24 February, 2011 The Associated Press
CAIRO — As Saudi Arabia’s 86-year-old monarch returned home from back surgery, his government tried to get ahead of potential unrest in the oil-rich country Wednesday by announcing an unprecedented economic package that will provide Saudis interest-free home loans, unemployment assistance and sweeping debt forgiveness.
The total cost was estimated at 135 billion Saudi riyals ($36 billion), but this was not largesse. Saudi Arabia clearly wants no part of the revolts and bloodshed sweeping the already unsettled Arab world.
Saudi officials are “pumping in huge amounts of money into areas where it will have an obvious trickle-down by addressing issues like housing shortages,” said John Sfakianakis, chief economist for the Riyadh, Saudi Arabia-based Banque Saudi Fransi. “It has, really, a social welfare purpose to it.”
The most prominent step was the injection of 40 billion riyals ($10.7 billion) into a fund that provides interest-free loans for Saudis to buy or build homes. The move could help reduce an 18-year waiting list for Saudis to qualify for a loan, Sfakianakis said.
Another 15 billion riyals ($4 billion) was being put into the General Housing Authority’s budget, while the Saudi Credit & Savings Bank was to get 30 billion riyals ($8 billion) in capital. The bank provides loans for marriage and setting up a business, among other things, and is supported by the Saudi government.
Other measures included a 15 percent cost of living adjustment for government workers, a year of unemployment assistance for youth and nearly doubling to 15 individuals the size of families that are eligible for state aid. The government also will write off the debts of people who had borrowed from the development fund and later died.
While Saudi Arabia has been mostly spared the unrest rippling through the Middle East, a robust protest movement has risen up in its tiny neighbor, Bahrain, which like others around the region is centered on calls for representative government and relief from poverty and unemployment.
There are no government figures in Saudi Arabia that provide a national income breakdown, but analysts estimate that there are over 450,000 jobless in the country. Despite the stereotype of rich Saudis driving SUVs, large swaths of the population rely on government help and live in government-provided housing. The nation has a rapidly growing population of youths – about two-thirds of the population is under 29 – many of whom are chaffing under the harsh religious rules that keep the sexes largely segregated.
A Facebook page calling for a “March 11 Revolution of Longing” in Saudi Arabia has begun attracting hundreds of viewers. A message posted on the page calls for “the ousting of the regime” and lists demands including the election of a ruler and members of the advisory assembly known as the Shura Council.
King Abdullah returned to the situation Wednesday after spending three months in the United States and Morocco getting treatment for a bad back. The economic sweeteners were announced before his plane landed.
The unrest in Bahrain, a Gulf Cooperation Council member state, is what has most worried Saudi Arabia and other Gulf Arab nations. Their worries, in turn, translate into concerns in the broader global oil market since most of those nations are key OPEC members. Saudi Arabia, alone, sits atop the world’s largest proven reserves of conventional crude.
A disruption in crude supplies from the Gulf would make the current, two-year-high levels of over $100 per barrel, appear cheap. Oil prices have already spiked because of Libya’s unrest.
Investment bank Goldman Sachs said in a research report that the Bahrain protests spotlight how the Gulf states are also vulnerable, noting that the unrest in the island nation and in Libya “increase the risks of major supply disruptions.”
While analysts largely discount the kind of wide-scale protests in Saudi Arabia, Qatar and the United Arab Emirates that have rocked the rest of the Arab world – and it’s not possible to know if the Facebook campaign has much support from within Saudi Arabia – leaders need to pay attention to the issues raised by the demonstrators, they say.
Abdullah, viewed as a reformer, has sought to address similar complaints before.
He has worked to ensure that the government has first and final say on all religious edicts – a step aimed at weeding out the conflicting and often increasingly austere messages put forward by competing clerics.
He has also set up a coed postgraduate university, and is pushing hard to complete a series of mega-projects to help diversify the country’s economic base and provide jobs for young Saudis.
Boosting the financing for development and housing funds will help address a key gripe of many Saudis, and the cost of living adjustment will help offset inflation in the kingdom, which stood at about 5.3 percent in January. Banque Saudi-Fransi, in a research note released late Wednesday, said the country is trying to stem the spiraling cost of housing by building 200,000 new units per year through 2014.
But few other Arab nations have had much success in using money to quash the protests.
Egyptian President Hosni Mubarak offered it as a carrot in the first days of the protests, but was ousted shortly thereafter. The 15 percent pay and pension raise he promised, however, remains in effect for public sector employees. Others, like Jordan and Yemen have looked to boost subsidies, and Jordan is reviving a government body that ensures the prices of basic commodities are within reach of the poor.
But Jordan, like other Arab countries where the protests are still ongoing, is not in the clear, and Saudi Arabia’s leaders are watching closely, hoping to stave off a contagion within their borders.