Kingdom Come [Archives:1999/14/Law & Diplomacy]

April 5 1999

By: Riad al Khouri,
Arab Intellectual and Columnist
based in Jordan.
Change of Heart!
Name a Middle East kingdom pushing to develop its tourism sector. If you answer “Jordan”, you are of course correct, but the reply of “Saudi Arabia” is not off the mark either. Name an Arabian Peninsula state interested in promoting its small and medium enterprises (SMEs). The reply “Yemen” is right, but the Saudis are also now into giving SMEs a higher priority.
So, why is Saudi Arabia, a conservative society that also happens to be the world’s largest oil exporter, interested in promoting tourism? And why is it that SME development, often a poor man’s game and practiced by, among many others in the region and the Third World in general, the Saudis’ less affluent neighbors Jordan and Yemen should become more important in a relatively rich economy?
The answer to these seeming paradoxes lies in the rapid changes Saudi Arabia is undergoing. Having spent the past ten days there, I had the chance to observe this process at first hand.
Less Money from Oil:
For a start, it is gradually sinking in that the oil boom of the 1970s and 80s is over. Despite last week’s good news about higher oil prices, many Saudis are now more convinced than ever that diversification away from the energy sector is vital for sustainable growth. This is correct, particularly since the price of oil is not likely to rise much beyond the ten dollar a barrel mark and stay there over the long-term, as opposed to the figures of fifteen to eighteen dollars being touted by some optimists. Either way, oil revenues will generally be lower than they were over the past two decades.
This in turn means that there will be less money coming into the Saudi Arabia as a whole and the public sector in particular. The latter has traditionally been the engine of Saudi growth, with the state pumping oil out of the ground and money into the economy. This mechanism is now becoming weaker, hence the search by some Saudis for new ways to do business, including tourism.
Discovering Tourism:
Calls for change now prevailing in the tourism sector in Saudi Arabia are particularly strong because tourism is an area in its economy which remains largely undeveloped. Actually, there is already considerable internal tourism in Saudi Arabia, particularly in the southwestern part of the country. The terrain there is mountainous. Thus, the highlands are cool and the valleys are green. In addition, there are many other attractions bringing large groups of people from the hotter and drier parts of the country.
Efforts aimed at developing tourism in the kingdom were given a boost last week with the government saying it will lend full support to moves in this direction. Policy on tourism was explained by Mecca Governor Prince Majed bin Abdelaziz while opening a two-day symposium on the development of tourism in Mecca region, promising that the authorities will “listen to what you tell us of the challenges and obstacles that deter the development of tourism in the region and we will work together to overcome these difficulties.” The region, headed by the prince, incorporates the western part of the kingdom and is seat to the holy city of Mecca, the destination of millions each year for pilgrimage. The region also includes Jeddah, Saudi Arabia’s commercial hub, and the summer resort city of Tayef.
A similar position was voiced by Minister of Communications Nasser Al-Saloum, who told the gathering of businessmen, corporate executives, government officials and academics that steps should be accelerated to set up an independent body to look after tourism.
Symposium papers touched on the absence of a clearly defined tourism policy and legislation, the tourist identity of the Mecca region in light of local traditions, the social impact of tourism with emphasis on the employment and training of local manpower, how the local population view and treat visitors from outside, and financing investments in this sector. The speakers lamented the poor state of the Saudi tourism industry in terms of the money spent inside the country, revenues generated, job creation, the condition of facilities, and the degree of awareness among the population. One speaker noted that in 1997 income generated from domestic tourism did not exceed $400 million, against $8 billion spent by Saudis outside the country.
Re-Orienting SMEs:
Other signs of change in the Saudi economy came in a workshop on SMEs held in Riyadh last week. Organized by the country’s Ministry of Finance and National Economy in conjunction with the World Bank, it included a paper presented by Dr Mohamad Abdelkarim Sulayman, head of Research and Studies at the country’s Manpower Council. In it, he talked about the need to support SMEs to boost Saudi national employment. He accused SMEs of being “the main factor causing structural disequilibrium in the labor market” in Saudi Arabia, “due to their small capital and low wages” which do not help to absorb national manpower.
Instead, low-capitalized SMEs, he added, actually encourage the recruitment of foreign workers at the expense of local manpower, thus exacerbating the country’s labor problems. Such talk of employment issues and SMEs was rare only a few years ago, and is further proof of the changes in the Saudi economy.
External Implications:
That SMEs, tourism, and other issues are being aired in Saudi Arabia today is a good sign. Saudi officialdom is becoming more sophisticated in dealing with the kingdom’s coming changes, and this makes many observers of the regional economy more optimistic.
Saudi Arabia is still by far the biggest Arab economy, and sustainable Saudi development is good news for the country’s poorer neighbors, like Yemen and Jordan, as well as for the rest of the Middle East.
A superficial assessment could result in wrong conclusions that the Saudis are going to compete in the regional tourism and investment markets. This is not accurate. Saudi success will lead to new opportunities for all.