WHERE IS THE SAUDI KINGDOM GOING UNDER MOHAMMED BIN SALMAN?

The legitimacy of Saudi Arabia's Crown Prince Mohammed bin Salman is seriously in jeopardy at this crucial time.

The Kingdom of Saudi Arabia is grappling with COVID-19, the unresolved war in Yemen and the collapse in oil prices. At the same time, repeated purges by opponents of Crown Prince Mohammed bin Salman (MBS) are worsening the country's foreign investment climate. Against this backdrop, the ambitious Vision 2030 initiative to transform the Saudi economy and society faces many challenges, meaning the young leader faces serious threats to his legitimacy at a very sensitive time for  his reign. 

Since the Saudis announced Vision 2030 in April 2016, this  economic diversification plan has been MBS's flagship initiative. The crown prince has gained  popularity among young Saudis, who have welcomed the societal changes brought about by Vision 2030 with the reopening of cinemas, pop concerts, soccer games and car shows.Some of the social changes that gave the kingdom's subjects, men and women, restricted personal liberties, accentuated by curtailing the authority of the religious police, were significant by Saudi standards. 

 In fact, just 10 years ago, Saudi experts  would have been shocked to learn that  there would be female drivers on the streets of Riyadh by 2018, or a partial overhaul of the  controversial international guardianship system. 

New Future 

The social transformation led by the ruling elite has influenced the formation of a new lifestyle model that fits the innovative vision of city dwellers created by MBS, exemplified by NEOM, a mega-city project that Smart on The Future Investment initiative conference  in October 2017 The name NEOM explains the project through the combination of the two words “neo” and “mostaqbal”, which mean “new” and “future”. Indeed, the goal of Initiative 

is to define a new future for Saudi Arabia by designing a state-of-the-art city spanning 10,000 square miles in Tabuk Province on the Saudi  Red Sea coast.

NEOM is a $500 billion project that aims not only to create a pioneering regional hub for the high-tech sector that will host next-generation technology start-ups, wealthy investors and fintechs, but also a create new type of city center from  scratch  powered by renewable energy. NEOM is defined as a “futuristic city” where the transportation system is based on automated vehicles, robots perform a variety of daily functions and activities, and people's daily  lives are supported by digitization and 5G technologies.

Secondly, the design of the urban environment  and the facilities offered are a key element to attract creative and innovative people who  find in this city the ideal place to define, implement and optimize their innovative projects. In addition, thanks to its legislation, taxation and regulation, NEOM will be an independent economic zone capable of stimulating a constant inflow of capital and funds from investors. 

Indeed, it should be noted that several well-known international donors - such as Masayoshi Son, President and CEO of  SoftBank Group Corp. in Japan; Stephen A. Schwartzman, President and Co-Founder of the Blackstone Group; Marc Raibert, CEO of Boston Dynamics; and Klaus Kleinfeld, former President and CEO of Arconic Alcoa Inc.and Siemens AG - expressly financed the NEOM plan. The Crown Prince himself has invested a significant portion of his international legitimacy and credibility in this multi-billion dollar project, which is one of the Saudi government's key economic diversification initiatives and the cornerstone of Vision 2030. 

Fourth Industrial Revolution 

Consistent Part The MBS Diversification Plan builds on the advances made during the Fourth Industrial Revolution (4IR), which  Klaus Schwab,  founder and CEO of the World Economic Forum, described as a new phenomenon in which technological advances affecting and integrating into the physical realms, digital and biological. Against this background, advanced new technologies will have a significant impact on both  economic performance and people's daily lives. 

Saudi Arabia has decided to increase its commitment to  4IR by launching the Center for the Fourth Industrial Revolution (C4IR) in November 2019, which is the fifth largest research center in the world focused on these issues.Schwab and Saudi Economy and Planning Minister Mohammed al-Tuwajri founded C4IR  to provide a hub for developing pilot projects on artificial intelligence (AI), Internet of Things, robots, smart cities, automated mobility, future skies, vehicular drones and blockchain create technology. 

Technological advances are expected to increase industry productivity, reduce unnecessary costs and reduce risks in hazardous work environments such as pipelines and natural gas and oil processing plants. In this respect, the Uthmaniyah Gas Plant represents  Saudi Arabia's flagship in terms of production facilities that integrate and align their production with forward-looking 4IR technologies. Additionally, the 

mining sector is expected to grow by  $266.6 billion  between 2017 and 2030 from 4IR investments, according to consultancy AT Kearney.

In particular, the inflow of funds for AI solutions is expected to increase GDP by 12.4% during this period. These initiatives therefore represent the first significant steps taken by Saudi Arabia to diversify its oil-based economy  and rebuild its economic and manufacturing system.

