Muzna Fayadan asks whether the record Saudi budget is all it’s being made out to be.
Last week saw the announcement of Saudi Arabia’s largest ever annual budget, raising its 2013 expenditure target by almost a fifth to a record SR820 billion ($219 billion). King Abdullah’s cabinet approved the budget, which projects revenues of SR829 billion and forecasts a SR9 billion surplus, on December 29. Saudi Arabia’s $727 billion economy grew 6.8% in 2012, including growth of 7.2% for non-oil industries. The country derives about 90% of revenue from oil sales.
Public Sector Allocations
The biggest proportion of spending will go towards education, “the basis of investment in any country” according to Saudi Arabia’s finance minister, Dr. Ibrahim bin Abdulaziz Al-Assaf. Education and training has been allocated SR204 billion, a 21% increase on its 2012 allocation. Some of the projects that will benefit from this financing include the construction of 539 new schools and the development of 1,900 existing school-construction projects, as well as SR13.4 billion for an electronic university. SR21.6 billion has also been allocated for the over 120,000 Saudi students studying abroad and their families. Meanwhile, health and social affairs was given a 16% rise in its budget to SR100 billion, accounting for 12.2% of total spending. New projects include construction on 19 new hospitals, on top of the 102 already in progress.
Transport and telecommunications was awarded the third largest increase of any of the areas announced, with spending budgeted to rise by 16% to SR65 billion. These funds are set to cover the completion of work on existing road projects and industrial cities’ infrastructure projects, in addition to new sea ports and the construction of railways, among other developments. Municipality services meanwhile received the highest budget increase of any area announced: a 23% increase to SR36 billion, SR4 billion of which will be financed by municipalities.
Dr. Al-Assaf affirms that the new budget came as an extension of previous developmental plans, focusing on the vital sectors of the national economy and strengthening financial institutions. The outlook of countless Saudis towards their country’s budget announcement, however, is resolutely negative. There is little to no effect felt by average citizens and households, according to many. The world’s leading oil-producer may be running astronomical year-on-year numbers. Nevertheless, it is another set of figures that concerns the average Saudi.
The ‘Other’ Figures
Although oil money is reportedly being used to fight unemployment, for instance through Saudization policies and benefit schemes such as the ‘Hafiz’ programme, about a quarter of Saudis between the ages of 20 and 30 do not have jobs. 5.3 million citizens are set to enter the job market in the next 10 years. The unemployment rate in Saudi Arabia has reached 12.1 percent in 2012, according to new numbers published by the Central Department of Statistics and Information (CDSI). This figure significantly does not include the large numbers of working-age Saudis not counted as part of the labour force. Recent government figures put the labour force participation rate (people who are currently employed or looking for work) at 36.4%, roughly half the global average. Around 90% of working Saudis are employed by the government, while 90% of private sector jobs are filled by about 8 million foreigners. Expatriates commonly fill very low-paying jobs, which many Saudis regard as menial, as well as higher-paying technical roles for which numerous Saudis lack the experience and training. This brings us to education.
Education will form 25% of government spending in 2013, among the highest in the world (spending on education constitutes 1.3% in the US and 13% in the UK). Many maintain, however, that education standards in Saudi Arabia are left woefully wanting, and that the problem can be found in the underlying structure of the education system itself. Countless Saudis leave secondary school wholly unprepared for higher education, with an even weaker basis for employment in private companies. According to opposition figure Sa’ad Al-Faqih in a January 3rd BBC Arabic interview, the Kingdom of Jordan spends SR7 billion on education while enjoying a reputation of having the best-educated population in the Middle East. In fact, Jordan is one of the countries to which Saudi Arabia sends its students on scholarships abroad. With the enormous gap between the two countries’ education budgets, questions inevitably arise regarding how the allocations can be better used to improve education standards in Saudi Arabia.
Healthcare is another area where many ordinary Saudis say they have yet to see real benefits arising from large budget allocations. While SR100 billion is being spent on health and social affairs, countless numbers suffering from myriad illnesses are still forced to rely on exorbitant health insurance premiums. Although 19 new hospitals are being built, some assert that they would prefer the implementation of appropriate routine maintenance and regulation in existing hospitals, with innumerable shortcomings in health and safety standards as well as in employee training. November 2012, for example, saw the death of a child at Dr. Erfan & Bagedo General Hospital as a result of a technical mix-up, with a blame-game ensuing between the hospital administration and a technical maintenance company. With the amounts being spent on healthcare this year and in previous years, such below-par standards should be beyond the thinkable.
Finally, a considerable number of Saudis suffer from serious ills in the housing system. King Abdullah has earmarked $130 billion for extra subsidies for housing and benefits. The current housing system as it stands, however, leaves much to be desired and requires a lot more than stop-gap measures. Only 30% of the Saudi population are homeowners, leaving 70% in the rent market. The next to non-existent mortgage market appears to be designed to benefit existing property owners and affluent borrowers, while marginalising middle class or poorer people. Well-connected property investors, among many others, benefit from the current system, which may explain government inaction. Saudi Arabia’s population grew almost 20% to 27.14 million between 2004 and 2010 according to a recent census, and the number of houses available cannot keep up. The nation has a deficit of two million housing units, a figure that is rising by roughly 150, 000 a year says Saud Jileadan, an independent economist. According to Saudi writer and economist Essam Al-Zamil, some specialists stress that an individual’s monthly income must be at least SR15, 000 to own a home. Distressingly, the percentage of those with a monthly income of that amount does not exceed 10% of Saudi families.
High Numbers, Low Expectations
It cannot be said that no good will come out of the numerous projects and policies included in this year’s budget. The commencement of a National Savings Fund for citizens like that of the other GCC member states, for instance, is a welcome feature. Many Saudis, however, have come to expect very little from stated plans. This is because countless projects have been announced over the years and subsequently neglected, or alternatively fallen prey to corruption, graft and nepotism within the system. An example of this is the planned irrigation system for Jeddah, the funds for which were reportedly stolen and the project abandoned, paving the way for city-wide flooding and mass devastation in 2009 and 2011. The lack of transparency, checks and balances mechanisms and administrative oversight respectively further contribute to low levels of confidence in the system.
Some optimistic observers claim that the nation’s ills cannot be solved in a year. Others retort that budget allocations for public and social services have been vast year after year, with little improvement. The budget has more than doubled in size since 2006. Without addressing root problems and implementing substantial and systemic reforms in areas where it is most needed such as education, healthcare and housing, not to mention addressing endemic corruption and nepotism in most official echelons, the numbers will continually fail to translate into concrete benefits for ordinary citizens.
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