‘Make your bargain before beginning to plough.’
—Arab Proverb
During the 1970s, under King Faisal, Saudi Arabia embarked on a programme to apply its oil revenue to building an industrial infrastructure. The obvious industries to develop were those based on hydrocarbon feedstock (from the oil refining process) such as fertilisers and plastics. For good measure, Saudi Arabia also built a steel industry based on reduction of iron oxide by gas instead of coal.
Two fishing villages, Jubail on the Persian Gulf and Yanbu on the Red Sea, were the selected locations for new industrial cities in which these industries were located. Both sites offered deepwater ports. Yanbu was strategically situated half way along the Red Sea coastline. Jubail lay at the centre of an oil/gas producing area and was the site of a major US naval base. From the basic industries it was hoped, the secondary and tertiary industries would also develop to transform Saudi Arabia into a manufacturing country.
The development plan was grand in its vision. But ultimately its results have been marginal. The industrial cities did succeed in setting up some basic industries, but Saudi Arabia has not turned itself into a manufacturing nation in the manner of Japan, Singapore and other Asian countries. The basic industries were built, but no commensurate programme was undertaken to develop the technical personnel to run them. And despite its industrialisation programme, Saudi Arabia remains almost entirely dependant on its exporting oil and gas products.
Saudis monitor share prices at a bank in Riyadh.
After the second oil price spike of 1979, the price of oil went into a long decline and the fortunes of Saudi Arabia did likewise. As oil revenue declined, Saudi Arabia fell into deficit, financing its operations by borrowing. In the 1970s, Saudi Arabia had been a creditor country. By the 1990s, Saudi national debt was over 100 per cent of GDP.
But reprieve was at hand. A third boom for Saudi Arabia started at the turn of the century with oil prices rising for five years before topping out in 2008, then entering another precipitous decline in the following year. During periods of strong oil prices, Saudi Arabia bolstered its reserves of foreign capital. During the down years, the country deficit budgeted. Either way seems to have had little direct effect on the demand for expat labour. In the short term at least, the country has continued to hire foreign labour regardless of the oil price.
Despite two generations since the first commercial development of their own oilfields, Saudis of the present day seem to be no more capable of running their own country than they were when their industrialisation started in the 1940s. They still rely on a massive foreign workforce to get their day’s work done. The question is often asked—why can’t the Saudis run their own country? The answer seems to lie in a mix of cultural and historical reasons that have changed little since Saudi Arabia first attempted to make the transition into a modern country.
One reason proposed is the absence of a traditional work culture. Agriculture, according to anthropologists such as Jared Diamond (and detailed in his prize winning book, Guns, Germs and Steel: The Fate of Human Societies), was the wellspring of the present work ethic of both the East and the West. In the West, the idea that man was put into the world to toil is sometimes referred to as the ‘Protestant work ethic’—an invention not merely of the Christian Church, but also of the lord of the manor of the feudal system during the Middle Ages. In times past, peasants were compelled to work in the fields from dawn to dusk. When the Industrial Revolution came along, the work ethic was transferred into town where workers toiled from dawn to dusk in the factories of the new industrial world. In societies with a culture of permanent agriculture and then of industrialisation, work was an essential part of life. Work filled people’s lives. Sloth was listed as one of the seven deadly sins of economics— and still is.
Such a mindset never got underway in Saudi Arabia.
Around 3000 BC, the permanent agriculture of the Sumerians took root in the ‘Fertile Crescent’, centred around the Tigris-Euphrates confluence in present-day Iraq. Permanent agriculture then spread east and west, becoming the mainstay of both Asian and Western societies. But Sumerian agriculture ultimately failed. Major factors behind this failure were salinity and climate change. The area became increasingly arid and depopulated as a result. Few large permanent settlements existed from which artisanship and innovation could spring. While agriculture prospered elsewhere in the world, and industry later followed, the region which invented permanent agriculture drifted back into nomadic animal husbandry.
After that, little changed for thousands of years. Bedouins lived a hand-to-mouth existence of driving their flocks between one patch of meagre grass and the next. While their animals were grazing, there was little for Bedouins to do during the hottest hours of the day but shelter from the brutal sun inside their camel-hair tents. Conditions were too harsh over most of the country for crops. As a result, Saudi Arabia failed to develop a culture of working in the fields from which a tradition of working in factories flowed in other countries. Bedouin traditions were more in line with other hunter-gatherer societies—Australian Aborigines, Eskimos, most North American Indians and Khalari Bushmen—who were also fast-forwarded into the modern-day work culture without the time to adjust to the work ethic that gripped much of the rest of the world.
Despite the Arab advances of the Middle Ages, when industrialisation arrived in the 20th century, Saudi Arabia wasn’t prepared for it. Unlike countries like the US, Saudi Arabia had no history of pioneering struggle to lay its foundations for a modern state. Unlike countries of Europe, and even Egypt, there were no generations of transition from agriculture to industrialisation. Unlike the nations further east—India and China—no complex administration was in place to handle commerce, trade and government.
With the advent of oil, the Saudis made a giant leap forward from Bedouinism to the consumer age in a single stride. The solution to the shortage of labour skills was promoted by oil companies themselves—hire a skilled foreign workforce to build an alien technocrat core within a technologically ignorant society. This was easily accomplished in just a few years. A society based on oil was an easier transition than other forms of industrialisation that revolutionised economies in other countries. Oil was simple. Oil companies drilled an oil well. Oil flowed to the surface all by itself, discharged into a pipeline and from there into an oil tanker. Everyone made money.
