The second significant act of his reign was to order a 15 per cent pay rise for public sector workers. This was less a bid for popularity than an act of necessity. It is the first such sweeping pay rise in more than 20 years, a period in which the Saudi economy has gained some muscle but living standards have declined markedly and unemployment has risen. Per capita gross domestic product (GDP) stood at about $18,000 in 1980, but sank to as little as $7,000 in the wake of the 2000 slump. Nominal GDP has since risen to about $12,000 per capita but, as The National Commercial Bank chief economist Said al-Sheikh points out, ‘this is still closer to $8,000 in real terms.’ (See Economy, pages 40-44.)

With the first acts of his reign, King Abdullah has signalled that reform and social justice are likely to remain the dominant themes of Saudi politics for a considerable time to come. But the new monarch has a proven track record in this area. ‘What we are seeing is simply the continuation of many years of change,’ says Abdulrahman al-Zamil, a leading industrialist and member of the Majlis al-Shoura (consultative council). ‘King Abdullah was in charge while King Fahd was sick and many reforms have taken place over the last 10-15 years, many of them in social reform.’ (See Interview, pages 60-64.)

There has never been a better time to tackle unpleasant topics than now. Many of the extra revenues from the oil windfall this year have already been used to pay down domestic debt and acquire foreign assets. Considerable emphasis has also been placed on diversifying the economy and encouraging the private sector to take a more pro-active role, particularly in the provision of jobs and in education and training (see pages 66-68).


While Keynsian economics has rarely been known to solve problems of endemic poverty, the rise of local capital markets is enabling wealth to be redistributed to some of the poorer parts of Saudi society (see Capital Markets, pages 48-50). And with full accession to the World Trade Organisation (WTO) seemingly just around the corner (see page 46), the benefits of trade liberalisation will soon be visible in the souks of Jeddah and Riyadh. The doors to foreign investment are also opening ever wider. In early September, the Foreign Affairs Ministry instructed its missions abroad to prioritise trade visas and streamline the general visa application process – one of the biggest bugbears for foreign nationals trying to do business in the kingdom.

Security is still a major concern for those visitors, but the relentless campaign waged by the Saudi Arabian security forces in the last two years, led by Prince Mohammed bin Nayef, has paid off. Clashes with militants remain frequent – five gunmen were killed during a siege of a house in Dammam in early September – but they have usually been instigated by the security forces. A particularly important scalp was claimed in August when Saleh Al-Oufi, believed to be the leader of a group of local insurgents, was killed during a police raid in Medina. ‘They say that they have succeeded in taking down the local Al-Qaeda network but that, in our professional assessment, is an underst