support the Kingdom’s commitments to reducing GHG emissions.33 The progamme’s strategy is not disseminated, but is implemented by the Ministry’s REPDO, established in 2017 and tasked to deliver on the goals and roadmap of the NREP, in collaboration with the King Abdallah City for Atomic and Renewable Energy (KACARE), ECRA and the Saudi Electricity Company (SEC). REPDO’s official portal, which also features NREP, does not include publications, national assessments or a complete roadmap, and is mainly used for e-procurement and the dissemination of official news and updates. The current renewable energy deployment strategy seems to be the periodic launch of projects, rather than a clearly defined scope of work, spanning over the target period. The Kingdom has, however, moved from launching one project per a specific time period, such as the sole solar and wind projects previously tendered part on round 1, to launching a set of projects such as in rounds 2 and 3. Projects for the period beyond round 3 in 2020 remain in the dark. Moreover, the Ministry of Energy’s (and back then MEIM) main mission translates into a direct competition with renewable energy, hindering the latter’s deployment. The ministry’s vision is the sustainable development of the oil and gas industry, and mining, aiming to achieve the highest added value to the national economy. Its scope of work and strategy is the optimization of the oil and gas and mineral resources usage to achieve the sustainable development of the Kingdom’s national economy, without negatively impacting the global economy, especially developing countries. The ministry also represents the Kingdom and defends its petroleum and mining interests.34 Not only is renewable energy is not reflected in the mission, vision, scope of plan and strategy of its umbrella agency, the ministry; the latter’s main strategy is to defend the Kingdom’s oil and gas industry, thus posing a potential challenge for the renewable energy industry.

Renewable energy procurement trends Procurement practices have modernized in recent years and have witnessed significant changes from manual to digital and from local to global, leading to more efficient and sustainable practices. Renewable Energy Governance

181

energy caught up fast on modern procurement practices. The increasing share of renewable energy in the electricity markets, and the growing engagement of the private sector in the industry, has led to an increasing focus on the procedures and principles adopted in the procurement of these systems. Thus, renewable energy procurement practices have a rising importance in addressing barriers to renewable energy deployment and achieving optimal results. Global renewable energy procurement practices have been constantly improving and benefiting from past experiences. Transparency and good governance in procurement have proved to lead to better performance, leading to more utilities, governments and companies adopting them as key pillars in renewable energy procurement. Auctions have gained traction as efficient instruments promoting renewable energy deployment qualification requirements, and have become the preferred procurement policy of an increasing number of countries. By 2015, more than sixty countries had adopted auctions in the procurement of renewable energy systems, up from only six countries a decade earlier.35 One of the key benefits of auctions is that they increase the level of competition. However, they have a set of risks too, and they do not necessarily eliminate monopoly, especially when competition is restricted. The key attributes in designing auctions for specific renewable energy systems are setting the technical criteria and risk allocation, the qualification requirements and the selection criteria for the contract award.

Saudi renewable energy auctions Saudi Arabia’s REPDO is supposed to oversee the implementation of 30 per cent of the renewable energy targets through public auctions, while PIF resort to public negotiations for the remaining 70 per cent. REPDO has launched to date request for qualifications (RFQ)/ expression of interest (EOI), and invitations to bid/request for proposals (RFP) for three rounds comprising twelve utility-scale renewable energy projects. The first utility-scale Sakaka solar farm was launched in April, following an initial RFQ launched two months earlier in February 2017, comprising general requirements, legal, financial and technical evaluation 182

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

criteria, and resulting in the shortlisting of ten companies, which were later invited to bid for the project’s implementation; eight of which have submitted an offer, with prices ranging between 1.78 and 3.36 USD cents/ kWh. The winning consortium led by ACWA Power ranked second, and signed the power purchase agreement (PPA) at a level electricity cost of electricity (LCOE) of 2.34 USD cents/kWh, a world record in global prices for PV. The first utility-scale Dumat Al Jandal wind farm bid received four offers, with prices ranging between 2.13 and 3.38 USD cents/kWh. The awarded entity, led by France’s EDF Energies Nouvelles, was the lowest offer and scored a global record-low price in wind power generation. The projects of round 2 were awarded as follows: Project

Capacity in MW Price in $c/kWh Consortium

Repdo Category A Medina

50

1.94

Al Blagha-Al FanarDesert Technologies

Rafha

20

3.49

Al Blagha-Al FanarDesert Technologies

Repdo Category B Jeddah

300

1.62

Masdar-EDF-Nesma

Rabigh

300

1.7

Marubeni-Al Jomaih

Qurayyat

200

1.78

ACWA Power-GIC-Al Babtain

Al Faisaliyah/ Shuaibah

600

1.04

ACWA Power-GIC-Al Babtain

PIF’s 1.5 GW in Sudair awarded to ACWA Power and Badeel consortium witnessed a record-low 1.24 USD cents/kWh. In general, Saudi Arabia has witnessed record-low prices in its renewable energy auctions. The extremely low prices have been the focus of governments in many countries, but overall, in the absence of published contracts and agreements, it remains unclear what the prices actually cover. As businesses enter a venture aiming for enough revenues to recover their capital and operating costs, while achieving a certain profit margin, the very low prices may be a reflection of either real significant reductions in the cost of technology, an aspiration of contracted businesses to re-negotiate the agreements at a later stage, an absence of grid works and Energy Governance

183

others, or a business goal to grow a portfolio, among others. The focus on reaching world’s lowest prices may not necessarily be the key factor for a country to sustainably grow its renewable energy industry.

Divergent energy procurement frameworks The renewable energy industry in Saudi Arabia has adopted different procurement practices than the Kingdom’s oil and gas industry; partly resorting to auctions and public bids in renewable energy, while the large share of projects will be under PIF direct negotiations, compared to the oil and gas industry’s full concessional grants and direct contracts negotiations. Good procurement practices entail a first pre-qualification phase for the shortlisting of potentially contracted companies, based on minimum selection criteria assessing the technical, financial, legal capacity and resources of the firms, and ensuring that the potential bidders have the necessary capacity to implement a certain type of projects, thus protecting the government against the firms that do not have the adequate capacity. Pre-qualification has not been a characteristic of projects in the Saudi oil and gas industry, but has been endorsed by REPDO prior to the launch of public invitations to bid for the three rounds, thus shortlisting firms, invited at a following stage to bid for the projects. The RFQ include the technical, financial and legal criteria. The pre-qualified shortlisted firms are invited to submit an RFP. The selection criteria for the contract award are listed but they are not detailed enough, although the RFQ mentions that ‘REPDO is not bound to accept the lowest priced proposal’.36 REPDO officially announces the shortlisted bids following the proposals’ evaluation, later followed by the awarded consortium, both of which are announced without a clarification for the reasons of acceptance or rejection of bid proposals. Whereas the first EOI had few shortlisted firms, the following rounds had more interested, and eventually, shortlisted firms, especially local ones. As a result of the second-round EOI launched in January 2019, sixty firms were shortlisted in the ‘Category A’ projects with the capacity less than 100 MW, and of which twenty-seven are local managing partners,

184

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

and twenty-one firms were shortlisted in the ‘Category B’ projects with a capacity greater than 100 MW, of which eleven are managing/ technical partners. The third round of qualifications launched in January 2020, after tendering round 2, led to the shortlisting of forty-nine firms for Category A and B projects, of which twenty-eight were local managing members. The REPDO portal is mainly an e-procurement portal, granting access to registered companies. Yet, the available documentation is limited. Making data available would enable transparency, improve the sector’s governance and sustainability, and increase the overall confidence in the sector, thus attracting more foreign direct investments, which the Kingdom needs.

Governance comparison of the two energy industries The renewable energy procurement framework has partly taken a different path than the oil and gas industry, yet, there is room for improvement to mitigate potential risk. The following table shows the distinct governance mechanisms between the oil industry and renewable energy in the Kingdom of Saudi Arabia. Oil industry

Renewable energy industry

Accepting foreign investments

No

Yes

Pre-qualification phase

No

Yes

Defined award criteria

No

Not solid, clear

Contract award mechanism

Concessional agreements/direct negotiations

Public auctions/direct negotiations

Publication of contracts

No

No

Monopoly over the sector

Strong monopoly

Doesn’t necessarily eliminate quasi-monopoly

Energy Governance

185

The Saudi oil industry has restrictions over accepting foreign investments in its petroleum industry; thus, investments are acceptable only in the natural gas sector. The renewable energy industry, however, relies heavily on foreign investments. The qualification and selection criteria are less well known in the oil and gas industry, but the contract award criteria are also not crystal clear in the renewable energy sector. The company award mechanism is very distinct, as it relies on concessional grants and direct negotiations in the oil and gas industry, while the renewable energy has adopted auctions and public bids. The publication of contracts is non-existent in both industries. While Saudi Aramco holds a strong monopoly on the oil and gas industry, the infancy stage of the renewable energy sector does not allow for a clear set of indicators on this matter, yet, the current procurement trends do not necessarily eliminate the risk of monopoly of a recurrent contract winner, prompting the need to implement mitigation measures and create legal framework to prevent monopoly and promote competition.

Regulatory framework Strong regulatory frameworks are a necessity to create incentives to investors and attract investments. A detailed procurement, auctions framework and renewable energy regulations decrease the risks and improve the sector’s governance. Saudi Arabia’s Vision 2030 relies heavily on private sector participation yet, it was only until March 2021 that the private sector participation (PSP) law was enacted. At the time of writing, the PSP law is not published but the Saudi National Centre for Privatisation (NCP) published in July 2018 a public consultation draft for the law, which regulates the partnerships with the private sector and privatization. The draft law grants the NCP the authority to develop policies, plans and studies, and issues regulations in the private sector participation, related to: ●●

●●

186

Prioritization, preparation, procurement and implementation of projects Implementing necessary measures for the reduction of monopoly

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

●●

●●

Setting restrictions on government personnel participation in procurement Issuing standards and provisions to monitor the implementation of contracts

The measures reducing the risk of monopoly are important for the any sector to thrive, especially renewable energy in a hydrocarbonrich economy. The procedures aiming to tackle the monopoly risk are, however, still undefined. A regulatory framework for renewable energy is yet to be enacted. The Kingdom has engaged the private sector in its renewable energy deployment, through the Independent Power Producers (IPP) model. These projects are regulated by ECRA and governed by the Electricity Law without a distinction between thermal and renewable generation. A well-recognized renewable energy regulatory framework needs to be put in place for the sustainable development of the industry. Moreover, as soon as the share of renewable energy starts growing in the energy mix, considerations for the business model of the electricity utilities and for grid management and integration should be accounted for. The Kingdom should consider fostering innovation and promoting new business models in electricity generation, leading the electricity market in the region. The regulatory framework of the overall electricity market, however, is not the core focus of this chapter.

Building investor confidence The successful implementation of Saudi Arabia diversification plans, whether in the energy mix or the overall Vision 2030, is largely linked to the Kingdom’s ability to attract significant foreign investments, which should become the key economic growth driver, instead of the current reliance on public spending. In recent years however, FDI inflows have been low, driven by multiple factors, including the inconsistency and uncertainty in policy, and the authoritarian Saudi regime. UNCTAD reports that FDI inflows to the Kingdom have been tightening since the 2008–9 global financial crisis. In 2017, FDI dropped drastically by 80 per cent

Energy Governance

187

compared to the previous year, falling to a fourteen-year low of $1.42 billion, down from $7.45 billion in 2016.37 Investments recovered in 2018, reaching $3.5 billion,38 and $4.6 billion in 2019; meanwhile the average for the period between 2006 and 2019 is approximately $4 billion. According to Bloomberg estimates, the Saudi government would miss its (NTP) target for the year 2020,39 set in 2016 as $18.7 billion by 2020. Increasing foreign investments requires a double down on Saudi efforts to build investors’ confidence. Instead, delays and inconsistencies have led to risk-aversion among investors of placing their money in the Kingdom. Saudi diversification plans have already taken a major hit by the 2020 pandemic containment measures lowering oil revenues and government spending capacity. Increasing investors’ confidence in the Kingdom’s renewable energy plans is critical. The government needs to reverse the growing perception that the Kingdom has grandiose renewable energy plans, but weak implementation,40 by showing solid detailed action plans and strategy. Following several inconsistent and ambitious plans, the Kingdom has set more realistic targets. Yet, a road map, consistent policies and a solid regulatory framework are key drivers for future investments. The targets should be coupled with a clear energy vision and strategy comprising the planned energy mix and a roadmap for renewable energy deployment. The roadmap should include, in addition to the utilityscale renewable energy, current kingdom’s focus, the promotion of decentralized renewable energy generation, engaging a larger share of investors and companies.

Promoting decentralized generation The need for a rapid diversification of the energy mix and the fast deployment of renewable energy should prompt efforts to increase decentralized renewable energy generation across the Kingdom. Data from ECRA statistical reports show that the residential sector is the Kingdom’s highest electricity consumer accountable for 49.6 per cent of the total electricity consumption, followed by the commercial sector with 16.7 per cent.

188

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

The sluggish economic activity and slashing of government spending following the 2020–1 pandemic, along with relatively low oil prices, calls for elimination of subsidies and restructuring of electricity tariffs, especially for the residential sector. The elimination of subsidies creates an opportunity to redirect financing mechanisms towards supporting distributed renewable energy for households. Distributed generation for productive sectors, following tariffs restructure, would improve competitiveness and create employment opportunities and new market for local firms. Promoting the implementation of small-scale decentralized renewable energy systems can decrease the electricity load of these buildings, reduce the stress on the state’s budget caused by the subsidies and increase the economic activity, by engaging new players and small and medium renewable energy enterprises, creating further employment opportunities in the Saudi Kingdom. The renewable energy deployment is shifting from a sole focus on utility-scale renewable energy deployment, to the inclusion and encouragement of small-scale decentralized generation, through the provision of net-metering regulations by ECRA for small-scale solar photovoltaic ranging from 1kW to 2MW. Additional policies such as power leasing and wheeling would incentivize a larger share of consumers.

Conclusion The Saudi oil and gas industry is characterized by the monopoly of the state-owned company, concessional agreements and direct negotiations of contracts, restricted competition and private sector participation, and lack of data dissemination. In contrast, the renewable energy industry has taken a divergent governance trend and has partly endorsed public auctions and open bids, promoting private sector’s engagement through independent power producer schemes, attracting investments and creating a more open business climate environment. Yet, enhancements within the regulatory and procurement frameworks, along with the provision of consistent targets and a defined strategy and action plan, would increase future prospects, build investors’ confidence and create local jobs. Major efforts

Energy Governance

189

in regulations and accounting for the energy mix have been made in the years 2020 and 2021, setting momentum for faster renewable energy deployment. Yet, the risk of sector’s quasi-monopoly still exists, especially within direct contract negotiations, requiring the implementation of mitigation measures. The governance of the renewable energy industry is stronger than that of the oil and gas industry. The new does not meet the old so far in Saudi energy governance, but there is room for improvement.

Policy recommendations ●●

●●

●●

●●

●●

The Ministry overseeing the renewable energy portfolio does not account for this new industry in its mission, vision and scope of work. Defining the role of the stakeholders in renewable energy and amending their mandates is necessary. The renewable energy targets should be coupled with a clear, solid action plan. Developing a consistent renewable energy policy, and strategic action plan and road map to achieve the planned targets should be a key priority. A primary goal for the renewable energy industry should be to build investor confidence and engage a larger share of private and local companies. Establishing a well-recognized regulatory framework for renewable energy and accounting for the structure of the utilities and grid integration are necessary to the sustainable development of the renewable energy industry. Making data available would enable transparency, improve the sector’s governance and increase the overall confidence in the sector, thus attracting more foreign investments.

Renewable energy deployment is switching from a sole focus on centralized utility-scale models to a combination of centralized and decentralized models, and governance structures, aiming to engage a larger share of actors and private sector. Regulatory provisions for power leasing and wheeling would incentivize a larger share of consumers and create more local jobs.

190

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Notes 1 D. Kaufmann and A. Krayy, ‘Governance Indicators: Where Are We, Where

Should We Be Going’, The World Bank Research Observer 23, no. 1 (2008): 4.

2 M. Lange et al., ‘Governance Barriers to Sustainable Energy

Transitions–Assessing Ireland’s Capacity towards Marine Energy Futures’, Elsevier Energy Policy (2018): 623–32, 624.

3 H. K. Colebatch, ‘Making Sense of Governance’, Policy and Society 33, no. 4 (2014): 307–316, 309.

4 All the six indexes scores of Saudi Arabia have been retrieved from The Global Economy portal, featuring data from the World Bank Group Worldwide Governance Indicators.

5 JP Morgan, Economic Research Global Data Watch: MENA, 15 May 2020, 2. 6 IMF, ‘Regional Economic Outlook Middle East and Central Asia’, April 2021, p. 2.

7 IMF, ‘Saudi Arabia: At a Glance’, 2021. 8 T. Gylfason, ‘Natural Resources, Education, and Economic Development’, European Economic Review, 45, nos. 4–6 (2001): 848.

9 R. Auty, Resource Abundance and Economic Development, UNU World Institute for Development Economics Research, 1998, 2.

10 V. Jukneviciene and R. Kateivaite, ‘Good Governance as the Instrument

for the Implementation of Sustainable Development’s Conception’, Social Research 3, no. 28 (2012): 28.

11 A. El Anshasy and K. Marina-Selini, ‘Natural Resources and Fiscal

Performance: Does Good Governance Matter?’, Journal of Macroeconomics, 37 (2013): 285.

12 H. Zuo and A., ‘Environment, Energy and Sustainable Economic Growth’, Procedia Engineering, 21 (2011): 513.

13 Figures calculated by the author originating from data collected from SEC and ECRA annual reports.

14 Ibid. 15 J. Blas, ‘Saudi Arabia’s “Win-Win-Win” Megadeal Is No Dead Cert for

Aramco’, Bloomberg [website], 29 March 2029, retrieved from: https://www. bloomberg.com/news/articles/2019-03-29/saudi-arabia-s-win-win-winmegadeal-is-no-dead-cert-for-aramco

16 Transparency International (2020), ‘An Overview of Corruption and AntiCorruption in Saudi Arabia’, 12.

Energy Governance

191

17 NRGI (2017), 2017 Resource Governance Index: Saudi Arabia, Natural Resource Governance Institute.

18 C. Nakhle (2017), Towards Good Governance of the Oil and Gas Sector in the MENA, UN ESCWA, 28.

19 According to map from SOLARGIS. 20 IRENA (2020), ‘Renewable Energy Capacity, International Renewable Energy Agency’, 4.

21 IRENA (2019), Renewable Energy Market Analysis GCC 2019, International Renewable Energy Agency, 14.

22 Saudi General Authority for Statistics (2017), Indicators of Renewable Energy in Saudi Arabia, 1.

23 Ibid. 24 B. Al Ghalayini, ‘Solar, a Key Option in the Saudi Renewable Energy

Strategy’, ArabNews [website], 27 October 2018, retrieved from: http://www. arabnews.com/node/1394976

25 Reuters, ‘Saudi to Launch $30-50 Billion Renewable Energy Programme

soon: Minister’ [website], 16 January 2017, retrieved from: https://www. reuters.com/article/us-saudi-energy-renewables/saudi-to-launch-30-50billion-renewable-energy-program-soon-minister-idUSKBN1501HE

26 E. Bellini, ‘Saudi Arabia Plans New Long-Term RE Targets, Will Resume

Tenders’, PV Magazine [website], 3 January 2019, retrieved from: https:// www.pv-magazine.com/2019/01/03/saudi-arabia-plans-to-set-new-longterm-re-targets-and-to-resume-tenders/

27 C. Mooney and S. Mufson, ‘Why Saudi Arabia Is Trying to Launch an

utterly Massive New Solar Project’, Washington Post [website], 28 March 2018, retrieved from: https://www.washingtonpost.com/news/energyenvironment/wp/2018/03/28/why-saudi-arabia-is-trying-to-pull-off-anutterly-massive-new-solar-project/?noredirect=on

28 J. Obeid, (2020), Saudi Arabia New Renewables Giant, Castlereagh Associates.

29 R. Kemp, D. Loorbach, and J. Rotmans (2005), ‘Transition Management

as a Model for Managing Processes of Co-Evolution towards Sustainable Development’, The International Journal of Sustainable Development and World Ecology, 1.

30 Ibid., 4. 31 J. Marquardt, ‘Conceptualizing Power in Multi-level Climate Governance’, Journal of Cleaner Production 154 (2017): 167–75, 168.

32 E. D. Brown, J. M. P. Cloke and J. Harrison, Governance, Decentralisation

and Energy: A Critical Review of the Key Issues, Loughborough University Institutional Repository, 2015, 16.

192

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

33 Saudi Arabia National Renewable Energy Program e-Procurement Portal, retrieved from: https://www.powersaudiarabia.com.sa/

34 As per the Ministry of Energy, Industry and Mineral Resources website, retrieved from: https://www.meim.gov.sa, accessed 5 May 2019.

35 IRENA (2015), Renewable Energy Auctions: A Guide to Design, International Renewable Energy Agency, 13.

36 REPDO (2017), Sakaka Solar PV Independent Power Plant: Request for Proposals, Renewable Energy Project Development Office, 78.

37 J. Obeid (2018), Saudi Arabia Is in a Double Bind on Oil Prices, Chatham House Expert Comment.

38 M. Rashad and S. Kalin, Foreign Investment in Saudi Arabia more than

Doubled in 2018: minister, Reuters [website], 19 December 2018, retrieved from: https://www.reuters.com/article/us-saudi-budget-energy-industry/ foreign-investment-in-saudi-arabia-more-than-doubled-in-2018-ministeridUSKBN1OI0QU

39 Z. Daoud, ‘Khashoggi Case Could Unravel Saudi Crown Prince’s Project’,

Bloomberg [website], 16 October 2018, retrieved from: https://www. bloomberg.com/news/articles/2018-10-16/khashoggi-case-could-unravelsaudi-crown-prince-s-project-chart

40 A. Di Poala, ‘It’s Hard to Be the Saudi Arabia of Solar’, Bloomberg [Website], 16 December 2018, retrieved from: https://www.bloomberg.com/news/ articles/2018-12-16/why-saudi-arabia-isn-t-meeting-its-ambitious-solarenergy-targets

References ‘Al Ghalayini, B. (2018). ‘Solar, a Key Option in the Saudi Renewable Energy Strategy’, ArabNews [website], 27 October 2018, retrieved from: http://www. arabnews.com/node/1394976 Auty, R. (1998). Resource Abundance and Economic Development, UNU World Institute for Development Economics Research. Bellini, (2019). ‘Saudi Arabia Plans New Long-term RE Targets, Will Resume Tenders’, PV Magazine [website], 3 January 2019, retrieved from: https:// www.pv-magazine.com/2019/01/03/saudi-arabia-plans-to-set-newlongterm-re-targets-and-to-resume-tenders Blas, J. (2019). ‘Saudi Arabia’s ‘Win-Win-Win’ Megadeal Is No Dead Cert for Aramco, Bloomberg’ [website], 29 March 2019, retrieved from: https:// www.bloomberg.com/news/articles/2019-03-29/saudi-arabia-s-win-winwinmegadeal-is-no-dead-cert-for-aramco Brown, E., Cloke, J. and Harrison, J. (2015). Governance, Decentralisation and Energy: A Critical Review of the Key Issues, Loughborough University Institutional Repository. Energy Governance

193

Colebatch, H. (2014). ‘Making Sense of Governance’, Policy and Society 33–4: 307–316. Di Poala, A. (2018). ‘It’s Hard to Be the Saudi Arabia of Solar’, Bloomberg [Website], 16 December 2018. Retrieved from: https://www.bloomberg.com/ news/articles/2018-12-16/why-saudi-arabia-isn-t-meeting-its-ambitioussolar-energy-targets El Anshasy, A. and Marina-Selini, K. (2013). ‘Natural Resources and Fiscal Performance: Does Good Governance Matter?’, Journal of Macroeconomics, 37. IMF. (2019). ‘‘Regional Economic Outlook Middle East and Central Asia’, April 2021’. IMF. (2021). ‘Saudi Arabia: At a Glance’, 2021. IRENA. (2015). Renewable Energy Auctions: A Guide to Design. International Renewable Energy Agency. IRENA. (2019). Renewable Energy Market Analysis GCC 2019. International Renewable Energy Agency. IRENA. (2020). Renewable Energy Capacity. International Renewable Energy Agency. JP Morgan. (2020). ‘Economic Research Global Data Watch: MENA’, 15 May 2020. Jukneviciene, V. and Kateivaite, R. (2012). ‘Good Governance as the Instrument for the Implementation of Sustainable Development’s Conception’, Social Research 3, no. 28 (2012): 28–42. Kaufmann, D. and Krayy, A. (2008). ‘Governance Indicators: Where Are We, Where Should We Be Going’ The World Bank Research Observer, 23, no. 1. Kemp, R., Loorbach, D. and Rotmans, J. (2005). ‘Transition Management as a Model for Managing Processes of Co-evolution towards Sustainable Development’, The International Journal of Sustainable Development and World Ecology. Lange, M. al. (2018). Governance Barriers to Sustainable Energy Transitions – Assessing Ireland’s Capacity towards Marine Energy Futures, Elsevier Energy Policy, 113: 623–32. Marquardt, J. (2017). Conceptualizing Power in Multi-level Climate Governance, Journal of Cleaner Production, 154: 167–75. Mooney, C. and Mufson, S. (2018). ‘Why Saudi Arabia Is Trying to Launch an Utterly Massive New Solar Project’, Washington Post [website], 28 March 2018, retrieved from: https://www.washingtonpost.com/news/ energyenvironment/wp/2018/03/28/why-saudi-arabia-is-trying-to-pull-offan-utterly-massive-new-solarproject/?noredirect=on Nakhle, C. (2017). Towards Good Governance of the Oil and Gas Sector in the MENA. UN ESCWA. NRGI. (2017). 2017 Resource Governance Index: Saudi Arabia. Natural Resource Governance Institute. Obeid, J. (2018). Saudi Arabia Is in a Double Bind on Oil Prices. Chatham House Expert Comment. Obeid, J. (2020). ‘Saudi Arabia New Renewables Giant’, Castlereagh Associates.

194

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Rashad, M. and Kalin, (2018). ‘Foreign Investment in Saudi Arabia More than Doubled in 2018: Minister’, Reuters [website], 19 December 2018. Retrieved from: https://www.reuters.com/article/us-saudi-budget-energy-industry/ foreign-investment-insaudi-arabia-more-than-doubled-in-2018-ministeridUSKBN1OI0QU REPDO. (2017). ‘Sakaka Solar PV Independent Power Plant: Request for Proposals’, Renewable Energy Project Development Office. Reuters. (n.d.). ‘Saudi to Launch $30-50 Billion Renewable Energy Program Soon: Minister’ [website], 16 January 2017, retrieved from: https://www. Reuters.com/article/us-saudi-energyrenewables/saudi-to-launch-30-50billion-renewable-energy-program-soon-ministeridUSKBN1501HE Saudi Arabia National Renewable Energy Program e-Procurement Portal. Retrieved from: https://www.powersaudiarabia.com.sa/ Saudi General Authority for Statistics, 2017, Indicators of Renewable Energy in Saudi Arabia. Saudi Ministry of Energy, Industry and Mineral Resources website. Retrieved from: https://www.meim.gov.sa, accessed 5 May 2019. Thorvaldur, G. (2001). ‘Natural Resources, Education, and Economic Development’, European Economic Review 45, nos. 4–6. Transparency International. (2020). ‘An Overview of Corruption and AntiCorruption in Saudi Arabia’. Ziad D. (2018). ‘Khashoggi Case Could Unravel Saudi Crown Prince’s Project’, Bloomberg [website], 16 October 2018. Retrieved from: https://www. bloomberg.com/news/articles/2018-10-16/khashoggi-case-could-unravelsaudicrown-prince-s-project-chart Zuo, H. and Danxiang, A. (2011). ‘Environment, Energy and Sustainable Economic Growth’, Procedia Engineering 21: 513.

Energy Governance

195

196

8 IN SEARCH OF LEGITIMACY Environmental policymaking in Saudi Arabia Tobias Zumbrägel

Introduction Albeit Saudi Arabia’s hydrocarbon abundance and its traditional record as a trustworthy and main supplier of fossil fuels, numerous structural challenges nudged decision-makers into considering a more environmental-friendly sustainable policy. Studying the adoption and implementation of climate policies and its legitimizing effects is an interesting research subject: On the one hand, climate change as a stress factor is one of the greatest challenges in the twenty-first century and mitigating the severe effects of it and adapting to global warming has become a key task for any political system. Hence, it bears a substantial degree of legitimation if it is successfully managed. On the other hand, environmental policymaking is characterized as a predominantly regulative policy field. Moreover, implemented climate action (i.e. output) is not immediately visible as the effects (i.e. outcomes) are rather long-term and influenced by many other variables. Both can result in a delegitimizing effect. Considering environmental policymaking as a legitimation strategy, this study provides an innovative analytical framework to shed light on policy processes intended to garner political legitimacy.

‘The kingdom can live in 2020 without any dependence on oil … the Saudi addiction to oil has disturbed development of many sectors in past years.’1 The words by then-Saudi Deputy Crown Prince, Mohammed bin Salman, in April 2016 marked probably the most decisive point that the chief hydrocarbon exporting country is at a crossroads. It also reflects unrealistic aspirations since the Kingdom remains deeply reliant on oil, not only for economic but also for political reasons as rentier theorists have shown.2 The wealth is distributed through direct cash handouts, subsidies of utilities and granting of specific in-kind benefits, such as housing, education and medical care, in order to enhance support among the population and loyalty among key elites.3 At the same time, Saudi Arabia is confronted with a magnitude of simultaneous structural challenges, above all environmental degradation and energy insecurity, which requires a rethinking of the hitherto ‘business as usual model’. The Kingdom faces vulnerability through desertification, pollution and environmental hazards. At the same time, the domestic oil-based energy infrastructure is shaped through skyrocketing consumption, the emergence of new technologies (e.g. shale gas revolution), fluctuations of oil prices (e.g. 2014–17 and 2020), stronger low-carbon demands and occasional terrorist attacks (e.g. 2006 and 2019 in Abqaiq).4 Against this backdrop, a shift towards an environment-friendlier sustainable development,5 particularly low-carbon technologies and a sound energy efficiency policy framework, seems paramount and can open up new business opportunities in a prospering sector as well as freeing more hydrocarbons for export.6 Yet, such a radical revision can also threaten the very basis of political power in the absolute monarchy because it requires fundamental economic restructuring, which will alter the foundations of the country’s rentier-driven social contract.7 Environmental degradation poses a threat to a regime’s political legitimacy mainly because of eruptions on social stability and economic prosperity based on energy, water and/or food insecurity, increasing health problems and growing environmental cost. It can also lead to a loss of international reputation because aspects such as denying global warming, poor environmental standards and documented ecological devastation can harm the image of a country and its leaders.8 In other words, similar to other big policy issues like security and foreign policy, whose effective and successful management is often seen as the ‘goldcard’ for political legitimacy,9 the comparatively low-priority 198

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

policy field of environmentalism increasingly gains more importance and might become the future ‘acid test’ for any regime’s legitimacy. This study intends to explore the mechanisms to garner legitimacy by adopting and implementing climate governance in oil-rich Saudi Arabia covering the rule of King Abdullah (2005–15) and King Salman (since 2015). A comparison of both reigns reveals not only the diverse approach of political leaders but also the way they seek to increase their support among different actors. It also provides a broader overview of the Kingdom’s environmental policymaking over the last decade. In brief, I argue that the innovative approach of examining environmental policymaking as a legitimation strategy unveils interesting avenues for research: First, it uncovers the rationale and intention behind the recent policy shift. Second, it clarifies in what way political actors make certain decisions and take action. The qualitative analysis is mainly based on semi-structured interviews conducted in Riyadh between October and November 2016 and in March 2017.10 Among those interviewed were experts, politicians, businesspeople, technocrats as well as climate and political scientists with considerable knowledge in the field of environmental politics in the Saudi Kingdom.11 Furthermore, this chapter is based on a content analysis of primary and secondary material. The empirical examination of primary material includes speeches by state officials and material by state-controlled newspapers like Asharq alAwsat, Saudi Gazette (both English) and ar-Riyadh (Arabic). The interviews, the speeches as well as the manifold newspaper articles have been coded and analysed with the qualitative data analytical software tools.