The influence of the Wahabbism sect of the Muslim religion was another factor that prevented Saudis from acquiring the skills needed to run their own country. Wahabbism is a highly dogmatic belief system that resists new knowledge, rejecting as sinful what other nations term as ‘progress’. Nations with a more tolerant brand of Islam have done better reconciling their Islamic beliefs with the ideals and aspirations of the modern world. Malaysia, for example, has managed to maintain its religious core culture while building a successful modern economy.
But not Saudi Arabia.
The type of education Saudis receive is a related factor inhibiting the country’s progress. The education system trains the new generation in theology not technology. A bachelor’s degree in Islamic philosophy is not a qualification that finds employment in a job market that seeks engineers, skilled workers, technicians and business graduates. In the 1990s, over 6 per cent of the country’s gross domestic product (GDP) was spent on education— much higher than most countries of a similar economic profile. But little of this expenditure had brought tangible benefits to the country.
Perhaps another reason for Saudi Arabia’s failure to train up a labour force is simply habit. With its long traditions of slavery, Saudis were accustomed to having the guest workforce around. Peons were imported to perform low-grade tasks in Saudi Arabia, even before oil was discovered. Importing the highly-skilled workforce to build and operate oilfields and processing facilities was merely an extension of a habitual dependency.
Saudi Arabian Self Sufficiency: the UN Assessment
In 2002, the United Nations (UN) published the Arab Human Development Report which considered the question of Saudi Arabia’s lack of labour self-sufficiency. The report found factors contributing to the kingdom’s dependency on foreign labour were lack of personal freedom, poor education, government appointments based on factors other than merit and rules against employing women, particularly in small business.
Says the Arab Human Development Report: ‘The barrier to better Arab performance is not a lack of resources, but the lamentable shortage of three essentials: freedom, knowledge and manpower. It is these deficits that hold the frustrated Arabs back from reaching their potential—and allow the rest of the world both to despise and to fear a deadly combination of wealth and backwardness.’
—Source: Arab Human Development Report,
Nader Fergany, Egyptian sociologist and
chief author of the report, 2000
published by the UN development programme.
Whatever the reasons, at the time of writing, Saudis have made little progress in taking over the running of their own country from their guest workforce. There are almost certainly more expatriate workers in the private sector workforce than Saudis, although reliable statistics are hard to come by. Saudis have allowed this situation to drift along for decades. They have been unable, one would have to say they haven’t tried very hard, to educate their own workforce and develop their own expertise.
An interview in The Economist of 11 January 2003 recorded the thoughts of one of Saudi Arabia’s 5,000 princes on his country. “We are the most conservative country in the world,” he said. Commented The Economist on the prince’s remarks, “with enforced Puritanism, medieval system of governance and culture of secrecy, the kingdom appears uniquely resistant to change.”
One of the questions that might intrigue a visitor to Saudi Arabia is this: here is a country which has imported an alien workforce to perform tasks which in other countries provide employment to the average person in the street. Wouldn’t this practice give rise to massive unemployment? What do people do for a living when three-quarters of society’s normal occupations are removed and transferred to an imported workforce?
Even if most Saudi women do not work, that still leaves an available indigenous workforce of about 7.6 million males aged 15–64, about a quarter of whom, according to the statistics available, appear to be out of work. Which raises the question of how the local population spend their time and get money to live.
What is the rate of unemployment in Saudi Arabia?
The CIA World Factbook’s convenient summary of the demographic statistics gives the unemployment figure for Saudi Arabia as up to 28 per cent, while noting the true figure is uncertain. Other sources give a similar impression of extremely high unemployment in Saudi Arabia.
Unemployment in Saudi Arabia will almost certainly get worse before it gets better. With nearly half the population of Saudi nationals under 16 years old, youth unemployment— already a considerable problem—seems likely to exacerbate in the future as the young population bulge is discharged from schools into the workforce.
The Saudi government has introduced several schemes to try and deal with the unemployment problem. One of these schemes is the unemployment allowance, introduced in 2011. Under this programme, unemployed men and women can receive up to US$ 530 a month to help them make ends meet while they supposedly look for a job. Critics of the programme fear it will exacerbate the already prevalent tendency among young Saudis to shun hard work, and in particular jobs that would pay less than the unemployment allowance.
Saudi Arabia has made desultory attempts to overcome this problem without really addressing the underlying issues that are causing unemployment in the first place. The policy to get Saudis into work is embodied in the phrase ‘Saudisation of the workforce’. The Saudisation programme, which has passed into legislation, requires Saudi companies to increase the number of Saudi nationals on their payroll by 5 per cent per year. According to an article in the Saudi Gazette, to comply with this rule some companies have gone so far as to put Saudis on their payrolls without requiring them to ever show up at work, thus sacrificing profitability in order to stay in business. Another measure of the Saudisation programme is to offer free vocational guidance and financial assistance for anyone wanting to establish their own business. The Saudis have proclaimed legislation that only Saudis could work in designated industries such as selling gold and driving taxis. These laws were fairly quickly rescinded when the targeted industries degenerated, almost immediately, into chaos after guest workers were replaced by Saudis with no job knowledge and little inclination to work.
Various conflicts between the five pillars of Islam and the modern world also compromise successful Saudisation. Even something as simple as salat—the requirement to pray five times a day—erodes productivity. Inshallah culture that God will take care of the smallest details breeds indifference to outcomes. The Wahhabi doctrine that no knowledge exists outside the Qur’an inhibits the learning of commercially useful skills. Only a massive change in the very cultural fabric of society—in particular religion—is likely to improve Saudisation performance. As long as religious studies remain the central theme in education, Saudi Arabia is unlikely to generate the skilled workforce it needs to run its own country.
