Tuesday, August 23, 2005

Monumental mistakes?

I wish I had the leeway to write stuff like this for publication.

Palm before a storm?

Palm Jumeirah has become synonymous with the triumphalist expansion programme that is Dubai. But stuffing the palms like sardine tins, which may or not bear up to the traffic, is surely a questionable move. Nakheel did not respond to efforts by The Daily Telegraph to discuss concerns raised about this project. However, let us hope that, unlike the Colossus of Rhodes, one of the seven wonders of the ancient world, this self-declared eighth wonder of the contemporary one doesn't end up at the bottom of the ocean.

Via The Emirates Economist

It strikes me that the UAE govt is increasingly running the risk of getting caught out by its hubris.

Granted, members of hte ruling families - the Minister of Education, Sheikh Nahyan, being a sterling example - seem bright, on the ball, and to know what needs to be done.

And it's not as if, as a group, they are unwilling to listen to reason: vid. the way that the Central Bank, on the recommendation of the IMF, has issued treasury bills to soak up some of the liquidity that is making the Abu Dhabi and Dubai financial markets go crazy.

But they are only human, and humans are fallible, and some mistakes may well have been made. Given the incredible scale of the work going on and the blistering pace of change, the ramifications of those mistakes seem to be materialising more rapidly than it is possible to fix them.

That said, I don't believe that any of these mistakes is fatal - nor, though I worry, do I think that they are all fatal even when taken in the aggregate. But I think there's going to be a period of some difficulty before things are finally resolved. If it's any consolation, by the end of it the government will have learned how best
to deal with problems.

Monday, August 22, 2005

Good article on over-heating GCC financial markets

Friday, August 19, 2005

Peter Galbraith on Iraq

Peter Galbraith's piece in the New York Review of Books on Iraq is pretty good, though I always find the US-centric prism of American commentators a little grating (not that you can really blame them for it, it's only natural).

In this instance, though, I think it is detrimental to his analysis. He talks in ominous tones about Iran's pervasive influence in Iraq, particularly through its proxy the SCIRI. But he doesn't note the divergences within the Shi'a community - the fact that Sadr does not want a situation where the SCIRI has overall control over the organs of the state; the fact that Sistani does not advocate the same system of clerical control over government that exists in Iran, epitomised in the velayet-e faqih.

He also sees relations between the two as a zero-sum game vis-a-vis the US - where Iran gains clout in Iraq, the US loses it. That is a superficial, short-termist analysis. Better relations between the two will help to ensure the stability of the new Iraqi government and will help to remove one the greatest causes of instability in the wider region over the last twenty yeras - the rivalry between Iraq and Iran. Moreover, there are strong pressures in Iran - both from liberal middle class kids in the cities and poor Muslim families in the countryside - for the clerical elite to become less corrupt, more accountable, and actually do something to improve the lot of the vast majority of Iranians. I don't think it would be any surprise if this were the same popular sentiment in a more stable Iraq under a Shi'a Islamic government.

In the short term, Shi'a theocracy may look scary to the US, but even Shi'a theocrats aren't immune from the pressures of demographics and economics. I'm just not as worried by the possibility, essentially - most of the aggression towards the West in Iran is just elite posturing to distract the more gullible from the country's economic problems.

Random musing on energy lingo

Power companies always talk about 'producing' power. Oil and gas companies always talk about 'producing' oil and gas. But they don't 'produce' anything - oil companies extract energy-laden minerals, energy companies convert those minerals into electricity. Increasingly, now, we also have companies that sequester carbon emissions resulting from that conversion process.

Perhaps the most important shift towards greater environmental responsibility will be a linguistic one - perhaps when eventually the language we use to describe the process of power generation will reflect that it is a cycle, we will begin to engineer our power generation cycle as a wholistic process that internalises what had previous been seen as externalities.

