Saudi Plan to Wean Off Oil Sees Success Even as Economy Stalls

[Tom Kirkman + 8,860]

The Saudi one trick pony (which has been firmly dependent on easy oil revenues) will have the pony bucking and kicking and throwing a mule-digging-in-its-heels-tantrum, as the flow of easy oil money to an overabundance of thousands of pampered princes gets curtailed by reality.

Switching to a non-oil-based economy means more people will actually need to work.  This idea of actually working will be a severe cultural problem.  From 2016:

'Saudi civil servants work 1 hour a day, we’re headed for bankruptcy in 3-4 years’ – ministers

Top Saudi officials have hit out at shockingly low productivity in the country’s bloated public sector, as the kingdom – reeling from low oil prices – tries to cut a budget deficit that ran to nearly $100 billion last year.

"The amount worked [among state employees] doesn't even exceed an hour – and that's based on studies," civil service minister Khaled Alaraj said during an official discussion of Saudi Arabia’s economy broadcast at prime time on Wednesday night.

More than two-thirds of all Saudis in employment work for the government – compared to fewer than 20 percent for the US – and last year the kingdom spent about 45 percent of its budget, or $128 billion, to pay their wages.

Prior to recent reforms, even a conscientious Saudi national civil servant had generous perks – a 35-hour working week, almost no prospect of being made redundant, and frequent bonuses, such as two monthly salaries paid to every bureaucrat, when King Salman ascended to the throne in early 2015.  ...

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Anyway, fast forward to present time.  Attempts to diversify the one trick pony away from easy oil revenues are ... mixed.  And a very, very long way to go:

Saudi Plan to Wean Off Oil Sees Success Even as Economy Stalls

Saudi Arabia’s economy shrank 0.5% in the third quarter, a contraction that was broadly expected even as the kingdom’s goal of weaning itself off crude began to pay off with solid growth in non-oil sectors.

The overall economy was weighed down by shrinkage of 6.4% in the country’s oil sector, according to data released Tuesday by the General Authority for Statistics. Overall growth for 2019 is expected to accelerate to a modest 0.4%, according to the latest government estimates, before climbing to 2.3% next year.

Non-oil sectors of the economy grew 4.3% in the third quarter compared to about 2% for the same period of 2018, a sign of Crown Prince’s Mohammed bin Salman’s initiative to diversify the world’s top oil exporter’s economy from crude.  ...

 

[John Foote + 1,135]

You do realize they don't really know how little they work, and at every turn someone who tries to really work is impeded. It's a patronage system. The odd thing is they by all accounts used to work. Aramco wasn't built with imported labor from India and Pakistan. It was Saudis, with primarily American engineering and management that build so much of Aramco.

IMHO they missed the mark when they embarked on mega-projects and didn't mandate Saudi's building them. Instead it was just a patronage Saudi agent, or Saudi company, but with foreign labor. It did help prevent power structures developing to change the House of Saud. 

Remember prior to the 80s even an electrical grid didn't exist. Riyadh had less than 1 million people, now it's closing in on 10 million. They have come a long way. The land just can't support 30 million people, so they have to import a lot, and to pay for that they need to create value, and just oil won't cut it 50 years from now. 

[0R0 + 6,251]

What are they going to do there? Surely not farming on a large scale. Can they train people to do industrial work? Asset management? It does not seem to have managed out of the basic oil extraction up the value scale.  

[Marcin + 519]

I do not know if the changes needed could be done in 2 generations, the time they have till easy oil is exausted. But they have  very good basic conditions, 300 billion dollars of free hydrocarbon money, 50% GDP each and every year.

[Marcin + 519]

Even Saudi probably could not sc**w such chance.

[NickW + 2,714]

On 1/2/2020 at 12:48 AM, John Foote said:

You do realize they don't really know how little they work, and at every turn someone who tries to really work is impeded. It's a patronage system. The odd thing is they by all accounts used to work. Aramco wasn't built with imported labor from India and Pakistan. It was Saudis, with primarily American engineering and management that build so much of Aramco.

IMHO they missed the mark when they embarked on mega-projects and didn't mandate Saudi's building them. Instead it was just a patronage Saudi agent, or Saudi company, but with foreign labor. It did help prevent power structures developing to change the House of Saud. 

Remember prior to the 80s even an electrical grid didn't exist. Riyadh had less than 1 million people, now it's closing in on 10 million. They have come a long way. The land just can't support 30 million people, so they have to import a lot, and to pay for that they need to create value, and just oil won't cut it 50 years from now. 

Probably told this before but when I was there I got lumbered mentoring this useless Saudi that the management wanted to do some actual work. I was in an Aramco Public Health team. 

So I took him to do water samples in RT. Easy job. Collect a dozen or so samples drop them off at RT labs with the paperwork. Have lunch and drive slowly back to DH. 

So that was  Saturday. Next day I said - we are off to Abqaiq (to do the same) . He says - no after yesterday I need to take a rest. 

[John Foote + 1,135]

19 hours ago, NickW said:

Probably told this before but when I was there I got lumbered mentoring this useless Saudi that the management wanted to do some actual work. I was in an Aramco Public Health team. 

So I took him to do water samples in RT. Easy job. Collect a dozen or so samples drop them off at RT labs with the paperwork. Have lunch and drive slowly back to DH. 

So that was  Saturday. Next day I said - we are off to Abqaiq (to do the same) . He says - no after yesterday I need to take a rest. 

I had a Saudi tennis buddy who was just agog he got a poor rating. He was open about not going to work, and not doing much when he got there. Even by the local standards he got nothing done. He liked Americans, he couldn't understand the American work ethic, but found it useful. He wouldn't want to work like a yank, but wanted one on his team for the output. The solution to this guy was his boss transferred him to another organization, which then loaned him out to some office Jeddah.