The Wrong Skills for the Job
‘“The companies who come to see us are looking for skilled workers, business grads, engineers and technicians,” said Nassir Salih al-Homoud, director of an unemployment office in Burayday, a quiet farming centre of 350,000 in central Saudi Arabia. Few Saudis qualify. One of his clients is Abdulrahman al-Ali, 25. “I’ve been trying to find a job for a year,” said al-Ali. “When I submit an application, people say they will call me, but they never do.”
“The problem is his schooling,” al Homoud comments. “Like many Saudis, al-Ali has a bachelor’s degree in Islamic philosophy.”’
—Source: ‘Kingdom on Edge: Saudi Arabia’,
National Geographic, October 2003..
The entire service industry, the biggest sector of most economies, has proved difficult to staff from the local workforce. An international retail chain embarked on a programme to employ hundreds of Saudi Nationals. After applications were received and processed, the company found itself unable to engage a single Saudi. The firm found that young Saudi men are culturally attuned to being served, not to serving.
Likewise, Saudis are not normally interested in becoming truck drivers, factory hands, manual labourers, domestic servants, shop assistants and secretaries. And they do not qualify in sufficient numbers to take most of the jobs available as engineers, technicians, accountants and doctors. Guest workers from both ends of the job spectrum are imported into the kingdom to fill these jobs, thereby filling most of the labour market needs across the economy, from menial tasks that Saudis find undignified and too poorly paid, to highly skilled tasks that are too technically demanding.
Employers have other reasons too for looking unkindly on the products of the Saudisation programme. One objection to hiring Saudis expressed by executives in a Jeddah-based company is that Saudi nationals take many more days off than their expat counterparts. Another is that, under employment legislation applying to Saudis (but not to the guest work force), once hired, a Saudi cannot be fired. Another is the lack of obliging servility that is expected from employees in the service industry. A parallel objection from the unemployed Saudis themselves is that pay rates for low-skilled jobs are very low. Unskilled labour is cheap in Saudi Arabia, a country with no unions, no labour laws and almost limitless competition for jobs from applicants in countries as far afield as India, the Philippines and Indonesia.
Such has been the resistance from employers (who are as often as not either members of the Royal Family or have royal connections) that the government has had to back down on its attempts at Saudisation. When companies complained that they had to pay higher salaries to Saudis in return for poorer standards of work, the government relaxed the rules on hiring expatriates.
At the personal level, Saudis may feel a level of shame about the inability of their nation to get its day’s work done without massive assistance. As a guest worker yourself, you may occasionally experience resentment expressed by your Saudi boss or your fellow employees. Saudis may get more than usually touchy about your performance of the job you have come to do. They may go to great lengths to explain to you why they need your services in the country instead of hiring a Saudi to do the job. This conversation is unlikely to touch on the real reason why your services are required—the clash of cultures between traditional Saudi beliefs and the skill requirements of the real world. In the opinion of most commentators, unless the Saudis fix their educational system, of which your boss is probably a product, the country’s dependence on an expat workforce will most likely continue, as will Saudi sensitivity on the subject.
Industrialisation projects originally initiated by King Faisal highlighted another aspect of Saudisation to one of the authors. These projects aimed not only to develop the physical infrastructure, but also the intellectual infrastructure by endeavouring to create a highly trained workforce of Saudis to take over future projects from the expatriate workforce. To facilitate the transfer of skills, guest workers were sat side-by-side with Saudi counterparts during their time on the project. The trainer was the guest worker and the trainee was a Saudi who, at some future period, was expected to take over the guest worker’s job.
This aspect of the Saudisation programme moved at glacial speed since trainers and trainees shared a mutual disinterest in the training objective. The guest worker didn’t come to Saudi Arabia to work himself out of a job. The Saudi trainee didn’t have an overwhelming desire to join the workforce. At an individual level, the two parties could co-operate on a mutually beneficial policy of preserving the status quo.
The training programme also suffered through the lingering slave owner mentality of the trainees themselves. Saudi trainees saw themselves as the client. They saw the guest worker as the hourly hire. The slave-owner/slave relationship was not the ideal arrangement for passing on knowledge from the slave to the slave owner. Saudi trainees were no more interested in receiving their training than the expats were in providing it.
Trainees lacked an additional motivation to emerge from their trainee role. Many saw themselves as perpetual students. Given the opportunity to pursue a full-time career as a trainee, Saudi trainees were forever agitating to be sent overseas to undertake new university courses, preferably in the USA. One expertise the trainees did develop was in the area of training courses. Trainees queued up to participate in government-sponsored overseas study courses, seemingly more by a desire for an expenses-paid trip out of the country than to acquire needed qualifications. There was always another course to study, even for the trainee approaching middle age.
During your employment in the country, you may well find your employer earnestly explaining to you the importance of training a Saudi to take your place. Listen politely and say you understand. Your predecessor probably had the same conversation and so far nothing has happened. Thousands of Saudis have been sent to the best overseas centres of education that money can buy to acquire every piece of knowledge their country can possibly need to make it run like a Swiss watch. But guest workers continue to be imported to do the work in greater numbers than ever before. There are little signs at all that Saudis are becoming any more self-sufficient than they ever were. Which probably means, so far as the guest worker is concerned, the Saudi employment bonanza will continue.
A word that you will hear repeatedly in conversations between Saudis is inshallah meaning ‘if God wills it’. Inshallah embodies the Arab philosophy of fatalism in the same way that mañana embodies the Latin philosophy of procrastination. Unlike the Saudis themselves, the Saudi God is considered to be tremendously industrious, getting involved in the minutiae of every Muslim’s life, making millions of decisions every second of the day of the most mundane aspects. Under the inshallah philosophy, believers may abandon all decision-making to God, neatly rationalising their own work avoidance as a violation of the Almighty’s will.