In addition to a climate of moderate social detente and an innovative urban environment shaped by artificial intelligence and autonomous vehicles, the third pillar of Vision 2030 is based on a complete overhaul of the Saudi public sector. The reforms concern the partial privatization of public services and public enterprises, the introduction of a more general tax system and the shedding of public sector jobs.In fact, between 2016 and 2018, Mohammad bin Salman implemented a decidedly neoliberal economic agenda aimed at lowering wages for public sector workers, reducing subsidies for energy and water services, and introducing a 5% VAT on certain goods, goods and services to introduce .

The attractive rhetoric that continues the narrative and portrays Saudi Arabia as a modern, tolerant and open country serves not only  to win the hearts and  minds of young Saudis, but  also  to convince international investors that Vision 2030 is reliable, promising and reliable earns your money. 

In a country where 60% of the population is under the age of 35, many young people want to escape the constraints of the conservative elites and are ready to play a new role in the Saudi dynamic. Indeed, MBS is promoting a new identity for the Saudi generation, reinforcing nationalist rhetoric based on  renewed patriotism, shedding the hitherto dominant role of the religious establishment, and  promising  a prosperous future. This narrative, which became fashionable in 

has the potential not only  to overthrow the two essential pillars of the Kingdom of Saudi Arabia, Wahhabism and the Al Saud family, but also to replace them with a new one constituted by the personality cult . the Heritage. to the throne, presenting himself as the only person capable of living up to  the expectations of  Saudi youth.

No one is immune 

But while Vision 2030 is a key pillar of MBS' strategy to secure its position, repeated purges appear to be the Crown Prince's preferred tool to secure  political power in the kingdom, and the most recent example is the wave of arrests that took place in early March. Under the threat of an attempted coup, senior members of the royal family such as Prince Ahmed bin Abdul Aziz, King Salman's younger brother  and  last member of the Sudari Seven of 

Prince Mohammed bin Najef, the former crown prince, and his brother Nawaf bin Nayef have been killed arrested. In fact, this purge can be seen as  another  of many steps taken to consolidate MBS's power.

First, King Salman amended the  Basic Law in 1990, replacing the horizontal line of royal succession with a vertical line from father to son. Second, the first wave of arrests in the fall of 2017 silenced the dissenting voices of several religious scholars, intellectuals, economists, businessmen and some 300 members of the royal family, including Prince Miteb bin Abdullah, then head of the Saudi  National Guard.

The regular purges are the result of a deliberate strategy  to replace the former royal establishment, accused of corruption, with a new group of establishment figures loyal to MBS, such as Prince Abdulaziz bin Salman, Energy Minister, Ahmad al-Khatib, Minister of Tourism, Prince Abdullah bin Bandar bin Abdulaziz Al Saud, Minister of the National Guard and Prince Khalid bin Salman,  former Ambassador of Saudi Arabia to the United States and Deputy Secretary of  Defense 

They also served to increase mass arrest campaigns under the Crown Prince's personal control through key branches of the state apparatus such as the Ministry of Defence, the Supreme Council of Saudi Arabia and the Boards of Directors of the Military Industries Corporation and the Public Investment Fund (PIF). Thus, the recent arrests confirm MBS's commitment to maintaining its hold on the backbone of the Saudi state.

Between the coronavirus and the oil war 

With the free fall in oil prices caused by both  the price war between Russian President Vladimir Putin and Mohammed bin Salman and  the sharp drop in global market demand for oil, Saudi Arabia was able to Increasing capability The revenue needed to implement the economic measures of Vision 2030 has been under scrutiny by several financial institutions. While the pandemic and Russia's initial resistance to  oil production cuts can be blamed for significant turmoil in Saudi Arabia's finances, it should be noted that the kingdom's downtrend dates back  several years. 

In fact, the country's GDP per capita increased from $25,243 in 2012 to $23,338 in 2018, and since King Salman bin Abdulaziz Al Saud's announcement in January 2015, the central bank's tax reserves held  in foreign exchange reserves have increased from $732 billion $ down to about $500 billion late last year. It turns out that foreign direct investment (FDI) has fallen significantly, from about $29 billion in 2010 to just over $3 billion two years  ago.

However, under the terms worked out by OPEC+, a meeting attended by 24 OPEC member states and several other major oil producers, Saudi Arabia will face a sustained government revenue deficit. With an imposed  oil production cut of about 10% of  global supply - or nearly 9.7 million barrels a day between May and June - the kingdom could see its $136.4 billion in oil revenue down to $91 billion this week -dollars will lose billions by the end of 2020. Economic losses are expected due to a  voluntary production cut of 1 million barrels per day in June recently announced by the Secretary of Energy.

To address the potential liquidity crunch, MBS and its advisors have already taken  fiscal measures, raising the country's debt ceiling from 30% to 50% of GDP, while cutting the country's budget by  five percentage points  for additional restrictions that could result in a 20% reduction in the overall budget. However, at this stage it is difficult to predict whether these measures will  be sufficient or whether other measures will be required. Additionally, it should be noted that several conditions leave room for Saudi Arabia  to try to improve its financial prospects. 

