Fancy Taif rather than Tenerife for your next summer vacation? Reckon property prices in Riyadh have more upside potential than those in Rome? If so, why not take the next flight to the Kingdom of Saudi Arabia? Although you’ll need a visa, you may soon be able to acquire one without jumping through the tortuous hoops of finding local Saudi sponsors prepared to vouch for your good character. Saudi Arabia, historically fortress-like in its approach to uninvited guests, is starting to open its doors to unlikely visitors. The Kingdom has just passed a new investment law described in a recent report published by the Saudi American Bank (Samba) as a “U-turn away from the old investment system”. It is also gearing up to give foreigners direct exposure to a stock market that has so far been accessible only via a single investment trust and (more recently) mutual funds. New legislation is being prepared that will allow foreign individuals to buy Saudi real estate. And senior Saudi policymakers are even talking seriously about more tourism – not just of the local, regional or religious variety, either. After all, the thinking seems to be, other Gulf economies have seen tourists landing on their shores, and survived. So if western visitors can be persuaded to dress sensibly, and to resist the alcoholic temptations of duty-free shops en route, where is the harm in encouraging a limited number of them to spend their dollars, pounds and euros in the Kingdom?
Why is all this happening in an economy that has seldom worried too much about money in the past, that today still controls about a quarter of the world’s output of crude oil, and is associated in the minds of many outside the Kingdom with fabulous wealth?
For much of the answer, turn the clock back a couple of decades to the oil bonanza of the late 1970s and to the Saudi baby boom that accompanied it. “During the boom,” as one local economist puts it, “it was OK to build an airline that lost money, an electric power grid that lost money, a telecommunications network that lost money, water desalination plants and distribution systems that lost money. It was also OK to pay farmers 12 times the world price to grow wheat in the desert.” In short, this was the age of plenty. Saudis sat back, enjoyed the bonanza and shipped in some six million expatriate workers – mostly unskilled labourers from the east – to do the jobs locals wouldn’t touch. Not having much else to do, Saudis concentrated on family-building. The average size of the Saudi family is now more than six, and over 50% of the population is aged 15 or under.
So today there is a large and growing population of young people who are making plans to buy cars and homes, get married and start the baby boom cycle all over again. The snag is that as many as 20% of them expect to be able to all do this without being employed. This might not matter too much this year or next, with oil prices high and forecast to remain that way. It might not even matter in five or 10 years’ time, with families still enjoying the wherewithal to support their unemployed sons and daughters. But Saudi policymakers know that it most assuredly will matter by the time today’s babies have become job hunters. The recognition that oil alone will not provide employment has prompted the volte-face in the Saudi attitude towards the private sector, the role of services in the economy, and – by extension – the contribution that can be provided by foreign investors.
So too has another development of the past decade: the Middle East has begun to transform itself from a politically combustible region into one integrating itself with the global economy surprisingly fast. Looking to its near neighbours, the Kingdom would need to have its head buried very deep in its abundant sand to be blind to change. Beirut is no longer a death trap. Telephones work in Cairo. Golfing tourists are swarming to Dubai. Abu Dhabi is positioning itself as the internet capital of the Gulf. Qatar is wooing Eurobond investors. Tehran is welcoming representatives from ratings agencies. Even the infrastructure in Yemen is emerging from the dark ages. A cartoon in a recent issue of the Riyadh Daily featured a Yemeni with two mobile phones on his belt standing in front of a genuflecting Saudi begging to borrow one. Saudis feel the need to keep pace with their neighbours.
Doing so does not just mean passing new investment laws and making it easier for foreigners to come to the Kingdom. It also means building physical and social infrastructure that better fits with the requirements of visitors from overseas. Changes in the Riyadh skyline attest to this. The most visible showpiece is the Faisaliah Project, a brand new office block inhabited largely by multinational companies that cost $300 million to build and at a height of 260 metres looks uncannily like Thunderbird One. Next door’s 189-room Al Faisaliah Hotel is one of the more recent additions to the Leading Hotels of the World portfolio, and features a rarity in the Middle East – a terraced, Brazilian-style barbecue restaurant on the first floor, mercifully equipped with ceiling fans the size of helicopter rotors.
It is developments of this kind that lead expatriate bankers to say that day-to-day life in the Kingdom, even in the summer when the temperature approaches 50 degrees, is not nearly as dreary as stereotypical representations may suggest. Granted, among younger expatriates based in Riyadh the old joke stands: the best way to have a good time in the city is to go to Bahrain. But most say that there is plenty to do in and around Riyadh, with a par-73 golf course just outside the city among the principal attractions. Evening diversions may be less energetic, with one banker saying that the hospitality, bestowed by locals as well as expatriates, is excellent. “It is very easy to put on weight here,” he says. Added pounds will inevitably come largely, although not necessarily exclusively, from an excessive intake of rich food. Expatriate bankers choose to skirt diplomatically around the subject of alcohol, smiling enigmatically and saying, in the words of one, that behind closed doors “nothing is allowed, but everything happens”.
A posting in Saudi Arabia does not have quite the buzz of one in New York or even Cairo, but there are compensations. Riyadh’s streets must be among the safest in the world. Crime is virtually non-existent, with muggers facing public dismemberment. And although some of Riyadh’s motorists might switch lanes as if they were plastered, drink-driving does not feature in the Saudi lexicon.