Towards a new approach of explaining climate action in the Arab Gulf states There is a common perception that the oil-rich Gulf monarchies, well known for their environmentally questionable lifestyle, face an ‘era of natural unsustainability’.12 In this sense, the countries of the GCC face several structural challenges, which include shrinking resources, growing consumption, oil price fluctuation and decreasing In search of legitimacy

199

revenues. Stronger demands of the global community to reduce emissions and to accelerate the transition towards a low-carbon development exacerbate the challenges.13 The economic fallout caused by the Covid-19 pandemic is a further stressor. While already highly vulnerable to environmental degradation and the long-term severe effects of climate change (e.g. desertification, sea-level rise), aggravated by environmental events (e.g. dust storms, floods), will compound the threats mentioned above.14 In this light, numerous climatological studies discuss the environmental and ecological effects in the Kingdom.15 Additionally, plentiful literature deals with the GCC states’ ‘subnationalisation’ and economic diversification away from the dependence on oil.16 Frequently, these studies are based on risk and impact assessments identifying and evaluating strengths, weaknesses, opportunities and threats (SWOT analysis) as well as providing policy recommendations.17 This literature thread, however, barely addresses core questions of political science and political ecology, in particular. In the words of Harry Verhoeven: ‘[D] iscussions of environmental issues still too often tend to be framed in isolation from wider societal dialectics and broader questions about authority, ideology, identity, legitimacy, and power that form the core of the social sciences.’18 This chapter intends to contribute to the scholarly debate by addressing the gap and integrating legitimacy to the field of environmentalism. It assumes that legitimacy, considered as a belief in and the acceptance of the incumbents’ rightful claim to rule,19 is an all-embracing feature that any political system needs to survive. While legitimacy is notoriously hard to measure,20 legitimation appears to be a more feasible concept. It is described as the dynamic, processoriented attempt of creating (and reproducing) a specific form of compliance. This can be achieved through legitimation strategies.21 As a corollary, legitimacy is a necessary prerequisite for regime stability and contributes either positively or negatively to regime resilience, described as the dynamic, process-oriented and continuous attempt of a regime to survive.22 Yet, there is a considerable lack of understanding of the relationship between legitimation effects and policymaking.23 Considering policymaking as such a legitimation strategy, I assume four legitimizing mechanisms are applied in order to support regime objectives, namely (a) elite cohesion and (b) regime popularity inside and outside.24 200

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

First, structural legitimation resembles what traditional scholars such as Max Weber have already described as legal-rational legitimacy. Modified to suit the ‘authoritarian bedrock’ it basically comprises forms of institution-building as well as formal and informal ways of political inclusion. In this sense, it also contains forms of co-optation, which have traditionally been differentiated from legitimacy. However, since co-optation, alike legitimation, seeks allegiance, albeit among a smaller or particular segment of the society, I agree with other scholars, who consider it as another facet of legitimation instead of a separate pillar of autocratic regime stability.25 Performance legitimation, in turn, targets the broader public through the provision of welfare gains and access to public goods. It is characterized by all tangible policy outputs. Conversely, the ideational-identitarian legitimation contains forms of symbolic politics, personal image-building and a specific ‘language of legitimation’ that aims at a strategic dissemination of political framing to, for instance, glorify the leadership’s achievements or highlighting the country’s superiority. Rephrased, in order to strengthen a regime’s legitimation base, it is important to adjust the policymaking to the country’s political culture, the role conception and the belief system that suits a general ‘idea of legitimacy’.26 Since aspects of combating climate change and global warming are foremost global threats, environmental policymaking offers ‘windows of opportunity’ to increase external legitimation. On the one hand, state leaders can instrumentalize the ‘environmental agenda’ on an international level to improve their image-building, increase their international leverage and portray their country as ‘good citizen’ within the global community. On the other hand, decision-makers can shift attention and conceal policy failures on a domestic level by external-oriented diversionary tactics. Especially blaming other industrialized nations for their emissions is an appropriate measure. External legitimation is multilayered, which comprises forms of international socialization, garnering external assistance (technology and knowledge) to implement sustainable innovation systems and ideationally diverting attention. In brief, it oscillates with other legitimation mechanisms. Empirically, the conceptual approach of legitimation through policymaking is transferred to Saudi Arabia’s eco-friendly efforts, which have been barely discussed in scholarly works so far.27 In the literature, the Kingdom of Saudi Arabia is often described as an ‘engima’,28 ‘paradox’29 In search of legitimacy

201

or ‘two faces’,30 which relate to the opaque process of decision-making in the country. By focusing on the legitimizing mechanisms, this study intends to shed light on the inner workings and process of decisionmaking in the Kingdom.31 By adding a political ecology perspective, it further contributes to a more nuanced understanding in evaluating the challenges and barriers of the country’s current transformational change.

Legitimation through environmental policymaking in Saudi Arabia Structural legitimation: King Abdullah’s fragmentation vs. King Salman’s centralization A first sign of a radical change appeared by the end of the 2000s.32 On behalf of King Abdullah, several research institutions and sustainable fiefdoms such as the King Abdullah Petroleum Studies and Research Center (KAPSARC), the King Abdullah University of Science and Technology (KAUST) and the King Abdullah City for Atomic and Renewable Energy (K∙A∙CARE) were established.33 While KAPSARC and KAUST were mandated under the national giant oil company, Saudi Aramco, the royal decree, which created K∙A∙CARE in April 2010, explicitly stressed the government’s direct supervision over the ‘city’. The new entity was also entrusted with licensing alternative energy sources which gave rise to a competition for competence with other ministerial and semi-state-organized agencies, such as the Ministry of Petroleum and Mineral Resources (MPMR), the Ministry of Water and Electricity (MOWE), the King Abdulaziz City for Science and Technology (KACST), Saudi Aramco and the Saudi Electricity Company (SEC). Also in 2010, the government founded the Saudi Green Building Forum (SGBF) and replaced the National Energy Efficiency Program (NEEP) with the Saudi for Energy Efficiency Center (SEEC). In contrast to the energy portfolio, the environmental sector experienced fewer disruptions: Created in 2001 under the stewardship of the Ministry of Foreign Affairs, the Presidency of Meteorology and Environment (PME) was seen as the mainstay of environmental protection in the absence of an environment ministry. The PME fell short of expectations, which can be attributed to

202

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

poorly defined competencies and overlapping responsibilities with other agencies. As Taher and Hajjar noted in 2014: ‘There are over 16 formal entities that are engaged with environmental issues and each of them has its own plans and programs.’34 By extensively enhancing institution-building, King Abdullah created his own constituencies by putting loyal and close elites in leadership positions in his newly created ‘fiefdoms’. For example, his sons, namely Prince Khaled, Prince Abdul Aziz and Prince Mansour, served on KAUST’s board of trustees.35 The son of HRH Prince Alwaleed bin Talal Al Saud, Khaled Bin Alwaleed, whose family closely aligned with late King Abdallah, became chairman of the SGBF.36 More importantly, Hashim Yamani, who had cultivated good relations with Abdullah when serving on a special committee that was responsible for the accession talks to the World Trade Organization (WTO) in 2005, was appointed president of K∙A∙CARE with the rank of a minister.37 The succession from Abdullah to Salman in 2015 led to a far-reaching restructuring of the state organization, which also affected the energy and environmental sectors. In spring 2016 a royal decree synthesized the portfolios of conventional and renewable energy management by creating the Ministry of Energy, Industry and Mineral Resources (MOEIMR).38 Long-term Oil Minister and close associate of late King Abdullah, Ali al-Naimi, was relieved of his post and replaced by Saudi Aramco’s former CEO (2009–15) and Minister of Health (2015–16), Khalid alFalih, as new Minister of Energy. It was reported that al-Falih used to had a close relationship with the current crown prince, Mohammed bin Salman, which was established when the latter was appointed head of the newly created ‘Aramco Supreme Council’ in 2015.39 At the same time, the Ministry of Environment, Water and Agriculture (MEWA) was created and run by the trustworthy technocrat Abdulrahman alFadley, who had previously held the position of Minister of Agriculture. In their roles as ministers, both al-Falih and al-Fadley also held supervisory positions in all other energy-, water- and environmentrelated issues.40 For instance, al-Falih was appointed chair of the Board of Saudi Aramco, the Royal Commission for Jubail and Yanbu, KACST, K∙A∙CARE and the Electricity and Cogeneration Regulatory Authority (ECRA). Additionally, the creation of another entity called REPDO under the umbrella of the MOIMR was given the mandate to oversee

In search of legitimacy

203

the sustainable transformation, coordinate and control other energyoriented stakeholders, as well as streamline energy transformation. REPDO was instructed to report to a special steering committee headed by al-Falih, which resulted in a further authority in the hands of a single individual. As one interviewee stressed, al-Falih became the ‘royal mouthpiece’ and replaced Hashim Yamani, who previously reported directly to the king.41 Revisiting the policy shift since 2015, the new Saudi leadership streamlined the fragmented policy field of sustainability into sectors of research, environment, energy and water by two loyal non-royal technocrats. The portfolio of energy has been promoted to one of the most important ministerial positions in the Kingdom. King Salman also abolished the Supreme Council of his predecessor’s centrepiece, K∙A∙CARE, and removed Abdullah’s sons from their posts on KAUST’s board. At the same time, he fostered his own son, Prince Abdulaziz bin Salman, by appointing him as State Minister for Energy Affairs in April 2017.42 In September 2019, his son Abdulaziz replaced al-Falih as Energy Minister. This incident marked a watershed in Saudi history since the energy portfolio had never been occupied by a member of the royal family.43 Simultaneously, another royal decree appointed Yasir al-Rumayyan as chairman of Saudi Aramco replacing al-Falih. Al-Rumayyan, a former banker, is a close advisor to the crown prince. Particularly, his role as governor of the PIF reveals interesting findings into how policymaking is conducted: While the fund was previously rather small it received special attention in the Saudi Vision 2030, which is the prestige project of Mohammed bin Salman. Within a short period of time the financial capacity of the PIF was doubled, making it to the leading investment fund in the Kingdom. In spring 2017, the fund was further restructured under the so-called Public Investment Fund Program and came under the responsibility of Mohammed bin Salman since then. As a consequence, the fund has emerged as a driving force behind the crown prince’s goal of promoting his sustainable agenda and vision. Thus, in summer 2018, the PIF took a 15.2 per cent direct stake in the Saudi-based company ACWA Power, which gradually increased from 33.6 per cent to 50 per cent in December 2020.44 ACWA Power is a subsidiary of the ACWA Holding, which was founded in 2002. The company develops, owns and operates both electricity and desalination

204

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

plants in over ten countries around the world and emerged as the mainstay of the region’s renewable sector. Realizing the potential of such a showcase model, the PIF’s purchase was characterized by one interviewee ‘as milking a fat cow’ and a vivid example of how to nurture national champions.45 As may be deduced, this chapter not only shows the Kingdom’s fresh strategic approach to environmental policymaking for cohesion amongst the elite. It also highlights the highly personal feature of policymaking in Saudi Arabia and how that can differ depending on who rules country.

Performance legitimation: Falling short of expectations Despite the country’s long-time experience with renewable energy (some projects started in the 1960s and 1970s) progress remains modest. Much has been centred on the creation of several fiefdoms such as KAUST, KAPSARC and K∙A∙CARE, which were established and run by major companies with close ties to the government such as Bin Laden, Saudi Oger or Drake and Scull International.46 Particularly, the creation of K∙A∙CARE was seen as a mainstay: Chosen to be King Abdullah’s primary agency in carrying out the country’s sustainable transition the institution was unable to fulfil its mandate. The lion’s share of K∙A∙CARE’s initial capital was spent on international consulting companies and marketing. When the institution revealed its development plan in early 2013, it was clear to many that it was unfeasible considering growing budgetary constraints at that time.47 The so-called white paper foresaw installing 23.9 GW by 2020 and 54.1 GW of renewable energy by 2032. Besides a renewable energy mixture of solar, wind, geothermal and waste-to-energy sources, the plan also intended to install 17.6 GW nuclear power in the upcoming years.48 To achieve this goal, K∙A∙CARE created the Sustainable Energy Procurement Company (SEPC) to supervise the procurement process, but already the ’introductory’ procurement round failed: Execution delayed and deadlines expired without calls for tender. According to several interview partners, K∙A∙CARE lacked the expertise, experience and human resources and, hence, was not able to compete with other big players such as SEC and Saudi Aramco. With the death of King

In search of legitimacy

205

Abdullah in January 2015, K∙A∙CARE was even more marginalized from the policy processes.49 Overall the ‘city’s’ output was limited to the instalment of a countrywide monitoring system called Atlas of Renewable Energy Sources in the Kingdom, which launched in 2013.50 The instalment of (small) RES initiatives was undertaken by other entities. In this sense, in 2010, Saudi Aramco developed a photovoltaic (PV) testing field on its headquarters and commissioned a German company to install a 2 MW PV solar system on the rooftop of KAUST. In 2012, Saudi Aramco inaugurated its car parking lot at its headquarters in Dhahran, which generated approximately 10.5 MW solar power. In the same year the oil company celebrated the completion of the first phase of a larger solar project at KAPSARC with an open-land solar installation producing approximately 3.5 MW. During a second phase in 2014, the solar field was expanded to generate 5.3 MW solar power. In early 2017, Saudi Aramco further experimented with wind power and installed wind turbines for power production.51 In the meantime, the Saudi Electricity Company (SEC) issued a pilot project solar plant with a capacity of 500 kW on Farasan Island with the help of a Japanese company. Another initiative included the inauguration of a large solar thermal plant (around 17 MW) at the Princess Noura University for Women (PNUW) near Riyadh in 2014.52 Under the new leadership, the competences of the Kingdom’s sustainable transformation moved to the newly created Ministry of Energy, Industry, and Mineral Resources (MOEIMR) and was guided by Vision 2030 and the more detailed short-termed National Transformation Program 2020. The strategic papers foresee an ‘initial target’ of producing 3.45 GW by 2020 and 9.5 GW by RES by 2030. The chief entity to fulfil these goals was REPDO, which implemented the National Renewable Energy Program (NREP) in early 2017 to assure the fulfilment of the renewable energy goals. NREP started the tendering of several RES projects in the scope of private independent power producer (IPP) programmes with long-term power purchase agreements by 2017. Among these had been the instalment of 300 MW of photovoltaic (PV) solar plant in the Al-Jouf province and 400 MW of wind capacity in the Tabuk province.53 The parastatal company ACWA Power received the bid for the solar project, whereas the Emirati-based leading energy company Masdar operates the wind park.54 In addition to the systematic

206

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

approach of REPDO that regularly informs the public about the status of tendering and construction on the official website, further initiatives have been rather opaque. Moreover, a vivid example of this practice shows how entities are obliged to compete in the prospering sector of RES is the case of collaboration between SEC and KACST. Without bidding SEC mandated the company Taqnia, which is affiliated with KACST, to construct a 10 MW solar plant, which was already financed by research funds of KACST.55 Saudi Arabia has also invested heavily in a greener infrastructure and energy efficiency measures. The Saudi Green Building Forum (SGBF) has been involved in around 300 sustainable construction projects that have included prestigious sustainable hubs such as King Abdullah Financial District and the King Abdullah Economic City, as well as entities including KAUST, KAPSARC, Aramco offices and SABIC.56 Furthermore, SGBF planned to retrofit thousands of mosques in the Kingdom from 2010 onwards. In 2012, the SEEC as prime mover started its Saudi Energy Efficiency Program (SEEP), which was supervised by Prince Abdulaziz bin Salman, in order to introduce energy-efficient standards for airconditioning systems, fridges, lighting for residential areas and so on. For instance, in December 2014 the government declared the imposition of minimum fuel/mileage standards for automobiles.57 Additionally, the public transport infrastructure has been promoted including the launch of a bus rapid transit and a light rail transit system in all major cities. Furthermore, Riyadh’s urban metro systems are a means to cut emissions.58 In order to alter consumption patterns and foster rationalization, the new leadership introduced regulations on subsidies and initiated an energy reform. While there had been some cautious attempts before, a decision was taken to raise the price on nearly all fossil fuels products in 2015.59 Having among the lowest energy prices in the world, which contributes to the high consumption and steadily growing demand, the decision marked a watershed in the Kingdom’s history. Particularly the increase of water prices caused a public outrage, which resulted in the minister’s resignation and a cancellation of this pricing reform.60 Shifting to the field of environmental management the output of both the Abdullah and Salman administrations appears weak in contrast to sustainable energy-related projects. As the prime institution the PME set up monitoring stations, developed environmental guidelines, implemented an early warning system and created an environmental database.61 In 2012, it was also responsible for issuing In search of legitimacy

207

nine environmental laws with a comprehensive list of standards and guidelines. Yet, according to Taher and Hajjar, ‘A critical look at the various environmental laws and regulations over the past decades suggests that, on paper, these regulations are as good as can be found anywhere in the world, but what is lacking is effective enforcement of the rules.’62 Instead of setting up a comprehensive environmental protection framework the Saudi government’s activities were limited to some eco-friendly or greenwashing events like the launch of the media channel Bee’aty (my environment) as well as beach cleaning or afforestation initiatives. In addition to that, especially officials of the PME hosted or participated in numerous national and international symposia, conferences, forums and exhibitions. The Saudi Wildlife Authority, in turn, oversees the sixteen protected areas in the Kingdom, where it is, among other tasks, responsible for monitoring and reintroducing endangered animals. Lately, it also experimented with eco-tourism. Under the new king, the renamed GAMEP developed some environmental projects, such as protecting the Kingdom’s coastal areas and regulating the wastewater treatment by companies. Like its predecessors, the PME, it is also responsible for representativeness like award ceremonies and hosting environmental conferences. In contrast, the newly created Ministry of Environment, Water and Agriculture (MEWA) appears to be low on outputs regarding climate policymaking. In spring 2021, another grand plan, the so-called Saudi Green Initiative, was announced by the crown prince to reduce GHG emissions through afforestation and conservation both inside and outside the Kingdom. Concretely, the initiative foresees to plant 10 billion trees in Saudi Arabia and an additional 40 billion across the Middle East over the upcoming decades. In terms of renewable energy the plan intends to generate 50 per cent of its energy from renewables by 2030. However, concrete strategies and ways to achieve these (over)ambitious goals were not disclosed at the time of writing.

External legitimation: Increasing hedging under the Salmans When investigating the rule of King Abdullah in comparison with the reign of King Salman since 2015 one should also note the change in the international environment. Notably, within the formal body

208

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

of the United Nations Framework Conventions for Climate Change (UNFCCC), the Kingdom took a more disruptive course of action under the previous  leadership and a more cooperative one under the new one.63 Long time known as a climate laggard of the Ministry of Petroleum and Mineral Resources (MPMR) chief negotiator, Mohammad al-Sabban, who publicly doubted human-caused global warming, Saudi Arabia changed course in the late 2000s. The PME evolved as a leading actor within the global climate forum by submitting the first (2005) and second (2011) National Communications to the UNFCCC. The inauguration of the CDM Designated National Authority (DNA) in 2009 was also another sign of a policy change.64 In 2016, a special committee in close cooperation with GAMEP and the MOEIMR submitted the Third National Communication. Already in 2012, al-Sabban was replaced by Khalid M. Abuleif, who, despite his role as a political advisor to the petroleum sector, is not known as a climate change denier. These examples show how Saudi Arabia abandoned its previous role as a climate antagonist and denier within the global climate regime. Furthermore, beyond the global climate regime, Saudi Arabia has fostered activities to improve its reputation and acquired assistance through technology and/or knowledge transfer in the fields of alternative energy and decarbonization. In the last fifteen years, Saudi Arabia joined several non-governmental initiatives, including the Carbon Sequestration Leadership Forum (2005), the ‘four Kingdoms’ (UK, the Netherlands, Norway and Saudi Arabia) initiative for Carbon Capture Utilisation and Storage (2008), the International Renewable Energy Agency (IRENA) (2013) and the Global Methane Initiative (GMI) (2013). Particularly in the field of nuclear technology Saudi Arabia is in need of foreign assistance and expertise. In this vein, several Memoranda of Understanding (MoU) had been signed with strategic partners like China, South Korea and Russia.65 Another example of boosting the Kingdom’s alternative energy capacity through foreign expertise and investment depicts the solar megaproject with the Japanese multinational conglomerate holding company SoftBank. In spring 2018 it was revealed that the Saudi government in the presence of the crown prince, Mohammed bin Salman, signed an MoU with the Japanese company SoftBank to create the Solar Plan 2030. The joint venture between the Japanese company and the PIF was announced

In search of legitimacy

209

shortly after news of Mohammed bin Salman’s most prestigious venture NEOM broke the $500 billion sustainable megacity – and several months after the chairman of the PIF, Yasir al-Rumayyan, was appointed a board member at SoftBank. The plan foresaw to generate 200 GW solar energy by 2032 but after several months, it was reported that the deal has been shelved over the assassination of Saudi critic and journalist Jamal Khashoggi.66 Meanwhile, it was revealed in 2019 that China’s Silk Road Fund purchased 49 per cent of ACWA Renewable Energy Holding. Prior to this, a strategic partnership between ACWA Power and Huawei on energy efficiency was announced. All indicate a closer strategic partnership between the Saudi Kingdom and China.67 Additionally, ACWA Power is increasingly involved in numerous energy projects across the region, including all Gulf States (except Kuwait and Qatar). Similarly, cooperation with numerous other external partners to foster solar technology in the Kingdom remained in a proposal stage and has not materialized.68

Ideational-identitarian legitimation: Compensating shortcomings The aforementioned legitimation mechanisms have been accompanied by well-adjusted non-tangible strategies connecting environmental-friendly vanity projects to the respective ruler at the top of the state.69 The fact that entities such as KAUST, KAPSARC and K∙A∙CARE as well as smaller initiatives (e.g. King Abdullah initiative for solar water desalination, King Abdullah Center for Energy Efficiency) bear the name of late King Abdullah manifests a distinctive personification. When King Abdullah ascended to the throne, he revitalized a vision of modernization and industrialization that was also associated with former King Faisal (1964– 75). Abdullah’s vision has been enhanced by the notion of sustainable development, which should be intrinsically tied to his person.70 Such an attempt to garner personal legitimation through a green framing has also been promoted by his successors, King Salman and his son, Mohammed bin Salman.71 Examples include the proclamation of the King Salman Renewable Energy Initiative, a King Salman Park, the King Salman Environmental Awareness and Sustainable Development Program, the creation of the Mohammed bin Salman Natural Reserve and the green framing of prestigious projects like the Vision 2030 and NEOM.72 Also the

210

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

recently announced ‘Saudi Green Initiative’ has been closely associated with the Saudi crown prince. Moreover, the Saudi leadership is not well known to construct national feelings73 but occasionally a green frame has also been utilized for strengthening sentiments of commonality. In this sense, largescale greenwashing projects like beach cleaning and tree planting have been associated with national and religious narratives. For instance, during the latest environmental week in Saudi Arabia, hundreds of clean-up and tree planting campaigns were started under the title ‘Protecting our environment for our society’s well-being’ which was circulated by the hashtag #bi’atok_baytok (Your environment, your home). Also several religious clerics took part in the initiative referring to the protection of the environment as an Islamic moral duty.74 In addition to that, on specific events such as the annual national day, key leaders used the opportunity to celebrate and emphasize the Kingdom’s sustainable efforts by referring to the country’s ‘glorious history’, its ‘wise leadership’ and the ‘remarkable achievements’.75 Fostering an ideational-identitarian legitimation is mostly undertaken by a specific ‘language of legitimation’ on behalf of specific key elites and government-affiliated media outlets. Particularly, elements of a rhetorical ‘whitewashing’ and ‘concealment’ are crucial to positively shape the regime’s popularity inside and outside. Regarding the rhetorical output, especially key elites, such as K∙A∙CARE’s president Hashim Yamani, the former Oil Minister Ali alNaimi, head of Saudi Arabia’s Electricity & Cogeneration Regulatory Authority (ECRA) Abdullah Al-Shehri and former Energy Minister Khalid al-Falih emphasized the benefits of a sustainable development that will ensure the country’s welfare and prosperity. On different occasions, they emphasized the great achievements of the country with regard to a more sustainable output closely linked to the Kingdom’s vision. Negative news, in turn, has been silently put aside. For example, in January 2015 Yamani declared that the K∙A∙CARE’s ‘white paper’ would be postponed to 2040 without providing any detailed information on the reasons for the delay. When the plan was completely abandoned shortly afterwards no further details were published either.76 Another narrative repeated by officials alludes to the country’s ‘dream’ of maintaining its role as a regional energy power and export renewable energy to other nations.77 Similar to the above-mentioned unrealistic announcement by the crown prince in 2016, al-Naimi had declared in 2009 that ‘Saudi In search of legitimacy

211

Arabia aspires to export as much solar energy in the future as it exports oil now.’78 Also his successor, al-Falih, echoed similar statements in April 2017. He said the Kingdom’s renewable plan ‘reinforces the kingdom’s position as the biggest and most trusted provider of energy in the world’.79 As especially the speeches at the various climate conferences reveal, Saudi Arabia perceives climate change as a predominantly national issue. In this sense, both al-Naimi and al-Falih emphasized the Kingdom’s longterm and active participation and commitment to the global climate regime, but also stressed the importance of complying with the principles of common but different responsibilities without renegotiation (meaning Saudi Arabian classification as non-Annex country). Furthermore, the speakers rejected any new imposition on developing countries and called for assistance through financial compensation and/or technology transfer as well as an inclusion of carbon capture and storage (CCS) projects.80 Beyond individual statements the state-controlled media assisted in positively framing the government’s climate policy. Different articles by state-affiliated outlets such as Ar-Riyadh and Asharq al-Awsat emphasized Saudi Arabia’s pioneer role in RES, honouring the leadership and its policy.81 On a regular basis, superlatives were applied where newspapers referred to Saudi Arabia as ‘the most attractive country for renewable and nuclear energy investments after China and India’ and that it shortly will become the ‘world’s biggest contributor of solar energy’ or the ‘world’s leading solar exporters in the future’.82 Another article highlighted that the Kingdom is by far the biggest investor in new energy projects in the MENA region.83 Additionally, one can notice a strong positive framing of the media when it comes to nuclear energy as a carbon-free and clean source. From the beginning of Saudi Arabia’s focus on alternative energy systems, nuclear energy has been perceived as a valid option to pursue sustainable development (although not environmental-friendly). In this sense, an article by Ar-Riyadh referred to the energy source as clean, sustainable and low cost of production and declared that there are low risks for humanity and the environment.84 In light of other global events like the signed nuclear deal with Iran in 2015 the newspaper declared that ‘Saudi Arabia must seek a way to create nuclear prestige through studies, research and construction of nuclear reactors’ in order to avoid falling behind in ‘the nuclear race’.85 Conversely, accompanied environmental damage caused by the usage of nuclear received little or no attention. 212

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Conclusion Politics in Saudi Arabia is highly centralized with a clear hierarchy. It is elite driven by a very small core of decision-makers and their advisors. Decision-making happens top-down on a considerably informal and opaque basis. In addition to these well-known patterns, the field of environmental policy discloses some other interesting findings. When looking at the organizational form of policymaking, one can detect considerable differences between Kings Abdullah and Salman. While the former relied on a broad network of loyal elites, partially outside the royal family but mainly with Najdi origin, the Salmans’ ‘increasingly establish[ed] a vertical top-down-structure with their family branch on the top of the power pyramid’.86 In order to bind many loyal elites close to him, Abdullah created several ‘silos of inefficiency’ leading to great fragmentation and turf wars between already existing and newly created fiefdoms. His successor intended to streamline the policymaking by ordering the creation of the Ministry of Energy, Industry and Mineral Resources (MOEIMR) as a leading entity to overcome fragmentation.87 Similarly, entities like REPDO and the National Energy Services Company (Tarshid) have been established in order to reduce the bureaucratization and improve efficiency and transparency in the energy sector. For instance, they do so by publishing the tendering of renewable energy projects and acting as hubs to communicate between different entities and shareholders. Those measures of structural legitimation not only help to increase the perception of an effective government; but they should also be seen as a political rationale to cement power within the royal court dominated by the Salmans. In this sense, REPDO directly reports to the Ministry of Energy, which is now headed by Prince Abdulaziz bin Salman as the first royal in Saudi history to oversee the energy portfolio. Furthermore, Tarshid is fully owned by PIF and acts as a vehicle of power for the crown prince, Mohammed bin Salman. A further issue relates to the growing role of technocrats on which both kings have increasingly relied on. Hereby, putting experienced technocrats in high positions boosts the efficiency of policymaking.88 At the same time, technocrats are more easily a subject to elite rotation. For instance, the marginalization of Khalid al-Falih and the promotion of Yasir al-Rumayyan can be seen as a tactic to contain the growing influence of certain non-royal elites and replacing them by installing more loyal figures in relevant strategic positions. In search of legitimacy

213

The dimension of performance legitimation clearly underlines the proposed assumption that Saudi Arabia’s sustainable policymaking is primarily about energy sustainability and not about environmental protection.89 As Aisha al-Sarihi makes very clear in her contribution to this volume: so far, there is no national climate action plan. Instead, many entities put up their own (comparatively short-sighted) environmental initiatives that rather resemble greenwashing efforts. Also the enforcement of regulations and unpopular austerity measures that are inherently linked to the field of environmental policy has been largely avoided to prevent a loss of legitimacy among the wider public. Only recently a gradual change of introducing price reforms and tackling the demand side has been implemented with caution. For the most part, the regime concentrates on the supply side, but substantial actions largely remained behind the announced goals.90 There are some landmark projects but particularly in light of the self-given aspirations of becoming ‘a global “powerhouse” of renewable energy’ the Kingdom is far behind to fulfil this objective.91 The external legitimation also reveals a change between the governments. While one can notice a general growing importance of the Kingdom’s socialization and integration within the global climate regime, one can see an increasing hedging policy under the Salmans that goes along with a general ‘Easternisation’.92 Yet, Saudi Arabia’s international reach in the sector of environmental policymaking is modest. Despite increasing efforts, attracting foreign direct investments has been hampered by a loss of reputation caused by specific incidents such as the murder of Jamal Khashoggi and more general patterns of uncertain and informal policymaking and an authoritarian resurgence. As Jessica Obeid makes clear in her contribution, during the last years, a high level of fragile investor confidence in the Kingdom also affects sustainable projects. Another reason includes the prioritization and promotion of local ‘islands of excellence’ like ACWA Power. Yet, it can be expected that Saudi Arabia will enhance its efforts on the global scale because it is highly dependent on external expertise, know-how and investments. The dismissal of Khalid al-Falih, who was not able to restore FDI, is one example. The ideational-identitarian legitimation, in turn, reveals a sophisticated strategy in diverting the attention from the manifold domestic deficiencies and hurdles. Concretely, the rhetorical framing of  overemphasizing achievements and concealing shortcomings (i.e. ‘re-labelling’ or 214

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

‘re-framing’) in combination with the confined public sphere helps the regime to legitimize a policy change and lower societal dissatisfaction. Notwithstanding, a long-standing mismatch between the action and rhetoric may inevitably cause a loss of legitimation. Beyond that, one clearly sees the adjustment of the policymaking towards the country’s belief system. Building up a narrative of a ‘dogma of development’ with the king, the crown prince respectively, as ‘the nation’s chief moderniser’ has deep historical roots and has been broadened by frame of environmental sustainability.93 At the same time, these disinformation campaigns and preference divulgence are at the expense of crucial elements of environmental politics like information-sharing and accountability. In various cases, shortcomings have been concealed and presented differently by officials and the media in order to avoid any delegitimizing effects. In other words, rhetorical framing trumps tangible action but only in the short term. The single legitimation mechanisms should not be seen isolated from each other. Instead, they closely interact and can be mutually dependent. For instance, the lack of performance has been hampered due to institutional fragmentation, a lack of consciousness and knowledge, and missing external assistance. Underlying reasons include the regime’s focus on structural legitimation to prioritize loyalty over knowledge. Also the frequent elite rotation impedes process. At the same time, the structural and performance legitimation tactics are reinforcing each other as examples of the existence of a ‘Najdi capitalism’ in the realm of constructing sustainable vanity projects like KAUST reveal. Moreover, the ability of the Saudi-based company ACWA Power to win the bids of international auctions to install renewable energy projects and the increasing purchase of the company’s shares through the PIF enhance presumptions that local companies are strategically nurtured because it benefits people in power. Overall, this study contributed another perspective in approaching the phenomenon of oil-rich Saudi Arabia’s green turn. On the one hand, it has provided a further dimension to the post-oil argument by considering environmental policymaking as a political strategy to gain legitimacy that helps to strengthen the regime’s resilience. On the other hand, it has shown how the ruling elite do so. In this sense, environmental policymaking has barely been adopted and implemented to respond to growing demands of environmental protection but rather to achieve fundamental goals of elite cohesion and regime popularity to increase In search of legitimacy

215

support bases among different actors. In a nutshell, the arguments presented here assure a willingness and perceived necessity to reform on behalf of the state leaders. Yet, the dual external shocks of the Covid-19 pandemic and the anew plunge in oil prices that hit Saudi Arabia recently alter the dynamics dramatically. Mohammed bin Salman’s vision was supposed to lower the Kingdom’s dependence on oil and, simultaneously, boost the private sector and attract investors. Yet, the global fragility and uncertainty caused by Covid-19 put the reform programme into question and exacerbate the bad economic situation, leading to a serious legitimacy crisis. While the current crisis provides reasonable grounds, and also a chance, to further promote clean energy technology to lower the importance and centralization of oil – and, hence, also a chance to turn constraints into opportunities (i.e. ‘green recovery’) – it is doubtful how this will be achieved in light of decreasing state budget. It is rather realistic to expect a return to a ‘business as usual’ to sell as much oil as possible and receive revenues to balance the budget. It remains to be seen whether the recently announced ‘Saudi Green Initiative’ marks a turning point.

