Rico's rants: A king and his money

20 February 2015

A king and his money

Ben Hubbard has an article in The New York Times about the Saudi king and his money:

European leaders are still battling over austerity. Congress is gearing up for another fight over the budget. But in Saudi Arabia, there are no such troubles when you are king; you just dole out billions and billions of dollars to ordinary Saudis by royal decree.
Not surprisingly, Saudis are very happy with their new monarch, King Salman.
“It is party time for Saudi Arabia right now,” said John Sfakianakis, the Riyadh-based director of the Ashmore Group, an investment company, who estimates that the king’s post-coronation giveaway will ultimately cost more than thirty billion dollars.
That is a lot of cash, more, for example, than the entire annual budget for Nigeria, which has Africa’s largest economy.
Since King Salman ascended the throne of this wealthy Arab kingdom last month, he has swiftly taken charge, abolishing government bodies and firing ministers. But no measure has caused as much buzz here as the giant payouts he ordered to a large chunk of the Saudi population.
These included grants to professional associations, literary and sports clubs; investments in water and electricity; and bonuses worth two months of salary to all government employees, soldiers, pensioners, and students on government stipends at home and abroad. Some private companies followed suit with comparable bonuses for their Saudi employees, putting another few billion dollars into people’s pockets.
Some of the government spending will come over years, but most will hit the Saudi market this month, including the bonuses. About three million of Saudi Arabia’s five million-person work force are employed by the government, Sfakianakis said.
So, for the moment at least, there is little talk about human rights abuses or political reform. Saudis are spending. Some have treated themselves to new cellphones, handbags, and trips abroad. They have paid off debts, given to charity, and bought gold necklaces for their mothers. Some men have set aside money to marry a first, second, or third wife. One was so pleased that he showered his infant son with crisp bills.
“The first thing I did was go and check my storerooms,” said Abdulrahman Alsanidi, who owns a camping supply store in Buraida, north of Riyadh. He expected a thirty percent jump in sales.
Saudi rulers have long used the wealth that comes from being the world’s top oil exporter to lavish benefits on their people, and many Saudis describe royal largess as part of a family-like social contract between rulers and loyal citizens.
But the new spending comes amid change and uncertainty for the kingdom. King Salman ascended the throne after the death of King Abdullah and announced the bonuses as a good-will gesture to his people.
But because about ninety percent of government income comes from oil, the drop in world prices has reduced state revenue by about twenty percent, said Rakan Alsheikh, a research analyst at Jadwa Investment. His company projected that the government would run a record deficit of over forty billion dollars in 2015. The new spending could increase that deficit to nearly seventy billion dollars, or nine percent of gross domestic product, Alsheikh said.
Those worries seem far from the SUV-clogged streets of the Saudi capital, where gas costs 45 cents a gallon because of huge state subsidies, and people are used to repaying government generosity with public displays of fealty.
“We pledge allegiance to you, hearing and obeying,” declare billboards for phone and construction companies.
Average government salaries are about $2,400 per month, with some workers earning additional allowances for transportation, housing, overtime and the holy month of Ramadan. Student stipends are less, while employees with years of service can earn $4,800 per month or more, Sfakianakis said.
As the bonuses have arrived, Saudis have pondered what to do with the cash. Many said government salaries had not kept pace with rising prices, so the bonuses merely helped to fill the gap. “Mostly rent and traffic tickets,” said Shakir Mohammed, an elementary schoolteacher, when asked how he would spend his bonus.
Others said the tradition of patriarchal distribution extended into their own homes, where children and wives expected the bonuses to trickle down. Abdelrahman Alhadlaq, an adviser to the interior minister, said he would like to invest his bonus, but guessed that he would face family pressure to spend it. His wife, a university professor, would get her own, as would three of his nine children. “So it is the young kids who will benefit,” he said, adding that he might treat his wife to a new watch or a trip to Dubai in the United Arab Emirates.
Many Saudis have taken to social media to express their joy, thanking the king with the hashtag #two_salaries in Arabic and posting jokes. One image showed a blue sky full of outbound airplanes with a caption reading “Saudi airports after the two salaries.”
One comedy video showed functionaries cheering, women ululating, and an gray-haired man dancing after the bonuses were announced. It ended with a reminder not to forget the mothers “who have given what has no equal”.
Such royal gifts are far from unprecedented. King Abdullah announced a fifteen percent raise in government salaries after his coronation in 2005, and he issued a one-month salary bonus in 2011 after returning from medical treatment abroad.
Western analysts noted that the last bonus came during the Arab Spring uprisings, when Saudi rulers worried about possible dissent at home.
“We are a welfare society, so the population depends a lot on government subsidies, directly and indirectly,” said Abdullah al-Alami, a Saudi writer and economist. “But one day we are going to run out of oil, and I don’t believe it is wise to be pampered and subsidized.”
Still, with more than seven hundred billion dollars in foreign reserves, the Saudi government faces no immediate crunch. The importance of government patronage is even clearer outside the cities, where non-government employment for Saudis is scarce.
Sitting in his vast salon in the village of Butain, north of Riyadh, Prince Moteb bin Fahed bin Farhan al-Saud, who lives in the village, asked the twenty or so men visiting who had received a two-month bonus. All raised their hands. “Now we are asking that the king forgive all the citizen’s debts,” said one visitor, Mohammed al-Sahli, adding that his bonus would help him marry a third wife.
Over the years, government money had transformed the village. While its residents once mostly farmed and raised animals, few bother to anymore. Electricity and phone service arrived in the 1980s. Now, there is power in every home and 4G data coverage throughout. Every weekday, a bus gives dozens of female students a free ride to the university in town, which is also free, Prince Moteb said. Driving his SUV through town, Prince Moteb pointed to construction crews building tree-lined roads and roundabouts and a pedestrian area with swing sets and picnic tables. Downtown stood some of the village’s main employers: the local office of the prince of Qassim Province; the Commission for the Promotion of Virtue and the Prevention of Vice, which monitors public morals; and a towering new fire station with shiny new engines.
“The government treats us very well here,” said Abdullah al-Sahli, the head of the local government office, who said he had distributed his bonus to his wife and children.
His son Moteb, six, said he already had two iPads, so he spent the money on a new toy Jeep. “We have nothing to complain about,” Sahli said.