Falling oil prices and the case for King Alwaleed

The key issue is that Saudi Arabia, despite three decades of government plans and spending, has failed to lessen its over-reliance on oil revenues. More specifically, it has failed to develop a robust non-oil private sector or a competitive workforce. So the country remains permanently and precariously dependent on high oil prices. 

 

And that is the case for Prince Alwaleed becoming King Alwaleed. The weakness of the Saudi private economy is a long-standing problem. And decades of attempts by the Ministry of Labor have failed to get Saudi nationals to even join the private sector, let alone to become a globally competitive workforce. Alwaleed is the only Saudi Royal with the ability to fix these private sector problems. 

 

So here are my predictions for how a King Alwaleed monarchy would actually build a more balanced and sustainable Saudi Arabian economy. 

 

First, he would create a world-class sovereign wealth fund, similar to Norway and Singapore. 

 

This long overdue development would move Saudi Arabia’s strategic reserves out of low-risk, low-yield cash deposits and into higher quality productive assets. Imagine Saudi’s US$800 billion cash reserve compounding at 5 per cent to 10 per cent a year. Even 4 per cent to 7 per cent annual growth would compound to over US$1.5 trillion in just a decade. Oil has been the engine for Saudi Arabia’s wealth for the past fifty years. Compounding should be one of the main engines going forward. 

 

Of course, such performance would require a world-class sovereign wealth fund. Fortunately, the “Warren Buffett of Arabia” already lives in downtown Riyadh. And he has been buying top global companies such as Citibank, Twitter and Bank of China for over twenty-five years.

 

Second, I predict Alwaleed would aggressively grow Saudi Arabia’s private sector. 

 

The Saudi private sector is only 40 per cent of the GDP today. And much of that follows from oil and government spending, such as infrastructure projects, contracting, and so on. There is no simple path to a robust and growing non-oil private sector. And certainly no five-year government plan will get you there. It requires hands-on leadership at the top. And in a country of Saudi Arabia’s size, hands-on expert management can make a major difference. Think Lee Kuan Yew and his impact on Singapore.

 

Fortunately, Alwaleed is, by any measure, the world’s foremost expert on Saudi Arabia’s private sector. In the past 36 years, he has built and run businesses across virtually every sector of the Saudi Arabian economy, including banks, insurance companies, hotels, retail, real estate, housing, supermarkets, schools, hospitals, agriculture, petrochemicals, and many others. 

 

I predict he would begin to bring foreign investment, expertise and technology into Saudi Arabia at a stunning pace. Virtually every foreign company, government and investment group already respects him. With the “Prince of Deals” in charge, inbound deals would happen very quickly.

 

He would also likely fuel the international expansion of Saudi Arabia’s top companies. A good model for this type of government-led outbound expansion is China, which has been very effective with its “Team China” approach. A similar “Team Saudi” approach could be very effective. Saudi’s top companies should already be dominant in the Middle East, not just in Saudi Arabia. And they should have expanded into Central Asia and Africa long ago.

 

Third, Alwaleed is the man to get Saudi Arabia’s workforce back to work. 

 

Despite decades of government effort, only half of Saudi nationals actually work. And two thirds of them have government jobs. Only 10 per cent of the Saudi Arabian private workforce today is actually Saudi (the rest are foreign workers). This is a massive problem. And at current “Saudisation” rates, it will take until 2060 before even half the private workforce is Saudi. 

 

But getting Saudi nationals into the private workforce is only the first step. Getting them to actually to be competitive in a global economy is a much bigger problem. And this is where the government desperately needs private sector expertise. Is it really a surprise that government leaders with only government experience have trained a workforce qualified only for government jobs? 

 

A competitive workforce is overwhelmingly trained on the job and in the workplace. It does not happen in schools or training programs. And it cannot happen as long as Saudi nationals are mostly in government jobs and the private sector is sluggish. This is Saudi Arabia’s biggest challenge.

 

Finally, an Alwaleed monarchy would be a sight to see. 

 

Alwaleed has a famously ferocious drive. I know very few people who can actually keep up with him on a daily basis. He simply works too fast, too hard and he never really stops. It’s exhausting. So imagine Saudi Arabia’s Royal Court trying to keep up with his super-charged pace, his 18-hour days, and his over 200 phone calls per day. Imagine the government ministers being called into meetings until 3-4am every night. Alwaleed would set a new standard as the world’s hardest working monarch. That would be very entertaining to watch. 

 

There would also probably be some pretty spectacular real estate projects. Alwaleed’s iconic Kingdom Centre is already the symbol of Riyadh. His one mile sky scraper being built in Jeddah will likely become the symbol of the country. Imagine the kinds of projects he would do as King? Could we see an entirely redeveloped Riyadh? Or perhaps new “oasis cities” created in the Saudi Arabian desert? 

 

That is my case for Alwaleed becoming King one day. He is the only royal with the private sector ability to finally free the country from its over-reliance on oil. Note: Saudi youth unemployment is now over 30 percent.

 

Saudi Arabia today has no clear line of succession beyond Crown Prince Salman (age 78) and Deputy Crown Prince Muqrin (age 70). King Abdullah can and should indicate that Alwaleed is one of the top future candidates. That would put him formally into contention. The idea of “King Alwaleed” is something that Saudi Arabia should start to debating. If nothing else, it would cause all the other senior princes to panic and to start working a lot harder.

 

Jeffrey Towson is the former Head of Direct Investments for Middle East North Africa and Asia Pacific for Kingdom Holding Company. This article represents the opinions of the author and there has been no contact of any kind with anyone associated with Prince Alwaleed or Kingdom Holding Company