Anti-Corruption Campaign In Saudi Arabia Raises Questions On Economic Health Of Country

Feb 5, 2018
Originally published on February 5, 2018 9:56 pm
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Saudi Arabia's government recently staged an anti-corruption campaign and came away with $106 billion. The corruption crackdown puts some of the Kingdom's wealthiest people in detention in a luxury hotel. Most of those people were released a little over a week ago, and now there are a lot of questions about what the government hoped to accomplish and how badly it needs the money. Here's NPR's Jackie Northam.

JACKIE NORTHAM, BYLINE: Stories about the endemic corruption in Saudi Arabia are legendary. Jean Francois Seznec, a Gulf state expert at the Atlantic Council, says huge government contracts are routinely inflated to double or triple their value, the largess then shared among government officials and businessmen and especially the royal family.

JEAN FRANCOIS SEZNEC: Especially in the security issues, in any kind of deal in the real estate, it was traditional to have the royal family get their pound of flesh - and a big pound of flesh, actually, I should say - many pounds of flesh.

NORTHAM: Ali Shihabi with the Arabia Foundation, a pro-Saudi think tank, says the sheer scale of corruption was draining Saudi Arabia's budget. And the Kingdom needed to change how it was doing business.

ALI SHIHABI: And to do that, you needed some form of shock therapy.

NORTHAM: And now that the shock has passed, there are questions about why key government ministers, top royals and internationally known businessmen disappeared for three months. Shihabi says the government needed to take drastic measures, even if they were outside the legal system.

SHIHABI: To have taken 300 members of the elite and gone through a full detailed legal procedure with them would have taken years and would have frozen the country into suspense, really, as everybody just was focused on these trials.

NORTHAM: The crackdown on corruption was spearheaded by Saudi Arabia's new crown prince, Mohammad bin Salman. It's part of his ambitious plan to overhaul the economy and create new industries and infrastructure projects. That takes money. The $100-plus billion collected from those who were detained will help, says Rachel Ziemba, who consults with businesses in the region.

RACHEL ZIEMBA: The big question people are asking with this shakedown, if we can call it that, has been a question of, do they need money, and do they need money urgently?

NORTHAM: Ziemba says Saudi Arabia currently has about $500 billion in cash reserves and oil assets. Its economy has also bounced back a bit from a couple years ago when oil prices plummeted and the kingdom was burning through $10 billion a month of its reserves.

ZIEMBA: My analysis is that they're not running out of money imminently, but they're looking over the longer term. And they're very well aware that they can't continue with business as usual.

NORTHAM: The government has introduced stringent austerity measures - raising the cost of water, food and gasoline. It's hoping to entice foreign investment to help expand the Kingdom beyond oil. But the dramatic nature of the crackdown rattled confidence of foreign investors worried about a lack of due process and transparency. The Arabia Foundation's Shihabi says that fear will not last long.

SHIHABI: The government will have to draw a red line behind this process, which I think they're trying to do now, to say that this was an extraordinary event. It cannot happen again, and the past will be put behind us.

NORTHAM: That's a message the crown prince may carry with him when he visits the U.S., the U.K. and France in the next few weeks. Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.