Thursday, August 11, 2005

Alhamedi on the Saudi Civil Service

The much-missed blogger behind The Religious Policeman is back. Amongst other things, he had this wry observation on the Saudi bureaucracy:

Well, in Saudi Arabia, we have massive unemployment, and a massive job creation scheme known as the Civil Service (although the "Civil" does not refer to the politeness of its servants). "Civil" servants pursue job preservation strategies that involve making everything as time-consuming, complicated and difficult as possible.

Wednesday, August 03, 2005

King Abdullah takes the throne

King Fahd, as most will doubtless know by now, has died. The playboy-turned-diplomat-turned-moderniser-turned-COTTHP*-turned-invalid has finally shuffled off this mortal coil, ten years after his last attempt and somewhat more conclusively this time.
*Custodian of the Two Holy Places

I'm not about to praise Fahd for his reign; nor do I feel the need to blame him for the world's ills. He was a man like any other, with a man's strengths and frailties – though perhaps, like many of us, with more of the latter than the former. His incredible wealth exaggerated those traits beyond imagining.

I'm far more curious about what happens next.

There's a tendency on the part of us hacks to look for drama in a situation. It makes it more interesting to read, for sure. But in the case of a subject as complex and as opaque as the House of Saud, it doesn't really help our analyses. I will try to bear that in mind as I run through my thinking on what we're looking at in the Kingdom.

The King is dead! Long live the King!
When Fahd died, few doubted that Abdullah would succeed him. The question had been resolved in the mid 90s, after Fahd's 1992 edict on succession.

The edict formalised a principle that has become common practice amongst the Gulf monarchies: the ruler has the power to appoint and dismiss his heirs. But since the time of King Faisal, the King has typically nominated not his immediate heir, but the heir's heir: the position of Second Deputy Prime Minister.

Abdullah was nominated to the position of Second Deputy Prime Minister in 1975 by King Khalid, an elderly and ailing man before he even took the throne. They may have had something in common: both were men more of the desert than of the casino. Khalid explained the rationale behind decisions to the press, and worked on the development of governmental institutions. And while the common view is that Khalid contented himself with being a figurehead while Fahd ruled, it was during Khalid's brief reign that the Kingdom invested heavily in infrastructure, in what was probably the first instance of the 'supply-led growth' model that Dubai is now championing.

Abdullah is also a strange fish amongst the al-Saud. His relatively austere lifestyle and his love of the desert make him more reminiscent of the UAE's much-loved Sheikh Zayed than of heavy-boozing playboy Fahd. His rapport with the tribes led Faisal to make him head of the National Guard in 1962, a tribally-based force that evolved out of the Ikhwan that had helped Ibn Saud conquer the Nejd and the Hejaz in the 1920s (on which more later).

Fahd, the eldest of the al-Sudairi – seven brothers by the same mother – had been appointed successor to Khalid by Faisal. For Khalid to appoint Abdullah successor to Fahd balanced the overwhelming influence of the al-Sudairi. So when, in 1992, Fahd issued his edict, his full brother Prince Sultan sought to oust Abdullah.

But in 1992, the Kingdom was experiencing one of its episodic renegotiations of the relationship between rulers and ruled (on which, again, more later). The modernisation polices of the 1970s under King Khalid had made traditionalists feel threatened, but while the standard of living was high, their dissent was muted, apart from one major exception (on which more later). But after Fahd took the throne in 1982, GDP per capita plunged precipitously.

[Vid. this graph]

Fahd's decision, in 1990, to allow US forces to be based on Saudi territory brought many of the underlying tensions in the Kingdom to a head (on which more later).

Abdullah's close relationship to the descendents of the Ikhwan and his austere lifestyle made him invaluable to Fahd as an acceptable face for the regime. But he was not without his opponents. When Fahd's youthful antics caught up with him in the form of a crippling embolism in 1995, the Sudairis and other princes moved to ensure that the King did not die, hoping to block Abdullah's early succession to the throne. While it would be a mistake to call Abdullah pro-Western, it had long been clear that he has opposed corruption and supported the creation of solid politico-economic institutions: hence the threat he posed to the more spoilt and kleptocratic princes.

