Vision 2030 and poverty in Saudi Arabia

MBS’s Vision 2030 will not alleviate poverty among Saudis and its austerity plan could lead to upheaval.

Saudi poverty
According to estimates, 20 percent of the Saudi population lives in poverty [Reuters/Susan Baaghil]

Growing up in Saudi Arabia in the 1990s, I was acutely aware that Saudi society was divided along class lines. There was the royal family and the super-rich, the middle class and the poor masses – all strictly segregated socially and culturally.

Like many other Saudi cities, Jeddah, where I lived and worked as a journalist between 2005 and 2010, was divided in two: the northern part of the city was reserved for royalty and upper middle-class families, while the southern part was where migrant workers, undocumented migrants and poor and middle-class Saudis lived.

Not being a member of the wealthy class, I too lived in the southern neighbourhoods.

Every morning, on my way to the office of the daily al-Madina newspaper, where I worked, I would pass by a street vendor, Om Mohammed, a widow and a mother of five. The death of her husband, the main breadwinner of the family, had forced her to start selling second-hand clothes on the street in order to make ends meet. Two of her sons had had to drop out of school because she could not afford to support their education. While public schools are free in the kingdom, the state does not cover additional costs for students, including school materials and food.

She herself had not received a proper education and was semi-illiterate, which made it difficult for her to go through the heavily bureaucratic process of applying for financial aid from the Ministry of Labour and Social Development. Another hurdle was that such payments could only be made into a bank account, which she could not open because she did not have the money for the minimum deposit required to open one. In Saudi Arabia some 7 million citizens do not have bank accounts, almost 60 percent of whom are women.

Om Mohammed lived in the Kilo 6 slum which had no proper sewage system or running water and flooded every time it rained. She, like her neighbours, was reduced to carrying water from the ablution fountains of the nearby mosques, to drink and wash with.

Om Mohammed is one of millions of Saudis stuck in a vicious circle of poverty on the peripheries of cities whom the world rarely sees or hears about.

Although the government rarely releases statistics, it is estimated that around 20 percent or more of the 34 million Saudi citizens live in poverty. Many of them are women or members of female-headed households.

For decades, successive Saudi governments have done little to alleviate the suffering of their country’s poor. They have been reluctant to openly talk about their existence because recognising poverty necessitates recognising income inequality and the unfair distribution of wealth in the oil-rich country. 

Under King Salman and the reform project of his son, Crown Prince Mohammed bin Salman, the situation is no different. Vision 2030 not only is unlikely to help uplift the poor, but the austerity measures it comes with are likely to push parts of the middle class into poverty.

Addressing poverty with charity

Throughout Saudi history, charity has been the central approach to addressing the issue of poverty. Being a Muslim country and the custodian of the two holy mosques, Saudi Arabia obliges every individual and corporation to donate 2.5 percent of their wealth to the government as part of the Islamic system of zakat. The government, in turn, is supposed to distribute it to poor families.

Needless to say, this approach was never successful in addressing the root causes of poverty in the kingdom.

In 2002, Abdullah bin Abdulaziz, who at that time was crown prince, paid a visit to the poor neighbourhood of al-Shemaysi in Riyadh. The move was unprecedented for a royal and marked the beginning of various initiatives by the state to address poverty.

After he became king in 2005, Abdullah created the National Poverty Reduction Strategy and the Supplementary Support Programmes which started to distribute monthly and one-time payments to poor families through the labour ministry. It was this programme that Om Mohammed was hoping to access but could not because of its bureaucratic hurdles.

Despite King Abdullah’s efforts, poverty persisted. In 2013, amid the Arab Spring, Saudi Arabia had its own public self-immolation incident. Mohammed al-Huraisi, a watermelon seller, set himself on fire after he was told he did not have permission to sell his produce at a street corner of a poor neighbourhood in Riyadh.

Saudi Poverty
The orphaned daughters of Mohammed al-Huraisi are seen with their grandfather Ali Abdullah al-Huraisi at their home on the outskirts of Riyadh on May 22, 2013 [Reuters/Faisal Al Nasser]

According to a 2017 UN report, the anti-poverty measures taken by the Saudi government over the past decade were “inefficient, unsustainable, poorly coordinated and, above all, unsuccessful in providing comprehensive social protection to those most in need”.

At the same time, the Saudi authorities continued to ignore the problem and keep public attention away from it. Saudi officials would avoid using the word “poor” in public statements and substitute it for vulnerable or needy persons or low-income families.

They would also clamp down on those publicly criticising the government for not taking adequate action. In 2011, bloggers Firas Buqna and Hussam al-Darwish were arrested for posting a video documenting the tough living conditions in al-Jaradiyaa, a poor neighbourhood of Riyadh.

In 2014, the government played down a report by Sami bin Abdul Aziz Al-Damigh, a professor at King Saud University in Riyadh, on the poverty problem in the kingdom. Al-Damigh proposed setting a poverty line for the country, which the government rejected.

Vision 2030

When King Salman came to power in 2015, the Saudi economy was going through the shock of a major oil price slump. In a matter of months, the oil price had gone done from $100 to $50 per barrel, cutting in half oil export profits, which accounted for about 87 percent of Saudi budget revenues.

The kingdom needed to take major austerity measures and the king decided to empower his son, Mohammed bin Salman (also known as MBS) to spearhead them. In 2016, the then deputy crown prince announced Vision 2030, a reform project based on a report produced by the controversial US-based consulting company McKinsey.

Vision 2030 is supposed to transform Saudi Arabia by weaning it off oil. It proposes ambitious steps to diversify its economy by growing the private sector and scaling down the public one. The main pillar of the project is the privatisation of Aramco, the Saudi state oil company, which has garnered much attention internationally.

