King Abdullah’s $67bn housing investment programme cannot be delivered without market reform. Housing crisis threatens stability of world’s largest oil producer
In response to the anti-government protests sweeping through the region, Saudi Arabia’s King Abdullah bin Abdulaziz al-Saud has pledged to spend upward of $67bn on building 500,000 new homes for Saudi citizens.
Unlike Hosni Mubarak in Egypt and Muammer Qaddafi in Libya, King Abdullah is generally popular with his people. But while the king personally may not face the same level of political threat as counterparts in the region, the kingdom suffers from many of the same economic inequalities that are fuelling unrest.
Saudi Arabia is the largest producer of crude in the world and the impact of regional events on the oil price are further increasing the strength of the government’s coffers. However, this wealth is not evenly distributed. There is a large gulf in the standard of living between the upper and lower echelons of Saudi society, and the sight of Arab counterparts protesting throughout the region has the potential to fuel discontent. That is unless these inequalities are adequately addressed by the king.
One of the main issues facing Saudi Arabia is the lack of housing. It is estimated that the kingdom will require about 1.6 million new homes by 2015. King Abdullah’s recent announcement is a good start, but the hard part is still to come.
Large stimulus packages and housing plans have been announced before, but few targets have been met. Bureaucratic institutions and lack of private sector involvement have thwarted previous efforts to meet the housing needs of the growing population.
The king has also set up a new housing ministry. It is imperative the ministry pushes ahead with housing plans quickly and efficiently. An increased role for the private sector is vital if Saudi Arabia is to meet the expected demand. To attract more private sector involvement, reforms such as the mortgage law will need to be implemented swiftly.
It is not the first time that Riyadh has promised to address the problem, but it is now more important than ever that it starts to deliver.
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