Notes 1 Al Arabiya English, 25 April 2016, ‘Highlights of Saudi Deputy Crown Prince’s Interview with Al Arabiya’.

2 Beblawi and Luciani (1987). 3 For instance, Crystal (2018); Niblock (2006). 4 Crystal (2018); The Guardian, 15 September 2019, ‘Drone Attacks on Saudi Plant Could Hit Global Oil Supplies’.

5 I rely on the UN-led definition of sustainable development as ‘meeting

the needs of the present generation without compromising the needs of future generations’ comprising economic sustainability, environmental sustainability and sociopolitical sustainability; compare: Beutel (2012). The term ‘environmental sustainability’ as it is also used in the Saudi Vision 2030 (al-istadāma al-bīʾiyya) focuses more on the environmental part.

6 Interview with an energy expert, Riyadh, 22 November 2016; Bahgat (2013); Russell (2016).

7 Krane (2019). 8 Similar: Wang (2013).

216

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

9 Interview with a political scientist, Riyadh, 24 November 2016. 10 I am deeply thankful for the King Faisal Centre for Research and Islamic

Studies (KFCRIS) in Riyadh for the institutional affiliation and assistance.

11 In order to create trust with the respondents, we agreed on anonymity. 12 Luomi (2012); further: Bahgat (2013); Lahn and Stevens (2011); Russell (2016); Taher and Hajjar (2014).

13 Interview with a Saudi businessman and former politician, Riyadh, 21 November 2016.

14 Mahmoud (2017); Asharq Alawsat (English), 4 May 2013, ‘Opinion: Climate Change in Saudi Arabia’.

15 Almazroui (2013); DeNicola et al. (2015). 16 Term borrowed by Alraouf and Clarke (2017). 17 Among others: Albanawi (2015); Abubakar and Dano (2019); Ferroukhi et al. (2013); Salam and Khan (2017); Sultan et al. (2011); Salam and Khan (2017).

18 Verhoeven (2018): 2. One notable exception includes the article ‘Understanding Input and Output Legitimacy of Environmental Policymaking in The Gulf Cooperation Council States’ by Yasemin Atalay, though she does not connect the legitimizing efforts to policymaking; compare: Atalay (2018).

19 Similar: Josua (2017: 303). 20 Also: Schlumberger (2010: 234). 21 Schlumberger (2010); further: Kailitz (2013). 22 Heydemann and Leenders (2013: 5). 23 Notably exception: Buzogány et al. (2016). 24 Also: Soest and Grauvogel (2017). 25 Josua (2017); Kailitz and Backes (2016); Differently: Gerschewski (2013). 26 Also resembled in Easton’s idea of a ‘diffuse support’, see: Easton (1965). 27 Exceptions: Taher and Hajjar (2014); Al-Sarihi (2019); Luomi (2009). 28 Ménoret (2005). 29 Bremmer (2004). 30 Yamani (2008). 31 Also: Jones (2015: 34). 32 Interview with an environmental researcher, Riyadh, 6 March 2017; Interview with a Saudi expert, London, 29 June 2018.

33 Jones (2015).

In search of legitimacy

217

34 Taher and Hajjar (2014). 2014; interview with an environmental advisor,

Riyadh, 5 March 2017; and interview with a Saudi businessman and former politician, Riyadh, 21 November 2016.

35 Arab News, 10 April 2008, King Names KAUST Board of Trustees. 36 Stenslie (2012: 58). 37 Interview with a Saudi expert, London, 29 June 2018. 38 Thompson (2018). 39 Interview with an energy expert, Erlangen, 24 April 2019; interview with a Saudi expert, London, 29 June 2018.

40 Interview with an energy expert, Riyadh, 22 November 2016. 41 Interview with an energy expert, Erlangen, 24 April 2019. 42 Asharq Alawsat (English), 15 May 2018 Tuesday, ‘Abdulaziz bin Salman: KSA Keen on Achieving Concept of Sustainable Development’.

43 Arab News, 8 September 2019, ‘King Salman Appoints New Energy Secretary, Ambassador to Bahrain’.

44 Reuters, 20 November 2020, ‘Saudi Fund Raises Ownership Stake in ACWA Power to 50%-statement’.

45 Phone interview with an economic advisor, Erlangen, Germany, 18 February 2019.

46 Interview with a business consultant, Riyadh, 8 March 2017. 47 Interview with an environmental researcher, Riyadh, 6 March 2017;

Interview with an energy expert, Riyadh, 7 March 2017; and interview with an energy expert, Erlangen, 24 April 2019.

48 Saudi Gazette, 8 September 2015, ‘K.A.CARE “Most Expensive” Project in GCC at $100 Billion’.

49 Interview with a business consultant, Riyadh, 8 March 2017; interview with

an energy expert, Riyadh, 22 November 2016; and interview with an energy expert, Riyadh, 7 March 2017.

50 Ar-Riyadh, 22 December 2013, ‫ خبرات وشراكات‬..‫إنجاز مشروع أطلس الطاقة المتجددة‬ ‫ ;محلية ودولية رائدة‬Ar-Riyadh, 18 December 2013, ‫مدينة الملك عبدهللا للطاقة المتجددة‬ ‫تحتفل بإطالق مشروع أطلس مصادر الطاقة المتجددة اليوم‬.

51 See: Salam and Khan (2017); Abubakar and Dano (2019). 52 See, for instance: Bahgat (2013); Bachellerie (2012); Salam and Khan (2017); Ar-Riyadh, 2 October 2011, «‫السعودية للكهرباء» تدشن أول محطة لتوليد الكهرباء بالطاقة‬ ‫الشمسية في فرسان‬.

53 IRENA (2019); The National, 20 February 2017, ‘Saudi Arabia Renewable Energy Programme Request for Qualifications Issued’.

218

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

54 IRENA (2019). 55 Interview with an energy expert, Erlangen, 24 April 2019. See further: PV

Magazine, 4 January 2019, ‘Taqnia Announces Completion of Phase 1 Layla Solar Plant, First Saudi IPP Project’.

56 Abubakar and Dano (2019); Aina et al. (2019); Designated National Authority (2016); Salam and Khan (2017).

57 Russell (2016). 58 Interview with a Saudi businessman and former politician, Riyadh, 21

November 2016. Further: Abubakar and Dano (2019); Aina et al. (2019).

59 For previous attempts, see: Gause (2015: 28). 60 Krane (2019). Interview with a political scientist, Riyadh, 4 December 2016;

Interview with a Saudi business men and former politician, Riyadh, 21 November 2016; and interview with an energy expert, Riyadh, 22 November 2016.

61 Aina et al. (2019). 62 Taher and Hajjar (2014: 17). 63 Interview with an energy expert, Riyadh, 7 March 2017. 64 The creation of a DNA is the UNFCCC’s requirement to apply and participating in CDM projects and receive the benefits.

65 See also: Bahgat (2013). 66 Deutsche Welle, 26 June 2019, ‘SoftBank creates ‘AI revolution’ Fund without Saudi Cash’.

67 Mogielnicki (2020). 68 Salam and Khan (2017: 12–14). 69 Interview with a political advisor, Riyadh, 1 March 2017; Interview with a researcher, Erlangen, 18 February 2019.

70 Jones (2015: 33). 71 See also: Niblock (2006: 10). 72 See, for instance, Aawsat, 24 October 2017, ‘Saudi Arabia’s NEOM Aspires to Become World’s Future Economic, Scientific Capitals’.

73 Gause (2015: 29). 74 Arab News, 6 April 2019, ‘Saudi Arabia Cultivates over 230,000 Trees during Environment Week’.

75 Ar-Riyadh, 22 September 2017, ‫ المملكة تُثبت عا ًما بعد عام مكانتها وأهميتها وقوة تأثيرها‬:‫الفالح‬. See also: Speech by Hashim Yamani on the Saudi National Day, https:// www.kacare.gov.sa/en/mediacenter/news/Pages/news41.aspx (accessed 10 May 2019).

In search of legitimacy

219

76 Russell (2016); interview with a business consultant, Riyadh, 8 March 2017. 77 Asharq Alawsat (English), 26 May 2014, ‘Saudi Arabia to Become Electricity

Exporter, Say Officials’; and interview with a Saudi businessman and former politician, Riyadh, 21 November 2016.

78 Cited in Lahn and Stevens (2011: 16). 79 Asharq Alawsat (English), 18 April 2017, ‘Riyadh Reveals 30 Projects to Produce Renewable Energy’.

80 Asharq Alawsat (English), 16 November 2016, ‘Saudi Arabia stresses commitment to address climate change challenges’.

81 Some examples include Al-Sharq al-Awsat, 21 July 2013, ‘Saudi Arabia’s Solar Future’, Ar-Riyadh, 10 May 2012,‫مليار لاير استثمارات متوقعة في الطاقة المتجددة‬ 400 ‫ عاما ً المقبلة‬20 ‫ ;خالل ال‬Al-Sharq al-Awsat, 1 April 2018, ‘Solar Power Project Plan 2030, Greatest Energy Source Worldwide by 2050.’

82 Ar-Riyadh, 7 November 2013, ‫ من احتياجاتها للكهرباء باستخدام‬10% ‫المملكة تعتزم توليد‬ ‫ ;الطاقة الشمسي‬Ar-Riyadh, 19 April 2010, ‫ واالستثمار في الطاقات البديلة‬..‫المملكة‬..; ArRiyadh, 10 May 2012,ً ‫ عاما‬20 ‫مليار لاير استثمارات متوقعة في الطاقة المتجددة خالل ال‬ 400 ‫المقبلة‬. 83 Ar-Riyadh, 3 February 2012, ‫السعودية تتصدر قائمة مشروعات الطاقة الجديدة في الشرق‬ ‫ مليارات دوالر‬109 ‫األوسط بقيمة‬. 84 For example: Ar-Riyadh, 15 May 2010, ‫تنويع مصادر الطاقة عين الصواب (لكن‬ ‫)الشمس ليست بترول المملكة‬. 85 Ar-Riyadh, 10 April 2015, ‫ والطاقة النووية‬..‫ ;المملكة‬also interview with a political scientist, Riyadh, 4 December 2016; Interview with an energy expert, Riyadh, 22 November 2016.

86 Demmelhuber (2019). 87 However, in autumn 2019, King Salman announced the split of this

‘super ministry’ into one Ministry of Energy and a separate institution of industry and mineral resources, which will become independent on 1 January 2020.

88 Interview with an energy expert, Riyadh, 22 November 2016. 89 Interview with an energy expert, Erlangen, 24 April 2019; and interview with an energy expert, Riyadh, 22 November 2016.

90 Some interviewees pointed out that there is a willingness, but objectives

have been overrated because of a lack of data, interview with an energy expert, Riyadh, 22 November 2016; and interview with a political advisor, Riyadh, 1 March 2017.

91 Saudi Gazette, 30 January 2017, ‘Aramco Said to Weigh up to $5 Billion Renewables Deals’.

220

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

92 Interview with an energy expert, Riyadh, 22 November 2016. 93 Jones (2015: 45).

References Abubakar, I. R. and Dano, U. L. (2019). ‘Sustainable Urban Planning Strategies for Mitigating Climate Change in Saudi Arabia’, in Environment, Development and Sustainability Environment. DOI: https://doi.org/10.1007/ s10668-019-00417-1. Aina, Y. A., Wafer, A., Ahmed, F. and Alshuwaikhat, H. M. (2019). ‘Topdown Sustainable Urban Development? Urban Governance Transformation in Saudi Arabia’, Cities 90: 272–81. Albanawi, N. I. (2015). ‘Saudi Arabian Green Economy Infrastructure: Barriers, Strategies & Opportunity – An Analysis’, International Journal of Business and Economic Development 3, no. 3: 90–6. Almazroui, M. (2013). ‘Simulation of Present and Future Climate of Saudi Arabia Using a Regional Climate Model (PRECIS)’, Int. J. Climatol. 33, no. 9: 2247–59. doi:10.1002/joc.3721. Alraouf, A. and Clarke, S. F. (2017). ‘From Pearling to Skyscrapers: The Predicament of Sustainable Architecture and Urbanism in Contemporary Gulf Cities’, in P. Sillitoe (ed.), Sustainable Development: An Appraisal of the Gulf Region. New York: Berghahn Books (Environmental Anthropology and Ethnobiology, 19), pp. 313–42. Al-Sarihi, A. (2019). ‘Climate Change and Economic Diversification in Saudi Arabia: Integrity, Challenges, and Opportunities’, Arab Gulf States Institute in Washington (Policy Paper, 1), checked on 3/20/2019. Atalay, Y. (2018). ‘Understanding Input and Output Legitimacy of Environmental Policymaking in the Gulf Cooperation Council States’, Env. Pol. Gov. 28, no. 1: 39–50. doi:10.1002/eet.1794. Bachellerie, I. J. (2012). Renewable Energy in the GCC Countries. Resources, Potential, and Prospects. Gulf Research Center. Jeddah. Bahgat, G. (2013). ‘The Changing Saudi Energy Outlook: Strategic Implications’, The Middle East Journal 67, no. 4: 565–79. doi:10.3751/67.4.14. Beblawi, H. and Luciani, G. (1987). The Rentier State. London, New York, Sydney: Croom Helm. Beutel, J. (2012). ‘Conceptual Problems of Measuring Economic Diversification, as Applied to the GCC Economies’, in G. Luciani, S. Hertog, E. Woertz and R. Youngs (eds), Resources Blessed: Diversification and the Gulf Development Model, Berlin: Gerlach Press, pp. 29–70. Bremmer, I. (2004). ‘The Saudi Paradox’, World Policy Journal 21, no. 3: 23–30.

In search of legitimacy

221

Buzogány, A., Frankenberger, R. and Graf, P. (2016). ‘Policy-Making und Legitimation in Autokratien. Das Beispiel der Innovationspolitik’, Totalitarismus und Demokratie 13, no. 2: 257–79. Crystal, J. (2018). ‘The Securitization of Oil and Its Ramifications in the Gulf Cooperation Council States’, in H. Verhoeven (ed.), Environmental Politics in the Middle East. Oxford: Oxford University Press, pp. 75–98. Demmelhuber, Th. (2019). ‘Playing the Diversity Card: Saudi Arabia’s Foreign Policy under the Salmans’, The International Spectator 4: 109–214. DeNicola, E., Aburizaiza, O. S., Siddique, A., Khwaja, H. and Carpenter, D. O. (2015). ‘Climate Change and Water Scarcity: The Case of Saudi Arabia’, Annals of Global Health 81, no. 3: 342–53. doi:10.1016/j. aogh.2015.08.005. Designated National Authority. (2016). Third National Communication. Kingdom of Saudi Arabia. Riyadh. Easton, D. (1965). A Systems Analysis of Political Life. New Haven, London: John Wiley and Sons. Ferroukhi, R., Ghazal‐Aswad, N., Androulaki, S., Hawila, D. and Mezher, T. (2013). Toufic ‘Renewable Energy in the GCC. Status and Challenges’, International Journal of Energy Sector Management 7, no. 1: 84–112. doi:10.1108/17506221311316498. Gause, F. G. [III]. (2015). ‘Oil and Political Mobilization in Saudi Arabia’, in B. Haykel, T. Hegghammer and S. Lacroix (eds), Saudi Arabia in Transition: Insights on Social, Political, Economic and Religious Change. New York and Cambridge: Cambridge university Press. Gerschewski, J. (2013). ‘The Three Pillars of Stability: Legitimation, Repression, and Co-optation in Autocratic Regimes’, Democratization 20, 1: 13–38. doi:10.1080/13510347.2013.738860. Heydemann, S. and Leenders, R. (2013). Middle East Authoritarianisms. Governance, Contestation, and Regime Resilience in Syria and Iran. Stanford, CA: Stanford University Press. (Stanford Studies in Middle Eastern and I). IRENA. (2019). Renewable Energy Market Analysis. GCC 2019. International Renewable Energy Agency (IRENA). Abu Dhabi. Jones, T. C. (2015). ‘The Dogma of Development: Technopolitics and Power in Saudi Arabia’, in B. Haykel, T. Hegghammer and S. Lacroix (eds), Saudi Arabia in Transition: Insights on Social, Political, Economic and Religious Change. New York: Cambridge University Press, pp. 31–47. Josua, M. (2017). ‘Legitimation towards Whom? Managing the Legitimacy Crisis in Algeria during the Arab Uprisings’, Zeitschrift für Vergleichende Politikwissenschaft 11, no. 2: 301–24. doi:10.1007/s12286-017-0331-3. Kailitz, S. (2013). ‘Classifying Political Regimes Revisited. Legitimation and Durability’, Democratization 20, no. 1: 39–60. doi:10.1080/13510347.2013.7 38861. Kailitz, S. and Backes, U. (2016). ‘Introduction’, in S. Kailitz and U. Backes (eds), Ideocracies in Comparison: Legitimation, Co-optation, Repression. Abingdon and New York: Routledge, pp. 1–10. 222

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Krane, Jim. (2019). Energy Kingdoms: Oil and Political Survival in the Persian Gulf. New York: Columbia University Press (Center on Global Energy Policy series). Lahn, G. and Stevens, P. (2011). Burning Oil to Keep Cool: The Hidden Energy Crisis in Saudi Arabia. Edited by Chatham House. London: The Royal Institute for International Affairs. Luomi, M. (2009). ‘Bargaining in the Saudi Bazaar. Common Grounds for a Post-2012 Climate Agreement?’ The Finish Institute of International Affairs (Briefing Paper, 48). Luomi, M. (2012). ‘The Gulf Monarchies and Climate Change’, in Abu Dhabi and Qatar in an Era of Natural Unsustainability. London: Hurst Company. Mahmoud, M. (2017). ‘Weathering Climate Change in the Gulf ’, Arab Gulf States Institute in Washington (The AGSIW Visions of Change Series, 12). Mogielnicki, R. (2020). ‘China Strengthens Its Presence in Gulf Renewable Energy’. Arab Gulf States Institute in Washington. Ménoret, P. (2005). The Saudi Enigma: A History. New York: Zed Books. Niblock, T. (2006). ‘Saudi Arabia’, in Power, Legitimacy and Survival. London: Routledge. Russell, J. A. (2016). ‘Saudi Arabia: The Strategic Dimensions of Environmental Insecurity’, Middle East Policy 23, no. 2: 44–58. doi:10.1111/mepo.12194. Salam, M. A. and Khan, Sami A. (2017). ‘Transition towards Sustainable Energy Production: A Review of the Progress for Solar Energy in Saudi Arabia’, Energy Exploration & Exploitation 36, no. 1: 3–27. doi:10.1177/0144598717737442. Schlumberger, O. (2010). ‘Opening Old Bottles in Search of New Wine: On Nondemocratic Legitimacy in the Middle East’, Middle East Critique 19, no. 3: 233–50. doi:10.1080/19436149.2010.514473. Soest, C. von and Grauvogel, J. (2017). ‘Identity, Procedures and Performance: How Authoritarian Regimes Legitimize their Rule’, Contemporary Politics 2, no. 2: 1–19. doi:10.1080/13569775.2017.1304319. Stenslie, S. (2012). ‘Regime Stability in Saudi Arabia’, in The Challenge of Succession. London: Routledge (Routledge Studies in Middle Eastern Politics). Sultan, N. A., Weir, D. and Karake-Shalboub, Z. (2011). The New Post-Oil Arab Gulf: Managing People and Wealth. London: SAQI Books. Taher, N and Hajjar, B. (2014). ‘Energy and Environment in Saudi Arabia’, in Concerns and Opportunities. New York: Springer International Publishing (SpringerLink). Thompson, M. C. (2018). ‘Saudi Arabia: Civil Society and Natural Resource Management’, in I. Overland (ed.), Public Brainpower. Cham: Springer International Publishing, pp. 293–309. Verhoeven, H. (2018). ‘Introduction. The Middle East in Global Environmental Politics’, in H. Verhoeven (ed.), Environmental Politics in the Middle East. Oxford: Oxford University Press, pp. 1–26.

In search of legitimacy

223

Wang, A. (2013). ‘The Search for Sustainable Legitimacy: Environmental Law and Bureaucracy in China’, Harvard Environmental Law Review 37: 367–440. Yamani, M. (2008). ‘The Two Faces of Saudi Arabia’, Survival 50, no. 1: 143–56. doi:10.1080/00396330801899488.

224

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

9 FACTORING CLIMATE ACTION INTO SAUDI ARABIA’S ECONOMIC DIVERSIFICATION AND STIMULUS MEASURES Politics, challenges and opportunities Aisha Al-Sarihi

Introduction Saudi Arabia’s economy has proved to be most vulnerable to external shocks of oil prices and health pandemics. Climate change is expected to impose a similar impact on Saudi Arabia’s oil-dependent economy. Climate-related economic challenges might arise as a result of advanced global climate action aimed at reducing global reliance on oil exports, the main source of Saudi Arabia’s income. Climate change furthermore adds additional pressure on domestic non-oil economic sectors such

Many thanks to the Arab Gulf States Institute in Washington for funding this research. Thanks are due to all the interviewees who spared time in their busy schedules to take part in the research interviews. I give special thanks to Faris Al-Sulayman for helping to facilitate interviews in Saudi Arabia, and also to those who participated in the workshop on ‘Domestic Policy Making and Governance in Saudi Arabia’ held as part of annual Gulf Research Meeting at the University of Cambridge, UK, on 15–18 July 2019.

as agriculture, fisheries, infrastructure, tourism and logistics. Factoring climate action into Saudi Arabia’s economic development and stimulus measures, including fossil fuel subsidy reforms, the promotion of renewables and energy efficiency and enhanced climate adaptation, could not only minimize the impacts of climate change but also create new economic opportunities that go in line with Saudi Arabia’s economic diversification ambitions set in Vision 2030. Aware of the potential threat as well as opportunities posed by climate change, especially constraints on fossil fuels, Saudi Arabia has been actively involved in climate change negotiations since the 1990s, joined the United Nations Framework Convention on Climate Change in 1992 and has been persistently working towards global acknowledgement of the special circumstances of fossil fuel-rich countries, stressing the possibility for those countries to address climate change through cobenefits of economic diversification. In 2016, Saudi Arabia ratified the Paris Agreement, and had submitted its Intended Nationally Determined Contribution (INDC) ahead of the Conference of Parties in December 2015. While Saudi Arabia’s international governance of climate change has received mounting attention, little is known about its domestic climate change policies and governance, or whether sufficient attention have been paid to aligning domestic climate action with economic diversification strategies, as stated in its INDC: The Kingdom will engage in actions and plans in pursuit of economic diversification that have co-benefits in the form of greenhouse gas (GHG) emission avoidances and adaptation to the impacts of climate change, as well as reducing the impacts of response measures. (Saudi Arabia 2015)

This chapter assesses the current status of climate change governance in Saudi Arabia and studies the challenges and opportunities for aligning climate policies with the Kingdom’s economic diversification strategies. It, furthermore, examines the role of Saudi Arabia’s political economic structures – featured by deriving a substantial part of revenues from oil exports – in influencing the country’s domestic climate policy and governance. Drawing from secondary literature and interviews with Saudi climate change and energy experts, the chapter reveals that effective governance of climate change in Saudi Arabia still faces fundamental challenges 226

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

such as low data and information; absence of a climate action plan; heavy involvement of the Ministry of Energy in addressing climaterelated matters; and fragmented climate-related policies and efforts. Furthermore, the chapter reveals that tangible action on climate change has been delayed due to three political economic strategies: defensive strategies (by expanding public sector dominance of climate action and strategic isolation of other climate change interest groups), material strategies (i.e. using large-scale low-carbon technologies to protect interests in hydrocarbons) and discursive strategies (i.e. influencing public debate through media framing).

Saudi Arabia: climate change, economy and governance Intersection between climate change and economy Climate change poses threats to both Saudi Arabia’s oil-based and nonoil-based economic sectors (Al-Sarihi 2018). Sustainability and resilience of non-oil economic sectors such as agriculture and food security, water, fisheries,1 tourism, and infrastructure are already affected by the physical impacts of climate change due to increases in the earth’s average surface temperature, decreases in annual total precipitation, sea-level rise, and, in some cases, extreme events like intense rainfall (ESCWA et al. 2017; Elasha 2010). A 2018 study suggests that the impact of 3°C warming could cause Saudi Arabia large GDP annual losses of 0.4 per cent after 2027 and 2 per cent from 2067 (Kompas et al. 2018). GDP losses stem from sea-level rise, loss in work productivity due to heat/humidity exposure, and from proliferation of infectious disease. These estimates, however, do not factor in the costs of extreme weather events, such as storms, flooding and wildfires. Examples of extreme rainfall events in Saudi Arabia include the flash floods that hit Jeddah in November 2009 and most recently in October 2018. The 2009 flash flood was described as the worst in the region in thirty years, causing the deaths of more than 150 people and resulting in great economic losses, with damage to more than 7,000 vehicles and 8,000 homes. Over 3.5 inches of rain fell in four hours over an area that normally receives

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

227

1.8 inches per year (Mahmoud 2017). The flash flood in October caused the deaths of at least thirty people (Nagraj 2018). At the same time, climate change imposes risks to the sustainability and resilience of oil-based economic sectors, especially due to global constraints on fossil fuel use. That is critical because Saudi Arabia holds around 22 per cent of the world’s proven petroleum reserves, and its economy is highly reliant upon oil, the exportation of which continues to account for 62.9 per cent of total governmental revenue. Given its narrow profile of exports,2 wherein oil accounts for 76.7 per cent of its total exports3 and 23.1 per cent of its GDP in 2017,4 Saudi Arabia’s economy has been highly vulnerable to external shocks especially oil price declines. Since fossil fuels represent more than 70 per cent of global GHG emissions (Metz et al. 2007), future access to fossil fuel-based energy will need to be constrained to keep climate change at a (relatively) safe level, meaning a rise in global mean surface temperatures well below 1.5°C compared to preindustrial levels. These are the objectives of the Paris Agreement. Climate constraints on fossil fuels use could have similar effects on the Saudi economy as those of oil prices. A 2019 study suggests that oil demand declines quite dramatically as temperatures rise, and the price declines implied by the reduction in oil demand reach nearly 14 per cent by 2048 in the RCP 8.5 scenario. This creates a great deal of economic stress for Saudi Arabia’s economy, which is expected to decline by over 10 per cent by 2048 in the RCP 8.5 scenario (Lafakis et al. 2019). At present, many of Saudi Arabia oil importers such as European countries, China and India, are pursuing ambitious programmes to cut GHG emissions and improve energy efficiency. India aims for at least 15 per cent of the vehicles on its roads to be electric in five years, and more than 30 per cent by 2030.5 Similarly, China targets 2 million annual electric vehicles sales by 2020 and a complete ban on internal combustion engines by 2040 (Busch 2018). A recent study by Oil Change International also suggests that for a likely chance of keeping warming below 2°C, 68 per cent of reserves must remain in the ground, and 85 per cent of fossil fuels should remain unburned in order to keep global warming below 1.5°C (Muttitt 2016). In this context, the Middle East would need to leave about 40 per cent of its oil and 60 per cent of its gas underground (McGlade and Ekins 2015). In this sense, if Saudi reserves are fully extracted and burned, the resulting emissions would amount to an estimated 112 gigatons of CO2, oneseventh of total global emissions in a 2°C carbon budget, or one-third of 228

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

total global emissions in a 1.5°C carbon budget (Muttitt and McKinnon 2017). Global constraints on fossil fuels (which have already started to take place in a form of low-carbon economic transitions, or fossil fuel divestments) could thus impose direct economic losses on Saudi Arabia should crude petroleum and downstream oil products continue to dominate its export profile. Furthermore, as many countries impose carbon taxes as a way to reduce consumption of fossil fuels and cut global GHG emissions, the consequences of such measures can translate into increases in production costs of many fossil fuel-dependent industries and hence costs of importable goods and services. Saudi Arabia, like other Gulf countries, is highly dependent on imports of goods, especially food. Since the 1960s, the percentage of imported goods and services in total GDP has continued to increase in all Gulf countries. In 2017, the imports of goods and services accounted for more than 26.8 per cent of Saudi Arabia’s GDP (World Bank 2017).

Climate change, economic diversification and stimulus measures: A need for climate economy integrity to unlock long-term co-benefits Economic vulnerability to external shocks like oil prices, health pandemics and climate change bring both challenges and opportunities to Saudi Arabia. If managed properly, addressing these challenges could also enhance economic diversification, meeting the ambitions of Saudi Vision 2030. Factoring climate risks and opportunities in the ambitious economic diversification measures, as well as stimulus measures associated with economic shocks like coronavirus pandemic, could ensure that long-term economic diversification investments are more resilient and sustainable. Serious action towards such economic diversification and reform, however, was not taken until after the oil price drop in mid-2014. In response, in 2016, Saudi Arabia launched its ambitious economic diversification plan, Vision 2030, which targets enhancing privatization, education-based economy, boosting small and medium-sized enterprises, and improving business environment. At present, the most notable examples of economic policy reforms associated with Saudi Arabia’s economic diversification include the introduction of energy subsidy reforms and subsequent

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

229

increase in the price of fuel, electricity and water. Such reforms create a window of opportunity for the Kingdom to enhance domestic climate action, for example increase uptake and integration of low-carbon energy technologies such as renewables, energy efficiency and carbon capture and storage technologies which, in turn, could bring socio-economic and environmental co-benefits that go in line with the economic diversification ambitions. These include enhancing energy security, job creation, improving public health as well as creating new market opportunities for small and medium enterprises (Al-Sarihi 2018), Further, as discussed in the previous section, climate change presents additional challenge to the sustainability and resilience of non-oil economic sectors, such as fisheries, agriculture, infrastructure, tourism, infrastructure and water resources, all of which are essential to boost the Kingdom’s economic diversification. Thus, enhancing climate change adaptation through factoring climate change in the planning and development of different economic sectors could help eliminate the physical impacts of climate change and at the same time maximize the economic productivity of these sectors, and hence contribute to boosting country’s economic diversification. To this end, this chapter argues that it makes sense for Saudi Arabia to progress towards addressing climate change in line with economic diversification strategies because the co-benefits of aligning climate change policies with economic diversification are likely to outweigh the costs associated with the long-term impacts of climate change on oil and non-oil economic sectors. Examples of co-benefits associated with factoring climate action (both mitigation and adaptation investments) into economic diversification and stimulus measures include improving food security, water security, energy security through switching to alternative clean energy sources like renewables, job creation, triggering private sector investments in new economic sectors, enhancing fiscal sustainability and improving air quality hence avoiding future health costs (Jacobson et al. 2019).

