Interpreting Middle East Economic News and Analyzing Market Trends

Proverty in Saudi Arabia: The number of poor keeps growing

http://timethemoment.files.wordpress.com/2013/05/saudi002.jpg?w=735

It’s well-known in the Gulf that if you are rich in Saudi Arabia you are very very rich, but not many know that if you are poor in Saudi Arabia you are very very poor.  Unlike the rest of the oil exporting countries in the Middle East, Saudi Arabia is somewhat of an anomaly because it’s social welfare/benefit system is not as generous as say, Kuwait or the UAE, and not even close to Qatar.  One of the main reasons is because Saudi Arabia has a much larger population than the rest of the Gulf.  With a population of 27 million, it’s more than double the rest of the GCC countries put together.  As such, solving it’s going poverty problem is not an easy challenge.

 

With its vast oil wealth, Saudi Arabia has one of the highest concentrations of super rich households in the world. But an estimated 20 percent of the population, if not more, lives in crippling poverty. Beggars panhandle in the shadows of Riyadh’s luxury shopping malls, and just a few kilometers away families struggle to get by in the capital’s southern slums. While the government has finally acknowledged that poverty is a problem in the kingdom, the world of the Saudi poor is largely hidden from sight.

Accessing this world is a difficult undertaking for foreign journalists, granted only with the assistance of a few dedicated social workers who risk government opprobrium to expose the realities of life lived on the margins. The Saudi state offers free health care and education, but little in the way of income assistance or food stamps. Many poor Saudi families rely on handouts from private citizens instead. Muslims are expected to give a portion of their annual income to charity, and many go beyond the bare minimum. Prince Al Waleed bin Talal, Saudi Arabia’s richest investor, estimates that he has given several billions of dollars in charity over the past 30 years, much of it wired directly to the accounts of petitioners who apply to his office for assistance with paying back loans, buying a car or getting married. It’s not necessary, but most of those supplicants visit the prince in person as part of a weekly ritual dating back to the early days of the al Saud dynasty. They line up to deliver their requests. Several pause to recite poems in praise of his generosity. The government has pledged to eradicate poverty, but it is a difficult and long-term undertaking made all the more complex by a rapidly growing population and a paucity of jobs.

Read the full story from Time (available to Time subscribers).

Time also posted a photo essay of the poor, which is open to all.  Click here to see.

 

Source: CIA World Factbook

 

Poverty is Saudi Arabia is not new, but it’s been hidden for so long that now the numbers are so large the government can no longer hide it.  Fly in to Riyadh airport any time and see mobs of young Saudis fighting over who gets to take you in their car to your hotel (unlicensed of course).  Drive down the main road leading to the top shopping malls and see kids as young as 10 begging for money at the stop light.  This is not the Saudi Arabia many picture in the West.  This is the real Saudi Arabia.

 

https://www.cia.gov/library/publications/the-world-factbook/population/SA_popgraph%202013.bmp

Source: CIA World Factbook

 

The key to solving this problem is trying to figure out what to do with the demographic time-bomb.  As you can see from the graph above, Saudi Arabia is like the rest of the Middle East, an ever increasing number of young people entering the labor force.  The current crony system that has been in place for decades is out of date and cannot cope.  We’ve covered Saudi Arabia’s problems in other posts, but here are the most relevant to this story, here, here and here.

 

There are no easy solutions and the government has not even acknowledged the full extent of the problem much less try to deal with it.  For now it’s putting small band-aids on the problem with the hope it goes away for a few more years.  However, the longer they wait to deal with it, the more painful it will be.  God forbid if the price of oil drop were to again like it did in 2008 (from $140 to $36/bbl in a matter of months).  I can smell Saudi Spring!