The barrage of media criticism greeting King Abdullah and his royal entourage on his state visit to London in early November would have mystified many Saudis watching at home.

While large sections of the Western media still paint a black-and-white picture of Saudi political life, viewing the kingdom through a reductive prism of corruption, feudalism and mediaeval Islamic practice, the perspective from inside the country is acutely different.

Two years on from his succession, King Abdullah is slowly increasing the pace of change, building institutions sufficiently weighty to sustain the crafted package of reforms designed to propel the kingdom into the 21st century. His reputation for ‘clean hands’ and moral probity make him a highly popular leader in a country that is undergoing a massive social and economic upheaval. Saudi business dealings with Western defence contractors may dominate headlines in Europe, but in the kingdom it is the leadership’s clear-eyed assessment of the many challenges facing the country that receives most media attention.

The biggest challenge is managing change in a country where the prevailing social dynamic - a fast-growing young population, rapid urbanisation and massive inflows of liquidity - is coming face to face with the conservative values entrenched within the Saudi population.

Much progress has been made. The Saudi state has successfully faced down the Jihadist upsurge of 2003-05, eliminating the hard core of militants who plunged the country into its biggest crisis since its inception more than 70 years ago. Sporadic outbreaks of violence are still possible - the attempted attack on the Abqaiq oil installation in 2006 and the killing of four French expatriates near Medina in February 2007 confirming the continued threat from militant terrorists - but the authorities appear to have the upper hand. This has allowed King Abdullah to apply the power of the state to contain the Jihadist threat.

The current thrust, an intense counter-radicalisation programme, is a distinctly Saudi solution to terrorism. Deploying the state’s strong influence over the country’s myriad clerics, it comes down to one-on-one questioning of young Saudi men who have come under the influence of the taqfiri strain of militant Islam. Detainees undergo a series of social and psychological profiling tests, followed by a 10-week course of religious reasoning that unravels their extremist beliefs. They are even offered jobs and cash payments.

The results look impressive at first sight. More than 700 militants have been released out of more than 2,000 who have gone through the counter-radicalisation programme. Riyadh claims that many turn away from the radical brand of Islamism when confronted by cogent argument from learned scholars - finding Wahhabist teachings do not provide theological cover for acts of extreme violence.

Radical changes

Even clerics themselves, who once called for Jihad, are now advising young firebrands against that course of action. Families of detainees have also emerged as a key source of intelligence about Al-Qaeda operatives.

But some urge caution about the real value of this venture. “Many of those 700 who have been reprogrammed were not actively involved in violence,” says a Western diplomatic source in Riyadh.

More lasting changes in attitudes - directly targeting the fertile ground provided for militant Islam - may come through the development of Saudi political and social institutions.

King Abdullah has long been a believer in educational reform, focusing on change to an antiquated national curriculum. His promotion of a new, co-educational science-based university in the Western Province - King Abdullah University of Science & Technology, due to open in 2009 - is significant in this respect.

It suggests an implied criticism of the religious teaching hitherto dominant. The leadership is eager to reform the Education Ministry, although changing it from within will take time.

Equally important is judicial reform, the latest strand in King Abdullah’s overhaul of Saudi institutions.

In early October, he announced a judiciary law designed to bring about qualitative change in the judicial system through the creation of specialised courts.

Much has been invested in the judicial reforms, which hope to infuse a legal culture and respect for the rule of law throughout Saudi society. Local experts also see the changes as giving greater scope to streamline jurisprudence, with the publication of fatwas on the internet likely to make it more difficult for hardline judges to deliver controversial verdicts. These changes may appear prosaic but, taken together, they represent a significant shift in the country’s legal fibre.

Other low-level changes should also have an impact. The introduction of forensic technology, for example, is likely to lead to a transformation in the way the security forces deal with detainees. Forensic evidence will reduce pressure on the police to extract confessions.

The Al-Sauds have also formalised the highly sensitive mechanisms of royal rule, releasing rules in early October to guide the Allegiance Committee, established in October 2006, to oversee the kingly succession process. This body of princes will determine the succession process after King Abdullah, whose chosen successor is fellow octogenarian Crown Prince Sultan. The committee may emerge as a route for a new generation of reformist rulers to emerge. It also resonates as a way of demonstrating that the House of Saud can effect a smooth transition between the generations of royal princes.

More intriguingly, the committee may work to the advantage of King Abdullah in his battle with rival factions within the House of Saud. The rules came weeks after one of the few voices of political reform within the princely realm raised his head above the parapet.

Prince Talal bin Abdulaziz, the outspoken father of billionaire investor Prince Alwaleed bin Talal al-Saud, issued a statement on 4 September announcing his intention to form a political party, which would include opposition figures.