Inshallah thinking can be a tremendous irritant to the Western workforce. To holders of the Western work ethic, inshallah culture borders on intellectual laziness. But in its own context, inshallah thinking is a completely self consistent system of belief. If God has already pre-ordained every aspect of the future, planning ahead has no purpose. Why bother to plan if the outcome has already been determined by a higher being? In fact, planning ahead may be counterproductive. God might have cause to feel put out by the interference of man in the smooth unfolding of His future plans. On that argument, the puny efforts of man to plan ahead could be dangerous to one’s spiritual health.
The time that Saudis are obliged to devote to their religious needs is considerable. Of the five daily prayer calls, three are answered during the working day. Competition between religious time and work time for Saudis at the workplace can be exasperating for those from countries with a more structured work culture.
From the point of view of a guest worker in regular contact with Saudis, the call to prayer during working hours is a major disruption in the workplace. While it might seem practicable to schedule work around prayer breaks, in the manner of lunch breaks and meal breaks, this doesn’t seem to happen, perhaps for no better reason than prayer calls are answered only by Muslims. Prayer calls leave the normal working day highly fragmented. As an alien guest worker you can be engaged in some deep and meaningful conversation with your boss, your friend or your bank manager when the muezzin or the loudspeaker announces the time for prayers. On a construction site you may be in the middle of a concrete pour. Whatever the situation, Muslims will answer the call, stop work and head for the nearest mosque, if there is one. (If there isn’t, prayers will still be conducted, but at an alternative venue.)
Saudis will stop what they are doing in order to attend prayers.
Of the five prayer calls each day, the most disruptive from a business point of view are those in mid-morning and mid-afternoon. By the time participants have left the work site, made it to the mosque (which under law should never be more than 800 metres from every inhabited spot in the country), offered their prayers, perhaps stopped to chat with each other after proceedings in the mosque are completed, and made it back to work, half an hour to 40 minutes will have elapsed.
Praying on the Job
In the old days, before most of Saudi Arabia built its thousands of mosques, prayer time devotions would be performed from a prayer mat laid upon some level piece of ground. This is still the method for those out of range of a mosque at prayer time. Even in the middle of a business meeting, a prayer mat may be laid in a corner of the office, and the meeting adjourned while Muslims present perform their religious obligations and non-Muslims at the meeting look on. When prayers are complete, prayer mats will be rolled up, and the meeting will resume. (This arrangement takes less time and is less disruptive to the business of the meeting than having half the meeting attendees walk or drive to and from the nearest mosque.)
At whatever level you work in Saudi Arabia, the demands of religion on the workplace will be felt. If you work for a Saudi boss, religion will consume your boss’s time. If Saudis work for you, religion will consume the time of your employees. From a business viewpoint, this aspect of religious practice performed twice or three times in every working day, must take its toll on the country’s productivity and economic competitiveness.
The effect of the prayer call is felt further afield than the office. Prayers close down business operations across the country two or three times per day. If you are in a shop when the prayer call is heard, the shop may close and you may be discharged onto the street. If you happen to make a badly-timed visit to a restaurant and the prayer call is heard you may be bundled outside between courses, or even halfway through a course. If you are half way through a transaction at a bank, you may have to return to complete the other half about 45 minutes later. In addition to the massive loss of time each day to religion, Saudis are very often late for appointments anyway. So habitual is this practice it has earned its own sobriquet—ma’esh time—which loosely translated means late time.
All in all, despite occasional lip service to the contrary, Saudis, by and large, are not greatly impressed by the Western drive for getting things done in a hurry. Displays of exasperation by guest workers at breaks in the flow of work are not well regarded. It’s not considered good form to show displeasure if the attention of your Saudi colleague strays from the subject under discussion. Stressed guest workers might take a leaf out of the book of the Saudi hosts at this juncture. It’s not a bad idea to say to yourself as your work slips from dangerously behind schedule to critical: inshallah, this is the way things are in this part of the world. Life unfolds to a pattern determined by a higher being. Schedules that don’t work out are not merely the fault of man: they are also the will of God.
Arab culture is not really one that sets great store by the letter of the law. Arabs are unlikely to have quite such the same regard for contracts as their Western counterparts. This is one of the major cultural differences between West and East that has frustrated many a Westerner more accustomed to a society that operates according to written rules.
In their negotiations Saudis expect to do lots of talking and lots of bargaining. They expect their negotiating partners to do the same. However even though an agreement is eventually reached, the terms of a written contract may mean little in the event of a conflict. In an arrangement that is not working out to the advantage of the Saudi partner, you are likely to find that your partner may try to change the terms of the contract without notice, and quite possibly without your knowledge. Saudis don’t expect to expend their energies debating points of law about the changes they propose. Arabs are traders and have been for a long time. To them a written contract may be regarded more as an expression of the intention at a point in time rather than a hard and fast arrangement. After the written contract is signed, they will still be inclined to talk and bargain.
Whether your employment contract or business contract is worth the paper it is written on depends mainly on the co-operation of the Saudi partner. In the event of a dispute, Saudi law may offer little protection to foreigners, either collectively or individually. Collectively, Saudi Arabia has refused to sign a number of international agreements, including labour agreements. Individually, a Saudi can generally rely on the courts to support his version of events in a disagreement with his foreign partner to the contract. The terms of a written contract are most likely to be upheld in Saudi Arabia if the contracting partner is a large foreign company. Next best is a foreign-Saudi partnership. If you have contracted to a fully-owned Saudi business, the smaller the business, the less the entitlements you feel are yours under your employment contract are likely to be understood by your Saudi partner or employer. In the Saudi Arabian small business world, written contracts are neither widely understood nor highly regarded.
