Saudi Arabia opens to outsiders as it looks to the future Gulf nation is liberalising and the West needs to alter its outdated perceptions

TELEGRAPH (UK)

2/8/10

Saudi Arabia opens to outsiders as it looks to the future

Gulf nation is liberalising and the West needs to alter its outdated perceptions

Richard Spencer



If anything sums up the mystery of Saudi Arabia, it is the story of two women who "mingled" with members of the opposite sex.

One was Khamisa Sawadi, a 75-year-old grandmother sentenced to 40 lashes for being found in the presence of a man who was not a blood relative. It was her late husband's nephew, and he had called at her house to deliver a loaf of bread.

The other was Aisha Natto, a businesswoman from Jeddah, who was to be seen the other day "mingling" quite openly with a large number of men: Saudis, other Arabs and Westerners. Many of the women around her were not even veiled.

The very same government that has refused to intervene on behalf of Mrs Sawadi was hosting the Global Competitiveness Forum at Riyadh's Four Seasons Hotel, where Dr Natto received an award as founder of one of the country's fastest growing businesses.

The forum is one of a string of initiatives by which Saudi Arabia is trying to change its reputation as an inward-looking, conservative – and men-only – state whose economic policies revolve around deploying its oil wealth in the interests of its ruling family.

Dr Natto, who runs a chain of opticians and sits on Jeddah's chamber of commerce, was among numerous businesswomen, female reporters and public relations flaks hovering in the hotel's lobbies. Many saw the whole event as a deliberate policy of social "shock and awe": the possibilities of partnership with the oil superpower were being sweetened with social liberation.

"This is incredible compared even with five years ago," said Maha al-Ghunaim, a Kuwaiti financier who runs the Global Investment House, a regional private equity firm. She cites women-only queues at immigration as a significant step forward – an odd choice until you remember that in theory women in Saudi Arabia are not allowed out of the house without the permission of their husbands. It is no coincidence that she now regards Saudi Arabia as her top investment priority.

The relaxation of controls over women is part of a broader shift to which the West has been slow to wake up. The results are already plain to see, at least in Saudi Arabia's main cities.

Foreign investment, in a country long assumed to have no need of any, rose from $2bn (£1.2bn) in 2004 to $38bn in 2008 – figures that make China look dull. The World Bank last year ranked Saudi Arabia 13th in its list of easiest countries to do business in, a figure that caught even locally-based analysts by surprise. In 2005 it was 65th.

Confusion is understandable. Used as we are to the statistical twitches that represent triumph and disaster in Europe, it is hard to get beyond the headline figures of oil economies: the kingdom's nominal GDP rose 22pc in 2008 and fell 31pc in 2009.

But the more important comparison is that in 1973, the year of the last oil crisis, oil accounted for 72pc of GDP. In 2008, when oil prices peaked again, it was 31pc. The role of the private sector has risen until it is now almost half the economy. Leaving aside the oil gyrations, a clearer, emerging market story is unfolding as the state loosens the reins: long-term, non-oil growth of 5pc annually since 2004.

As in other emerging markets, the evidence is visible as well as statistical: take construction sector growth, which has averaged 5pc a year for a decade, and then look at the massive Kingdom Tower skyscraper, shaped like a bottle-opener, which houses
the Four Seasons. Alternatively, see the red-and-white logo of HSBC, sprinkling the white buildings of Riyadh and Jeddah like the markings on an Arab keffiyeh: financial services liberalisation has allowed foreign banks to operate for the first time, with 10 opening up in the last decade.

Although the countries could not be more different in many ways, the comparison with China is apt. For both, an economic driver has been joining the World Trade Organisation, a step that seems obvious elsewhere but was brave in countries where outsiders are often regarded with suspicion.

"We have opened a lot of sectors to investors," said Khaldoon Muhassen, head of the National Competitiveness Centre, a body set up to spearhead reform. He said the country had gone beyond WTO commitments by opening government contracts to foreign firms, and held out the possibility of more change to come: reducing the need for outside investors to take local partners and, most shockingly of all, the possibility of business visas on arrival. Currently, all visitors require a letter of invitation, which is often only the starting point in a process lasting days or weeks.

There is a simple political motive for these changes. Unlike neighbours such as Qatar and Abu Dhabi, where oil money is shared among tiny native populations, Saudi Arabia has 25m mouths to feed, many poor and 60pc of them under the age of 25. Newly arriving firms are encouraged to employ as many locals as possible – a tall order, given the religious priorities of the education system.

For some, it is all too late, with the religious militancy of the last three decades clearly connected to a backwards and distorted economy. The reform-minded, but 85-year-old, King Abdullah has been the real power here for 15 years but was only able to put into practice his more forward-looking beliefs – for example, appointing a woman minister – after King Fahd died in 2005.

One US-educated former banker, now a women's rights activist, says that the radicalisation of Saudi youth means a majority would probably vote against the king's reforms, were there democracy.

Sops left to the conservatives include the continuing power of the religious police, who arrested the grandmother with the loaf of bread. The Four Seasons was undoubtedly unrepresentative, while the repeated mantra of Dubai's embattled bankers remains: "Would you rather live in Riyadh?" No one's betting on finding champagne in the mini-bars any time soon.
Miss al-Ghunaim, as an outsider, has no role in Saudi politics, but offers consolation. "There is now a plan," she said. "What King Abdullah is doing is fabulous. The longer it continues, the harder it will be to reverse."