One of these is undoubtedly the near-completed $10 billion loan from a  consortium of banks led by HSBC and  Sumitomo Mitsui Banking Corporation. It is expected to provide Saudi Arabia with the necessary financial support to secure its acquisition of a controlling stake in Saudi Basic Industries Corporation,  a key step in the Crown Prince's economic diversification agenda.Second, Saudi Aramco's long-awaited and enthusiastic IPO last December raised $29.4 billion in Saudi Arabian revenue, which would not only allow the crown prince  to allocate funds to the PIF, the Saudi sovereign wealth fund, for support of the Vision 2030 economic initiative - but also to provide new liquidity that is needed to cover urgent needs. 

Despite the ongoing uncertainty surrounding the coronavirus outbreak and the state of the global oil market, there is a consensus that oil demand could stabilize and optimistically  recover by the end of the year. Should such a  situation arise, Saudi Arabia would certainly benefit. However, while multiple scenarios need to be considered for a country like Saudi Arabia, where 80% of its revenues derive from oil, such projections are not an option but a necessity, particularly given the scale of investment and funding required for are required to operate Vision 2030. In this respect, the new political, economic and social contract made by the MBS rests firmly  on  massive  capital inflows, without which the regime will not be  able to maintain its legitimacy or gain public support.

Yet while Mohammed bin Salman's reforms appeared to usher in an effective transformation of  Saudi Arabia's social and economic context, four years after their introduction they have proved nothing more than a simple exercise in superficiality, leaving the  structures almost unchanged politically, socially and economically. Although some restrictions on women's freedoms have been lifted, the overall situation of women's rights is far from acceptable. 

Not only are several  activists such as Aziza al-Yousef, Loujain al-Hathloul and Nouf Abdulaziz still imprisoned and accused of undermining "the security and stability" of the nation, but  the male guardianship system continues to fundamentally prevent women from marrying enjoyment of human rights and fundamental freedoms. 

As for the vaunted economic reforms, they have  almost entirely stalled due to the widespread discontent they have caused among the Saudi middle and lower classes. It is important to emphasize that in a Saudi context ill-prepared for a non-paternalistic free economic market, the establishment of such a political and economic framework risks leading to  anything other than worsening working conditions.Indeed, this perception is corroborated not only  by the fact that at least 20% of the Saudi population is said to live in chronic poverty, but also by the lack of adequate job protection for private sector workers who might leave the market. Conditions. working conditions and leave workers in  a vicious circle. 

Young Saudis need economic policies aimed primarily at tackling the country's structural poverty; second, by equipping them for an even more competitive private sector; and finally,  training Saudi workers for a smooth and prepared transition from a state-dominated to a liberal labor market. 

Fourth Saudi State 

There is no doubt that MBS's economic and political agenda has begun to undermine the pillars of  Saudi Arabian identity, which Joseph Nevo describes as "strict adherence to the Islamic faith and, of course,  loyalty to the House of Saudi". In this regard, Mohammed bin Salman walks a tightrope, for by abandoning the two traditional tools used by the Al Saud family to build  political support and  replacing them with the promise of modernity and economic growth, he has his  legitimacy directly with the Success linked to  Vision 2030.

At a time when Saudi Arabia's ability to attract investment is being severely challenged and an oil-based economy seems  a less secure source of revenue, Saudi economic growth is certainly at stake, but so is the Crown Prince's ability to to secure funds. necessary to maintain middle-class support and prevent rivals from attempting to loosen their power. 

Mohammed bin Salman, nicknamed the "Prince of Chaos," brought perpetual unpredictability and uncertainty to the Saudi kingdom, previously characterized by internal political stability and a gradual transition to the throne. However, it is difficult to assess whether the heir to the throne's recent behavior has strengthened or weakened his position. What is certain, however, is  that MBS  alienated several members of the Al-Saud house. 

In addition, the economic policies pursued by MBS are unlikely to produce the desired results.Indeed, risky investments like those in Uber, Lyft, Snap, Tesla, Lucid and Softbank's Vision Fund  by PIF's Masayoshi Son are struggling to steer the Saudi economy onto a reliable, well-managed and efficient diversification path. In addition, the death of Abdulrahim al-Huwaiti, a civilian activist who was protesting the government's decision to relocate  20,000 residents from Tabuk province  to make way for NEOM, has put the project under close international scrutiny.  In summary, the Crown Prince's strategy is based on a radical overhaul of  Saudi Arabia's political, social and economic structure, but his vision depends heavily on a constant and significant influx of foreign investment and revenue. On the one hand, MBS questions the traditional pension state apparatus and its tacit social contract, but on the other hand refuses to seriously address Saudi Arabia's inexplicable structural challenges. 

In addition,  Saudi Finance Minister Mohammed al-Jadaan's recent announcement of $26 billion in federal budget cuts and the introduction of an austerity plan that suspends subsistence allocations until June increases the sales tax from 5% to 15% by July and lowers it by $7.The 9 billion  NEOM project appears to be an additional burden for Saudi families. However, it remains to be seen if House Salman can replace House Al Saud.