In addition, when argued in court, elements of the contract, particularly those relating to payment, may be illegal under Shariah Law if in the opinion of the judges it infringes on some interpretation of the Qur’an. In this case, provisions of the Qur’an will prevail over those of the contract.
People working in domestic duty are in the weakest situation of all. They may well be asked to work 16–18 hour days without holidays or days off. They may or may not be paid at the agreed rate. Whether they get paid at all is at the discretion of the employer. If they are female, or even if they are male, they may be pressured to grant sexual favours. The embassies of countries like the Philippines have had little success at protecting the rights of its citizens working in Saudi Arabia. Whatever goodwill the employees might enjoy from their employers is entirely based on the personal relationships that are forged.
Paying off the Agent
Workers from the Third World are particularly vulnerable to mistreatment by their Saudi bosses. Despite the hazards and discomforts, competition for jobs in Saudi Arabia is high, even though written contracts of employment are onerous. Workers are normally recruited in their home countries by employment agents who make their own arrangements with Saudi officials issuing work visas. According to a UN report on the subject, such agents typically charge their clients extravagant ‘processing fees’. Cases have been cited of Asian nationals paying engagement fees of up to two years’ wages payable to their agent before they see any money of their own. Nevertheless, guest workers accept these terms. When they’ve paid off their agents, as often as not, they will remit most of their earnings to home base to finance their extended families back home. Such are the economic exigencies of the Third World that there is no shortage of applicants for positions carrying onerous terms of employment.
Building Regulations and the Qur’an
After construction of the new Saudi city in Jubail was underway, the Mutawa’een paid a visit to the engineering drawing office. After inspecting the project drawings, the Mutawa’een ordered that all layout drawings of the project should also include an arrow showing the direction of Mecca, which happened to lie approximately WSW on this particular project. This direction arrow was duly added to drawings without too much difficulty.
However, trouble was to follow. A little while later, the Mutawa’een paid another visit to demand that no sewage could flow in the direction of the Mecca arrow (sewage flowing towards Mecca would have been considered insulting to Islam). The engineers then sat down to figure out how this requirement could be met without tearing up most of the work done so far.
Technically complying with the requirement wasn’t possible. Streets and the pipes they contained ran in all directions. The engineers considered and rejected various arguments. That no other cities in Saudi Arabia complied with this requirement was rejected as a defence on the grounds that rules of precedent were a foreign concept to Saudi law. There was, of course, no point in disputing the relevant text in the Qur’an, the interpretation of which the Mutawa’een themselves were the world’s leading experts. Instead, the engineers opted for the Non-Flat Earth Defence. The engineers argued that since the Earth was round and since Mecca was about 800 km from Jubail, nothing constructed horizontal or near horizontal could, on a three-dimensional view of the world, be considered as pointing in the direction of a town well over the horizon. Against most expectations, the Mutawa’een bought this explanation. Nothing in the Qur’an said the earth was flat! Engineers drew a collective sigh of relief and construction work continued.
But the Mutawa’een later returned. They had considered the three-dimensional view of the universe, they said, and were concerned about the orientation of toilets inside the houses of the new town. When pressed for details, the Mutawa’een explained their concern about the direction of flow of sewage in the act of using the toilets. They pointed out that, at some part in its trajectory would inevitably be in the direction of Mecca! They suggested that construction work be put on hold while engineers considered this problem.
A number of meetings were held at which the trajectory of urination was debated at some length, but no solution could be suggested. Cost engineers were summoned to estimate the cost of re-orientating the direction of those toilets in houses which pointed WSW. Earnest discussions were held on what direction the toilet in which the plumbing was vertical actually meant. No conclusion was reached. Construction proceeded cautiously while the next visit from the Mutawa’een was awaited. But they never returned, at least not to pursue this issue. They had made their point.
In Saudi Arabia, the Qur’an rules and the clerics interpret it.
Occasionally people may wish to change employers while working in the country. Since work visas are issued by your existing employer, this is only possible with the cooperation of the three parties involved in the transaction—your existing employer, your new employer and the Saudi government. Not only do you need your employer’s permission to leave the country, you need his permission to leave his employment—a process that can take months even with willingness on both sides. Switching employers in Saudi Arabia is difficult but not impossible.
Since the Qur’an was written in the 7th century AD, many of the matters the law has to interpret were not in existence when the basis of the law was written. When one considers what wasn’t around when the Prophet lived his life—running water, sewerage, cars, telephones, paper and so on—it is some minor miracle that modern society run to the rules of Shariah Law can operate at all.
One of the difficulties with the commercial side of doing business in Saudi Arabia has been that Islam isn’t really comfortable with the notion of paying interest on loans. Those lending money to Saudi institutions should be wary. Borrowers who default on their interest payments may escape their interest obligations on the grounds of that, under Shariah Law, the lender’s loan was illegal in the first place.
Islam is also uncomfortable with the notion of insurance on the grounds that actuarial science can be interpreted as a form of gambling, which is against the tenets of Islam. The impossibility of hedging normal business risks can also increase the difficulty of doing business in Saudi Arabia.
The Saudi authorities recognise and are making some attempt to overcome the country’s cultural conflicts between religion and normal business practice in the modern commercial world. The Government has created Special Tribunals tasked with the job of finding ways to circumnavigate the more restrictive aspects of Shariah Law and keep the wheels of industry turning. These Special Tribunals now hear most commercial law cases ranging from breach of contract suits to trade mark infringement and labour disputes.