But the less-publicised economic initiatives include privatising important public service institutions, like hospitals and schools, slashing public sector employment and increasing taxation. Currently two-thirds of employed Saudis work for the state; under Vision 2030, it is supposed to go down to 20 percent.

Soon after the project was announced, MBS started to implement some of its harshest provisions. In September 2016, the government announced pay cuts for public sector employees. In 2017, it released a timetable for decreasing subsidies for fuel, natural gas, electricity and water over the next few years. In 2018, the government introduced a value-added tax of 5 percent on most goods and services.

Saudi poverty
Fuel prices in Saudi Arabia almost doubled in 2018 as a result of a subsidy cut. Octane 91 went up from 0.75 riyals to 1.37 riyals (from $0.20 to $0.36) [Reuters/Waleed Ali]

These economic decisions sent prices of basic commodities, including fuel, soaring, which not only hit hard the Saudi poor, but also affected middle classes, who have been dependent for generations on state largesse. All of a sudden, middle-income households found themselves unable to pay for housing and their basic necessities. This caused a wave of public anger and capital flight; many Saudis decided not only to transfer money out of the country but also to emigrate.

In 2016, the government estimated that as many as one million Saudis had left the country to seek livelihoods abroad in a short period of time. The crackdown on dissent that the government unleashed under the guidance of MBS further worsened the situation.

MBS’s anti-poverty measures

Despite purporting to transform Saudi Arabia, Vision 2030 does not mention in any significant way the issue of poverty in Saudi Arabia. Among its many different programmes, there are only two which seem to focus to some extent on socio-economic ills.

The National Transformation Program (NTP) has a number of declared goals, including “increase the percentage of residential areas, including peripheral areas, covered by health service from 78% to 88%” and “increase the percentage of population with access to water services from 87% to 92%”. The Housing Program aims to “increase the percentage of home ownership among Saudi citizens to 60%”.

But, needless to say, none of these measures can alleviate the structural causes of poverty in Saudi Arabia. And as Saudi economist Ihsan Bu Haliqa pointed out in 2016 after the unveiling of Vision 2030, “there is an urgent need to restructure the social safety net” in Saudi Arabia which should have happened before the reduction of public spending on subsidies.

Because it did not, there was no buffer to protect lower-income households when cuts in public spending were implemented that could muffle the reaction of the public. Growing dissatisfaction and the risk of social unrest forced MBS to roll back some of his plans, bring back bonus payments for public sector employees and introducing a new Citizen Account Program disbursing money to families in need.

These direct cash transfers may help some families cope with the sudden rise in prices of basic commodities and rent, but it will not help pull them out of poverty or provide them with financial security in the long-term.

Charity did not alleviate Saudi Arabia’s poverty problem in the past and it won’t now, either. These stop-gap measures do not address structural inequality. They may defuse tension in the short term but will not stave off the storm that is coming. The World Bank itself has warned that the country faces a “looming poverty problem“.

Examples in other countries abound of how neoliberal policies, privatisation of public services and austerity measures worsen structural poverty and lead to social upheaval. Even if Saudi Arabia manages to achieve economic growth under Vision 2030, this would not alleviate the socio-economic problems the majority of Saudis (the poor and the middle classes) face. We already know that the idea of wealth “trickling down” to the poorer layers of society without major wealth distribution policies does not work.

As lawyer Yahya al-Shahrani has pointed out, if the government really wanted to protect the poor, it would have taxed the rich instead of imposing a flat tax on everyone and cutting subsidies.

We have to remember that Vision 2030 is implemented in a society rife with patronage networks and by a state that does not have proper separation of powers. This means that wealth will not necessarily change hands with privatisation and the privileged few at the top of the Saudi society will continue to disproportionately benefit from the economic transformation.

And as Bu Haliqa has mentioned, in the absence of labour protections, pushing more Saudis to the private sector would expose them to even more exploitation and abuse. Private companies already pay on average 60 percent less than public ones for the same job.

What Vision 2030 envisions is dismantling the Saudi “rentier” state. While in theory, this may be a positive step, in practice, it undermines the basis of the unwritten social contract between the Saudi population and the house of Saud. Loyalty to the ruling family has been predicated on redistribution of the country’s oil wealth.

Saudi poverty
Vision 2030 aims to increase home ownership among Saudi citizens to 60 percent  [Reuters/Sultan Al Fahed]

If this contract has to change and wealth has to be extracted from the population through taxation, then political and social reforms will also have to be undertaken. There will have to be transparency and accountability for how the taxpayers’ money is spent, for taxation without representation is tyranny.

That of course is not part of Vision 2030, which is why any criticism of its provisions has been met with repression. Saudi economist Essam al-Zamil and Al-Watan columnist Saleh al-Shehi, among many others, have already been imprisoned for their public criticism of the plan. In fact, anyone who has dared express anything but praise for the crown prince has been pressured, jailed or exiled.

For now, repression and monetary handouts might work to suppress public anger but they will not do away with it.

And there are already cracks showing. The Saudi middle class, which has long been a supporter of the political status quo, is increasingly dissatisfied. The austerity measures could impact significantly its political orientations, and lead to political and economic unrest. One form this dissatisfaction is taking is the increasing number of Saudis fleeing the country and some of them are already starting to organise politically in exile.

If Vision 2030 is not revised to address major socio-economic ills and poverty, inequality and injustice will continue to grow and Saudi Arabia will likely face major political instability in the future.

Editor’s note: An earlier version of this article stated that the consulting firm McKinsey had drafted the Vision 2030 reform project. It has been updated to clarify that McKinsey prepared a report which was used as the basis of the project. 

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.