Is Riyadh belt-tightening or amending economic approach?

Abdulrahman al-Rashed

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I do not think the pricing decisions that the Saudi government recently announced reflect a policy of belt-tightening, as some claim. They say these decisions are temporary and a response to the steep decline in oil prices, but according to what was announced, the pricing decisions are corrective, not austerity measures. The solution is to diversify the economy so it is not so dependent on oil revenues, otherwise Saudi Arabia will be poor within a few years.

In Britain, filling a car with petrol costs around $100, while in Saudi Arabia it only costs $10. However, the price is not the issue - rather, it is citizens’ income, which needs to be increased. The government needs to develop the economy so the entire country - not just the government - becomes rich, and so people are able to pay for commodities without state help.

It is easier for politicians to just pay subsidies and employ the unemployed, but this is unsustainable. Correcting prices is necessary in order to decrease the government’s heavy burden of subsidies. The most important thing here is that all this falls within the context of changing the economy’s philosophy and dynamics.

A difficult step has been taken in reforming a governing style that is more than 40 years old

Abdulrahman al-Rashed

Many will be patient with a situation they are not accustomed to - such as price increases due to subsidy decreases - on condition that there is real economic and developmental reform. This is what the government is promising.

Necessary steps

The task is complicated, requiring the correction of education, providing training support, altering the interests of bank investments that are currently inactive, introducing the concepts of modern management, amending the map of industries, encouraging women to work to improve family income, fighting social habits of depending on others, holding government institutions accountable, and adopting a program that fights corruption on all levels.

The wish list goes on, but it is not impossible to implement because when the country’s production increases, the incomes of citizens - who will pay the entire price of a liter of fuel according to the price of global markets, without complaining - will also increase.

A difficult step has been taken in reforming a governing style that is more than 40 years old. Since the 1970s, the concept of state subsidies has been favored due to financial abundance, but the Saudi population has increased from 8 million to around 25 million, including 4 million foreign workers.

It is in citizens’ interest to amend the economic situation and work toward a safe future. Correcting prices is the first major step. Oil revenues are decreasing and the population will double, while the standard of living in the world will continue to rise.

Therefore, the public interest is not in paying off fiscal deficits via government support, borrowing money or austerity measures. The solution is to develop citizens’ capabilities and the country’s productive potential so Saudis become like citizens of developed countries.

This article was first published in Asharq al-Awsat on Dec. 30, 2015.

Abdulrahman al-Rashed is the former General Manager of Al Arabiya News Channel. A veteran and internationally acclaimed journalist, he is a former editor-in-chief of the London-based leading Arab daily Asharq al-Awsat, where he still regularly writes a political column. He has also served as the editor of Asharq al-Awsat’s sister publication, al-Majalla. Throughout his career, Rashed has interviewed several world leaders, with his articles garnering worldwide recognition, and he has successfully led Al Arabiya to the highly regarded, thriving and influential position it is in today.

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