To overcome the theological objection to insurance, a form of co-operative insurance known as takaful (under which resources are pooled to help the needy) has been around for centuries. Takaful casts the insured in the role of the potentially needy, and thereby overcomes the objection to acturial calculations by regarding the insured as a recipient of charity. Other forms of insurance are also gradually becoming accepted. For example, third party insurance to provide diya payments to road accident victims is now compulsory. A social insurance system was recently introduced, aimed at looking after the health care and other social needs of Saudi citizens in private business. Subscription under this scheme is voluntary, set at 18 per cent of the employee’s salary, and shared 50:50 between employer and employee. A parallel compulsory insurance scheme for expat workers is also operating to oblige employers to provide health insurance for their employees.
The Shariah Law rules on income tax is good news for guest workers. The Qur’an, according to the clerics, prohibits the levying of income tax. But, as the kingdom sank deeper into deficit in the 1980s and 1990s, the interpretation of the Qur’an prohibiting income tax came under cautious scrutiny.
Saudi Arabia’s objection to income tax was not merely religious. It was also political. Most people are quite aware of the extravagances of the House of Saud. If these extravagances were financed by oil money, that was thought to be one thing. If they were financed from the pockets of citizens, it might be quite another. To date, given their tribal cultural background, Saudi Arabians had not worried all that much about their lack of voting rights. But imposing taxes was thought likely to raise the argument: ‘no taxation without representation’.
At the date of writing, Saudi Arabia is one of few countries which has never had to levy income tax. As a result of King Faisal’s far-sighted policy in 1970 of wresting Saudi oil from the hands of major oil companies, Saudi Arabia owns its own resources. The country now lives almost entirely off the earnings of its oil company Aramco. Public revenue derived from this source has risen and fallen over the years with the oil price. After the oil price rises from 2003 onwards, pressures to increase government revenue through income tax abated. The government could once more finance its operations through oil revenue. Discussions about income tax were quietly shelved.
In terms of tax, as things stand at the moment, income earned by guest workers in Saudi Arabia remains untaxed and this arrangement looks likely to stand for the immediate future. Shariah Law states that one-fortieth of personal assets (zakat), an effective wealth tax of 2.5 per cent is meant to be given to charity. This is a voluntary arrangement based on religious beliefs and is not applied to the guest workforce.
Issuing and receiving criticism is a tricky subject in any culture. The human race doesn’t vary all that much in this area. No one, no matter what nation they belong to, enjoys being criticised. But it’s probably fair to say that criticism of Saudis by members of their guest workforce has to be handled with unusual sensitivity. Candid criticism of a Saudi by a Westerner can quite easily be interpreted as a personal insult. A Saudi should never be criticised directly, or even to a third party. In the area of criticism and personal pride, Saudi culture is Eastern. Face matters. Face lost may never be regained. Criticism needs to be delivered indirectly, and never in front of others, and so circumspectly (amongst much praise and thanking for small favours) that it is scarcely noticeable.
If you have bad news to tell your Saudi boss, it should be delivered in such a way that there is no suggestion that a Saudi is responsible. A good technique is to first praise your Saudi boss for his business acumen and then to attribute the unpleasant news to bad luck. The more your boss convinces himself that your bad news is the will of Allah and not human error, the more easily the problem is likely to be resolved.
Those going to Saudi Arabia to run businesses inside Saudi Arabia with Saudi partners and subject to Saudi law are advised to check out their intended partners very carefully. If you’re working for a Saudi Arabian company, obtaining and nourishing the goodwill of your Saudi sponsor is all important. Falling out with one’s Saudi partners usually results in financial loss, whatever the legal rights and wrongs of the issue. Generally, if a contract is terminated, deportation from the kingdom follows, on the grounds that the reason for your being issued a visa in the first place is no longer valid.
Worse than deportation, in the experience of some, is the incarceration inside the country on some trumped up charge. Serious breakdown of relations between Saudis and their expatriate employees have led to some extraordinary escape stories when employers refused to return the passports of their employees or grant them exit visas. When all other avenues were closed to them, expat employees in conflict with their Saudi employers have been known to freight themselves out of the country as sea or air cargo—rolled up in a Persian rug, or nailed up inside a packing case!
Collecting from Royalty
In a widely publicised case in 1986, Sam Bamieh, a US citizen and businessman, went to Saudi Arabia to collect money owed to him by a business associate of the House of Saud. On arrival in Saudi Arabia, the Saudi creditors promptly had Bamieh thrown into jail in Jeddah without charge—and there he probably would have stayed except that he was able to get his plight known all the way up to the State Department who got him released.
On return to the US (without his money) Bamieh, a determined character, sued the Saudi Royal Family for wrongful arrest and got enormous publicity. As the case moved through the courts, Bamieh managed to implicate the House of Saud in scandals as widely separated as the Nicaraguan Contras affair, the Bank of Credit and Commerce International, and financing political movements in Afghanistan, Somalia and the Sudan. Bameih had the money and resolve to make a nuisance of himself to both the Saudis and the US State Department. To avoid further unwanted negative publicity, the Saudis offered an out of court settlement which Bamieh accepted.
Employees can also fall foul of disagreements between governments. Despite long periods of residence, it is not easy for non-Saudi Arabs to become Saudi citizens. Saudi Arabia retains the right to deport its long-term immigrants back to their country of origin at a moment’s notice. In the last ten years, this right has been exercised at various times when the policy of these other countries departed from Saudi policy.
During the first Gulf War, the Republic of Yemen supported Iraq. Approximately 850,000 Yemenis, many who had been in Saudi Arabia for decades, found themselves suddenly deported to a Yemen with which they had cut all ties. In Saudi Arabia, this action devastated the retail industry, where Yemenis tend to concentrate. In addition, the Republic of Yemen then had to cope with the sudden influx of nearly a million economic refugees it thought had left its lands forever. Palestinians and Jordanians, whose governments were also sympathetic to Iraq, faced similar problems for the same reason. Palestinians who had relocated their lives in Saudi Arabia were not welcome back after the war ended. Recruits from places like India and Egypt were admitted to fill the jobs that Palestinians had vacated.