Current status of climate change governance in Saudi Arabia Climate change governance in Saudi Arabia is pursued at national and international levels. At the international level, Saudi Arabia ratified the UN Framework Convention on Climate Change, an international 230

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

environmental treaty, by accession on 28 December 1994. The convention was adopted on 9 May 1992 and opened for signature at the Earth Summit in Rio de Janeiro from 3 to 14 June 1992. It then entered into force on 21 March 1994, after a sufficient number of countries had ratified it. The treaty pledges to stabilize GHG concentrations ‘at a level that would prevent dangerous anthropogenic interference with the climate system’. In 1997, the Kyoto Protocol emerged from the UN Framework Convention on Climate Change. It was adopted to strengthen the global response to climate change, but this time to mandate individual country’s GHG emission reduction and entered into force on 16 February 2005. The Kyoto Protocol recognizes that developed countries, i.e. Annex I countries, are primarily responsible for the high levels of GHG emissions into the atmosphere due to more than 150 years of industrial activity. Thus, it imposes a greater burden on developed countries under the principle of ‘common but differentiated responsibilities’. To demonstrate all parties’ compliance with the Kyoto Protocol, non-Annex I countries are also required to submit National Communication reports providing a vulnerability and adaptation assessment and relevant information on national circumstances; GHG inventories; financial resources and transfer of technology; and education, training and public awareness. Non-Annex I parties are required to submit their first National Communications within three years of joining the convention and every four years thereafter. Saudi Arabia acceded to the Kyoto Protocol on 31 January 2005. In response to the protocol, the Kingdom submitted its first, second and third National Communications in 2005, 2011 and 2016, respectively. In December 2015, parties to the UN Framework Convention on Climate Change reached a landmark agreement to combat climate change and accelerate and intensify the actions and investments needed for a sustainable low-carbon future. The Paris Agreement builds upon the convention and – for the first time – brings all countries, including developing countries, into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects, with enhanced support to assist developing countries to do so. Entered into force on 4 November 2016, the Paris Agreement requires all parties to put forward their best efforts through Nationally Determined Contributions (NDCs) and to strengthen these efforts in the years ahead. This includes requirements that all parties report regularly on their emissions and their implementation efforts. Saudi Arabia ratified the Paris Agreement on CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

231

3 November 2016 and had submitted its INDC ahead of the Conference of Parties in December 2015. At the national level, despite the submission of INDC, Saudi Arabia is yet to have a climate action plan outlining specific targets, plans, strategies, policies and regulations to deliver on its climate change mitigation and adaptation ambitions. Nevertheless, the Kingdom has established different initiatives to address the impacts of climate change. These include the Kingdom’s National Committee for the Clean Development Mechanism and Designated National Authority, which were established in 2009. The Designated National Authority oversees the development process of Clean Development Mechanism projects, preparation and submission of National Communications, Biennial Update Reports, and preparation and update of INDC.6 Other climate-related initiatives include the launch of the first National Energy Efficiency Program, in 2003 as a three-year programme to improve the management and efficiency of electricity generation and consumption in the Kingdom. Building on the experiences gained during that period, a Council of Ministers’ Decree established the Saudi Energy Efficiency Center in 2010. The centre is managed by a Board of Directors composed of more than twenty-six entities from ministries, government departments and the private sector. Its main tasks have included development of a national energy efficiency programme, promoting awareness about energy efficiency, participating in the implementation of pilot projects, and proposing energy efficiency policies and regulations and monitoring their implementation. In 2012, the Saudi Energy Efficiency Center launched the Saudi Energy Efficiency Program to improve the Kingdom’s energy efficiency by designing and implementing energy efficiency initiatives. To establish the programme, an executive committee was created by the Saudi Energy Efficiency Center board, chaired by Prince Abdulaziz bin Salman, Vice Minister of Petroleum and Mineral Resources (now the Ministry of Energy, Industry, and Mineral Resources), and composed of members from fourteen government and semi-government entities. The executive committee targeted more than 90 per cent of the Kingdom’s energy consumption by creating specialized teams that focused on the building, transportation and industrial sectors. The National Energy Efficiency Plan is currently focusing on the design of the first energy conservation law and national and regional regulations, preparation of a new national

232

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

database on energy supply and demand, capacity development of energy efficiency managers and public awareness. Furthermore, in 2010, the Saudi Green Building Forum was launched to promote the construction of energy- and resource-efficient and environmentally responsible buildings. By the end of 2014, the Kingdom had more than 300 green building projects, investing approximately $53 billion. Additionally, the operation of the Kingdom’s first carbon dioxide-enhanced oil recovery demonstration project commenced in 2015. The Uthmaniyah carbon dioxide-enhanced oil recovery demonstration compresses and dehydrates carbon dioxide from the Hawiyah natural gas liquid recovery plant in Saudi Arabia’s Eastern Province.7 The captured carbon dioxide is transported via pipeline to the injection site at the Ghawar oil field (a small flooded area in the Uthmaniyah production unit) for enhanced oil recovery. Also, in 2017, a Renewable Energy Project Development Office was established at the Ministry of Energy to increase the Kingdom’s generation of renewable energy to 30 per cent by 2030 (now the target is increased to 50 per cent) (IRENA 2019). Yet, given the absence of climate action plan, such climate policy initiatives will continue to be fragmented. Furthermore, despite the Kingdom’s intention to address climate change in line with economic diversification, these two types of policies will continue to be viewed separately unless clear targets, plans and strategies are set to not only progressing towards economic diversification but also factoring climate action in economic planning and development.

Analytical framework – understanding climate economy integration This section presents the analytical framework used to inform the analysis of factors and conditions that promote or resist domestic climate action in Saudi Arabia. Because this chapter is concerned with addressing the potential of aligning climate policy with economic diversification strategies in a hydrocarbon-rich state, Saudi Arabia, two strands of literature are deemed relevant: climate policy integration (CPI) and rentier state theory (RST).

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

233

Climate policy integration (CPI) Climate policy integration can be defined as ‘integration of policies and measures to address climate change in ongoing sectoral and development planning and decision-making’ to ‘minimize the harm caused by climate impacts, while maximizing the many human development opportunities presented by a low emission, more resilient future’, combining the definitions by Richard J. Klein et al. (2005), and Tom Mitchell and Simon Maxwell (2010). With this in mind, climate policy integration takes the traditional responses to climate change, i.e. mitigation and adaptation, a step further by linking mitigation and adaptation to one another, and importantly with long-term national development planning and strategies (OECD 2009). According to William Lafferty and Eivind Hovden (2003), such integration can be achieved through two main orientations of governance: vertical integration, referring to the assimilation of environmental or climate goals at vertical tiers of governance; and horizontal integration, which is achieved when climate concerns are addressed across policy sectors. Given the increasing interlinkages between scales and sectors driven by globalization, a new paradigm has emerged combining both vertical and horizontal integration: diagonal integration (Mullally and Dunphy 2015) (Figure 9.1). While this type of policy is relevant to the Gulf Arab states in general, and Saudi Arabia in particular, it is yet to be recognized in these countries. Against this background, climate policy integration can be problematic because in practice it often involves economic, social, technological and political dimensions; interactions between different sectors (such as energy, water and agriculture); interactions between different actors (such as academic, government, private, non-governmental and individual citizens); different policy domains (e.g. climate policy and development policies) and interactions between different levels of governance (Adelle and Russel 2013). Since its origin, traced back to Collier’s 1997 work, scholars and practitioners have attempted to assess the factors that influence CPI. However, a systematic framework that enables the identification of different factors and conditions, and the possible links between them, to promote or hinder CPI is still lacking (Adelle and Russel 2013; Runhaar et al. 2014). Thus, this section offers a synthesis of relevant factors influencing CPI based on review of literature on general theories on climate adaptation and mitigation governance, 234

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

FIGURE 9.1 Vertical, horizontal and diagonal orientations of climate policy integration. (Source: Mullally and Dunphy (2015).)

environmental policy integration and climate change mainstreaming. This chapter categorizes three main factors influencing CPI: information and awareness, institutional architecture, and availability of financial and human resources.

Data, information and awareness The challenges related to climate change information critically affect climate change policy integration. These include the extent of data, knowledge and awareness of climate-related issues and the availability, accessibility, credibility and reliability of information. Furthermore, the manner by which information is communicated and translated by climate change experts and the way the information is received by the users (i.e. planners and decision-makers) are also vital. Science-based knowledge needs to be applicable and relevant to be integrated into policy. This requires translating scientific data on climate change into policy-relevant information (Ayers et al. 2014; Cuevas et al. 2015; Oliveira et al. 2015). The knowledge gap on the links between climate change and economic development could prevent an accurate analysis of the opportunities for integrating climate policies into economic development policies.

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

235

The level of awareness of climate change and its predicted impacts can shape the attitudes, behaviours, priorities and actions of governments towards climate change policy integration, and this can result in powerful opportunities or barriers to integration (Biesbroek et al. 2011).

Institutional architecture Planning for climate change policy integration is a challenge about ‘leadership, co-ordination, and collective action’; thus, it is about institutions (Evans and Steven 2009). Several studies have identified the serious barriers to climate policy integration as institutional (Cuevas et al. 2015; Eisenack et al. 2014; Oberlack and Eisenack 2014), classified as rule-based institutional, social structure-based institutional and organizational challenges. First, the rule-based institutional challenges relate to how formal institutions such as policies and regulatory support affect the commitment of governments to address climate change, the government prioritization of climate change, and the autonomy of governments to make decisions on climate change. For instance, the absence of formal legislation that mandates actors to incorporate adaptation or mitigation into their activities is a serious barrier to climate policy integration. Second, social structures that affect the planning for climate change include attitudes, values, norms, practices and beliefs that influence how and why individuals and societies engage in climate change and economic planning. Third, the challenges related to organizational institutions primarily deal with the institutional arrangements between organizations that build cooperation and collaboration across scales, and the linkages among organizations that encourage either cohesion or fragmentation among institutions.

Availability of financial and human resources Resource constraints have always been a problem for governments. They also play a crucial role in climate change planning and integrational capacity (Biesbroek et al. 2011). In many cases, lack of funding is typically among the primary reasons why the implementation of climate policy integration is delayed (Cuevas 2016). Governments have limited capabilities to invest in or begin new endeavours since their budgets often are overextended. Hence, funding can be a great barrier to integration when it is lacking and a significant opportunity when it is sufficient.

236

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

In climate policy integration, the need for adequate resources extends beyond finance. The availability of staff dedicated solely to climate policy integration is critical. Because climate change is a long-term challenge, the stability of tenure of the human resources is vital – a permanent workforce can help ensure the continuity of integration activities. This issue becomes more complex because these workers must be trained, skilled and knowledgeable about climate change (Cuevas 2016). Accordingly, investing in human resources is necessary.

Introducing political economy of rentier states to CPI While useful in shaping this study’s analytical framework, the focus on the aforementioned CPI barriers only – i.e. information and awareness, institutional architecture and availability of financial and human resources – is insufficient. Given the focus of this study on Saudi Arabia, which is a hydrocarbon-rich state with a majority of its income sourced from oil exports, the study of political economic structures and factors wherein CPI happens is also important alongside the CPI factors to enhance the understanding of what factors and conditions promote or delay climate action in Saudi Arabia. Yet, the role of power and politics in influencing CPI has been largely neglected in CPI literature, and actually there is still no study that specifically focuses on the hydrocarbon-rich Gulf Arab states. Therefore, this section introduces political economic literature to CPI in order to enrich the concept of CPI, and to better understand the special context of hydrocarbon-rich Arab Gulf states, such as Saudi Arabia. The most relevant theory to understand the political economy of hydrocarbon-rich states is rentier state theory (RST). RST is a political economic theory that seeks to explain state–society relations and decision-making process in states that are over-reliant on resource rents (oil export in the case of Saudi Arabia), or externally derived, unproductively earned payments (Gray 2011). In these states, large proportions of national income come from these rents. In the case of the Gulf Arab states including Saudi Arabia, the average share of oil revenues in total government revenues is more than 60 per cent (KPMG 2018). An important feature of rentier states is the significant role played by the abundance of natural resources in shaping the states’

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

237

political economy, and political and social structures. In a rentier state, the government receives the external rent and distributes it according to a hierarchy of beneficiaries that maintains resilient dominance of the government (Beblawi 1987). In such case, only a few groups of actors are involved in generating the majority of wealth and the remaining groups are engaged only in the distribution and utilization of the wealth created (Beblawi 1987). To elaborate this further, it is important to point out the monarchial characteristic of rentier states regimes, wherein the king (or amir) stands at the centre of a regime coalition. In the Gulf Arab states, except Oman, the ruler distributed key offices to his family relatives at the beginning of oil era, creating a dynastic monopoly of important state posts of the new petrostate (Herb 1999). Yet, the ruler has the last word on all state matters, and the room for manoeuvre for other political actors of the state is very little. In monarchical regimes, the constitution formally grants the monarch unchecked power (Lucas 2004). The monarch is the primary distributor of resource revenues. This understanding of political economy is critical to the understanding of domestic climate change policy and governance especially in the oildependent Gulf Arab states because enhancing climate action often requires promoting a transition from hydrocarbon-based economy to low-carbon-based economy with limited dependence on fossil fuels. It raises significant questions for the political economy of rentier states’ structures, including whether advanced climate action (both mitigation and adaptation) will be compatible with or threaten the status quo featured by the central role of the public sector in wealth distribution.

Towards a systematic framework of analysis To illustrate how the RST is introduced to CPI, a regime matrix that links potential actors in climate policy regime and those delineated in a political economic (rentier) regime has been developed (Figure 9.2). A space of interaction, represented by a dotted circle, illustrates how both climate policy actors and political economic actors interact through lobbying, patronage and alignment of political interests. Such interaction could result in recursive path dependency as political economic actors use their power, patronage networks, or even climate policy actors to divert material and financial resources of the state in exchange for maintenance of the status quo. 238

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

FIGURE 9.2 A conceptual framework illustrating the interaction between climate policy regime and political-economy regime.

In this chapter, four types of strategies identified in the literature on political economy and rent are explored to elaborate on the strategies employed by rentier actors to maintain the status quo at the expense of environment or climate. First, rentier actors such as government representatives and related elites engage in ‘defensive strategies’ by ensuring that attempts at lowcarbon transitions are blocked. Instead of focusing on reformulating regime rules and norms to block transitions, this strategy relies on the patronage network between business corporations and governments. This network consists of informal power structures and systematically weakens attempts at low-carbon transitions by rendering formal decisions that favour regime interests (Schmitz et al. 2013). Second, actors can employ ‘material strategies’ that draw on technical capabilities and financial resources to improve the technical dimension of existing technologies and projects. This might involve promises and statements that ‘solutions are just around the corner’. An example is the political support for carbon capture and storage technologies, which claim to use ‘clean coal’ and, thus, are used to legitimate support for the coal industry. The third form of resistance relates to ‘institutional interests’, which are embedded in political cultures, ideologies and governmental structures. The engagement of rentier actors to use institutional powers often involves the use of policy and institutional resources to make existing CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

239

technologies and practices appear superior to proposed alternatives. This could be achieved by prioritizing certain technologies over others by creating policy arguments on the basis of comparative costs, energy security and technicalities. The provision of fossil fuels is one example of institutional power used to maintain a civil society bond towards fossil fuels. Fourth, rentier actors engage in the use of ‘discursive strategies’, which refer to the tendency of actors to dominate the discourses that shape not only what is discussed but also how issues are discussed. In this case, actors facilitate research and technical support, expert witness hearings, position papers and sometimes advertisements in ways that enhance the legitimacy of the existing regime. Regime actors can use their position and authority to, for example, render problem definitions or policy goals.

Climate economy integration in Saudi Arabia: Challenges and opportunities In this section, drawing on a review of secondary literature including national communication reports, INDC, Saudi Vision 2030 and the National Transformation Program (2018–20), as well as interviews with Saudi climate change experts, challenges and opportunities for climate policy integration in Saudi Arabia are identified.

Data uncertainty and knowledge gap about climate change Availability of country-specific data and information is vital to address the impacts of climate change effectively. The data needed to guide strategies, plans and decision-making processes include: emissions inventories (to guide mitigation plans); physical impacts of climate change, such as increased average temperatures, changes in precipitation and sealevel rise, non-oil economic sectors including agriculture, fisheries, tourism, water and infrastructure (to guide adaptation plans); and the socio-economic impacts of climate change and the potential co-benefits

240

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

resulting from addressing climate issues in line with general economic development plans. Saudi Arabia’s National Communications provide relevant information on the Kingdom’s national circumstances, GHG inventories and their sources and sinks – or reservoirs – as well as the impacts of climate change on water resources, desertification, health, agriculture and food security. The National Communications indicate that climate-related data, if available, is inconsistent, and of a high level of uncertainty. The uncertainty of data inputs was addressed in many instances in the ‘Third National Communication’: Due to the unavailability of certain source specific input data including emission factors, uncertainties are unavoidable when any estimate of national emissions or removals is made. It is therefore important to establish and express uncertainties quantitatively and/or with the acceptable confidence interval or range … Uncertainties related to input data depend mainly on the size and quality of data collection and record keeping … Uncertainties also appear when the unavailability of input data compels the use of extrapolated and/or averaged values for a particular set of data. Uncertainty of extrapolated or averaged data cannot be quantified precisely because the uncertainties associated with the interpolation and/or averaging procedures also depend on the quality of the relevant data including accuracy.8 The inconsistency of available data can be attributed to the lack of a focal point responsible for collecting, monitoring and validating climate-related data. The collection of climate-related data in Saudi Arabia is based on ad hoc processes depending on the need to respond to UN Framework Convention on Climate Change requirements, such as through National Communications or the NDC. Indeed, the King Abdulaziz City for Science and Technology, King Abdullah City for Atomic and Renewable Energy, King Abdullah Petroleum Studies and Research Center,9 and King Abdullah University of Science and Technology, as well as industries, are important sources of climate-related data and information. Yet, the lack of a central mechanism to coordinate the efforts between these different entities and communicate their research outcomes to end users, including policymakers, could contribute to delays in addressing climate change in the Kingdom. Importantly, fragmentation and uncoordinated efforts

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

241

to collect data may lead to ineffective communication of information between climate change experts and decision-makers, and thus hinder the integration of science into policy. Additionally, the lack of available data, credibility and a communication channel between researchers and policymakers is a major reason behind the limited awareness of the science-based impacts of climate change among stakeholders. Climate change awareness is vital both at a decisionmaking level and for societal actors, who are the most vulnerable to its impacts and who can play a vital role in addressing those impacts. In Saudi Arabia, the climate change delegation has been described as highly skilled, with the ability to spot opportunities to push the country’s agenda forward in international climate change negotiations (Chemnick 2018; Depledge 2008; Skibell 2017). However, the knowledge gap and understanding of climate change impacts for end users (such as oil industry and utility companies) or at the societal level remain an issue in Saudi Arabia. For instance, the ‘Third National Communication’ indicates: The public and healthcare professionals are not fully aware about the issue of climate change and its adverse health impacts. There is also a lack of [a] comprehensive research programme on climate change and health impacts across the Kingdom. As a result, there [are] scarce statistics on climate related health problems and other environment related health events with climate change.10

Heavy involvement of the Ministry of Energy At the international level, the Saudi delegation to international climate change negotiations has been dominated by the Ministry of Energy (named the Ministry of Energy, Industry, and Mineral Resources before September 2019). The centrality of the Ministry of Energy reflects the early focus of Saudi Arabian climate change policy on its economic, more than environmental, dimension (Depledge 2008). The Ministry of Energy also dominates Saudi Arabia’s climate change governance at the national level. Under the oversight of its Designated National Authority, the Ministry of Energy is also responsible for developing climate mitigation policies that target cutting the country’s GHG emissions. The Ministry of Environment, Water and Agriculture, which leads the country’s

242

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

effort to protecting its natural environment (including environmental pollution, water and food security, marine and coastal environments, desertification and afforestation, waste management and biodiversity), oversees the country’s adaptation to climate change. Furthermore, the General Authority of Meteorology and Environmental Protection has a stake in addressing climate change with a focus on meteorology and weather forecasting. This institutional architecture presents both challenges and opportunities for climate change governance in Saudi Arabia. In its NDC, Saudi Arabia listed its climate change ambitions in terms of both mitigation (such as promoting energy efficiency, renewable energy, carbon capture and storage or utilization, methane recovery and flare minimization) and adaptation (such as water and wastewater management, urban planning, marine protection, desertification reduction, early warning system establishment and coastal zone management). At present, however, Saudi Arabia does not have a national climate action plan, which can provide a holistic approach that translates climate mitigation and adaptation ambitions listed in the NDCs into action. The lack of a holistic approach to addressing climate change as well as inefficient coordination between different governmental entities and industries might jeopardize the Kingdom’s ambitions to address climate change effectively. At present, most of Saudi Arabia’s climate-related initiatives are focused on the energy sector. Most notably, as part of Saudi Arabia presidency of the G20, the Ministry of Energy has put forward the concept of the circular carbon economy (CCE) and plans to put it at the centre of the country’s climate change mitigation strategy (Williams 2019). Also, in 2017, a Renewable Energy Project Development Office was established in the Ministry of the Energy (formerly, Ministry of Energy, Industry, and Mineral Resources). The aim of the office is to raise the renewable energy in the total electricity mix within the Kingdom to 27.3 GW by 2023, and 58.7 GW by 2030. Further, Saudi Aramco took the lead as a founding member of the Oil and Gas Climate Initiative, a chief executive officer–led initiative of ten companies that formulates a platform for knowledge exchange and collaboration on climate change action in oil and gas industries.11 While the Ministry of Environment, Water and Agriculture is responsible for addressing the sustainability of environmental issues, like food and water security, agriculture, marine

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

243

and coastal environments, these environmental issues are yet to be linked to climate change (MEWA 2018). Successful planning for climate change integration is about coordination and collective action. The central role of the Ministry of Energy and Aramco in addressing climate-related matters focusing mainly on the energy sector could jeopardize the Kingdom’s ambitions to align climate change policies with economic diversification strategies by: creating biased decision-making that benefits oil and gas sectors at the expense of other sectors such as agriculture, water, fisheries and infrastructure; and fragmenting policy among organizations, especially given the limited role of the Ministry of Environment, Water and Agriculture and the lack of an inter-ministerial committee whose role is to ensure integrity and collaboration between organizations across sectors and different levels of governance. This could eliminate the role of bottom-up initiatives and citizens’ involvement in addressing climate change and could counteract Vision 2030’s economic ambitions.

Availability of financial resources but misallocation towards climate finance Allocating financial resources for both mitigation and adaptation, or the synergy of the two with general economic development funding, is essential to achieve climate action ambitions. The gap in data, information and knowledge and the lack of a climate action plan hinder the allocation of funding to climate-related issues. Interviewed Saudi climate change experts stress that the availability of financial resources is not an impediment to addressing climate change; rather, it is the allocation of finances that is the challenge. The lack of necessary information about the costs of climate change impacts, potential co-benefits associated with addressing climate change in line with economic diversification, and the knowledge gap necessary to factor climate change into sectoral development planning are major challenges to allocate available funding towards addressing climaterelated issues. Vision 2030 focuses on enabling the private sector as a main pillar of its economic diversification away from hydrocarbon dependence. Addressing the impacts of climate change can bring about potential

244

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

co-benefits and open a window of opportunity for local and international investors to participate in new markets, such as renewable energy, energy efficiency and electric vehicles. Investments in value chains of renewable energy, energy efficiency, electric vehicles or sustainable water desalination are promising opportunities with economic, environmental and social advantages, including the creation of new jobs and reduction of air emissions and associated health benefits. Investments in these new markets mean new technologies, which in many cases involve financial incentives to enable their adoption, especially at an early stage. Lack of sectoral plans that factor in climate change misinforms the financial needs of sectors to address climate-related issues or puts an extra burden on the state budget. In Saudi Arabia, at present, there is no climate-related finance specified in the NDC, National Communications or Vision 2030. This is mainly because of the lack of climate change governance architecture in Saudi Arabia. ‘Green finance’, or ‘climate finance’, which is a mechanism aimed at funding sustainable projects and enabling green economic growth12 is yet to be adopted in the Gulf Arab states except in the UAE. In Saudi Arabia, oil and gas export revenue continues to account for over 60 per cent of government revenue. Saudi Arabia’s sovereign wealth fund, the PIF, has shifted attention towards investing in green technologies only recently. For example, the PIF agreed to invest more than $1 billion in the electric car start-up Lucid Motors (Arnold 2018). However, the lack of a climate action plan brings no clear signs whether clean technology investments and divestment from fossil fuels are priorities for the PIF. For instance, Saudi Arabia and the SoftBank Group announced a $200 billion plan to build the world’s biggest solar power generation plant (Algethami 2018). However, the project has been stalled (Jones and Said 2018). Human capacity, on the other hand, offers a mix of challenge and opportunity for Saudi Arabia to support the implementation of ambitions set out in the NDC. Saudi Arabia’s NDC suggests that there is a need for sustained capacity-building efforts and upgrading of skills at the individual and systemic levels to support the implementation of the climate ambitions set out therein (Saudi Arabia NDC 2015). Yet, insufficient knowledge of links between climate change and economic development poses a barrier to specifying the capacity-building and the financial needs to support upgrading of skills.

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

245

Climate action ambition or perpetuation of hydrocarbon-path dependency? This section aims to explain the reasons behind a delayed action on climate change in Saudi Arabia, i.e. the persistence of climate policy issues of inconsistency and uncertainty of climate-related data, weak climate-related institutional structures, and limited financial and human capacity resources associated with climate action (see the section ‘Climate economy integration in Saudi Arabia: Challenges and opportunities’). This section draws upon secondary data, including company and governmental websites; newspaper articles; governmental documents, such as Saudi Arabia’s National Communication reports, Saudi Arabia’s INDC, Saudi Vision 2030 and Saudi National Transformation Program (2018–20); and in some cases social media outlets – such as official Twitter accounts – were also instrumental. It adopts the concepts of RST to explore the interaction between political economic regime and climate policy regime in order to identify the strategies employed by political economic actors to assist or resist advancement of climate action in Saudi (see Figure 9.2). It identifies four strategies adopted by political actors to delay climate action while protecting long-term production of hydrocarbons.

Material strategies: Use of low-carbon technologies to protect interests in hydrocarbons The second form of power is material strategies, through which national oil companies and energy ministry are involved in addressing climaterelated issues by drawing on technical capabilities and financial resources to address arising challenges that constrain companies’ profit and hence state’s revenues. A salient example is the concept of circular carbon economy (CCE) which was proposed by Saudi Arabia in the lead-up to its G20 presidency in 2020. CCE is a framework that focuses on addressing carbon emissions from all energy sectors through the 4Rs: Reducing the carbon that must 246

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

be managed in the first place (through energy efficiency, renewables and nuclear energy), Reusing carbon as an input to create feedstocks and fuels (including mobile carbon capture technology for transportation that captures and stores carbon on board the vehicle using a redesigned exhaust system, and CO2-enhanced oil recovery [CO2-EOR], which uses injected CO2 to extract oil that is otherwise not recoverable), Recycling carbon through the natural carbon cycle with bioenergy, and, unique to circular carbon economy (through natural sinks such as forests and oceans and the use of hydrogen-based synthetic fuels to recycle CO2), and Removing excess carbon and storing it (through carbon capture, utilization, and storage [CCUS]) (KAPSARC 2020). Led by the Ministry of Energy, the concept was developed in association with international energy and climate influential organizations including International Energy Agency (IEA), International Renewable Energy Agency and Global CCS Institute. Similarly, the development of the Kingdom’s first carbon dioxideenhanced oil recovery demonstration project commenced in 2015. It was estimated that 60–65 per cent of all Saudi oil produced between 1948 and 2000 came from Ghawar, and in 2009, Ghawar produced about 6.25 per cent of global oil production. After sixty years of production, the field’s production capacity has been significantly reduced from more than 5 million barrels a day to less than 4 million barrels a day and Saudi Aramco seeks new schemes to extend its life, including through the use of CO2-enhanced oil recovery (EOR). The carbon project is entirely financed by Saudi Aramco,13 and led by the Saudi Aramco’s EXPECAdvanced Research Center. It captures 40 million cubic feet per day of CO2 at the Hawiyah gas recovery plant, and transport the captured carbon via an 85-kilometre pipeline to the injection site at the Ghawar oil field (a small flooded area in the Uthmaniyah production unit) for enhanced oil recovery.14 While carbon capture schemes are being promoted around the world as a way to slow global warming by preventing the release of carbon dioxide into the atmosphere, the main purposes of the CCE and Uthmaniyah project are to increase oil production for further export, and to keep up with increasing domestic demand for natural gas. The focus on carbon capture and reuse technologies is particularly concerning given the immaturity of these technologies to help achieve global Paris Climate Accord targets of cutting greenhouse emissions by almost the half by 2050. CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

247

Discursive strategies: Influencing public debate through media framing Other observed strategies in the Kingdom are discursive strategies aimed at reinforcing, steering public sentiments and dissuading public about governmental, albeit exemplified, action on climate change. These include facilitation of research and technical resources to support claims of fossil forms of energy. For example, in 2018, the outcome of a study, partially funded by Aramco Services Company, on ‘Global carbon intensity of crude oil production’ (Masnadi et al. 2018) has been highlighted by governmental actors through different media outlets, mainly because the study has classified Saudi Arabia’s crude oil as one with the lowest carbon intensity in the world. This has been echoed through different media platforms including through Saudi Arabia’s official Twitter account for Climate Change and Sustainability,15 and Saudi Aramco website.16 The aforementioned Uthmaniyah project is another example of discourse used to promote the viability of existing fossil forms of energy. As HE Ali al-Naimi17 puts it: ‘I believe there is enough technology to sequester CO2 and to take CO2 out of the atmosphere.’ The use of media framing has also been observed in announcements of mega low-carbon energy projects such as the signing of a memorandum of understanding between Saudi Arabia and Japanese multinational conglomerate Soft Bank to build the world’s largest solar development of a $200 billion and 200 GW capacity.18 However, this project has later on been scaled back.19 These terms such as ‘largest in the world’ contradict with the actual implementation of renewable energy projects in Saudi Arabia, which has already set a target to source 3.45 GW of its electricity from renewables by 2020 and 9.5 GW by 2023 (IRENA 2019) that was also scaled back from original target of sourcing 54 GW of electricity from renewables by 2023. Similarly, in 2021, Saudi Arabia announced its intent to generate 50 per cent of its electricity from renewables by 2030, with the other half coming from natural gas-fired power generation (Paraskova 2021), meaning meeting the 2030 target of generating 58.7 GW from renewables in less than ten years. While this is promising, a strategy that details how this target will be achieved has not been launched. In fact, the total installed capacity of renewables in Saudi Arabia does not exceed 413 MW (0.5 per cent of total electricity installed capacity) by the end of 2020 (IRENA 2021). This gives little indication that Saudi Arabia will be able 248

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

to meet its ambitious target of 3.45 GW by 2020. Similarly, while many joint ventures have been established with international organizations to facilitate renewable energy technology transfer to Saudi Arabia, most of them have been terminated without actual renewable energy output (Atalay et al. 2016). Therefore, the government’s discourse – which is often used to influence public debate – contradicts the main purpose of the projects. The discourse, for example, claims that the importance of constructing such CO2-enhanced oil recovery project is to minimize the environmental degradation associated with carbon dioxide production, putting emphasis on the amount of carbon emission reductions. Indeed, according to the frequently used statements on their media outlets, as, for example, stated on Saudi Aramco’s website: ‘This breakthrough initiative demonstrates that we, as an industry leader, are part of the solution to proactively address global environmental challenges’, said Amin H. Nasser, acting president and CEO. ‘Saudi Aramco is carrying out extensive research to enable us to lower our carbon footprint while continuing to supply the energy the world needs.’20 In this way, economic-political actors are capable of maintaining the status quo (i.e. extend the reliance on hydrocarbons) and at the same time influencing the public debate about the expansion of low-carbon technologies.