He spoke out against what he deemed the monopolisation of authority by a small group within the ruling family, sparking much discussion among Saudi political analysts in light of his close ties to the king.

Diplomatic sources detect King Abdullah’s hand behind Prince Talal’s call for change, as part of a wider effort to blunt the influence of the Sudeiri princes within the royal family.

Whatever the truth, the series of changes undertaken in recent months grant real political substance to the king’s programme for change. The more overtly political experiments undertaken by the state have been less successful. Municipal elections in 2005 succeeded only in demonstrating that Saudi voters are more in thrall to local clerics. Few were encouraged by the results of the elec-toral process.

“They are wary of political experiments and are sensibly concentrating on the other bits of the puzzle - robust institutions, for example,” says a senior Western diplomat in Riyadh. “Until all the institutions are in place, they will be hesitant about extending democracy.”

After the difficult post-9/11 years, Saudi Arabia’s external relationships have improved exponentially. Saudi foreign policy activism has had a real impact on several regional diplomatic conflicts. The idea of a pan-Gulf civil nuclear enrichment programme was first suggested by Riyadh.

Strategic relationships

The UK believes that with Saudi-British defence projects now ‘on budget’ - perhaps another sign of King Abdullah’s influence - future commercial and strategic relations, such as counter-terrorism co-operation, appear sound.

The press coverage in the wake of the allegations over illicit funds for princes related to arms contracts awarded to BAE Systems will have little material impact on top-level relations between Saudi Arabia and the UK. The added value of cutting-edge defence equipment, such as the mooted order of a further 24 Eurofighter Typhoon fighter jets from BAE Systems, outweighs the public slights endured by the Saudis at the hands of the Western media.

The Western view is that on all the serious international and regional issues - Iran, Iraq, nuclear proliferation, Lebanon and the Palestine/Israel conflict - Saudi Arabia is in agreement. Saudi diplomacy, therefore, is valued, although there are concerns about the lack of action on key initiatives originated in Riyadh.

Saudi Arabia lacks a genuine foreign policy decision-making apparatus, leaving the critical decisions up to the senior leadership - mostly men in their 70s and 80s. This inevitably limits the scope for more energetic leadership.

It also suggests that, for all the focus on reform, the Saudi government still has some way to go before its institutions will be in a suitably robust state to ensure the continued and confident management of change that has been the hallmark of King Abdullah’s relatively brief reign.

Reform programme

Judicial reform

The Judiciary Law, approved in October 2007, sets up two Supreme Courts - a general court and an administrative court - supported by a substantial SR7bn budget ($1.86bn). The courts replace the Supreme Judicial Council, which now only has authority to review admin-istrative issues, such as judges’ salaries. The decree also implements court circuits for commercial, labour and personal status cases, a move expected since Saudi Arabia joined the World Trade Organisation in December 2005.

Educational reform

The Council of Ministers, chaired by King Abdullah, approved a six-year SR9bn project to upgrade the nation’s education system in February. This follows a series of recent efforts to tackle an education system that is failing to produce employ-able young adults. Education reform remains a key area in the battle between reformist and conservative elements. Religious education makes up one-third of teaching time for children at primary school, reducing to one-quarter at secondary school and one-fifth at high school, so changing the curriculum is controversial.

Capital markets reform

The introduction of a capital market law in 2003 and the ensuing creation of the Capital Market Authority (CMA) in 2004 have been the key milestones in the reform of the Tadawul (Saudi stock market). New regulations governing licensing, trading eligibility, disclosure of information and corporate governance are being enthusiastically enforced, and firms suspended from trading when rules are broken. In ensuring firms are operating under International Organisation of Security Commissions (Iosco) rules, the CMA has improved confidence in the Saudi financial sector.

Government reform

King Abdullah is credited as the driving force behind the democratic reform programme. The then Crown Prince’s visit to a Riyadh slum in January 2003 was understood to be the trigger for a radical review of the social contract between the Saudi people and the ruling family. This was followed weeks later by an Arab covenant, which contains an unexpected call for more political participation across the region. By April 2005, citizens were eligible to vote for members of 178 town councils. However, critics claim these councils remain relatively powerless. It is uncertain what the next steps in the democratic reform process will be.

Succession reform

When it was introduced in October 2006, the succession law brought in by King Abdullah was praised for introducing clarity to the sensitive issue of succession. By creating an Allegiance Committee comprising the male heirs to King Abdulaziz, it effectively removed the decision-making process from just one man and handed it to several princes. For a crown prince to be selected, the king must seek the approval of the commission. If the commission disagrees, it will go to a vote or a new candidate will be nominated.

Key fact

Government expenditure for 2007 will be SR445bn versus revenues of SR671bn.