The aristocracy of Saudi Arabia is one of the biggest in the world. If you operate anywhere near VIP level, you have a better chance of meeting royalty in Saudi Arabia than almost any other country. Some of the minor blue bloods operate at quite modest levels in the corporate and administrative hierarchies.
In Saudi Arabia, government and private ownership merges imperceptibly. Unlike other countries, no distinct boundary separates the private sector and the government. Since they have access to the almost unlimited funds of the Royal Treasury and are inclined to involve themselves in commercial activities, members of the Royal Family engage in all sorts of businesses. The Royal Family may own businesses in their own right, or in partnership with other people, either Saudi citizens or foreigners. Measured by extent of Royal Family shareholdings, in the mid-1990s, the Saudi government owned about two-thirds of the business interests of the country.
At the less regal level, people in Saudi Arabia tend to accept their lot in life to a greater degree than some other cultures. The frantic struggle to rise to the top of the heap is not quite as evident in Saudi Arabia as other parts of the world. However, there are exceptions. Despite the natural advantages in capital and connections of the aristocracy, heroic rise to fame and fortune of the workingman is not unheard of.
Pipeline Welder Makes Good
Sulieman S Olayan started his life as a pipe welder on a Saudi oil rig. In a chance encounter with a member of Aramco’s senior management who was one day making an inspection of his company’s oil rig, Olayan offered his services as a sub-contractor to Aramco. The Aramco manager gave Olayan his chance. From this small beginning, the Olayan Group of companies grew to what has become one of the largest and most diversified and profitable businesses in the country; among many other things, selling Coca-Cola and Burger King franchises throughout the kingdom. Olayan is a typical large diversified Saudi Arabian company with interests in everything from catering to heavy construction and petrochemicals. Wherever you go in Saudi Arabia, an Olayan company can supply you something. In a similar story, the bin Laden family, now the biggest contractor in Saudi Arabia with operations also in the US, started as a minor contractor after Osama bin Laden’s father crossed the border as a penniless emigrant from Yemen.
Until the mid-1980s, Saudi Arabia maintained controlling interests for all businesses operated inside the country. Foreign companies were permitted to operate in the country in partnership with Saudi firms, provided their partnership holdings were 49 per cent or less. In the mid-1990s, as the oil price plunged, the country needed increasing amounts of foreign investment to balance its books. Foreign ownership rules were relaxed. Areas identified as needing foreign investment were telecoms, utilities and financial services.
Changing Rules for Control of Hydrocarbons
In 2000, a Royal Decree was issued to allow 100 per cent foreignowned businesses to operate in the country. Multinational companies including Exxon, Mobil, Royal Dutch Shell and Phillips Petroleum set up operations in the kingdom. This was a watershed event in a country that had previously wrested control of the country’s oilfields back from the oil majors during the 1970s and 1980s. The Economist magazine, a fervent believer in free markets, commented at the time on the new measure: ‘The most significant initiative is a US$ 25 billion scheme to attract oil majors into three huge natural gas projects...’
At a more personal level, Saudi Arabia remains a country where guest workers as individuals are denied the opportunity of embarking on a business for themselves. Guest workers are normally bound by their visa conditions which are specific to a particular employer and maybe to a particular job. For those determined to set themselves up in business, a Saudi partner will be required to organise permissions and lodge the appropriate paperwork.
Overseas businesses small and large have established operations in Saudi Arabia in large numbers in recent times. Investment attractive features of the Saudi business environment include generally good infrastructure, an entrepreneurial culture, minimal currency risk (the Riyal is tied to the US dollar), unregulated currency controls and a liberal tax system. Most businesses bring with them key members of their labour force.
In some quarters, Saudi Arabia has a reputation for corruption, but no more so than the average of many other countries. In its ‘2011 Corruption Index’, Transparency International— the international organisation dedicated to fighting corruption—ranked Saudi Arabia as the 57th least corrupt country from over 180 countries surveyed.
An ongoing bone of contention between the clerics and the Royal Family is corruption in government, meaning the Royal Family itself. Allegations of corruption in the judiciary have also been raised. The most widely reported instances of major corruption are in relation to large arms purchases where payments of ‘commissions’ to princes holding ministerial positions are an accepted and expected way of doing business.
Handling the Critics
Saudi authorities are sensitive about corruption allegations whatever their source. In 2002, Arab News reported that the Saudi authorities arrested a Saudi poet, Abdul Mohsen al-Muslim, who had written a poem in which he alleged corruption of the judiciary. The editor of the Saudi daily al-Madina, which published the poem was fired from his job. Abdul Mohsen was arrested and ‘interrogated ... for a long time about his poem’ by high ranking security officers. In 2003, the authorities conducted a major purge of clerics to weed out those who were critical of the administration.
At the day-to day-level, our experience is that Saudis are pretty honest. Not much gets pilfered. Perhaps deterrence offered by the legal system is working. No one wants to lose a hand for an act of petty theft. An American guest worker in the kingdom has recorded on the Internet a typical experience of the culture of honesty regarding private property:
‘Returning to Saudi Arabia after a vacation, my wife and I inadvertently left one of our many suitcases on the sidewalk outside the airport while we were loading them into the car. After the weekend, we asked a company driver to see if it had been turned in to lost-and-found. The driver returned with the bag. Airport security told the driver it sat on the sidewalk for two days. When no one picked it up, a policeman brought it to lost-and-found. Try leaving your bag on the platform in the New York subway for two days!’