Defensive strategies: Strategic isolation of new entrants The first form of power is defensive strategy by which government representatives and related elites ensure that attempts which might threaten regime survival are blocked. In Saudi Arabia, the dominance of energy ministry as well as national oil companies in climate change governance, both at international and national levels, has played a key role in strategically isolating new entrants who might threaten the interests of regime. The Ministry of Energy has played a central role in representing Saudi Arabia’s delegation in international climate change negotiations such as the UNFCCC’s Conferences of Parties. Also, it dominates climate change governance at the national level. For instance, in 2017, a Renewable Energy Project Development Office was established in the Ministry of Energy to raise the share of renewable energy capacity in the Kingdom’s energy mix to 27.3 GW by 2023 and 58.7 GW by 2030. This might be CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

249

useful because the Ministry has already been the sole policymaker of the energy sector in the Kingdom, including the electricity sector, and this can help eliminate energy policy fragmentation. Electricity generation in Saudi Arabia has been sourced under the Independent Power Producers model (IPP) along with power purchase agreement (PPA) to ensure the purchase of electricity from licensed generators. Thus, implementing the current IPP and PPA model can support the spread of renewable energy. However, the prevailing central role of the Ministry of Energy, and other state-owned enterprises such as Electricity and Cogeneration Regulatory Authority (ECRA), and the focus on large-scale implementation of power projects might eliminate the entry of small to medium enterprises or non-governmental organizations that are not advantaged by the wellestablished state patronage. In this way, new entrants will have limited ability to influence policy decisions associated with future inclusion of renewables in Saudi Arabia.

Conclusions This chapter investigated the domestic governance of climate change in Saudi Arabia. It assessed the challenges and opportunities for aligning climate change policies with the Kingdom’s economic diversification strategies. While Saudi Arabia has been actively involved in international climate change governance and negotiations, its domestic action on climate change is far from being tangible. Indeed, there have been few initiatives to address climate change. Yet, despite expressing interest to address climate change in line with economic diversification strategies, the Kingdom is yet to release a national climate action plan, and a closer look at those climate-related initiatives indicates that Saudi Arabia’s domestic action on climate change remains to be paradoxical. Saudi Arabia’s political trajectory has been featured by excessively centralized, top-down decision-making system with vested interest in hydrocarbons, informal institutions, absence of climate action plan, and an intensive role for the Ministry of Energy in addressing climate-related issues. This, however, delays progress in advancing the institutional architecture deemed essential to enable systematic consideration of climate change in sectoral planning and development; leads to fragmentation in

250

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

climate policy and efforts, and importantly leads to prioritizing economic agenda over climate-related agenda. This study revealed that political economic actors have played a strategic role in intervening in domestic climate action to protect interest in hydrocarbon and maintain the status quo. Specifically, three political strategies have contributed to a delayed tangible action on climate change: defensive strategies (by expanding public sector dominance of climate action and strategic isolation of other climate change interest groups), material strategies (i.e. using large-scale low-carbon technologies to protect interests in hydrocarbons) and discursive strategies (i.e. influencing public debate through media framing).

Policy recommendations Separate the duties of Energy and Environment Ministries in terms of addressing climate change but enhance their cooperation. It is important to ensure neutrality in climate action in order to avoid biased decisionmaking processes that meet the interests of strong lobbies such as those of oil industry. Saudi Arabia can be advantaged by developing an independent climate change committee to extend the influence now enjoyed by the Ministry of Energy in addressing climate change to other ministries; ensure consistent policy delivery across ministries and sectors, and eliminate policy fragmentation, including during health pandemic events. Develop a climate action plan that sets out targets, strategies, policies and regulations and assigns clear duties and responsibilities to coordinate and advance climate action with respect to reducing GHG emissions, as well as climate resilience. A climate action plan is an important tool to translate ambitions listed in NDCs into action on the ground. Use existing arrangements and institutional architecture set for delivering economic diversification ambitions but ensure to factor climate change into sectoral development and stimulus measures. Support climate change research, and coordinate efforts of data collection, monitoring and verification. Facilitate information exchanges between climate experts and economic development policymakers. Develop climate change capacity-building programmes targeting not only policymakers but also end users, such as utility companies, private investors, local municipalities and civilians.

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

251

Notes 1 ESCWA et al., Arab Climate Change Assessment Report – Main Report. RICCAR, 2017.

2 Data as of 2017, ‘Kingdom of Saudi Arabia Budget Report: A Review of

KSA 2019 Budget and Recent Economic Developments’, KPMG, accessed July 2019.

3 Ibid. 4 Data as of 2017, ‘Oil Rents (per cent of GDP)’, World Bank, accessed December 2018.

5 Anurag Kotoky, P. R. Sanjai and Anindya Upadhyay, ‘India Proposes a Goal

of 15 per cent Electric Vehicles in Five Years’, Bloomberg, 6 September 2018.

6 See homepage of Clean Development Mechanism Designated National Authority, https://www.cdmdna.gov.sa, accessed 12 September 2019.

7 The Global Status of CCS, https://adobeindd.com/view/publications/

2dab1be7-edd0-447d-b020-06242ea2cf3b/qhqw/publication-webresources/pdf/CCS_Global_Status_Report_2018_Interactive.pdf. 2018. Global CCS Institute.

8 The United Nations Framework Convention on Climate Change, Third National Communication of the Kingdom of Saudi Arabia (2016), 16.

9 KAPSARC data portal is a new initiative aiming to provide a platform for

energy-related database where data are imported from different sources both nationally and internationally, https://datasource.kapsarc.org/pages/home/

10 The United Nations Framework Convention on Climate Change, Third National Communication of the Kingdom of Saudi Arabia (2016), 244.

11 Learn more about the Oil and Gas Climate Initiative at http:// oilandgasclimateinitiative.com, accessed 14 September 2019.

12 Read more about ‘green financing’ at ‘Green Financing’, United Nations

Environment Programme, accessed 7 March 2019 and ‘climate finance’ at ‘What is Green Finance?’ Climate Mundial, accessed 7 March 2019.

13 Read about ‘Aramco to inject CO2 into world’s biggest oilfield in 2012’ at Arab Business, accessed 30 April 2019.

14 More information about Saudi Arabia pilot carbon capture project can be found at Reuters, accessed 1 May 2019.

15 KSA climate change Twitter feed, https://twitter.com/KSA_Climate_/ status/1065158288692707328

16 Read more about ‘Study shows record low carbon intensity of Saudi crude oil’ at Saudi Aramco website, accessed 30 April 2019.

252

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

17 Learn about Uthmaniyah CO2-EOR demonstration project, https://www. cslforum.org/cslf/sites/default/files/documents/riyadh2015/AlBuraikUthmaniyahCO2EORProject-Ministerial-Riyadh1115.pdf, accessed 30 April 2019.

18 Read more about Saudi–SoftBank Solar deal at Bloomberg, accessed 3 May 2019.

19 Read about the scale back of Saudi–SoftBank Solar deal at Wall Street Journal, accessed 3 May 2019.

20 Media coverage about Saudi Aramco’s carbon capture project can be found on Saudi Aramco website, accessed 20 April 2019.

References Adelle, C. and Russel, D. (2013). ‘Climate Policy Integration: A Case of Déjà Vu?’ Environmental Policy and Governance 23, no. 1: 1–12. Algethami, S. (2018). ‘From Lucid to Tesla, Saudi Wealth Fund Goes on Spending Spree’, Bloomberg, 19 September. Al-Sarihi, A. (2018). ‘Prospects for Climate Change Integration into the GCC Economic Diversification Strategies’, LSE Kuwait Programme Paper Series, no. 20, February. Arnold, T. (2018). ‘Saudi’s PIF Invests More than $1 Billion in Electric Carmaker Lucid Motors’, Reuters, 17 September. Atalay, Y., Biermann, F. and Kalfagianni, A. (2016). ‘Adoption of Renewable Energy Technologies in Oil-rich Countries: Explaining Policy Variation in the Gulf Cooperation Council States’, Renewable Energy 85: 206–14. Ayers. J. et al. (2014). ‘Mainstreaming Climate Change Adaptation into Development in Bangladesh’, Climate and Development 6, no. 4: 293–305. Beblawi, H. (1987). ‘The Rentier State in the Arab World’, Arab Studies Quarterly 9, 4: 53. Available from: http://www.jstor.org/stable/41857943 Biesbroek, R. et al. (2011). ‘Barriers to Climate Change Adaptation in the Netherlands’, Climate Law 2, no. 2: 181–99. Busch, C. (2018). ‘China’s All in on Electric Vehicles: Here’s How That Will Accelerate Sales in Other Nations’, Forbes, 30 May. Chemnick, J. (2018). ‘Saudi Arabia: Oil Kingdom and a “High Priest” Stall Action for 30 Years’, E&E News, 29 October. Cuevas, S. C. (2016). ‘Examining the Challenges in Mainstreaming Climate Change Adaptation into Local Land-Use Planning: The Case of Albay, Philippines’, PhD thesis, The University of Queensland, 2016. Cuevas, S. C. et al. (2015). ‘Challenges in Mainstreaming Climate Change Adaptation into Local Land Use Planning: Evidence from Albay, Philippines’, International Journal of Climate Change: Impacts and Responses 7, no. 3: 45–65.

CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

253

Depledge, J. (n.d.). ‘Striving for No: Saudi Arabia in the Climate Change Regime’. Eisenack, K. et al. (2014). ‘Explaining and Overcoming Barriers to Climate Change Adaptation’, Nature Climate Change 4: 867–72. Osman-Elasha, B. (2010). ‘Mapping of Climate Change Threats and Human Development Impacts in the Arab Region’, UNDP-RBAS. ESCWA et al. (2017). Arab Climate Change Assessment Report - Main Report. RICCAR. Evans, A. and Steven, D. (2009). ‘An Institutional Architecture for Climate Change: A Concept Paper’, Center on International Cooperation (March). Gray, M. (2011). ‘A Theory of “late Rentierism” in the Arab States of the Gulf ’, Centre for International and Regional Studies, Georgetown University, School of Foreign Service in Qatar. Occasional Paper No. 7. Herb, M. (1999). All in the Family: Absolutism, Revolution, and Democracy in the Middle Eastern Monarchies. SUNY Series in Middle Eastern Studies. Albany, NY: State University of New York Press, p. 236. IRENA. (2019). ‘Renewable Energy Market Analysis: GCC 2019’. International Renewable Energy Agency, Abu Dhabi, UAE. IRENA. (2021). ‘Renewable Capacity Statistics 2021’. International Renewable Energy Agency, Abu Dhabi, UAE. Jacobson, M. Z. et al. (2019). ‘Impacts of Green New Deal Energy Plans on Grid Stability, Costs, Jobs, Health, and Climate in 143 Countries’, 1, no. 4: 449–63. Jones, R. and Summer, S. (2018). ‘Saudi Arabia Shelves Work on SoftBank’s $200 Billion Solar Project’, The Wall Street Journal, last modified 30 September. KAPSARC dataportal is a new initiative aiming to provide a platform for energy-related database where data are imported from different sources both nationally and internationally. https://datasource.kapsarc.org/pages/home/ KAPSARC. (2020). ‘CCE Guide Overview: A Guide to the Circular Carbon Economy (CCE)’. King Abdullah Petroleum Studies and Research Center. Available at: https://www.cceguide.org/guide/ KPMG. (2019). ‘Kingdom of Saudi Arabia Budget Report: A Review of KSA 2019 Budget and Recent Economic Developments’, KPMG, accessed July 2019. Klein, R. J., Schipper, E. L. F. and Dessai S. (2005). ‘Integrating Mitigation and Adaptation into Climate and Development Policy: Three Research Questions’, Environmental Science & Policy 8, no. 6: 584. Kompas, T., Pham, V. H. and Che, T. N. (2018). ‘The Effects of Climate Change on GDP by Country and the Global Economic Gains from Complying with the Paris Climate Accord’, Earth’s Future 6, no. 8: 1153–73. Kotoky, A., Sanjai, P. R. and Upadhyay, Anindya. (2018). ‘India Proposes a Goal of 15% Electric Vehicles in Five Years’, Bloomberg, 6 September. KSA. (n.d.). Climate Change twitter feed https://twitter.com/KSA_Climate_/ status/1065158288692707328 Lafakis, C., Ratz, L., Fazio, E. and Cosma, M. (2019). ‘The Economic Implications of Climate Change’, Moody’s Analytics. online at: https://www. moodysanalytics.com/-/media/article/2019/economicimplications-ofclimate-change.pdf 254

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Lafferty, W. and Hovden, E. (2003). ‘Environmental Policy Integration: Towards an Analytical Framework’, Environmental Politics 12, no. 3: 1–22. Lucas, R. E. (2004). ‘Monarchical Authoritarianism: Survival and Political Liberalization in a Middle Eastern Regime Type’, International Journal of Middle East Studies 36: 108. Mahmoud, M. (2017). ‘Weathering Climate Change in the Gulf ’, Arab Gulf States Institute in Washington, 14 November. Masnadi, M. S. et al. (2018). ‘Global Carbon Intensity of Crude Oil Production’, Science 361, no. 6405: 851–3. McGlade, C. and Ekins, P. (2015). ‘The Geographical Distribution of Fossil Fuels Unused when Limiting Global Warming to 2C’, Nature 517: 187–90. Metz, B. et al. (eds). (2007). ‘Intergovernmental Panel on Climate Change’, in Technical Summary: Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge: Cambridge University Press. Ministry of Environment, Water and Agriculture (MEWA). (2018). ‫الملخص التنفيذي‬ ‫لالستراتيجية الوطنية للبيئة‬. Ministry of Environment, Water and Agriculture, Kingdom of Saudi Arabia. Mitchell, T. and Maxwell, S. (2010). ‘Defining Climate Compatible Development’, Climate and Development Knowledge Network, November. Mullally, G. and Dunphy, N. P. (2015). ‘State of Play Review of Environmental Policy Integration Literature’. Dublin: National Economic and Social Council. Research series paper no. 7. Muttitt, G. (2016). ‘The Sky’s Limit: Why the Paris Climate Goals Require a Managed Decline of Fossil Fuel Production’, Oil Change International, September. Muttitt, G. and McKinnon, H. (2017). ‘Overheated Expectations: Valuing Saudi Aramco’s IPO in Light of Climate Change’, Oil Change International, August. Nagraj, A. (2018). ‘Saudi Officials Form Committee in Qassim to Investigate Flood-Related Incidents’, Gulf Business, 19 November. Oberlack, C. and Eisenack, K. (2014). ‘Alleviating Barriers to Urban Climate Change Adaptation through International Cooperation’, Global Environmental Change 24 (January). OECD. (2009). ‘Integrating Climate Change Adaptation into Development Cooperation: Policy Guidance’, Organisation for Economic Cooperation and Development, October. Oliveira, B. C. P., Behagel, Jelle H., and Sette Camara Moreira, L. S. (2015). ‘Integrating Climate Resilience in Policy and Planning of Low Emission Development Strategies’, Ecosynergy. Paraskova, T. (2021). Saudi Arabia: ‘We Will Be Another Germany in Renewables’. Oil Price. 28.01.2021. Available at: https://oilprice.com/Alternative-Energy/ Renewable-Energy/Saudi-Arabia-We-Will-Be-Another-Germany-InRenewables.html Runhaar, H., Driessen, P. and Uittenbroek, C. (2014). ‘Towards a Systematic Framework for the Analysis of Environmental Policy Integration’, Environmental Policy and Governance 24, no. 4: 233–46. CLIMATE ACTION AND ECONOMIC DIVERSIFICATION

255

Saudi Arabia. (2015). ‘The Intended Nationally Determined Contribution of the Kingdom of Saudi Arabia under the UNFCCC’, United Nations Framework Convention on Climate Change, November 2015. Schmitz, H., Johnson, O. and Altenburg, T. (2013). ‘Rent Management – the Heart of Green Industrial Policy’, in IDS Working Paper 418. Brighton: IDS. Skibell, A. (2017). ‘Politics: How Do You Shift Republicans on Climate? Be Nice’, E&E News, 6 September. The United Nations Framework Convention on Climate Change, Third National Communication of the Kingdom of Saudi Arabia (2016). Williams, E. (2019). ‘Achieving Climate Goals by Closing the Loop in a Circular Carbon Economy’, in King Abdullah Petroleum Studies and Research Center. Riyadh, Saudi Arabia. World Bank. (2017). ‘Imports of Goods and Services (% of GDP)’, World Bank, accessed 2017.

256

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

10 LAST MAN STANDING Saudi Aramco and global climate action Jim Krane

Introduction In a world beset by intensifying climate change mainly produced by combustion of fossil fuel, Saudi Arabia is ground zero. The firm accountable for the single largest contribution to that warming is the Kingdom’s national oil company, Saudi Aramco. Oil and gas produced by Aramco was responsible for roughly 4.8 per cent of global emissions in 2018 and about 4.3 per cent of total atmospheric accumulations since 1965, the largest share of any single firm.1 At the same time, the Kingdom’s intense summer climate faces the potential of being warmed into intolerability by century’s end.2 Despite the implied climate damage to its homeland, Saudi Aramco is moving to expand, streamline and protect its system of oil monetization, so that the Saudi NOC can produce and market the Kingdom’s prodigious below-ground reserves ‘for generations to come’, as its prospectus states. ‘The Company intends to maintain its position as the world’s leading crude oil producer by production volume’, states the company’s bond prospectus of April 2019. ‘Its reserves, operational capabilities and spare capacity allow it to increase production in response to demand.’3 The Kingdom’s former energy minister Khalid al-Falih gave voice to the strategic plan outlined here, when he predicted in 2019 that no other oil producer would survive longer. ‘Saudi Arabia is the most prolific basin

for oil and gas. We have the best resources and the best capabilities and we are going to produce the last drop of oil’, al-Falih said.4 The expansion of hydrocarbon production, refining, conversion and marketing outlined in Saudi Aramco’s 2019 bond prospectus amounts to a determination to be the ‘last man standing’ in global oil markets. That ambition runs at cross-purposes to global decarbonization efforts, and presumes that oil will be difficult to replace in transportation sectors like aviation, while retaining increasing non-combustion applications in chemical and plastics manufacture.5 Aramco’s plan appears to leverage world-leading advantages in unit costs ($7.50 per barrel) and upstream carbon intensity (5g CO2 per megajoule), along with a forty-year exclusive concession agreement – which can be extended another sixty years until 2117 – to perpetuate a revenue stream far larger in 2018 than that of any other company in the world: $244 billion in EBITDA.6 The Aramco bond prospectus and other company statements infer that Saudi Arabia will not voluntarily phase out oil production and concede the market to competitors while oil demand still exists. Rather, the company will await signals from the global oil-consuming public that demand for oil is finally satiated.7 The $244 billion in 2018 revenues cited above were split almost evenly with the Saudi government: $111 billion for Aramco and $102 billion paid to the government in the form of taxes and royalties. Those payments, in turn, provided 63 per cent of government revenues. In 2018 overall, Aramco contributed 43 per cent of Saudi Arabia’s GDP.8 The Saudi gamble is that oil retains a role in a climate-stressed world, and that Saudi Arabia retains its business model even after other oil companies have failed or moved to other lines of business. At its core, Aramco’s ‘last man standing’ approach amounts to a response to three important calculations: ●●

●●

258

First, regime survival and external security remain reliant on regime control over oil rents, replacement of which constitutes a lengthy and uncertain process. Second, the risks to Saudi Arabia implied by of a loss of oil rents outweigh the risks (in the view of Saudi elites) of a changing climate, whether to the climate of the Arabian Peninsula or the Earth more broadly. This view is bolstered by interpreting petrostate climate strategy as a collective action problem, i.e. that GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

climate damage will be little affected by a premature winding up of Saudi Aramco, if other firms continue to market oil. ●●

Third, even in a world that is serious about decarbonisation, some uses for oil remain. Saudi Arabia, as the most competitive producer, retains a strong cost advantage that is complemented by the low-carbon intensity of Saudi oil production.9 These attributes allow Saudi Aramco to present itself as the optimal choice to serve a climate-stressed market, even one in decline.

Saudi climate policy calculations are far from unique, however. Myriad fossil fuel-producing states are confronting similar calculations. In autocratic polities in particular, policymakers are unlikely to find attractive replacements for the copious oil rents deployed to achieve social quiescence amid minimal taxation or political participation. Lowcost producers that manage to achieve low fiscal break-evens appear to be best placed to participate the longest10 (Figure 10.1). Internally, Saudi Aramco’s extraordinary rents are the substantive element that persuades the Saudi public to support the Al Saud, the family that so dominates political life that the Kingdom bears its name. Externally, oil and the capacity to adjust production – and the willingness to do so in concert with US interventions – are behind the

FIGURE 10.1 Major oil producers ranked by post-tax break-even costs for new oil production (assuming a 10 per cent rate of return) through 2030. (Source: Saudi Aramco bond prospectus, p. 82.)

Last man standing

259

Kingdom’s strategic power, its embrace and defence by powerful allies, and its lofty geopolitical stature. These are elusive accomplishments for exporters of primary products. Protecting the business – regardless of its environmental drawbacks – is therefore a strategic and economic imperative for the Kingdom and its ruling family. Even so, Saudi Arabia has begun to adopt an economic diversification plan.11 Press reports suggest that Saudi executives remain sceptical of prospects for diversified businesses matching Aramco’s profits, or the wisdom of sharing those profits by selling shares to foreign investors.12 Numerous scholars have demonstrated that oil rents comprise a durable source of income that supports centralized autocratic regimes.13 The oil market stresses imposed by the Covid-19 pandemic, just beginning to dissipate in early 2021, only reinforced the Kingdom’s determination to diversify. One wonders whether diversifying the sources of fiscal revenue implies increasing pressure for a similar process in the political realm, i.e. political decentralization, in the form of increased participation.14 This chapter makes a number of broad observations about climate action and Saudi Arabia by examining the Saudi Aramco bond prospectus, company investments and public statements of its executives, along with literature on climate risk and policy reactions among economies dependent on hydrocarbon rents. The policy reactions chosen by Saudi Arabia are important because of the size of its national oil company –in terms of both Aramco’s share of the oil market and its contributions to atmospheric emissions – as well as the message that Saudi preparations provide to rival oil producers.

Literature review Saudi Arabia is an enigmatic case within the international climate action scene. The Kingdom has long been an avid participant in multilateral climate talks, but its role has mainly been to obstruct progress.15 The Kingdom is also a signatory of the Paris Agreement and its former Oil Minister al-Falih has made statements in support of the Paris goals.16 Saudi Arabia’s NDC aims to reduce emissions by 130 million tonnes of carbon dioxide equivalent (MtCO2eq) from an unspecified businessas-usual trajectory by 2030. However, the Saudi NDC is a ‘conditional’ one that requires continued oil export rents to fund decarbonization efforts.17 260

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

The Saudi NDC target is ambiguous. Attempts to quantify it have resulted in differing estimates. One assessment, by the environmental organization Climate Action Tracker (CAT) finds that Saudi Arabia could claim that it was complying with its NDC and still experience emissions in 2030 that are as much as 77 per cent higher than 2015 levels. CAT categorized the Saudi NDC as ‘critically insufficient’ in late 2020 despite a Covid-driven decline in GHG emissions.18 Another examination of the Saudi NDC finds similarly, that the Kingdom could comply with its NDC and still emit 1,160 MtCO2eq in 2030, which is above levels published in the Kingdom’s own current policies scenarios model. Saudi Arabia’s proposed emissions peak would be the highest among the G-20 economies, at 32.8 tonnes CO2eq per person.19 Other examinations suggest the possibility of more optimistic outcomes. Wogan et al. examine three policy scenarios to pursue decarbonization in the Kingdom’s production of electricity and desalinated water, the source of 40 per cent of the country’s carbon emissions. The authors found that eliminating energy subsidies and adopting market prices on fuels used in power generation – and charging full prices for electricity and water – would discourage energy consumption and drive expensive liquid fuels from power generation. Higher fuel costs would push the sector towards cleaner natural gas and PV solar. Utility sector carbon emissions would fall by about 20 per cent, from 250 to about 200 MtCO2eq between 2018 and 2030. The change would be nearly sufficient to meet the cumulative Paris target of 130 MtCO2eq, and would also raise more than $900 billion for the government in recovered costs by 2030.20 Inside the Kingdom, however, there is little public pressure for climate action. Independent civil society groups that might lobby for action are prohibited. Public opinion appears to show that little can – or should – be done within the Kingdom. A public opinion survey by YouGov put Saudi Arabia on the low end of twenty-eight countries in citizens’ beliefs that human factors were the dominant cause of climate change. Saudis were the least likely among respondents of any country to say that they or their country could do more to mitigate climate change.21 High levels of energy intensity in the Kingdom and continued state subsidization of energy suggest that large gains in efficiency could be realized with straightforward changes in government policy. Data (Figure 10.2) show that Saudi carbon emissions as a percentage of global emissions have increased from about 0.5 per cent in the 1970s and early 1980s to a Last man standing

261

FIGURE 10.2  Saudi carbon emissions growth has outpaced its population growth as a share of the global total. (Sources: World Bank World Development Indicators 2021, BP Statistical Review of World Energy 2020.)

high of 1.8 per cent in 2015–17, a disproportionate amount for a population that was just 0.4 per cent of the global total in 2019. However, this chapter is less concerned with assessing Saudi participation in the global climate regime than in determining the potential effects of that regime on the Saudi political economy. Several authors have written on this subject, albeit using differing methodologies than that deployed here. The consensus appears to be that Saudi Aramco will remain an important player in the global oil market even under declining profitability. Russell frames Saudi Arabia’s climate challenge as a conflict of interest with environmental progress. ‘The central strategic problem facing Saudi Arabia is simply this: it depends on pumping increasing amounts of oil out of the ground to keep the state afloat for the foreseeable future at a time when the world is attempting to limit the carbon release produced by burning fossil fuels.’22 Other authors tackle questions of transforming petrostates into more competitive economies with diverse forms of fiscal revenue. Manley et al. find that producer countries are generally unprepared to deal with a decline in demand for oil and gas, with many holding enormous underground assets relative to GDP that suggest the potential for large stranded assets. Countries exacerbate their risk through policies that 262

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

expose even greater portions of their economies to fossil fuel, including by developing ‘local content’ requirements and subsidized energy services that exacerbate energy intensity of economies, and create industries at risk of decline.23 Luciani argues that climate action undermines prior incentives to leave reserves in the ground in anticipation of higher oil prices, and now portends a shift towards ‘panic and pump’ strategies of stepping up oil production.24 Soummane et al. triangulate the risk faced by Saudi Arabia of exposure to the level of decarbonization implied by the IEA’s Sustainable Development Scenario. By 2030, the authors find that Saudi Arabia remains a major oil exporter, but falling demand brings reduced rent, increased unemployment, a substantial decrease in trade surplus and large budget deficits. By 2030, the accumulated deficit is nearly as large as 2030 GDP.25 Advocacy group Oil Change International finds similarly that Saudi Aramco’s future stock valuation as a partially privatized company depends on investors’ perceptions on how large a portion of Saudi Arabian oil reserves are produced, and what portion is ultimately left stranded by climate action. The authors argue that such calculations are behind Aramco’s accelerating time frame for privatization and depletion.26 On the other hand, Goldthau and Westphal argue against premature demise of petrostates, suggesting that countries enjoying access to cheap fossil fuels may benefit by accruing energy-intensive industrial sectors driven out of the OECD by carbon taxes and other environmental restrictions. Ability to maintain oil export economies amid declines in demand and oil prices depends not just on cost competitiveness of oil production but also on costs of social welfare underwritten by oil. Low-cost producers able to rationalize welfare outlays could ‘outlast’ high-spending, high-cost competitors. The authors envision the oil sector falling to a small group of producers eking out a living by meeting remaining demand even as it declines.27 Further afield, Griffiths envisions producer countries protecting future rent incomes by shifting away from multilateral organizations like OPEC towards bilateral energy relations with major importers. Gulf petrostates would lock in long-run monetization of their oil reserves, in exchange for assistance with technological diversification. Griffiths outlines the strategic energy partnership between the UAE and China as one that could result in the UAE eventually winding up oil exports in exchange for an economy based on artificial intelligence.28 Last man standing

263

Van de Graaf and Verbruggen forecast pathways – both cooperative and competitive – that oil-exporting states and the OPEC bloc could pursue to maximize oil rents while avoiding stranded reserves and social chaos.29 The authors proffer a scenario that has Western powers colluding to maintain oil supply from ‘friendly’ producers like the GCC states, Canada and Norway, while keeping that of ‘hostile’ producers like Venezuela and Iran in the ground.30 Fattouh, Poudineh and West, along with and Sen and Fattouh, argue that oil-exporting states should prepare for the transition by building competence in renewables in their domestic markets, while freeing up fossil fuels for export.31 Successful economic diversification, most of these authors argue, is the ‘ultimate safeguard’.

Saudi Aramco’s climate risk disclosures Saudi Aramco describes its own views of climate risks and potential legal liabilities facing the company in its detailed bond prospectus of April 2019, as required by financial governance authorities in various jurisdictions where Aramco’s debt was sold. (The company raised $12 billion in the 9 April 2019 sale.) For instance, the US Securities and Exchange Commission in 2010 issued guidance requiring companies that are publicly traded in the United States to disclose climate-related risks that are ‘reasonably likely’ to affect their finances or operations.32 Aramco noted several possible risks, the effects of which it described as ‘difficult to predict’ since the company has no control over ‘the impact of climate change on the demand for, and price of, hydrocarbons’.33 Aramco’s risk disclosures include the following: Climate change concerns manifested in public sentiment, government policies, laws and regulations, international agreements and treaties and other actions may reduce global demand for hydrocarbons and propel a shift to lower carbon intensity fossil fuels such as gas or alternative energy sources. In particular, increasing pressure on governments to reduce GHG emissions has led to a variety of actions that aim to reduce the use of fossil fuels, including,

264

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

among others, carbon emission cap and trade regimes, carbon taxes, increased energy efficiency standards and incentives and mandates for renewable energy and other alternative energy sources. In addition, international agreements that aim to limit or reduce GHG emissions are currently in various stages of implementation. For example, the Paris Agreement became effective in November 2016, and many of the countries that have ratified the Paris Agreement are adopting domestic measures to meet its goals, which include reducing their use of fossil fuels and increasing their use of alternative energy sources. The landscape of GHG-related laws and regulations has been in a state of constant re-assessment and, in some cases, it is difficult to predict with certainty the ultimate impact GHGrelated laws, regulations and international agreements will have on the Company … In the future, areas in which the Company and its subsidiaries operate that are not currently subject to GHG regulation may become regulated and existing GHG regulations may become more stringent. Existing and future climate change concerns and impacts, including physical impacts to infrastructure, and related laws, regulations, treaties, protocols, policies and other actions could shift demand to lower carbon intensity fossil fuels, reduce demand for hydrocarbons and hydrocarbon-based products, have a material adverse effect on the Company’s business, financial condition and results of operations.34 … [I]ncreasing attention on climate change risks may result in an increased possibility of litigation against the Company and its affiliated companies. Claims have been filed by private parties, shareholders, public interest organisations, cities and other localities, especially in the United States, against companies in the oil and gas industry relating to climate change matters, including that the extraction and development of fossil fuels has increased climate change … Claims such as these could grow in number and the Company could be the subject of similar claims in the future.35 The Aramco bond prospectus identifies or infers further risks and potential remedies, which this chapter will address in the sections that follow. These include stranded reserves, changing social preferences, the global backlash against plastics and issues with economic diversification and strategic influence conferred upon oil exporters.36

Last man standing

265

Climate change opportunities described in the prospectus Just as significant as the risks, however, is the revelation that Aramco executives also view climate concerns as an opportunity to differentiate the company from its competitors based on significant advantages in energy intensity of production. Climate change has caused scholars to begin to assess the carbon intensity of crude oil industry, contrasting firms based on emissions from ‘upstream’ production, ‘midstream’ transport and ‘downstream’ refining and distribution, all of which take place before the oil products are combusted (Figure 10.3). Intensity of upstream emissions differs broadly among crude grades. Upstream contributions to lifecycle emissions (including final combustion) might render one type of crude oil as much as 25 per cent less carbon-intense than a competing grade. Upstream emissions range from roughly 5 grams of CO2 per megajoule of energy output (for efficient producers like Saudi Arabia, Norway, Denmark and some Angolan and US grades), to more than 30g CO2/MJ for extra-heavy Canadian, Venezuelan

FIGURE 10.3  Emissions intensity of global oil production by source, 2017. Note that the emissions intensity of the top 10 per cent of barrels produced (including high-carbon sources like Canada’s oil sands and Venezuelan extraheavy) is more than four times that of the lowest 10 per cent, when all precombustion emissions are tallied. Saudi Arabia’s oil is among the lowest. (Source: World Energy Outlook 2018, International Energy Agency.)

