The senior members of Saudi Arabia’s royal family have avoided taking any overt steps to begin grooming princes from the third generation of the Al Saud dynasty to eventually rule the kingdom. Once initiated, this move could potentially trigger a destabilizing power struggle among the dozens of grandsons of Ibn Saud, the country’s founding monarch, who for whatever reason perceive themselves to have a legitimate claim on the throne.

However, the inevitable generational transfer moved one step closer to reality on February 1, when Sheikh Muqrin was named to the post of second deputy prime minister. This effectively placed him second in the line of succession to the throne behind Crown Prince Salman.

Muqrin is the youngest of the sons of Ibn Saud. He is seen as being a suitable candidate to one day take the throne. Consequently, the next change at the top of the royal hierarchy — which, given the advanced age of both King Abdullah and Crown Prince Salman, could come at any time — will probably bring the official addition of one of the grandsons of the Ibn Saud to the line of succession.

Private businesses will have to adapt accordingly.

Fully cognizant of the potential for that step, once taken, to sow instability within the political structure, the senior princes will be especially keen to ensure that the Saudi population is content.

In the immediate near term, high levels of social spending will be a key component of the government’s strategy for achieving that goal. However, officials have acknowledged that the recent pace of public-spending growth cannot be sustained without creating the risk of fiscal deficits, and have suggested that the growth of expenditures will be held to single digits beginning in 2014.

Recognizing that state spending alone cannot be relied upon to protect against socioeconomic discontent, Saudi officials are shifting their focus to rapid job creation. The centerpiece of that strategy is the Nitaqat system.

This system establishes a maximum number of foreign employees that a firm may hire. The rules are very unpopular with private employers, many of whom contend that they cannot afford the higher wage costs associated with hiring from the domestic labor pool. They also complain that Saudi workers are unwilling to accept some jobs, especially those involving menial tasks or manual labor.

However, given the impressive results claimed by Saudi officials —  the official figures indicate that the employment of Saudis increased as much as nine-fold in 2012 — it is unlikely that the criticism will prompt any revision of the policy. In turn, private businesses will have to adapt accordingly.


The PRS Group
About The Author The PRS Group
The PRS Group is a leading global provider of political and country risk analysis and forecasts, covering 140 countries. Based on proprietary, quantitative risk models, the firm's clientele includes financial institutions, multilateral agencies, and trans-national firms.

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