For those who intend to do business in Saudi Arabia, advice can be obtained from The Saudi Chambers of Commerce and Industry which has offices in major urban centres of the kingdom. A list of Saudi distributors for most products imported into the kingdom can be obtained from these Chambers of Commerce. In addition, credit reports can be obtained on prospective Saudi business partners.
The Saudi Chambers of Commerce and Industry offices also offer an advertising service (for a fee) for those seeking Saudi representatives for their products or services. An Agent/Distributor Service is also available to identify the Saudi Arabian firms best suited to represent your products in the kingdom. After you have drawn up a short list of suitable representatives, you might be advised to visit Saudi Arabia to interview your candidates. For this purpose, you can obtain a short visit business visa, valid for one to three months, via a Saudi Arabian approved travel agent or through a Saudi Arabian consulate or diplomatic mission. For further information contact your Saudi Arabian Royal Embassy or Consulate or Diplomatic Mission. For contact details for the Chambers of Commerce go to:
http://www.csc.org.sa/English/Pages/default.aspx
Levi’s is just one of the foreign companies that is allowed to operate in Saudi Arabia.
By law, prospective exporters of goods or services to Saudi Arabia, or firms or individuals wishing to do business in the kingdom need to appoint a Saudi Arabian partner, an import agent or a local representative to handle their business inside the kingdom. Since a great deal of the business in the kingdom is done through personal contacts rather than formal tender processes, such an arrangement is needed anyway to operate successfully inside Saudi Arabia. A local network of contacts is all important to realise exporters’ ambitions.
It should be noted that companies that deal with Israel may be restricted from operating in Saudi Arabia. Two of the biggest brand names that found themselves unable to operate in Saudi Arabia for many years were Ford and Coca Cola.
Saudi Arabia’s bureaucracies are no better than many and quite a bit worse than some. Like many a developing country, Saudi Arabia has an insatiable appetite for documentation, and requires submission of a bewildering array of licence application forms to permit you to undertake the most trivial activities. You get a flavour of the bureaucratic culture on first entering Saudi Arabia. Officials tend to be officious. Paperwork is extensive. Space provided on the many forms that need to be completed seems to bear little relationship to the volume of data requested.
An important function of the bureaucracy in Saudi Arabia, it seems, is to provide employment for otherwise unemployable Saudi Arabians. The Saudi bureaucracy is the one area of the economy in which Saudis are isolated from competition from foreign labour for the simple reason that only Saudi citizens are permitted to work for the Saudi civil service. Guest workers who can work as consultants advising the Saudi government on their bureaucracy, cannot work among the bureaucracy itself. In fact, employment in the Saudi Civil Service is discriminatory even within Saudi Arabians. Members of the Shia sect, for example, are not normally hired for civil service positions.
From the point of view of the foreigner, Saudi bureaucracy is widespread, all embracing and on occasions, almost impenetrable. For example, while in Saudi Arabia, one of the authors decided to buy a windsurfer to sail in the fresh breezes of the Persian Gulf. This turned out to be no simple transaction of paying the money and collecting the goods. The retailer selling the craft explained (after the money had been paid) that the law required him to see a copy of the boat licence before the goods could be delivered. In Saudi Arabia, he said, a windsurfer is treated like a boat and every boat must have a licence issued by the Department of Licences. He explained where the office issuing the licence was located. A trip to the designated office confirmed his account. Catch 22 was that the boat licence could only be issued after inspection of the boat, the boat could only be released by the vendor on presentation of the licence, and the boat inspector was not permitted, or willing, to visit the premises of the retailer to carry out an inspection.
With matters gridlocked at this point, the author returned to the shop. After pleading with the retailer, and leaving a gold watch in the shop as security against proper issue of the licence, the goods were released into the buyer’s custody on a temporary basis. The ‘boat’ was loaded onto the roof rack on the top of the car then driven to the Department of Licences. From there it was taken to the Harbour authority where it could be measured. A form was produced, written around a passenger-carrying vessel the size of QE2. The form asked about the number of crew, the number of engines and their size, the gross registered tonnage, the number of lifeboats and so forth. Legally registered sailboards in Saudi Arabia, according to this form, are meant to carry lights, flares and an impressive array of life preserving equipment!
The author filled out the form and submitted it to the official along with a fee (as always paid in cash). The official scanned the form, and didn’t seem over-concerned about the absence of lifeboats and lifebelts, then asked where the boat was moored. Told that it was on the roof-rack of a car parked outside, the official shrugged, but co-operated and solemnly ran his tape measure over the boat and entered the results (2.5 m / 10 ft) as the waterline length of the boat. Back in the office, the official duly signed and stamped the form explaining it would need to be presented to the Department of Licences, as it wasn’t the licence but merely a measurement certificate that would enable the licence to be issued!
The author had been in Saudi Arabia long enough to recognise the process. No one bureaucrat can explain the entire procedure. Each bureaucrat would explain a fragment and the customer would gradually piece the fragments together to make the whole picture. At each step of the procedure, a small amount of money (always cash) would change hands. Saudi bureaucracy isn’t merely a licensing authority. It’s an industry.
Back at the Department of Licences, the official accepted the measurement certificate and commenced filling out the licence form with the name of the vessel (which had to be displayed in letters at least 150mm high on both sides of the bow and across the stern). The official also explained that sailing a windsurfer legally in the waters of Saudi Arabia would also require issue of a master’s licence issued by the Department of Coastguard! The author didn’t bother with that. But occasionally, watchers at the security gate of the compound reported personnel from the coastguard en route to the beach to check the paperwork of the sailing fraternity. No one, to my knowledge, managed to complete the entire paper trail and most never even start.