266

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

and Californian crudes. Upstream emissions comprise anywhere from 5 to 30 per cent of total emissions, which include greenhouse gases released during combustion as well as in transport, refining and distribution of oil-based fuels. For instance, full lifecycle emissions from Saudi Safaniyah crude have been estimated at 88 g/MJ, while those of Canadian oil sands are estimated at 117 g/MJ, a difference of 25 per cent.37 Aramco sees competitive advantage in informing consumers about the lower-average carbon intensity of oil produced by Saudi Aramco38 in comparison to high-carbon-intensity crudes from competitors which resort to flaring off associated natural gas (Russia, the United States, Nigeria, Iraq), or which require energy-intensive recovery techniques (Canada, Venezuela, Oman, Indonesia) or complex refining (Canada, Venezuela, Nigeria). Climate change concerns may cause demand for crude oil with lower average carbon intensities to increase relative to those with higher average carbon intensities. The Company has a commitment to emissions reduction and a GHG emissions management program. The Kingdom has a small number of large and productive oil reservoirs, low per barrel gas flaring rates and low water production, resulting in less mass lifted per unit of oil produced and less energy used for fluid separation, handling, treatment and reinjection, all of which contribute to low upstream carbon intensity.39 As Table 10.1 shows, a $50 per metric ton carbon tax that differentiates among grades of crude oil by the intensity of upstream emissions would also reward Saudi Aramco with a competitive price advantage, in the form of a nearly $9/barrel discount, relative to Venezuelan extra-heavy. However, offsetting GHG emissions via carbon sequestration during production, as planned by Occidental Petroleum (discussed below), would produce even greater discounts.

Changing depletion strategy For Saudi Arabia, the scale of reserves – and the time required to monetize them – necessitates a climate strategy that differs from those of its smaller competitors, including shareholder-owned international oil companies (IOCs). Saudi 2018 proven reserves of 260 billion barrels were more than Last man standing

267

TABLE 10.1 Differentiating among crude oil types by upstream carbon emissions could result in lower taxes for less carbon-intensive producers, like Saudi Arabia, compared with high-carbon producers like Venezuela. Final prices are based on average oil price of $60/barrel. This table also analyses tax effects on crude oil produced by firms that deliberately sequester carbon during the production process, as proposed by Occidental Petroleum in its Permian Basin operations. Tax assumptions include differentiation among crude grades by upstream emissions and reductions for GHG offsets. (Source: Baker Institute, Masnadi et al. 2018, Carnegie Endowment for International Peace 2015.)

Upstream carbon intensity and its effects on carbon taxation assuming $60/barrel oil and $50/tonne carbon tax Crude oil source

Upstream GHG intensity (g CO2eq/MJ)

Upstream GHG tax per barrel @ $50/t

Total GHG tax @$50/t*

Oil price per barrel given $50/t GHG tax

Saudi average

3.5

$ 1.07

$ 23.28

$ 83.28

Venezuela Orinoco

31.9

$ 9.76

$ 31.97

$ 91.97

Permian (Spraberry), Texas

6.9

$ 2.10

$ 24.31

$ 84.31

Permian with 50 per cent GHG offset

3.4

$ 1.05

$ 12.15

$ 72.15

Permian with 100 per cent GHG offset

n/a

n/a

$-

$ 60.00

five times larger than those of any of the five major IOCs, ExxonMobil, Shell, Chevron, Total and BP. Saudi Aramco retains at least fifty-two years of production from domestic reserves at current rates (~11 million barrels per day), a timeline that would be extended by further discoveries. Given the strong likelihood of additions to its proven reserves, the Saudi government has made allowances for Aramco to maintain its monopoly over the Saudi oil concession for as long as 100 years – until the year 2117. By contrast, IOCs’ proven reserves of just over 200 billion barrels would be collectively depleted in 9 to 15 years based on current rates of output.40 268

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Mineral deposits like oil reserves represent an unrealized financial asset in a state’s wealth portfolio. By producing and marketing oil and gas, depletable resource stocks are converted into forms of above-ground wealth and development, which, optimally, generate income for future generations. The principle of ‘intergenerational equit’ in reserves depletion has commanded strong influence in Saudi Arabia. The intergenerational principle implies a constrained approach to production; a strategy that also happens to stimulate global market prices for oil, which, in turn, underwrite generous social benefits for Saudi citizens. Constraints on production have also been calibrated to lengthen the lifespan of the Saudi oil economy, and thereby maximize the duration that oil revenue can support Al Saud family rule. Production constraints are occasionally referenced publicly. In 2008, King Abdullah noted that he had ordered Saudi Aramco to deliberately leave viable fields untapped on behalf of future generations.41 In this way, geologic, economic and political factors converge to reinforce Aramco’s long-term depletion horizon and underproduction relative to its reserves base, which contrasts with those of more short-term-oriented IOCs. Shareholder-owned oil companies produce from smaller resource bases at much higher depletion rates. If IOC executives decided to recast their business models in a new direction, they could run down their reserves without replacing them while shifting investment from fossil fuels towards new types of business. Many IOCs demonstrated their ability to complete major transformations when their foreign oil concessions were nationalized, mainly in the 1970s. The companies shifted oil exploration and production to new parts of the globe, or moved into services and technology businesses, and remained viable. For them, climate change appears like a slow-moving reprise of the disruptions they experienced during the heyday of nationalization, rather than a threat to their existence. Significant progress in transitioning to new area of business might be accomplished over a decade or two. For a large national oil company, a decade is the short term. As mentioned, Saudi Aramco could have monopoly access to remaining underground reserves for a century, on top of the eighty-five years of oil production that have already taken place in the Kingdom. Given the intensifying pace of climate change – the physical effects as well as the growing public acceptance of the necessity of drastic action – multigenerational depletion horizons, like those of Aramco, face considerable uncertainty. Last man standing

269

The onset of climate risk appears to be altering Saudi Aramco’s calculations. The statements of the company and its executives have taken on a more short-term, expansion-oriented flavour, with terms ‘growth strategy’ and ‘expansion strategy’ appearing frequently, even during periods when oil markets were oversupplied.42 Operating costs and competitiveness have been accorded increased attention, given the possibility of slower oil demand growth and lower prices. There is a sense that the Kingdom’s actions to rein in the growth of social welfare provision are, in part, to prepare Saudi society for an era of uncertain rents and potential difficulty in meeting the ‘social break-even’ costs that depend on inflated oil prices.

Changing social preferences Another risk factor cited in the Aramco bond prospectus was the change in social preferences around fossil fuels. Global public concern about climate damage has increased in recent years. The 2018 Pew Global Attitudes Survey found 67 per cent of those surveyed in twenty-six countries chose climate change as the No. 1 threat facing the world, up from 63 per cent in 2017 and 56 per cent in 2013. Climate change was the No. 1 issue in a diverse array of countries, including Greece, South Korea, France and Mexico (where it was chosen by 80–90 per cent of respondents) as well as in Japan, Argentina, Brazil, Germany, Kenya and the Netherlands, where it was chosen by more than 70 per cent of respondents. In the United States, climate concerns lagged those of cyberattacks and terrorism in the 2018 Pew survey.43 A separate Pew opinion survey found that 65 per cent of American respondents wanted to prioritize alternative energy sources versus 27 per cent who preferred expanded production of oil, natural gas and coal.44 Individuals, companies and governments are taking measures to reduce emissions and move away from fossil fuels. In some cases, consumers are making choices based on improved cost competitiveness of alternate technology and vehicles, or through state subsidies for substitutes like biofuels or wind-generated electricity. But in some cases, shifts to non-emitting or more efficient technology are being made regardless of comparative cost calculations. In some rich countries, higher-cost substitutes are preferred over lower-cost but emitting options. 270

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

However, changing global opinion had not coincided with reduced demand for fossil fuels, prior to the coronavirus outbreak in 2020. Among the 92 regions and countries assessed in the BP Statistical Review of World Energy 2020, oil demand rose in 60, and shrank in just 32.45 In few of the countries where oil demand declined did climate concerns appear to play a material role. It remains possible that political institutions in multiple jurisdictions could be pushed to confront entrenched fossil fuel interests. Policymaking in several important countries appeared to be shifting in late 2020 towards increasing restrictions on pollution and GHG emissions and stronger regulation of consuming technology. However, another factor could temper the aggregate effects. In countries where energy intensity and carbon emissions were highest – i.e. large consuming countries like China, the United States and Russia – climate concerns tended to be lower (Figure 10 4). Aramco’s bond prospectus acknowledges these risks. The company is already subject to climate change policies that affect demand for oil, as

FIGURE 10.4  Respondents in countries with high per capita levels of carbon emissions exhibited less concern with climate change than counterparts in developing countries. (Source: Pew Research Center 2015 Global Attitudes Survey. Note: Survey polled 40 countries.)

Last man standing

271

well as anti-pollution regulations. In the future, Aramco could face direct challenges from lawsuits and litigation related to climate damage due to extraction and marketing of fossil fuel. Exclusive sovereign ownership of Aramco by the Saudi government once protected it from legal action targeting antitrust behaviour and its role in climate change. Saudi Aramco’s 2019 decision to sell equity shares to private investors may have increased its exposure to legal risk.46 Downstream expansion in high-growth geographies, particularly East and South Asia, insulates Aramco from some near-term pressure. But oil demand and prices are still affected by social pressures in the OECD which are transmitted globally through the multilateral institutions funded by OECD governments. Border tariffs, reduced or conditional financing and aid, intensified focus on supply chain emissions for Westernheadquartered firms and even importer embargo are conceivable policies that pose future risks for emissions-dependent states and firms, including Saudi Aramco.

Non-combustion uses for crude are under separate pressure Non-combustion uses for crude oil and natural gas, particularly production of petrochemicals, have become niche markets for oil producers to extend their business models into the era of decarbonization. Oil and gas are mainly used as feedstocks that are converted to plastic resins and polymers, which, as long as they are unburned, retain the carbon content of the fossil fuels within final product.47 For rentier states overseeing large reserves with long depletion horizons, such ‘climate compliant’ uses for natural resources appear as a revenue lifeline. From a demand growth and jobs perspective, petrochemicals offer further attractions. Demand for ethylene, a key base product for chemical precursors to plastic, is forecasted to grow at an average yearly rate of 3.6 per cent to 2030, up from 3.3 per cent per year during the past decade. That growth looks attractive compared to Aramco’s 0.5 per cent per year pre-coronavirus growth forecast for global oil demand for the 2030s.48 The virus, still spreading in 2021, deeply undermined transportation and global oil demand, rendering the future of transport-based oil demand even more fraught in comparison to that of plastics. And, while

272

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

production of plastic resins is capital-intensive and requires only small numbers of workers, diverse manufacturing can be built around domestic resin production that is far more labour intensive than the oil sector. However, the global plastics industry also faces problems with social acceptance. Plastic has an enormous and increasing worldwide pollution footprint from improper disposal. Like oil, plastics also face increasing restriction and regulation. However, the long-term durability of plastic – one of the characteristics that makes plastic persist so long in the environment – may actually be an advantage from a carbon emissions standpoint, since the carbon stays locked into the plastic waste that finds its way into landfills and oceans. Globally, 58 per cent of plastic is discarded or landfilled.49 Unfortunately for oil producers, the plastic industry is also far from a ‘climate compliant’ use for oil and gas. Zheng and Suh found that global plastic production and disposal emitted 1.7 gigatonnes of CO2 in 2015, accounting for about 4 per cent of worldwide emissions. Based on current demand growth trends, plastics emissions could comprise 15 per cent of global emissions by 2050. The most viable way to decarbonize plastics is to replace oil or gas feedstocks with biomass feedstocks based on corn or sugar cane, and to replace the fossil fuel energy used as heat source in resin production with renewable fuels, while maximizing plastics recycling (and landfilling waste that cannot be recycled).50 The GHG reduction strategies outlined would all but purge fossil fuels from plastics.

Economic diversification versus maintaining oil rents The attractiveness of the oil business is grounded in the rents, or extraordinary profits, that persist in the oil sector. Rents are more ‘pervasive, lasting, and protected’ in oil markets than in other businesses, which tend to see rents driven out by competition.51 Low-cost producers like Saudi Aramco enjoy extremely high profit margins per unit of investment. In 2018, with Brent crude averaging $71/barrel, Aramco’s returns on capital invested were nearly 80 per cent (Figure 10.4). Such profit levels would be nearly impossible to replace in any alternate sector, especially over the multiple decades that oil rents have persisted.

Last man standing

273

FIGURE 10.5  Saudi Aramco’s return on capital employed dwarfs that of its higher-cost competitors. (Source: Bloomberg 2019.)

Renewables offer a cautionary example of an energy sector in which Saudi Arabia also holds a strong resource advantage – high levels of insolation and low land costs – but where rents have been driven out by cost competitiveness. Figure 10.6 estimates internal rates of return (a similar metric to ROCE in Figure 10.5) of 6.4 per cent for solar PV projects in emerging-market countries and just under 9 per cent for onshore wind. A $1 million investment at these rates of return implies a return of $800,000 in Saudi oil, and just $87,000 for wind and $64,000 for PV solar.

FIGURE 10.6 Internal rates of return for renewable energy projects range between 5 and 9 per cent while those for onshore oil investments in the United States averaged 33 per cent. (Source: Wood Mackenzie, ‘Oil & gas majors in renewable energy’ slide presentation, November 2018.)

274

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Oil rents are well known as advantageous for maintaining autocratic governance and fending off democratic pressures. Beyond simple profitability, oil rents flow directly to regimes. The centralized income has a centralizing effect on governance. By decentralizing or diversifying the sources of fiscal revenue, including through taxation – even tax limited to the commercial sector – autocratic regimes open the door to creating ‘accountability links’ with contributing parties, and, eventually, stimulating demands for political participation. Despite these risks, economic diversification offers numerous advantages, even for a rentier autocracy. These include countercyclical fiscal buffers that reduce the effects of oil price fluctuations and increase the labour intensity of the economy. Global decarbonization also presents a strong rationale for Saudi diversification. The IEA models oil demand under three scenarios, all of which depict Saudi Arabia as a major oil exporter in 2030, as described in the IEA World Energy Outlook 2018. But in the WEO’s low-carbon Sustainable Development Scenario, falling prices present the Saudi Kingdom with deep reductions in oil rent – due to falling demand and prices – alongside increased unemployment, decreasing trade surplus and large budget deficits.52 The possibility of such an eventuality strengthens the case for seeking out new economic sectors, despite profit margins that cannot match those currently available in oil.

Declining geopolitical importance of oil exporters Saudi Arabia faces further risks from any global turn away from oil, which are not discussed in the bond prospectus. The Kingdom’s strategic importance is largely based on its vital role in oil markets and willingness to vary output in line with US interests. America’s provision of hard security for Saudi Arabia and the Gulf monarchies is predicated on those countries remaining important exporters, and on oil enduring as the world’s dominant transportation fuel. Should exports falter or oil substitutes gain ground, the strategic stature of oil-exporting states will decline. General trends show global oil demand beginning to decouple from GDP growth, with energy demand growing at roughly half the pace of

Last man standing

275

GDP, and non-carbon fuels and technologies emerging as early-stage oil substitutes. Given the scale of the global transportation sector, the fact that 95 per cent of transportation services are oil-based, and the difficulty of replacing oil in most of its applications, any threat to oil would not come in the short term. In 2019, consultancy McKinsey predicted a peak in global oil demand by 2035.53 The coronavirus deepens the uncertainty around such forecasts.54 At the same time, sources of oil supply are becoming far more diverse. In the 1970s, there were thirty-eight oil producers of note in the BP Statistical Review. Of those, only sixteen produced more than 500,000 b/d. The top 10 producers brought 82 per cent of global oil to market. Today, there are forty-nine producers, with twenty-eight supplying more than 500,000 b/d. The top 10 are responsible for 65 per cent of the total.55 Increasingly diverse supply renders importers less exposed to political risks and supply issues emanating from the Middle East.56 These factors suggest reduced dependence on Middle East exporters and diminishing strategic importance of those states, particularly to North America and Europe. These continents not only source oil elsewhere but have grown more efficient in oil use and substitution. In 2019, 73 per cent of Aramco’s exported oil flowed to Asia, versus 8 per cent to North America and 11 per cent to Europe. These trends, in turn, present an opportunity for re-assessing the considerable expense ($50 billion to $100 billion per year57) of US military support for Persian Gulf. The US-Gulf relationships were once considered so inviolable that they spawned the Carter Doctrine of 1980, which declares that the United States will use force to protect its interests in the region. Slipping geopolitical prestige portends a coming decline in Western provision of hard security, which, in turn, renders these regimes more independent and self-reliant in external security provision.

Leveraging downstream investments to ‘capture’ markets Saudi Aramco and its host government have developed a number of strategies aimed at protecting oil’s role in the world economy, Saudi Arabia’s roughly 13 per cent share of the global oil market and the rent stream that maintains the Saudi monarchy in power. First among

276

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

these is the firm’s ongoing efforts at vertical integration, which involves combining its mature ‘upstream’ sector with growing ‘downstream’ importing and conversion businesses configured for Saudi crudes. The vertical integration strategy is driven, in part, by climate risk and the threat of a supply glut. Saudi Aramco has begun investing in markets, particularly in developing Asian countries where policymaking prioritizes living standards over environmental damage. It is in these countries where oil demand is likeliest to grow strongly in coming decades, even as it falls away elsewhere. Aramco’s downstream investments are aimed at ensuring that Saudi oil has preferential market access through ‘captive’ ownership and configuration of refining capacity around Saudi oil.58 The company’s 2019 bond prospectus acknowledges this strategy in straightforward language. The Company is focusing its downstream investments in areas of high-growth, including China, India and Southeast Asia, material demand centers, such as the United States, and countries that rely on importing crude oil, such as Japan and South Korea.59 The integration of the Company’s upstream and downstream segments provides a unique opportunity for the Company to secure crude oil demand by selling to its captive system of domestic and international wholly owned and affiliated refineries.60 By embedding itself in markets where demand growth defies climate concerns, Saudi Aramco can maximize monetization of its below-ground reserves and reduce the quantity eventually abandoned.

Discussion and conclusion Saudi Aramco is so profitable that protecting the company and its business is a strategic and economic imperative for the Kingdom and its ruling family. It also risks alienating the Kingdom in international relations. Saudi Arabia has taken steps to prepare itself for a future of low oil prices. The Kingdom has launched domestic reforms of social spending, particularly on energy subsidies.61 These reforms have reduced the government’s fiscal break-even, which provides some insulation from lower oil prices. The more fiscally restrained the Kingdom grows – within

Last man standing

277

social boundaries – the more internationally competitive it becomes, which, in turn, improves its likelihood of retaining oil income. This is because Saudi Aramco faces duelling pressures in oil marketing strategy. Over the short term, the company is strongly incentivized to constrain production in the name of higher oil prices. During the Covid-19 pandemic, Aramco imposed deep cuts that were only starting to be lifted in April 2021. Longer term, Aramco’s interests are congruent with maximizing the monetization of below-ground oil, which augurs for increasing its share of the global market, and potentially accepting lower prices. The ultra-low unit costs of Saudi oil allow it the luxury of alternating between both strategies. Reduced social dependence on oil rents only increases that flexibility. But in the long run, the Saudi oil sector cannot maintain the monarchy on the basis of cost competitiveness alone. In a climate-constrained world where regulations are likely to increase alongside the decline in social acceptance of fossil fuel combustion, the Kingdom’s interests would be better served if Saudi Aramco were able to increase the margin of environmental benefits of Saudi oil relative to that of competing grades, and, perhaps, take steps sufficient to market Saudi crude as carboncompetitive, including with substitute fuels and technologies.62 Saudi Arabia and its national oil company appear to be pursuing these goals. However, competing firms are taking similar steps. For example, Houston-based Occidental Petroleum, a midsized oil producer with large operations in the US Permian Basin, already injects carbon dioxide (itself produced during oil and gas output) into its oil wells to enhance recovery. The firm has announced plans to begin injecting carbon dioxide from industrial sources currently emitted to the atmosphere as well as CO2 captured directly from ambient air. Occidental eventually aims to sequester sufficient carbon to render its oil carbon-neutral.63 Royal Dutch Shell, BP and Total are also among the firms pursuing competitive decarbonization strategies due to social pressures around climate change. The IEA has issued guidelines for firms to reduce emissions across the oil and gas sector, from production to refining and in downstream sectors like petrochemicals and plastics.64 As firms adopt these ideas, Saudi Aramco’s advantage in carbon intensity will come under challenge. Within a few years, other producers could tout their products as the climate-compliant choice. Non-Saudi producers could demand that their products receive preferences based on reduced environmental harm. Such attributes would challenge Saudi Aramco’s environmental case 278

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

for remaining ‘the last man standing’ in oil markets. With firms already publicizing investments in reduced carbon intensity, one expects that, at a minimum, some brands of fuel will be advertized as environmentally advantageous. The advent of carbon taxes and border tariffs, structured to differentiate among carbon intensity of fuel products, would allow carbon advantages to migrate into fuel prices. At the moment, such a tax would favour Saudi Aramco. But faster carbon innovation by competitors could outstrip Aramco’s advantage. If that happens, the structure of the carbon tax would mean that Saudi crude would also forfeit its cost advantage (see Table 10.1). In short, Saudi Aramco’s quest to remain the ‘last man standing’ in the climate-buffeted global oil market depends not just on its substantial advantages in lifting and capital costs but on enhancing carbon competitiveness. Climate change is beginning to shift energy systems. In oil’s case, the shift is taking place in a slow and uneven way. Oil consumption will fall away in some sectors, stagnate in others and continue to grow in still others. Producer states have ample warning and opportunities for response. Saudi Aramco has begun to pursue a multipronged climate strategy. The Kingdom’s case is an important one, but far from unique. Saudi Aramco’s competitors are equally motivated and convinced by their own exceptionalist rationales for retaining long-term roles in oil supply.

Acknowledgements The author would like to thank Rice University’s Michael Maher and KAPSARC’s Aisha al-Sarihi for their useful comments on an earlier draft of this chapter.

Notes 1 Climate Accountability Institute, ‘Carbon Majors 2018 Data Set’, database

(Snowmass, CO: Climate Accountability Institute, December 2020), https:// climateaccountability.org/carbonmajors_dataset2020.html

2 Jeremy S. Pal and Elfatih A. B. Eltahir, ‘Future Temperature in Southwest

Asia Projected to Exceed a Threshold for Human Adaptability’, Nature Clim. Change 6, no. 2 (February 2016): 197–200. Last man standing

279

3 Saudi Aramco, ‘Base Prospectus: Saudi Aramco Global Medium Term Note Programme’ (Saudi Aramco, 1 April 2019), 89.

4 Anjli Raval and Ed Crooks, ‘Oil Groups Face Dilemma on Climate Change’, Financial Times, 13 March 2019, online edition, https://www.ft.com/ content/ec42c3d8-4540-11e9-b168-96a37d002cd3. Emphasis added.

5 David Chiaramonti, ‘Sustainable Aviation Fuels: The Challenge of Decarbonization’, Energy Procedia 158 (2019): 1202–7.

6 Earnings before interest, taxes, depreciation and amortization. See: Saudi

Aramco, p. 48. Note that Saudi Aramco’s earnings fell substantially in 2019 and 2020 due to declining oil prices as well as production cuts, pushing it from the No. 1 spot.

7 For instance, Saudi Aramco’s 2017 Annual Review implies that the

company’s long-term strategy aims to maintain or increase its role in global oil sector as long as possible. ‘By tempering production from mature fields, accelerating younger fields and secondary reservoirs, and developing fresh reserves from new increments, we plan to create and sustain value for generations to come’. See: ‘Upstream Operations’, in Saudi Aramco Annual Review 2017 (Saudi Aramco 2018): 20, https://www.saudiaramco.com/-/ media/images/annual-review-2017/pdfs/en/06-upstream-operations_ en.pdf

8 Saudi Aramco, ‘Saudi Aramco Bond Prospectus’, 19. 9 Note that other oil firms are already competing in the realm of lowest

carbon intensity of their crude oil. Norway’s Equinor and Occidental Petroleum of the United States are among those pursuing carbon-neutral or carbon-negative oil by sequestering as much or more carbon during the production process than is emitted upon combustion.

10 Andreas Goldthau and Kirsten Westphal, ‘Why the Global Energy

Transition Does Not Mean the End of the Petrostate’, Global Policy 10, no. 2 (May 2019): 279–83, https://doi.org/10.1111/1758-5899.12649

11 Government of Saudi Arabia, ‘Vision 2030: Kingdom of Saudi Arabia’,

Government report (Riyadh: Government of Saudi Arabia, 25 April 2016), http://vision2030.gov.sa/download/file/fid/417

12 Summer Said, Rory Jones and Georgi Kantchev, ‘Mohammed Bin Salman Meets Resistance—From His Own Bureaucrats’, Wall Street Journal, 4 February 2019, online edition, https://www.wsj.com/articles/saudicrown-prince-meets-resistance-on-economic-overhaulfrom-his-ownbureaucrats-11549295905

13 Articles reaching this conclusion include: Benjamin Smith, ‘Oil Wealth and Regime Survival in the Developing World, 1960-1999’, American Journal of Political Science 48, no. 2 (2004): 232–46; Joseph Wright, Erica Frantz and Barbara Geddes, ‘Oil and Autocratic Regime Survival’, British Journal of

280

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Political Science 45, no. 2 (2015): 287–306; Jay Ulfelder, ‘Natural-Resource Wealth and the Survival of Autocracy’, Comparative Political Studies 40, no. 8 (2007): 995–1018; Jørgen Juel Andersen and Silje Aslaksen, ‘Oil and Political Survival’, Journal of Development Economics 100, no. 1 (2013): 89–106; Bruce Bueno De Mesquita and Alastair Smith, ‘Leader Survival, Revolutions, and the Nature of Government Finance’, American Journal of Political Science 54, no. 4 (2010): 936–50; Jesus Crespo Cuaresma, Harald Oberhofer and Paul A. Raschky, ‘Oil and the Duration of Dictatorships’, Public Choice 148, no. 3–4 (2011): 505–30.

14 The UAE, and Dubai, in particular show that it is possible to decentralize

fiscal revenue and retain autocratic control. Indonesia presents a countercase. See: Ehtisham Ahmad and Ali M Mansoor, Indonesia: Managing Decentralization, IMF Working Paper, WP/02/136 (Washington: International Monetary Fund, 2002), https://www.researchgate.net/ profile/Ehtisham_Ahmad/publication/5123876_Indonesia_Managing_ Decentralization/links/00463527a4b04849c8000000.pdf

15 Joanna Depledge, ‘Striving for No: Saudi Arabia in the Climate Change

Regime’, Global Environmental Politics 8, no. 4 (2008): 9–35. Suzanne Goldenberg, ‘Saudi Arabia Accused of Trying to Wreck Paris Climate Deal’, The Guardian, 8 December 2016, https://www.theguardian.com/ environment/2015/dec/08/saudi-arabia-accused-of-trying-to-wreck-theparis-climate-deal

16 Ministry of Energy, Industry & Mineral Resources of Saudi Arabia, ‘Saudi

Arabia Takes Its Place as Global Citizen at COP 22’, Government press release (Riyadh: Ministry of Energy, Industry & Mineral Resources of Saudi Arabia 2017), https://docs.wixstatic.com/ugd/bc5fc9_455265c3bb8a41db98 7af3d3f72308cc.pdf

17 Kingdom of Saudi Arabia, ‘The Intended Nationally Determined

Contribution of the Kingdom of Saudi Arabia under the UNFCCC’, Government pledge (Riyadh: United Nations Framework Convention on Climate Change, November 2015), http://www4.unfccc.int/submissions/ INDC/Published%20Documents/Saudi%20Arabia/1/KSA-INDCs%20 English.pdf

18 Climate Action Tracker, ‘Saudi Arabia: Country Summary’, online

database (Climate Action Tracker Partners, 22 September 2020), https:// climateactiontracker.org/countries/saudi-arabia/

19 Michel Den Elzen et al., ‘Contribution of the G20 Economies to the Global

Impact of the Paris Agreement Climate Proposals’, Climatic Change 137, no. 3–4 (2016): 655–65.

20 David Wogan, Elizabeth Carey and Douglas Cooke, ‘Policy Pathways to

Meet Saudi Arabia’s Contributions to the Paris Agreement’, Research paper (Riyadh: King Abdullah Petroleum Studies and Research Center, February 2019). Last man standing

281

21 YouGov, ‘YouGov - International Climate Change Survey’, Public opinion survey in 28 countries (London: YouGov, 17 September 2019), https:// mena.yougov.com/en/news/2019/09/17/international-poll-most-expectfeel-impact-climate/

22 James A. Russell, ‘Saudi Arabia: The Strategic Dimensions of Environmental Insecurity’, Middle East Policy 23, no. 2 (2016): 44–58, https://doi. org/10.1111/mepo.12194

23 David Manley, James Frederick Cust and Giorgia Cecchinato, ‘Stranded

Nations? The Climate Policy Implications for Fossil Fuel-Rich Developing Countries’, (1 February 2017). OxCarre Policy Paper 34.

24 Giacomo Luciani, ‘Middle East: Clean Energy Sources and the

Diversification of the Oil Economies?’ Revue Internationale et Stratégique, no. 4 (2016): 143–52.

25 Salaheddine Soummane, Frédéric Ghersi and Julien Lefèvre,

‘Macroeconomic Pathways of the Saudi Economy: The Challenge of Global Mitigation Action versus the Opportunity of National Energy Reforms’, Energy Policy 130 (2019): 263–82.

26 Greg Muttitt and Hannah McKinnon, ‘Overheated Expectations: Valuing

Saudi Aramco’s IPO in Light of Climate Change’, Climate policy paper (Washington: Oil Change International, August 2017), http://priceofoil.org/ content/uploads/2017/08/Overheating-Expectations.pdf

27 Goldthau and Westphal, ‘Why the Global Energy Transition Does Not Mean the End of the Petrostate’.

28 Steven Griffiths, ‘Bilateral Energy Diplomacy in a Time of Energy

Transition’, Government-sponsored research, EDA Insight (Abu Dhabi: Emirates Diplomatic Academy, December 2018).

29 Thijs Van de Graaf and Aviel Verbruggen, ‘The Oil Endgame: Strategies of

Oil Exporters in a Carbon-Constrained World’, Environmental Science & Policy 54 (2015): 456–62; Aviel Verbruggen and Thijs Van de Graaf, ‘The Geopolitics of Oil in a Carbon-Constrained World’, IAEE Energy Forum 2, no. 2 (2015): 21–4.

30 Aviel Verbruggen and Thijs Van de Graaf, ‘Peak Oil Supply or Oil Not for Sale?’, Futures 53 (1 September 2013): 74–85, https://doi.org/10.1016/j. futures.2013.08.005

31 Bassam Fattouh, Rahmat Poudineh and Rob West, ‘The Rise of Renewables

and Energy Transition: What Adaptation Strategy for Oil Companies and Oil-Exporting Countries?’, Academic paper (Oxford: Oxford Institute for Energy Studies, 2018), https://www.oxfordenergy.org/wpcms/wp-content/ uploads/2018/05/The-rise-of-renewables-and-energy-transition-whatadaptation-strategy-for-oil-companies-and-oil-exporting-countriesMEP-19.pdf. Anupama Sen and Bassam Fattouh, ‘Economic Diversification

282

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

in the MENA in the Context of Peak Oil and the Energy Transition’, in Workshop on Sustainability in the GCC (Gulf Research Meeting, University of Cambridge, 2018).

