Fears over fate of free services ahead of Saudi privatisation push

Unemployment falls as economic activity resumes

One thing that marked the rise of Dubai from a small port to a major commerce and tourism hub has been the utter obsession with breaking records: the tallest tower, the biggest mall, the largest fountain, the longest 22-karat handmade gold chain and the largest dish of mango sticky rice

People may think that getting into the Guinness Book of World Records is a major feat that requires ingenuity and innovation to come up with something that has not been done before, but actually that’s not the case. All you need to do is pay Guinness a consulting fee and its marketing department would work with you to plan a record-breaking event.

As Saudi Arabia began following Dubai’s model for economic diversification, officials in the kingdom appear to have caught the unfortunate Guinness bug from our neighbours in the UAE. Turki al-Alsheikh, the head of the General Entertainment Authority, boasted last December that the GEA has received four certificates from Guinness and that three more are on the way.

The entertainment industry is still a nascent sector in Saudi Arabia, so seeking such records to draw more attention to it is somewhat understandable and can arguably be seen as part of the “fun and games” culture that GEA is trying to promote. But I was nonplussed that far more serious government entities are also getting in on this game.

Earlier this month, the government’s Saline Water Conversion Corporation (SWCC) announced that it has set a Guinness World Record for the lowest energy-consuming desalination plant in the world. This was not their first one: SWCC won a world record in 2019 for the biggest desalinated water plant with a production of 5.6m cubic meters of water a day, and broke its 2018 world record of five million cubic meters of water a day.

The fact that Saudi Arabia produces more desalinated water than any other country in the world should not be surprising. The kingdom has no rivers or lakes, and rainfall is scant to non-existent. The country’s precious groundwater supplies were squandered in just a few short decades on growing wheat under the banner of food security, until the practice was banned in 2008.

When Saudi oil facilities in Abqaiq and Khurais were attacked with Iranian weapons in September 2019, energy markets were rattled and questions were raised about the effectiveness of the kingdom’s American-made air defence systems. But another fear also manifested itself in the aftermath of the attack: what if desalination plants on the Gulf, including the world’s largest in Ras al-Khair, were targeted? The impact on people’s daily lives would have been far more devastating.

A leaked US State Department diplomatic cable from 2008 said Riyadh “would have to evacuate within a week if the plant, its pipelines, or associated power infrastructure were seriously damaged or destroyed.” The capital receives more than 90% of its drinking water from Ras al-Khair and the “current structure of the Saudi government could not exist without” the plant.

Water desalination is a complex and energy-intensive industry. Being the largest producer of desalinated water means that Saudi Arabia also makes the most amount of waste from this process. The technology has been imported from outside, but the kingdom is now stepping up its R&D efforts to make it more efficient and less wasteful. SWCC told Reuters last year that its researchers have filed several patents on technologies to extract minerals and decrease the amount of concentrated brine that flows back into the sea to limit the damage to marine ecosystems.

Considering the scale and importance of desalination to the Saudi economy, the sector is seen as ripe for privatisation plans. The government’s Saudi Water Partnership Company said last month it had reached financial close of a new $825m plant in the Red Sea city of Yanbu. French energy giant Engie will own 40% of the project, while the remaining 60% will be divided between two local companies. The project is expected to create 500 direct and indirect jobs, with at least two in five of them going to Saudis, officials said.

The announcement came ahead of the cabinet’s approval of the long-anticipated privatisation law, which targets 16 sectors in the kingdom: environment, water and agricultural, transportation, energy, industry and mineral wealth, labour and social development, housing, education, health, municipalities, hajj and umrah, communications and information technology, media, sports, interior and finance.

The inclusion of basic services such as utilities, health and education on that list has raised concerns about the possibility of having to pay more for them in the future. Okaz columnist Humoud Abutalib wrote:

It is absolutely necessary for those responsible for implementing privatisation programmes to understand the sensitivity of the equation and the need to balance its two sides between cutting ‘public spending and increasing state revenues’ and ‘raising the level of comprehensiveness and quality of services and providing them in a timely manner’ because if this equation is disturbed, it will have a negative impact on society, and on the strategic goal of privatisation. Some officials may focus on cutting spending just to save public money at the expense of the quality of services in order to brag about what they have saved, some of them may understand privatisation as a partial or complete surrender of the state to its responsibilities towards citizens, and for some privatisation could mean exhausting the citizen’s budget and leaving him at the mercy of the state’s new partner in its services, ie the private sector.

Trade minister Majid al-Qasabi sought to reassure the public on Wednesday, saying in a televised briefing that the government is committed to offering education and healthcare to citizens for free.

Unemployment falls to 12.6% in Q4

Unemployment among Saudi citizens fell to 12.6% in the fourth quarter from 14.9% in the third quarter of 2020 as the government relaxed coronavirus restrictions and gradually allowed the resumption of economic activity.

Data released by the General Authority for Statistics on Wednesday show a continued improvement in female participation in the workforce as women unemployment declined from 30.2% to 24.4%.

The latest numbers suggest that the labour market is returning to near pre-pandemic levels, but joblessness remains a major challenge facing Crown Prince Mohammed bin Salman as he seeks to bring the unemployment rate down to 7% by 2030 as stated in the goals for his reform plans to diversify the economy away from oil revenues and increase job creations in the private sector.

The prince earlier this week announced a new initiative to stimulate the private sector and increase its investments to $1.3 trn over the coming ten years under a new programme called “Shareek” (Arabic for “partner”), which he said would create hundreds of thousands of new jobs.

The kingdom’s private sector is highly dependent on cheap foreign labour from Asia and Arab countries, while the majority of Saudis are employed by the government. One of the main goals of the economic reform plans is to reduce the public sector wage bill which comprises nearly half of spending in the state budget.

A growing number of Saudis are now willing to work in the private sector. A survey conducted by the statistics authority in the fourth quarter says 93.2% of unemployed citizens would accept non-government jobs.

Long commute times appear to be a major concern to job seekers, particularly women, even after lifting the ban on female driving. 64.1% of women said one hour would be the maximum acceptable committing time, compared with 46.6 of men, according to the survey. Less than 20% of unemployed Saudis said they would be okay with a commute longer than two hours.