LONDON, 25 August 2003 — A Saudi consultant physician recently returned home after a holiday in Europe with his family, only to find out that his contract at the hospital in Jeddah was not going to be renewed, because it was running out of funds and therefore could not guarantee paying his salary for the duration of the new contract.
An appeal to the Ministry of Health forced the hospital to renew his contract. Not that the hospital was at fault. It was the ministry and other state clients that were delaying payments. Only last week, Dr. Khaled Al-Rashoud, supervisor of Health Institutes & Colleges at the Ministry of Health, rued the dire shortage of medical and health care staff in the Kingdom and called for effective policies to remedy the situation.
One eminent British consultant obstetrician, who visited Saudi Arabia and spent some time at the local hospitals in Jeddah and Riyadh, was astonished at the poor state of the hospitals and the quality of basic health care provision.
This in the context of the approval of a new bylaw allowing the Ministry of Health to privatize some hospitals and to outsource the operations and management of others to private companies. This subject to the final approval by the Cabinet and the establishment of yet another quango, the Health Service Council, to prepare a health care strategy for the Kingdom.
In many parts of the Kingdom, including some smart suburbs of Jeddah, there is no tap water available and no sewage infrastructure. Residents have to rely on water tankers to buy their water supplies, and the sewage similarly is pumped into tankers weekly for disposal. In Jeddah’s Umm Al-Salam district raw sewage has been flowing down the streets of one area near the Old Makkah Road for the last five months.
In Jizan, residents and businesses have suffered their version of a power cut, which forced Minister of Electricity and Water Dr. Ghazi Al-Gosaibi to apologize, stressing that what has happened was “an embarrassing thing that was not acceptable either for the authorities or the people of Saudi Arabia”. The sheer spectacle of Saudi ministers admitting mistakes and apologizing is refreshing. But, accountability still seems elusive. Whether sackings and resignations are the answer, is a moot point. As one Saudi observer stresses, “the Kingdom is already suffering from a serious shortage of skilled human resources. Sacking bureaucrats and even ministers for every mistake or breakdown in services and policies, in itself will create a major human resource bottleneck, which in turn would exacerbate the original situation.”
Why is Saudi Arabia’s public services then in such a state of decay, and is privatization the answer? The perception outside is that of a country with immense petrodollar wealth; where citizens don’t pay any income tax or national insurance; and where the government pays for everything — education, health care, cheap land and loans for housing. This stereotype could not be further from the reality. Unfortunately, the structure of Saudi society, and the excesses of some members (a minority) of the elites tends to give credence to such stereotypes.
The reality is that the future economic success of Saudi Arabia, like any other emerging country, will be based on a strong and expanded tax-paying middle class, the backbone of any free market economy. Millionaires don’t create economies. They can be as fickle as fund managers — here today, gone tomorrow. They are the prime creators of bubble economies. They love building the latest shopping malls, boasting the latest brand names. They love to build the expensive five-star hotels; the latest leisure complexes. There mantra is “Consumption, Consumption, Consumption”.
Unfortunately, the sudden and huge wealth brought by the oil price rise in the 1970s virtually skipped the creation of a strong and stable middle class in all of the oil producing Gulf Arab countries. Coupled with an autocratic and authoritarian political system, where the state was the effective benefactor of the needs of citizens (education, health care, housing); lack of budget transparency; inefficient allocation of resources; corruption and wastage; unrealistically high defense expenditure; all this served to stunt the growth of a viable and sustained middle class culture and ethic. Instead, it gave rise to the high net worth culture - where services ranging from banking and finance, to leisure, private jets, private schools and hospitals, private residential developments — were all aimed at high net worth individuals or families (effectively your millionaires).
On the other hand, the petrodollar economies caught up with the real economy which the rest of the world had to cope with on a daily basis. Fiscal inflexibility; unreliability of oil prices; excessive public expenditure to spoon-feed the needs of citizens; over-dependence on one commodity; inadequate economic diversification strategies; have resulted in persistent budget deficits. This in turn has put pressure on government revenues and therefore spending. This has had a knock-on effect on the government’s ability to service its obligations — payments to public utilities, services, universities, hospitals, and its clients such as contractors, and service providers.
Not surprisingly, Saudi Arabia’s internal debt to GDP ratio is almost 96 percent. Even the International Monetary Fund has moaned about the Kingdom’s fiscal inflexibility and urged the introduction of taxes, the efficient utilization and allocation of resources, especially sudden windfalls due to the rise in oil prices, which hitherto is being squandered in a haphazard way.
Saudi Arabia needs an urgent rethink of its future political and economic dispensation. The current situation is both unsustainable and dangerous. For inertia will merely further fuel radicalism and extremism. Citizens will only tolerate decaying public infrastructure and services up to a point. The Kingdom would not like to contemplate any breaking point in this tolerance.
Saudi Arabia’s best resource after oil is its people - all 26 million of them, of which the overwhelming majority are not high net worth. The sooner the government realizes the better. They have to gear their economic and development policies to leverage this constituency, which is the best route to creating that elusive upwardly-mobile middle class. What the Kingdom needs is its version of Malaysia’s Vision 2020. Malaysian Prime Minister Mahathir Mohamad in fact retires in October. Perhaps the Kingdom should seriously think of engaging him as a consultant, instead of those excessively paid ones from the occident.