32 U.S. Securities and Exchange Commission, ‘Commission Guidance

Regarding Disclosure Related to Climate Change’ (U.S. Securities and Exchange Commission, 8 February 2010), https://www.sec.gov/rules/ interp/2010/33-9106.pdf

33 Saudi Aramco, ‘Saudi Aramco Bond Prospectus’, 12. 34 Ibid., 21–2. 35 Ibid., 16. 36 A useful compendium of climate risks for fossil fuel producers is contained

in: Jim Krane, ‘Climate Change and Fossil Fuel: An Examination of Risks for the Energy Industry and Producer States’, MRS Energy & Sustainability 4 (2017), https://doi.org/10.1557/mre.2017.3

37 Carnegie Endowment for International Peace, ‘Oil-Climate Index: Profiling Emissions in the Supply Chain’ (Washington: Carnegie Endowment for International Peace, 2015), https://oci.carnegieendowment.org/

38 Saudi Aramco, ‘Saudi Aramco Bond Prospectus’, 91. 39 Ibid., 92. 40 Ibid., pp. 31, 87–8. 41 Reuters, ‘Saudi King Says Keeping Some Oil Finds for Future’, Reuters Oil Report, 13 April 2008, online edition, https://uk.reuters.com/ article/saudi-oil/saudi-king-says-keeping-some-oil-finds-for-futureidUKL139687720080413

42 For instance, CEO Amin Nasser said in 2018: ‘Today, we are further

expanding our relationship with agreements and MOUs with leading French companies and organizations to support Saudi Aramco’s long business growth strategy. At Saudi Aramco we have real, tangible and meaningful opportunities to collaborate and build partnerships now and in the future. The strengths of French businesses and industry can play a role in Saudi Aramco’ business plan including in our diversification and expansion strategies underscored by the framework of Vision 2030’ (italics added). See: ‘Saudi Aramco announces commercial cooperation worth over $12 billion with French companies during Saudi-France CEOs forum in Paris’. Saudi Aramco press release, 10 April 2018, https://www.saudiaramco. com/en/news-media/news/2018/commercial-cooperation-saudi-franceceos-forum

43 Spring 2018 Global Attitudes Survey, Pew Research Center, 2019, https://

www.pewresearch.org/global/2019/02/10/climate-change-still-seen-as-thetop-global-threat-but-cyberattacks-a-rising-concern/

Last man standing

283

44 ‘2016 Pew Public Attitudes Survey’, Pew Research Center 2017, https://

www.pewresearch.org/science/2016/10/04/public-opinion-on-renewablesand-other-energy-sources/

45 BP, ‘Statistical Review of World Energy 2020’, statistical report (London: BP, June 2020), https://www.bp.com/en/global/corporate/energy-economics/ statistical-review-of-world-energy.html

46 Gabriel Collins and Jim Krane, ‘NOPEC’s Extraterritorial Overreach Would

Harm Core U.S. Economic and Energy Interests’, Policy brief (Houston: Baker Institute for Public Policy, 6 March 2019), https://www.bakerinstitute. org/files/14114/

47 Jim Krane, ‘Climate Strategy for Producer Countries: The Case of

Saudi Arabia’, Working Paper (Houston: Baker Institute for Public Policy, Rice University, 2018), https://scholarship.rice.edu/bitstream/ handle/1911/102798/ces-krane-climate-strategy-082818.pdf?sequence=1; Jim Krane, ‘Decarbonization in the Oil Kingdom: Saudi Arabia’s Energy Policy and Climate Strategy’, in Patrice Geoffron, Lorna A. Greening and Raphael Heffron (eds), Energy Policy-Making in a Cross-National Comparison: Energy Resources, Policy Processes and Law (New York: Springer US, 2019).

48 Saudi Aramco 79, 88. 49 Jiajia Zheng and Sangwon Suh, ‘Strategies to Reduce the Global Carbon Footprint of Plastics’, Nature Climate Change 9 (15 April 2019): 374–81, https://doi.org/10.1038/s41558-019-0459-z

50 Ibid. 51 Albert Bressand, ‘The Role of Markets and Investment in Global Energy’, in Andreas Goldthau (ed.), The Handbook of Global Energy Policy (Hoboken, NJ: John Wiley and Sons, 2013).

52 Soummane, Ghersi, and Lefèvre, ‘Macroeconomic Pathways of the

Saudi Economy: The Challenge of Global Mitigation Action versus the Opportunity of National Energy Reforms’.

53 McKinsey, ‘Global Energy Perspective 2019: Reference Case’, Consultancy

Research Report (McKinsey, January 2019), https://www.mckinsey. com/~/media/McKinsey/Industries/Oil%20and%20Gas/Our%20Insights/ Global%20Energy%20Perspective%202019/McKinsey-Energy-InsightsGlobal-Energy-Perspective-2019_Reference-Case-Summary.ashx

54 For instance BP’s CEO said it was possible peak demand was reached in

2019. Anjli Raval, Billy Nauman, and Gillian Tett, ‘BP Chief Sees Risk of Oil Demand Passing Peak as Pandemic Hits’, Financial Times, 11 May 2020, online edition, https://www.ft.com/content/21affff2-1e57-4000-a43962cfef6344fb

284

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

55 Note that the break-up of the Soviet Union has split former Soviet

production among five current producers. Only Russia is in the top 10. The others, in order of prominence, are Kazakhstan, Azerbaijan, Turkmenistan and Uzbekistan.

56 Jim Krane and Kenneth B. Medlock III, ‘Geopolitical Dimensions of US

Oil Security’, Energy Policy 114 (2018): 558–65, https://doi.org/10.1016/j. enpol.2017.12.050

57 Michael O’Hanlon, ‘How Much Does the United States Spend Protecting Persian Gulf Oil?’, in Energy Security: Economics, Politics, Strategies, and Implications (Washington: Brookings, 2010), 59–72.

58 Jim Krane, ‘A Refined Approach: Saudi Arabia Moves beyond Crude’, Energy Policy 82 (2015): 99–104.

59 Saudi Aramco, ‘Saudi Aramco Bond Prospectus’, 88. 60 Ibid., 50. 61 Jim Krane, ‘Political Enablers of Energy Subsidy Reform in Middle Eastern Oil Exporters’, Nature Energy, April 2018, https://doi.org/10.1038/s41560018-0113-4. Jim Krane, Energy Kingdoms: Oil and Political Survival in the Persian Gulf, Center on Global Energy Policy Series (New York: Columbia University Press, 2019).

62 Combustion of crude oil products releases about 75g CO2 equivalent per

megajoule, regardless of origin. The idea here is that Saudi Aramco reduce the carbon intensity of its crude oil by sequestering as much or more GHGs per unit marketed than are emitted from that unit’s production, refining, transport and final combustion.

63 ‘Climate-Related Risks and Opportunities: Positioning for a Low-

Carbon Economy’, Occidental Petroleum, 2019, https://www.oxy.com/ SocialResponsibility/overview/SiteAssets/Pages/Social-Responsibility-atOxy/Assets/Occidental-Climate-Report-2019.pdf

64 ‘Innovation and the Environmental Performance of Oil and Gas Supply’, World Energy Outlook 2018, pp. 477–514. International Energy Agency, Paris (2018).

References Ahmad, E. and Mansoor, A. M. (2002). Indonesia: Managing Decentralization. IMF Working Paper, WP/02/136. Washington: International Monetary Fund. https://www.researchgate.net/profile/Ehtisham_Ahmad/ publication/5123876_Indonesia_Managing_Decentralization/ links/00463527a4b04849c8000000.pdf

Last man standing

285

Andersen, J. J. and Aslaksen, S. (2013). ‘Oil and Political Survival’, Journal of Development Economics 100, no. 1: 89–106. Bressand, A. (2013). ‘The Role of Markets and Investment in Global Energy’, in Andreas Goldthau (ed.), The Handbook of Global Energy Policy. Hoboken, NJ: John Wiley and Sons. Carnegie Endowment for International Peace. (2015). ‘Oil-Climate Index: Profiling Emissions in the Supply Chain’, Washington: Carnegie Endowment for International Peace. https://oci.carnegieendowment.org/ Chiaramonti, D. (2019). ‘Sustainable Aviation Fuels: The Challenge of Decarbonization’, Energy Procedia 158: 1202–7. Climate Accountability Institute. (2020). ‘Carbon Majors 2018 Data Set’, database. Snowmass, CO: Climate Accountability Institute, December. https://climateaccountability.org/carbonmajors_dataset2020.html Climate Action Tracker. (2020). ‘Saudi Arabia: Country Summary’, online database. Climate Action Tracker Partners, 22 September. https:// climateactiontracker.org/countries/saudi-arabia/ Collins, G. and Krane, J. (2019). ‘NOPEC’s Extraterritorial Overreach Would Harm Core U.S. Economic and Energy Interests’, Policy brief. Houston: Baker Institute for Public Policy, 6 March. https://www.bakerinstitute.org/ files/14114/ Cuaresma, J. C, Oberhofer, H. and Raschky, P. A. (2011). ‘Oil and the Duration of Dictatorships’, Public Choice 148, no. 3–4: 505–30. De Mesquita, B. B. and Smith, A. (2010). ‘Leader Survival, Revolutions, and the Nature of Government Finance’. American Journal of Political Science 54, no. 4: 936–50. Den Elzen, M., Admiraal, A., Roelfsema, M., van Soest, H., Hof, Andries F. and Forsell, N. (2016). ‘Contribution of the G20 Economies to the Global Impact of the Paris Agreement Climate Proposals’, Climatic Change 137, no. 3–4: 655–65. Depledge, J. (2008). ‘Striving for No: Saudi Arabia in the Climate Change Regime’, Global Environmental Politics 8, no. 4: 9–35. Fattouh, B., Poudineh, R. and West, R. (2018). ‘The Rise of Renewables and Energy Transition: What Adaptation Strategy for Oil Companies and Oil-Exporting Countries?’ Academic paper. Oxford: Oxford Institute for Energy Studies. https://www.oxfordenergy.org/wpcms/wp-content/ uploads/2018/05/The-rise-of-renewables-and-energy-transition-whatadaptation-strategy-for-oil-companies-and-oil-exporting-countriesMEP-19.pdf Goldenberg, S. (2016). ‘Saudi Arabia Accused of Trying to Wreck Paris Climate Deal’, The Guardian, 8 December. https://www.theguardian.com/ environment/2015/dec/08/saudi-arabia-accused-of-trying-to-wreck-theparis-climate-deal Goldthau, A. and Westphal, K. (2019). ‘Why the Global Energy Transition Does Not Mean the End of the Petrostate’, Global Policy 10, no. 2 (May): 279–83. https://doi.org/10.1111/1758-5899.12649

286

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Government of Saudi Arabia. (2016). ‘Vision 2030: Kingdom of Saudi Arabia’, Government report. Riyadh: Government of Saudi Arabia, 25 April. http://vision2030.gov.sa/download/file/fid/417 Griffiths, S. (2018). ‘Bilateral Energy Diplomacy in a Time of Energy Transition’, Government-sponsored research. EDA Insight. Abu Dhabi: Emirates Diplomatic Academy, December. Kingdom of Saudi Arabia. (2015). ‘The Intended Nationally Determined Contribution of the Kingdom of Saudi Arabia under the UNFCCC’, Government pledge. Riyadh: United Nations Framework Convention on Climate Change, November. http://www4.unfccc.int/submissions/INDC/ Published%20Documents/Saudi%20Arabia/1/KSA-INDCs%20English.pdf Krane, J. (2015). ‘A Refined Approach: Saudi Arabia Moves beyond Crude’, Energy Policy 82: 99–104. Krane, J. (2017). ‘Climate Change and Fossil Fuel: An Examination of Risks for the Energy Industry and Producer States’, MRS Energy & Sustainability 4. https://doi.org/10.1557/mre.2017.3 Krane, J. (2018). ‘Climate Strategy for Producer Countries: The Case of Saudi Arabia’, Working Paper. Houston: Baker Institute for Public Policy, Rice University. https://scholarship.rice.edu/bitstream/handle/1911/102798/ceskrane-climate-strategy-082818.pdf?sequence=1 Krane, J. (2019). ‘Decarbonization in the Oil Kingdom: Saudi Arabia’s Energy Policy and Climate Strategy’, in P. Geoffron, L. A. Greening and R. Heffron (eds), Energy Policy-Making in a Cross-National Comparison: Energy Resources, Policy Processes and Law. New York: Springer US. Krane, J. (2019). Energy Kingdoms: Oil and Political Survival in the Persian Gulf. Center on Global Energy Policy Series. New York: Columbia University Press. Krane, J. (2018). ‘Political Enablers of Energy Subsidy Reform in Middle Eastern Oil Exporters’, Nature Energy, April. https://doi.org/10.1038/s41560-0180113-4 Krane, J. and Medlock III, K. B. (2018). ‘Geopolitical Dimensions of US Oil Security’, Energy Policy 114: 558–65. https://doi.org/10.1016/j. enpol.2017.12.050 Luciani, G. (2016). ‘Middle East: Clean Energy Sources and the Diversification of the Oil Economies?’ Revue Internationale et Stratégique, no. 4: 143–52. Manley, D., Cust, J. F. and Cecchinato, G. (2017). ‘Stranded Nations? The Climate Policy Implications for Fossil Fuel-Rich Developing Countries’, (1 February). OxCarre Policy Paper 34 (2017). McKinsey. (2019). ‘Global Energy Perspective 2019: Reference Case’, Consultancy Research Report. McKinsey, January. https://www.mckinsey. com/~/media/McKinsey/Industries/Oil%20and%20Gas/Our%20Insights/ Global%20Energy%20Perspective%202019/McKinsey-Energy-InsightsGlobal-Energy-Perspective-2019_Reference-Case-Summary.ashx Ministry of Energy, Industry & Mineral Resources of Saudi Arabia. (2017). ‘Saudi Arabia Takes Its Place as Global Citizen at COP 22’, Government press

Last man standing

287

release. Riyadh: Ministry of Energy, Industry & Mineral Resources of Saudi Arabia. https://docs.wixstatic.com/ugd/bc5fc9_455265c3bb8a41db987af3d3 f72308cc.pdf Muttitt, G. and McKinnon, H. (2017). ‘Overheated Expectations: Valuing Saudi Aramco’s IPO in Light of Climate Change’, Climate policy paper. Washington: Oil Change International, August. http://priceofoil.org/content/ uploads/2017/08/Overheating-Expectations.pdf O’Hanlon, M. (2010). ‘How Much Does the United States Spend Protecting Persian Gulf Oil?’ in Energy Security: Economics, Politics, Strategies, and Implications. Washington: Brookings, pp. 59–72. Pal, J. and Elfatih, A. B. E. (2016). ‘Future Temperature in Southwest Asia Projected to Exceed a Threshold for Human Adaptability’, Nature Clim. Change 6, no. 2 (February): 197–200. Raval, A, Nauman, B. and Tett, G. (2020). ‘BP Chief Sees Risk of Oil Demand Passing Peak as Pandemic Hits’, Financial Times. 11 May, online edition. https://www.ft.com/content/21affff2-1e57-4000-a439-62cfef6344fb Reuters. (2008). ‘Saudi King Says Keeping Some Oil Finds for Future’, Reuters Oil Report. 13 April, online edition. https://uk.reuters.com/ article/saudi-oil/saudi-king-says-keeping-some-oil-finds-for-futureidUKL139687720080413 Russell, J. A. (2016). ‘Saudi Arabia: The Strategic Dimensions of Environmental Insecurity’, Middle East Policy 23, no. 2: 44–58. https://doi.org/10.1111/ mepo.12194 Said, S., Jones, R. and Kantchev, G. (2019). ‘Mohammed Bin Salman Meets Resistance—From His Own Bureaucrats’, Wall Street Journal. 4 February, online edition. https://www.wsj.com/articles/saudi-crown-prince-meetsresistance-on-economic-overhaulfrom-his-own-bureaucrats-11549295905 Saudi Aramco. (2019). ‘Base Prospectus: Saudi Aramco Global Medium Term Note Programme’. Saudi Aramco, 1 April. Sen, A. and Fattouh, B. (2018). ‘Economic Diversification in the MENA in the Context of Peak Oil and the Energy Transition’, in Workshop on Sustainability in the GCC. University of Cambridge. Smith, B. (2004). ‘Oil Wealth and Regime Survival in the Developing World, 1960-1999’, American Journal of Political Science 48, no. 2: 232–46. Soummane, S., Ghersi, F. and Lefèvre, J. (2019). ‘Macroeconomic Pathways of the Saudi Economy: The Challenge of Global Mitigation Action versus the Opportunity of National Energy Reforms’, Energy Policy 130: 263–82. Ulfelder, J. (2007). ‘Natural-Resource Wealth and the Survival of Autocracy’, Comparative Political Studies 40, no. 8: 995–1018. U.S. Securities and Exchange Commission. (2010). ‘Commission Guidance Regarding Disclosure Related to Climate Change’. U.S. Securities and Exchange Commission, 8 February. https://www.sec.gov/rules/ interp/2010/33-9106.pdf Van de Graaf, T. and Verbruggen, A. (2015). ‘The Oil Endgame: Strategies of Oil Exporters in a Carbon-Constrained World’, Environmental Science & Policy 54: 456–62. 288

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Verbruggen, A. and Van de Graaf, T. (2013). ‘Peak Oil Supply or Oil Not for Sale?’ Futures 53 (1 September): 74–85. https://doi.org/10.1016/j. futures.2013.08.005 Verbruggen, A. and Van de Graaf, T. (2015). ‘The Geopolitics of Oil in a Carbon-Constrained World’, IAEE Energy Forum 2, no. 2: 21–4. Wogan, D. Carey, E. and Cooke, D. (2019). ‘Policy Pathways to Meet Saudi Arabia’s Contributions to the Paris Agreement’, Research paper. Riyadh: King Abdullah Petroleum Studies and Research Center, February 2019. Wright, J. Frantz, E. and Geddes, B. (2015). ‘Oil and Autocratic Regime Survival’, British Journal of Political Science 45, no. 2: 287–306. YouGov. ‘YouGov - International Climate Change Survey’, Public opinion survey in 28 countries. London: YouGov, September 17, 2019. https://mena.yougov. com/en/news/2019/09/17/international-poll-most-expect-feel-impactclimate/ Zheng, J. and Sangwon Suh. (2019). ‘Strategies to Reduce the Global Carbon Footprint of Plastics’, Nature Climate Change 9 (15 April): 374–81. https://doi.org/10.1038/s41558-019-0459-z

Last man standing

289

290

AFTERWORD Mark C. Thompson and Neil Quilliam

Like the rest of the world, Saudi Arabia’s 2020 and 2021 were dominated by the coronavirus (Covid-19) pandemic. Unlike other countries, such as the United States and the United Kingdom, during this period, the Saudi authorities handled the pandemic more effectively and maintained widespread public support for government-mandated precautionary coronavirus measures. Hence, the overall feeling in Saudi Arabia was one of quiet relief, even satisfaction, that during the height of the pandemic, the Kingdom weathered the worst of the storm. From the outset, the Saudi government took the threat of the novel coronavirus seriously, responding rapidly and robustly to slow its spread in the Kingdom. Precisely because Saudi Arabia had experienced a coronavirus outbreak in the form of Middle East respiratory syndrome (MERS) in 2012 and 2015,1 the government and health services were better prepared for the coronavirus pandemic in 2020 than many other countries.2 Indeed, the Saudi government demonstrated throughout 2020 and 2021 that it was not afraid to act quickly and decisively when faced with pandemic-related threats. The Saudi authorities were also ahead of the infection curve, as they took preventative measures, such as the complete closure of the Kingdom’s borders, early into the pandemic to mitigate the impact of the coronavirus. There was widespread consensus that if the government had hesitated to take these stringent measures at the outset of the pandemic, then the overall situation in Saudi Arabia might have been a lot worse. Instead, the Kingdom has experienced relatively few fatalities in comparison to many other countries.3 While Saudi Arabia appeared to have avoided the worst of the pandemic, the government understood clearly that there was no room for complacency, and regularly issued stern warnings to the Kingdom’s populace, both nationals and residents.4 Saudi Arabia’s popular

and respected Minister of Health, Dr Tawfiq Al Rabiah, took the lead in announcing pandemic restrictions and procedures to the Kingdom, also frequently cautioning the population about the ramifications of not adhering to Covid-19 precautionary measures.5 Furthermore, it was Dr Al Rabiah who featured on national television, as well as all social media platforms, receiving the Kingdom’s first vaccine, closely followed by the king, crown prince and other senior princes; in other words, leading by example.6 Because of the emphasis of ‘family’, Saudi Arabia’s diverse societies possess innate senses of community. Indeed, as Montagu highlights, the Kingdom is a particularly community-focused country where associational and community life is deeply implanted.7 The coronavirus pandemic has underscored the significance of community health, with the government believing that the well-being of its citizens constitutes a fundamental aspect of the unwritten Saudi state–society social contract. In fact, in recent years, the existing social contract, i.e. state–society relations vis-à-vis the traditional religious legitimacy of the ruling Al Saud family, has changed significantly.8 Nowadays, from the perspective of the Kingdom’s varied constituencies, the Al Saud’s legitimacy is based predominantly on the government being able to provide adequate health services and social security to distinct communities that still fear fitna (unrest and discord). Certainly, the coronavirus outbreak proved challenging for the Saudi government (as it has for all governments) as it tried to minimize infection rates and fatalities. Yet, Saudis still expect the government to protect its citizens, and in the coronavirus case it appears to have risen to the challenge. In fact, as a consequence, public confidence in key state institutions has increased and has been largely attributed to changes introduced since 2015. In other words, at a time when the terms of the social contract have come under greater scrutiny, the state has stepped up and managed the pandemic effectively. It is difficult to imagine those same state institutions performing quite so competently and efficiently before the advent of Saudi Vision 2030. As such, the government’s decisive response to the pandemic, especially when compared to other countries, has given younger Saudis pause for thought and reinforced the social contract. Indeed, as the global pandemic accelerated, by and large the Saudi authorities enjoyed overwhelming public support when introducing policies aimed at limiting the spread of coronavirus within the Kingdom. In this respect, in what remains a highly patriarchal society, it has given King Salman an opportunity to address the population directly by not only explaining 292

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

why social restrictions are necessary to combat and mitigate the impact of the coronavirus pandemic but also refreshing the Al Saud’s legitimacy with younger generation Saudis eager for change.9 That said, as elsewhere in the world, social priorities in Saudi Arabia have changed due to the pandemic’s ramifications. Nowadays, Saudi nationals and residents are more preoccupied with issues related to health, both personal and family, their children’s education and job security during a time of economic uncertainty. Whilst many nationals were contemplating the prospect of foreign travel resuming in May 2021, in reality, during discussions with young Saudis in spring 2021, the main topics of conversation were not holidays, entertainment opportunities or high-profile Vision 2030 initiatives; rather, the focus was on the merits of various Covid-19 vaccinations available to them, and their families, through the government’s vaccination programme. This underscores how people’s priorities have changed as a result of the coronavirus pandemic. Still, it remains to be seen to what extent this social ‘reprioritization’ will be reflected in the future direction of Saudi Vision 2030, and whether the Vision and accompanying National Transformation Program will require significant ‘course corrections’ post-pandemic. Nevertheless, the bottom line is that Saudi Arabia stands to benefit from its experience with coronavirus. Although not widely covered outside the Kingdom, the government enjoyed considerable success with its rapid implementation of the widely used Ministry of Health Tawakkalna app, and highly effective test, trace and track coronavirus system. The Kingdom’s experience should strengthen both public and private sector bodies, especially if they can draw upon lessons learned – locally – and deepen governance capability, not only in health but also in other service-led sectors. Indeed, Saudi Arabia could serve as a useful case study on how to manage future pandemics, given that its Covid-19 experience has universal merit and applies to all countries and, itself, was based upon developing a response to the MERS outbreaks in 2012 and 2015, from which Saudi Arabia undoubtedly benefited.

Notes 1 ‘Middle East Respiratory Syndrome (MERS)’ (2021), Centers for Disease Control and Prevention (CDC), www.cdc.gov/coronavirus/mers/index. html Afterword

293

2 F. Neve, (2020), ‘Saudi Arabia’s Response to the COVID-19 Pandemic’,

King Faisal Center for Research & Islamic Studies, www.kfcris.com/en/view/ post/285

3 Johns Hopkins University & Medicine (2021), ‘Coronavirus Resource Center’, https://coronavirus.jhu.edu/map.html

4 D. Al-Khudair, (28 March 2021), ‘Saudi Arabia Reminds Residents of Fines

for Violating Health Rules’, Arab News: www.arabnews.com/node/1832976/ saudi-arabia

5 Saudi Gazette report (31 January 2021), ‘Dr. Al-Rabiah Warns against

Laxity in Following Protocols amid Recent Surge in Coronavirus Cases’, https://saudigazette.com.sa/article/603083/SAUDI-ARABIA/Dr-AlRabiah-warns-against-laxity-in-following-protocols-amid-recent-surge-inCoronavirus-cases

6 Ministry of Health (2020), ‘Al-Rabiah Launches COVID-19 Vaccination Campaign’, https://www.moh.gov.sa/en/Ministry/MediaCenter/News/ Pages/News-2020-12-17-007.aspx

7 C. Montagu, (March 2015), ‘Civil Society in Saudi Arabia: The Power and

Challenges of Association’, Chatham House, p. 4, www.chathamhouse.org/ publication/civil-society-saudi-arabia-power-and-challenges-association

8 J. Nevo, (1998), ‘Religion and National Identity in Saudi Arabia’, Middle Eastern Studies, 34 (3): 34–53.

9 ‘King Salman says Saudi Arabia “taking all measures” to fight coronavirus in speech to nation’ (19 March 2020), Arab News, https://www.arabnews. com/node/1643926/saudi-arabia

References Al Ghalayini, B. (2018). ‘Solar, a Key Option in the Saudi Renewable Energy Strategy’. http://www.arabnews.com/node/1394976 Bellini, E. (2019). ‘Saudi Arabia Plans New Long-term RE Targets, Will Resume Tenders’. https://www.pv-magazine.com/2019/01/03/saudi-arabia-plans-toset-new-long-term-re-targets-and-to-resume-tenders/ Blas, J. (2019). ‘Saudi Arabia’s “Win-Win-Win” Megadeal Is no Dead Cert for Aramco’. https://www.bloomberg.com/news/articles/2019-03-29/saudiarabia-s-win-win-win-megadeal-is-no-dead-cert-for-aramco Brown, E., Cloke, J. and Harrison, J. (2015). ‘Governance, Decentralisation and Energy: A Critical Review of the Key Issues’. Loughborough University Institutional Repository. Castlereagh Associates. (2020). ‘Saudi Arabia New Renewables Giant’. Colebatch, H. (2014). ‘Making Sense of Governance’, Policy and Society: 33–4.

294

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

Daoud, Z. (2018). ‘Khashoggi Case Could Unravel Saudi Crown Prince’s Project’. https://www.bloomberg.com/news/articles/2018-10-16/khashoggi-casecould-unravel-saudi-crown-prince-s-project-chart Di Poala, A. (2018). ‘It’s Hard to Be the Saudi Arabia of Solar’. https://www. bloomberg.com/news/articles/2018-12-16/why-saudi-arabia-isn-t-meetingits-ambitious-solar-energy-targets IMF. (2021). ‘Regional Economic Outlook Middle East and Central Asia’. IMF. (2021). ‘Saudi Arabia: At a Glance’. International Renewable Energy Agency. (2015). ‘Renewable Energy Auctions: A Guide to Design’. International Renewable Energy Agency. (2019). ‘Renewable Energy Market Analysis GCC’. International Renewable Energy Agency. (2020). ‘Renewable Energy Capacity’. JP Morgan. (2020). ‘Economic Research Global Data Watch: MENA’. Kaufmann, D. and Krayy, A. (2008). ‘Governance Indicators: Where Are We, Where should We Be Going?’, The World Bank Research Observer: 23–1. Kemp, R. Loorbach, D. and Rotmans, J. (2008). ‘Transition Management as a Model for Managing Processes of Co-Evolution towards Sustainable Development’. The International Journal of Sustainable Development and World Ecology. Lange, O’Hagan, A., Devoy, R. et al. (2018). ‘Governance Barriers to Sustainable Energy Transitions–Assessing Ireland’s Capacity towards Marine Energy Futures’, Elsevier Energy Policy: 113–623–32, p. 624. Marquardt, J. (2017). ‘Conceptualizing Power in Multi-level Climate Governance’, Journal of Cleaner Production: 154. Mooney, C. and Mufson, S. (2018). ‘Why Saudi Arabia Is Trying to Launch an Utterly Massive New Solar Project’. https://www.washingtonpost.com/news/ energy-environment/wp/2018/03/28/why-saudi-arabia-is-trying-to-pull-offan-utterly-massive-new-solar-project/ Nakhle, C. (2017). ‘Towards Good Governance of the Oil and Gas Sector in the MENA’. UN ESCWA. Natural Resource Governance Institute. (2017). ‘Resource Governance Index: Saudi Arabia’. Obeid, J. (2018). ‘Saudi Arabia Is in a Double Bind on Oil Prices’. Chatham House. Rashad, M. and Kalin, S. (2018). ‘Foreign Investment in Saudi Arabia More than Doubled in 2018: Minister’. https://www.reuters.com/article/us-saudibudget-energy-industry/foreign-investment-in-saudi-arabia-more-thandoubled-in-2018-minister-idUSKBN1OI0QU Renewable Energy Project Development Office. (2017). ‘Sakaka Solar PV Independent Power Plant: Request for Proposals’. Reuters. (2017). ‘Saudi to Launch $30-50 Billion Renewable Energy Program Soon: Minister’. https://www.reuters.com/article/us-saudi-energyrenewables/saudi-to-launch-30-50-billion-renewable-energy-program-soonminister-idUSKBN1501HE

Afterword

295

Saudi Arabia National Renewable Energy Program e-Procurement Portal. (2020). https://www.powersaudiarabia.com.sa/ Saudi General Authority for Statistics. (2017). ‘Indicators of Renewable Energy in Saudi Arabia’. Saudi Ministry of Energy, Industry and Mineral Resources website. (2019). https://www.meim.gov.sa (Accessed May 2019). Transparency International. (2020). ‘An Overview of Corruption and AntiCorruption in Saudi Arabia’.

296

GOVERNANCE AND DOMESTIC POLICYMAKING IN SAUDI ARABIA

INDEX King Abdullah 10, 23, 95, 100, 199, 202–3, 205–8, 210, 213, 269 Abu Dhabi National Oil Company (ADNOC) 175 Abuleif, Khalid M. 209 active labour market policy (ALMP) 51–2 ACWA Power company 179, 183, 204, 206, 210, 214–15 ACWA Renewable Energy Holding 204, 210 administrative archaeology 74, 87 anti-corruption campaign 78, 109 n.8. See also corruption Arab Gulf States Institute 225 Arab Spring 136 n.2 Aramco Services Company 248. See also Saudi Aramco company Asa’ad regime in Syria 94–5 Asharq al-Awsat newspaper 199, 212 Asia 2, 10, 72, 272, 276–7 Atlas of Renewable Energy Sources in the Kingdom 206 authoritarian/authoritarianism 71, 79, 88, 187, 201, 214 Bahrain 99, 106, 110 n.17, 177 Bee’aty media channel 208 best-fit policy model 159. See also obesity #bi’atok_baytok (Your environment, your home) 211 Biden, Joe 107 Bin Alwaleed, Khaled 203 bin Salman, Abdul Aziz 95, 203–4, 207, 232 bin Salman, Mohammed 4, 13 n.8, 66, 70–2, 100, 104, 198, 203–4, 209–11, 213, 216

Booz Allen Hamilton company 69, 106 Boston Consulting Groups 67, 70, 106 Bourdieu, Pierre, habitus 124 BP Company 175, 268, 278 Statistical Review of World Energy 2020 271, 276 Britain. See The United Kingdom capacity-building programs 7, 18, 22, 34, 49, 93, 97, 245, 251 capitalism 53 colonial 54 egalitarian 51 Najdi 215 carbon capture and storage (CCS) projects 212, 230, 239, 243 Carbon Capture Utilisation and Storage 209 Carbon Sequestration Leadership Forum 209 Careership theory 123 Carter Doctrine of 1980 276 Chatham House 2, 12 n.1 Chevron company 268 ­China 69, 209, 212, 228, 263, 271 Silk Road Fund 210 Circular Carbon Economy (CCE) 243, 246–7 citizen(s)/citizenship 3, 5, 8, 12, 18, 23–4, 27, 38, 42–4, 55, 71, 80–2, 84, 87, 116, 122, 172, 234, 244, 261, 269, 292 Citizens Account program 45 citizenship 2.0 81 employment (see employment) good 81, 201 rentier 4 civil society 3, 240, 261 civil society organization 154

Climate Action Tracker (CAT) 261, 281 n.18 climate change/action 9–10, 173, 180, 197–202, 209, 212, 225–6, 230, 233, 238, 251, 264–5, 279 carbon emissions/carbon intensity 248, 252 n.16, 258–9, 262, 264–8, 271, 278–9, 280 n.9, 285 n.62 climate compliant 272–3, 278 climate finance/green finance 244–5, 252 n.12 climate policy regime and political economy regime 239 CPI (see climate policy integration) decarbonization 209, 258–61, 263, 272, 275, 278 defensive strategies 227, 239, 249–51 delayed action on 237, 241, 246 depletion strategy 267–70 discursive strategies 227, 240, 248–9 economic diversification 229–30, 233, 244, 250, 260, 264–5 and economy 227–9 global emissions 228–9, 257, 261, 273 global warming 197–8, 201, 209, 228, 247 governance 9–10, 226, 230–3, 243, 245, 249–50 hydrocarbons 244, 246–51, 258, 260, 264–5 institutional interests 239–40 material strategies 227, 239, 246–7, 251 and Ministry of Energy (see Ministry of Energy, Industry and Mineral Resources) negotiations 226, 242, 249–50 systematic framework of analysis 238–40 298

INDEX

Third National Communication on 209, 231, 241–2 upstream emissions 266–8 Climate Change and Sustainability 248 climate economy integration 240–5 analytical framework 233–40 data uncertainty and knowledge gap 240–2 climate policy integration (CPI) 233–8 ­data, information and awareness 235–6 diagonal integration 234–5 financial and human resources 236–7 institutional architecture 236 political economy of rentier states 237–8 CO2-Enhanced Oil Recovery (EOR) 247, 249 construction industry 106 consultants 6–7, 36, 65, 80, 85–8 consulting contracts (payments) 74 delivery-based costing model 77 expatriation (see expatriates/ expatriation) external 7, 75 foreign/international 66, 69–70, 73, 77–8, 83 ban on 77–8 insurance policy 75 local contract law 73 management 7, 71–2, 84 migration/migrant workers 69, 73, 85–6 and NTP 66–73 public sector 65, 75–7, 79 technical 68 Consultative Council 137 n.3, 137 n.8 coordinated market economies (CMEs) 60 n.25 corruption 11, 67, 95, 102, 109 n.8, 171. See also anti-corruption campaign Corruption Perception Index 77

Covid-19 pandemic/coronavirus 2, 5, 11–12, 44–5, 58, 84–5, 136, 158, 172, 188–9, 200, 216, 229, 260, 271, 278, 291 and defence reform 106–7 impact of 25–6, 31, 173 lockdown 5, 85, 136, 174 precautionary measures in Saudi 291–2 social distancing 136 Tawakkalna app 293 vaccine/vaccination 292–3 Crown Prince. See bin Salman, Mohammed Da‘am ‘Amala wage support program 47 Danish model. See Scandinavian (Danish) model decision-making process/decisionmakers 3–5, 8, 17–19, 22, 35–7, 123–4, 170, 180, 202, 213, 250. See also policymakers/ policymaking defence industry 7–8, 107. See also Saudi Armed Forces armed forces (patronage) 11, 94–5, 98, 100, 103 coup-proofing 94–5, 108 n.4 cultural deficiency 96 defence capacity building 7, 93–4, 97–9, 102 defence/military spending 69, 94, 103 ­defence reform 8, 93, 97, 100–2, 106–8 doctrine 98–9 leadership and education 104–5 merit-based promotion system 97, 104–5 military equipment/material 69, 95–7, 102–4 military facilities 106 military organizations 96, 98–101

military training (collective/ individual) 101–2 Ministry of Defense (MoD) 98–103, 105, 108 personnel reform 105 standardization 8, 103 Denmark 51–5 Danish Right Party 53 electoral system 53 Designated National Authority (DNA) 209, 232, 242 DesRoches, David 7–8 developing countries 68, 96, 145, 181, 212, 231, 271, 277 distributive systems (state–society) 54–5 donors 17–18, 36 DOTMLPF, elements of 97 Dubai 106, 281 n.14 Dumat Al Jandal wind farm 183 Dutch Hunger Winter 149–50 Earnings before interest, taxes, depreciation and amortization (EBITDA) 258, 280 n.6 Easternisation 214 economic diversification 1, 4, 10, 43, 115, 172–3, 178, 200, 226, 229–30, 233, 244, 250, 260, 264–5 vs. maintaining oil rents 273–5 economy/economic policy 23, 43–4 budget deficit 47, 175, 263, 275 and climate change 227–9 debt (government/public) 61 n.46, 67, 173 diversification (see economic diversification) East Asian 50, 60 n.25 economic growth 8, 10, 41, 50, 67, 119–20, 136, 187, 245 economic reform agendas 6–7, 41–3, 46, 83 foreign reserves 5, 61 n.46 global 5, 12, 121, 181 INDEX

299

impact of Covid-19 25–6, 31, 45, 58 oil-dependent 4, 225 political (see political economy) Education and Training Evaluation Committee (ETEC) 118 education/education system 6, 38, 45, 115, 120 academic 122, 126, 135 ­budget 48, 120, 137 n.4 curriculum 105, 121, 134–6, 155 distance learning 136 improving standards of 4 Maher workshop series 118 military educational institutions 104–5 Ministry of Education (MOE) 48, 118, 121 in Pakistan 21 policy implications 134–5 post-secondary 116, 119, 122–3, 126, 130 secondary schools 118–19, 121, 124, 127, 134–5 social meanings 125 STEM (science, technology, engineering, mathematics) 48 tracks 119, 121, 134 and training system 117–18 TVET (see technical and vocational education and training) vocational 8, 116 wait-and-see approach 127 egalitarian capitalism 51 e-government services 5 electricity 45, 177–8, 187, 230, 248, 261 consumption 173–5, 188, 232 demand 174 and fuel subsidies 173–4 generation capacity 174, 177–8, 187, 232, 250 tariffs 45, 173–4, 189 wind-generated 270

300

INDEX

Electricity and Cogeneration Regulatory Authority (ECRA) 174, 181, 187–9, 203, 250 elite(s) 4, 7, 10, 66, 71, 75–7, 80–1, 88, 95, 213 employment 4, 8, 23, 41, 46, 86, 131. See also job creation; labour market policy; unemployment female 25 gender 26, 29 government 43, 46, 79 impact of Covid-19 25–6, 31 job-seekers 47–8, 50–1 public sector 42, 44, 46, 81 public to private 24 energy-intensive industries 46, 263 energy policy 6–7. See also oil and gas industry climate change (see climate change/action) economic diversification 172–3, 178 electricity (see electricity) energy diversification 173–5 ­energy transition 172, 180 fossil fuels 10, 173–5, 177, 197, 226, 228–9, 238, 240, 257, 259, 262–5, 270–3, 278 governance 170 hydrocarbon-rich economies 9–10, 169, 173, 187, 197–8, 237–8 low-carbon technologies 177, 198, 230, 246–7, 261 national governance indicators 191 n.4 control of corruption index 171 government effectiveness index 171 political stability index 172 regulatory quality index 171 rule of law index 171 voice and accountability index 172

nuclear energy 173, 212 renewable energy (see renewable energy) solar energy 176–9, 206, 210, 212 wind energy 176–9, 206 entitled loyalists 81, 83 environmental policymaking 197 climate change (see climate change/action) eco-friendly 201, 208, 210 environmental damage 212, 257, 259, 270, 272, 277 environmental degradation 198, 200, 249 environmental hazards 198, 200 environmental protection 202, 208, 214–15, 243 environmental sustainability 215, 216 n.5 greenhouse gas (GHG) emission 10, 226, 228–9, 231, 241–2, 261, 264–5, 267–8, 271, 273, 285 n.62 green recovery 216 greenwashing project 208, 211 legitimacy/legitimation (see legitimacy/legitimation strategy) low-carbon technologies 246–7, 251 policy recommendations 251 pollution 198, 243, 271, 273 rhetorical framing 214–15 EPoD–HRDF policy 19, 22–3, 30–1 Europe 2, 228, 276 evidence-based policymaking 6, 8, 17–19, 156 improving policymakers’ capacity 37–8 Evidence for Policy Design (EPoD) research programme 6, 18, 35 expatriates/expatriation 23–4, 27, 29, 69, 73, 79–81, 83–6, 88 ‘Expatriation 2.0’ 79–80, 86

external legitimation 201, 208–10, 214 ExxonMobil company 268 ­King Faisal 210 Fakieh, Adel 78 Al-Falih, Khalid 178, 203–4, 211–14, 257–8, 260 fauj (tribal militia element) 99 fiscal 26, 176, 230, 259 Fiscal Balance Programs 42 fiscal pressures 4, 41, 43–9 fiscal revenue 260, 262, 275, 281 n.14 fiscal sustainability 51, 230 government fiscal policies on obesity 155 fitna 292 flexicurity 51 foreign direct investment (FDI) 9, 45, 185, 187–8, 214 foreign labour/employee 42, 47, 79, 85–6, 115 foreign policy 4, 198 G20 145, 243, 246, 261 GAMEP 208–9 General Authority for Military Industries (GAMI) 8, 103 General Authority of Meteorology and Environmental Protection 243 General Authority of Statistics 154, 157 General Authority of Zakat and Tax 159, 161 geographic location of Saudi 176–7 Ghawar oil field 233, 247 glitter factor criticism 96–7, 102 Global CCS Institute 247 globalization 83, 86, 234 Global Methane Initiative (GMI) 209 Goldwater-Nichols Defense Reform Act (1986) 99 green card resident status 69 Griffiths, Steven 263

INDEX

301

gross domestic product (GDP) 44, 48, 67, 145–6, 172, 228–9, 275–6 Gulf 1–2, 9, 83, 85, 199–202, 210, 229 Gulf Arab states 234, 237–8, 245 Persian Gulf 276 petro-states 263 US-Gulf relationships 276 Gulf Cooperation Council (GCC) 18, 30, 44, 67, 69, 73, 76, 80, 83–4, 146, 177, 199–200, 264 economic integration 111 n.32 Peninsula Shield force 99 Hawiyah natural gas liquid recovery plant 233, 247 health/healthcare policy 4, 8, 45. See also obesity fines for violating health rules 294 n.4 high politics 4. See also low politics Holy Mecca (mosque), digital campaign to 157 ­home-grown research institutions 17, 35 human capital development 42 Human Capital Development Program 117–18 and labour localization requirements 48–9 human capital–oriented welfare model 51–2. See also flexicurity Human Resources Development 120 Human Resources Development Fund (HRDF) 19, 22–5, 30–2, 35, 47 Tamheer program 60 n.22 ideational-identitarian legitimation 201, 210–12, 214 implementation, policy 2, 7–9, 17, 37, 52, 54, 70, 84, 156, 159, 197, 236. See also

302

INDEX

Smart Policy Design and Implementation (SPDI) Independent Power Producers (IPP) model 9, 187, 206, 250 India 69, 212, 228 Indonesia 281 n.14 infrastructure security 93–6. See also defence industry insurance policy 75 Intended Nationally Determined Contribution (INDC) 226, 232, 240 international development partners. See donors International Energy Agency (IEA) 247, 275, 278 World Energy Outlook 275 International Finance Corporation 179 International Labour Organisation (ILO) 141 n.44 International Monetary Fund (IMF) 67–8 international oil companies (IOCs) 10, 267–9. See also national oil companies (NOCs) International Renewable Energy Agency (IRENA) 209, 247 international stock market 67, 82 Jadwa Research (2019) 80 job creation 7, 28, 42, 44, 178. See also employment and liberalization 45–6, 49, 57 job rotation system 52 Joint Forces Command 98, 101 Jones, Calvert 71, 79–81, 83 Jones, Davis 7 Jones, James 106 kafala system of sponsorship 69, 73, 77 Key Performance Indicators (KPIs) 24, 31, 43, 70, 116–17, 154, 162

Khashoggi, Jamal, killing of 66, 76, 210, 214 King Abdallah City for Atomic and Renewable Energy (KACARE) 181, 241 King Abdulaziz City for Science and Technology (KACST) 202–3, 207, 241 King Abdullah Center for Energy Efficiency 210 King Abdullah City for Atomic and Renewable Energy (K∙A∙CARE) 202–3, 205–6, 210–11 King Abdullah Petroleum Studies and Research Center (KAPSARC) 202, 205, 207, 210, 241, 252 n.9 ­King Abdullah University of Science and Technology (KAUST) 202–7, 210, 215, 241 King Faisal Centre for Research and Islamic Studies (KFCRIS) 217 n.10 King Salman Environmental Awareness and Sustainable Development Program 210 King Salman Renewable Energy Initiative 180, 210 knowledge-based economy 41, 51, 115 Kyoto Protocol 231 labour localization 42, 59 n.2 and human capital development 48–9 labour market policy 2, 8, 18, 22–30, 35, 41–2, 44, 73, 79, 84, 116, 120. See also employment; unemployment data sharing, challenges 32–3 demand and supply 22, 24–5, 30 fast-pace environment 31–2 Fifth Development Plan 23 impact of Covid-19 25–6, 31

incentives 18, 30, 33–4, 36 job creation 6–7, 28, 42, 44, 178 labour market literacy 122 National Employment Portal 24 parts of labour force (expats/ male/female) 29 policy analysts (training for) 36–7 priorities to women 26 research standard 36 timelines 31–2 training/on-the-job training 30 Lagarde, Christine 67 leadership 6–8, 11–12, 34, 38, 41–3, 72, 93, 104–5, 107–8, 119, 201, 204, 206–7, 209, 211–12, 236 legal-rational legitimacy 201 legitimacy/legitimation strategy 9–10, 55–6, 197–200, 208 external 201, 208–10, 214 ideational-identitarian 201, 210–12, 214 performance 201, 205–8, 214–15 structural 201–5, 213, 215 level electricity cost of electricity (LCOE) 183 liberalization 6–7, 42, 47 and statist job creation agendas 45–6, 49, 57 liberal market economies (LMEs) 60 n.25 low politics 3–5. See also high politics loyal bourgeois 81, 83–4 Lucid Motors 245 macrocorporatism 52–5, 57–8. See also Denmark Maher, Michael 279 ­Majlis al-shura. See Consultative Council Malik, Monica 4 Prince Mansour 203 Mariana, Mazzucato 72, 87 Masar 118 Masdar company 206

INDEX

303

McKinsey and Company 67, 70, 78, 106, 276 Memoranda of Understanding (MoU) 209, 283 n.42 The Middle East 2, 66, 73, 174, 177, 179, 208, 228, 276 Middle East Supply Centre 54 Middle East respiratory syndrome (MERS) 291, 293 migration/migrant workers 69, 73, 85–6 million tonnes of carbon dioxide equivalent (MtCO2eq) 260–1 Ministry of Defense (MoD) 98–103, 105, 108 Ministry of Economy and Planning (MEP) 117, 137 n.5 Ministry of Education (MOE) 48, 118, 121 Ministry of Energy, Industry and Mineral Resources (MOEIMR) 180–1, 203, 206, 213, 242–4, 247, 249–50 Ministry of Environment, Water and Agriculture (MEWA) 203, 208, 242–4 Ministry of Health 159, 293 Ministry of Human Resources and Social Development 46 Ministry of Petroleum and Mineral Resources (MPMR) 202, 209 Ministry of Water and Electricity (MOWE) 202 Missile Technology Control Regime 109 n.12 modernization 86, 107, 210 Mohammed bin Salman Natural Reserve 210 Muslim Brotherhood 83 Al-Naimi, Ali 203, 211–12, 248 Najdi capitalism 215

304

INDEX

narratives of TVET dead end (career limiting) 125, 129–30 last resort 125–8 second chance 125, 130–2 welcome alternative 125, 132–4 Nasser, Amin H. 249, 283 n.42 Nasser, Gamal Abdel 54–5, 83, 94 National Centre for Privatisation (NCP) 186 national champions 42, 49, 205 National Committee for the Clean Development Mechanism 232 National Energy Efficiency Program (NEEP) 202, 232 National Energy Services Company 213 Nationalisation 2.0 79 nationalism 76, 81, 83, 87 nationalization 7, 76, 80–1, 83–4, 86–7, 269 Nationally Determined Contributions (NDC) 231, 243, 260–1 ­national oil companies (NOCs) 10, 175, 246, 249, 257, 260, 269, 278. See also international oil companies (IOCs) National Renewable Energy Program (NREP) 180–1, 206 National Training Center 101, 110 n.23 National Transformation Program (NTP) 2020 1–2, 4–6, 24, 41, 43, 59 n.2, 66, 79, 81, 84, 116, 173, 188, 206, 240, 246, 293. See also Saudi Vision 2030 and role of consultants 66–73 Natural Resource Governance Institute (NRGI) 169–70, 175 NEOM (sustainable megacity) 210 Niblock, Tim 4

Nitaqat program 24, 46. See also Taqat program non-oil economic sectors 42, 225–7, 240 non-Saudis 29, 73, 278. See also Saudis/Saudi nationals non-state actors 180 North America 2, 276 Obeid, Jessica 214 obesity 8. See also health/healthcare policy adult 146 adverse metabolic health 149–50 case study 159–61 causes of 148–54 environmental factors 149, 153–4 epigenetic factors 149–50 genetic factors 150–1 psychological factors 149 childhood 151 decrease sugary beverages 157, 159 deoxyribonucleic acid (DNA) 149 ectopic fat 153 fast-food 147 foetal malnutrition (pregnancy) 149 genotypes 151 government fiscal policies 155 homeostasis 148–9 inactivity of women 147 Leningrad famine 150 leptin 150–1 life expectancy 145 and metabolic disorders 149 multifactorial nature of 148 one size fits all approach 148 parental 151 pet 151 Pima Indians 151–2 ­purchasing power party (PPP) 145–6 recommendations 162

risk factors (consumption/eating habits) 146 SSB tax 159–61, 163 systematic approach for policy-/ decision-makers 156–9 ground assessment stage 156 identification of causes 156–7 maintaining feedback loop 158–9 thinking 157–8 UK Biobank study on 153 walking habits (exercise) 153 digital campaign to Mecca 157 Observer Controller effect 110 n.23 occidentalism 76 Occidental Petroleum 267–8, 280 n.9 Oil and Gas Climate Initiative 243 oil and gas industry 25, 72, 169–70, 186, 189–90, 198. See also energy and environmental policy crude oil 172, 248, 257, 266–8, 272, 277, 279, 280 n.9, 285 n.62 emissions intensity of global 266 feedstocks 247, 272–3 foreign investments 176, 186–8 (see also foreign direct investment) governance 175–6, 185–6 monopoly 169, 175, 182, 186–7, 189, 238, 268 natural gas/natural gas reserves 172, 174, 186, 247, 261, 267 non-combustion uses for crude 272–3 oil demand 5, 11, 172, 228, 258, 270–2, 275–7 oil exports/exporters 26–8, 169, 172, 263–5 declining geopolitical importance of 275–6 oil prices, collapse/crash 2, 4–5, 11, 41–3, 67, 115, 175, 216, 225, 269, 277

INDEX

305

decline 44, 47 recovery in 2017 47 oil producers, ranking 259 oil rents 55–6, 258–60, 264, 273, 275 petrochemicals 272, 278 petroleum reserves 172, 176, 228 political stability 169, 172, 175 resource governance index 175–6 revenues from 26–7, 93, 169, 172, 188, 199–200, 237 oil-based economic sectors 227–8 Oil Change International 228, 263 OPEC 172, 263–4 ­Organisation for Economic Cooperation and Development (OECD) 50–1, 73, 145, 263, 272 orientalism 76 Pakistan, education system in 21 Paris Agreement 226, 231, 247, 260, 265 performance legitimation 201, 205–8, 214–15 petrostates 238, 262–3 Pew Global Attitudes Survey (2018) 270 photovoltaic (PV) 177–8, 189, 206, 261, 274 plastics industry 273, 278 policymakers/policymaking 6, 17–19, 21–3, 30–2, 34, 36, 44, 50, 52, 54, 58, 71, 84, 86. See also decision-making process/decision-makers improving capacity (for evidencebased policymaking) 37–8 public policy 6, 17–19, 34, 72 public sector 65, 68, 75, 79 tackling obesity 156–9 TVET 117–19 policy-research engagement 6–7, 17, 19, 22, 31–5, 37 political economy 9, 43, 48, 55, 227–8, 262 306

INDEX

of rentier states to CPI 237–8 Pollack, Kenneth, Armies of Sand 109 n.10 population growth 42, 93, 173 and carbon emissions growth 262 Power Purchase Agreement (PPA) 183, 250 Predictive Adaptive Response model 150 Presidency of Meteorology and Environment (PME) 202, 207–9 PriceWaterhouseCoopers 106 Princess Noura University for Women (PNUW) 206 private sector 9, 18, 23–5, 27–8, 31, 42, 48, 54, 57, 67, 122, 182, 189. See also public sector employment 46–7 local 46, 49 private sector participation (PSP) law 186 wage support program 47 privatization 42, 45–6, 72, 88, 186, 229, 263 Public Investment Fund (PIF) 49, 176–7, 179, 182–4, 204–5, 209–10, 213, 215, 245 public investments 34 public policy/policymaking 6, 11, 17–19, 34, 72, 82, 159–61 public–private partnership 3, 9, 58 public sector 18, 23, 26–7, 41, 43, 122. See also private sector distorting effect of 46–8 employers 82 employment/employees 42, 44, 46–7, 59 n.2, 79, 81–2, 87 policy/policymaking 65, 68, 75, 79, 83–4 ­wages/wage bill 44, 47, 77 Qatar 66 The Quality of Life Vision Realization programme 9, 155, 158

Al Rabiah, Tawfiq 292 rationalization, budget 45, 207 Realization Programs 41, 43. See also Vision Realization Programs reform dissonance 6, 41–9 crowding-out effect 42, 49, 84 labour localization and human capital development 48–9 liberalization and statist job creation 45–6, 57 public sector 46–8 and reform resonance 50–6 regulatory rents 56–7 renewable energy 9–10, 49, 169–70, 186, 189, 192 n.26, 205, 212, 245, 248–9, 274. See also energy policy auctions 182–4 decentralized generation 188–9 demand for 175 deployment 179–82, 187–90 divergent energy procurement 184–5 governance (oil industry vs.) 185–6 inconsistent plans/projects 178–9 policy recommendations 190 potential 176–8 procurement practices 181–2 projects 274 regulations 186–7 Renewable Energy Project Development Office (REPDO) 177, 179, 181–2, 184, 203–4, 206–7, 213, 233, 243, 249 Category A/Category B projects 184–5 expression of interest (EOI) 182, 184 request for proposals (RFP) 182, 184 request for qualifications (RFQ) 182, 184 rentier state 4, 42, 46, 59 n.2, 238–9 rentier state theory (RST) 233, 237–8, 246

research-policy. See policy-research engagement resistance 83, 99, 151, 239 Reuters 192 n.25, 252 n.14 Ar-Riyadh newspaper 199, 212 Riyadh, Saudi Arabia 2, 30, 70, 87, 106, 121, 199 consultants 68–9 urban metro systems 207 Royal Decree 31, 118, 137 n.3, 159, 202–4 Royal Dutch Shell Company 175, 278 Royal Order 68 ­Royal Saudi Air Defense Forces (RSADF) 98, 100–1, 104 Royal Saudi Air Force (RSAF) 98, 101 Royal Saudi Land Forces (RSLF) 98–100, 104 Al-Rumayyan, Yasir 204, 210, 213 Russia 285 n.55 Al-Sabban, Mohammad 209 Sakaka solar farm 177, 182 King Salman 10, 66, 97, 180, 199, 204, 207–8, 210, 213, 220 n.87, 292, 294 n.9 Al-Sarihi, Aisha 214, 279 Al Saud, Alwaleed bin Talal 203 Al Saud family 9–10, 259–60, 269, 292–3 Saudi Arabia National Guard (SANG) 95, 99–100 Saudi Arabian Military Industries (SAMI) 8, 103 Saudi Aramco company 10–11, 45, 66, 72, 130, 175–6, 202, 205–7, 243–4, 247, 249, 262, 267–70, 274, 278 Annual Review (2017) 280 n.7 Aramco Supreme Council 203 bond prospectus 258, 260, 264–7, 270–1, 277 business growth strategy 283 n.42 carbon capture project 253 n.20 change in social preferences 270–2 INDEX

307

climate risk disclosures 264–5 concession agreement 258 during Covid-19 pandemic 278 downstream investments 276–7 expansion of hydrocarbon production 258 expansion strategy 283 n.42 EXPEC-Advanced Research Center 247 global emissions 257 last man standing approach 258–9, 279 lawsuits and litigation 272 oil monetization 257, 263, 277–8 profits 260 and Saudi Arabia’s GDP 258 Saudi Armed Forces 95, 98, 104–5. See also defence industry Saudi Council of Economic and Development Affairs (CEDA) 117 Saudi Data and Artificial Intelligence Authority 154 Saudi Electricity Company (SEC) 174, 181, 202, 206–7 Saudi Energy Efficiency Center (SEEC) 202, 232 Saudi Energy Efficiency Program (SEEP) 207, 232 Saudi Food and Drugs Association 159 Saudi Gazette newspaper 199 Saudi General Authority for Statistics (GaStat) 44 Saudi Green Building Forum (SGBF) 202–3, 207, 233 Saudi Green Initiative 208, 211, 216 ­Saudi health Vision 2030 145 Saudi National Defense University 104–5 Saudi Petroleum Services Polytechnic Institute 134 Saudi Royal Commission for Jubail and Yanbu 138 nn.15–16, 203

308

INDEX

Saudis/Saudi nationals 4, 8, 27, 29, 36, 73, 79, 108. See also non-Saudis Saudi Vision 2030 1–2, 4–8, 19, 35, 41, 43, 45, 57, 66, 72, 88, 93, 97, 103–4, 110 n.28, 115–19, 173, 180, 186–7, 204, 210, 226, 240, 244–5, 293. See also National Transformation Plan (NTP) 2020 Saudi Wildlife Authority 208 Saudization 23, 27, 47, 69, 79, 115, 117, 137 n.3, 177 Scandinavian (Danish) model 7, 41, 43, 50–6, 60 n.25 clientelism 55–6 macrocorporatism 52–5 (See also Denmark) science-based knowledge 235 Secondary Industrial Institute 119, 129, 133, 135 Second World War 54, 98 security. See defence industry; infrastructure security shale gas revolution 198 shareholder-owned oil companies 267–8 Sharik civil society organization 154 Al-Shehri, Abdullah 211 Shell company 268, 278 Shura Council. See Consultative Council small and medium enterprises (SMEs) 5, 9, 42, 49 General Authority (Monsha’at) for 58 Smart Policy Design and Implementation (SPDI) framework 19–23, 30, 37 education in Pakistan 21 sample application 21 stages 20–1 social contracts 4–5, 43–4, 47, 86, 292 socialism 54

social media 4–5, 35, 155–6, 160, 246, 292 social partners 52–4, 56, 58 SoftBank company 209–10, 245, 248 South Korea 72 Soviet Union 285 n.55 stakeholders 3, 8, 22, 31, 86–7, 123, 153, 155–6, 159–63, 175, 190, 204, 242 state–business relations, Danish 41, 43, 52, 54, 56 state effectiveness 50 state-owned enterprises (SOEs) 42, 49, 250 state–society relations 4, 50, 52, 54–5, 57, 237, 292 structural legitimation 201–5, 213, 215 subsidy/subsidies reform 10, 24, 26, 30, 42, 44–6, 79, 155, 174–5, 189, 198, 207, 226, 229, 261, 270, 277 Sugar Drinks Industry Levy (SDIL) 159 ­sugar-sweetened beverages (SSB) tax 159–61, 163 Al-Sulami, Mohamed 75–6 Al-Sulayman, Faris 225 Prince Sultan 95, 100 sustainable development 9, 67, 120, 169, 173, 180–1, 187, 190, 198, 211–12, 216 n.5 Sustainable Energy Procurement Company (SEPC) 205 Syria 66, 94–5 Tamheer program, HRDF 60 n.22 Taqat program 24, 32, 46. See also Nitaqat program Tarshid Company 213 Tatweer Education Holding company 118 Tawakkalna app 293 tax/taxation 27, 44, 82 carbon 229, 263, 265, 267–8, 279

non-income 44–5 SSB 159–61, 163 VAT 45–6, 107, 111 n.32, 159, 172 technical and vocational education and training (TVET) 115–16 and Covid-19 pandemic 136 policymaking 117–19 qualifications 120 specializations 125–6, 128–9, 132–3 state-sponsored 134 study design 124–5 supply and demand 119–24 training institutes (tertiary level) 119–20 transitions decision-making in 123–4 narratives (see narratives of TVET) vision of 119 Technical and Vocational Training Corporation (TVTC) 118–19, 138 nn.16–17 Total Company 175, 268, 278 transparency 4, 33, 75, 162, 176, 182, 185, 190, 213 transportation sector 232, 247, 258, 272, 276 Trump, Donald 107 UK Biobank study on obesity 153 unemployment 25–6, 41–4, 47, 67, 70, 122, 275. See also employment female 26, 29 rate 59 n.2, 138 n.12 youth 115, 117 UN Framework Convention on Climate Change 230–1, 241 United Arab Emirates (UAE) 71, 80–1, 83–4, 245, 263, 281 n.14 The United Kingdom 69, 108, 110 n.17, 291 The United Nations 67

INDEX

309

­United Nations Development Programme 170 United Nations Framework Conventions on Climate Change (UNFCCC) 209, 226 Conferences of Parties 249 The United Nations International Centre for Technical and Vocational Education and Training (UNEVOC) 120–1, 139 n.23 The United States 97, 100, 108, 109 n.12, 265, 270–1, 291 legal action by 9/11 victim’s families 66 obesity (Pima Indians) 151–2 onshore oil investments in 274 The United States Army Corps of Engineers 106 US-Gulf relationships 276 US Securities and Exchange Commission 264 US Permian Basin 278 Uthmaniyah project 233, 247–8, 253 n.17 value-added tax (VAT) 45–6, 107, 111 n.32, 159, 172 Varieties of Capitalism scholarship 50, 60 n.25 Verhoeven, Harry 200 Vinnell Arabia Corporation 100 ‘A virtual Walk to Holy Mecca’ campaign 157

310

INDEX

Vision 2030. See Saudi Vision 2030 Vision Realization Programs (VLPs) 117, 162, 173 Vision Strategic Management Office 87 vocational education 8, 116 Vocational Educational and Training programme. See technical and vocational education and training (TVET) wastas 139 n.27 Weber, Max 201 women in sports 147 World Bank 170 Worldwide Governance Indicators 171–2, 191 n.4 World Economic Forum 67, 172 World Health Organization (WHO) 146 World Trade Organization (WTO) 203 Al Yamama (–British Aerospace) arms deal 95, 102 scandal 77 Yamani, Hashim 204, 211 Yemen 66, 76, 93, 100, 104, 108, 137 n.2 YouGov, ‘YouGov – International Climate Change Survey,’ survey 261, 282 n.21 young people in Saudi Arabia 4–5, 8, 116, 124, 135 unemployment 115, 117

311

312

313

314

315

316