But in the late 1990s, as the threat to the regime from a new wave of Islamic dissent – this time drawing equal inspiration from the salaf and from the Egyptian theorist Qutb – Abdullah was able to consolidate his hold on power.

But he has not been able to escape from symbiosis with the al-Sudairi. Abdullah has no full brothers, and found himself reliant on the two most powerful of the al-Sudairi – Defence Minister Prince Sultan and Interior Minister Prince Nayef – to help him defeat the insurgency that wracked the kingdom in the early 2000s.

Which brings us to the present day. What will King Abdullah's reign hold for the Magic Kingdom? Clearly, much will be business as usual: after all, Abdullah's interests and the interests of the al-Sudairi overlap in many places, particularly in foreign policy and in oil policy. The crucial question is whether Abdullah will be able to indulge his desire for institutional reform. But while the country direly needs reform, it is far from clear that he will.

Déjà vu?
Saudi Arabia is currently enduring the latest episode in a crisis whose roots go back to its formation. It is a crisis in constant evolution, whose shape changes in each episode, but the underlying discourse and dynamics are often the same.

The first uprising
In the early C20th, Ibn Saud consolidated his hold over the
Nejd and the Hejaz with the aid of the Ikhwan, warrior Bedouin dedicated to spreading Islam as the Prophet had done before.

Ibn Saud's spreading hegemony across the Peninsula started to break down the complex balance of power that had existed between the tribes of the Nejd in the 1910s. Combined with Ibn Saud's entirely strategic Wahhabi proselytising (he saw it as a means to claim legitimacy), the dissolution of an old way of life set in motion a Salafi revival amongst the Bedouin.

When the Prophet abandoned his tribe and left Mecca, he moved to Medina, a move called the hijra. The tribes of Medina , unable to adjust to urbanisation, had long been at war with each other. The developing religious/political/legal code of shari'a helped Mohammed to unify the warring tribes there and helped the tribes to adjust to urbanisation.

In the 1910s, the Ikhwan abandoned their Bedu lifestyle and to settle the land and submit completely to Allah in tribal unity. Their villages were called hujra (the plural of hijra). Ibn Saud gave them money, agricultural implements and weapons: by 1915, there were 60,000 of them.

For Mohammed, the hijra was a brief moment of calm before the period of war by which he took control of most of the Arabian Peninsula. His successors were to spread the Caliphate to Mesopotamia, Persia, the Levant, the Maghreb and al-Andalus.

The Ikhwan clearly hoped to follow in the footsteps of the Prophet and his companions. Sweeping all before them, they took the rest of the Nejd, Asir and the Hejaz. Through marriages and patronage Ibn Saud secured the loyalty of the defeated sheikhs.

But unlike Mohammed and his companions (the 'salafi', in the original sense of the word), Ibn Saud had to deal with a greater, industrialised hegemon: the British. The British had guaranteed the protection of the peripheral emirates of the Trucial Coast, (today's UAE, Oman and Qatar), and launched punitive raids against the Ikhwan when they tried to invade the British Mandates of Mesopotamia and Jordan in the early 1920s.

Ibn Saud had long recognised that the British held the balance of power on the Peninsula, and once he had secured control over the Peninsula, he allied with the British to consolidate his power and refine his instruments of coercion, particularly in the creation of a standing army.

The Ikhwan were disgusted with Ibn Saud's modernisation policies and his collaboration with the British, and claimed that he was betraying the path of the salaf.

British armour and planes helped Ibn Saud defeat their 1929-30 rebellion.

The second uprising
In the 1970s, King Khalid's modernisation policies once again threatened the way of life on the
Peninsula. With the Kingdom's coffers swelled by the OPEC price hike, the King was free to make massive investments in infrastructure projects, which were performed by expat workers. But as many Princes sought to skim the cream off the investment programme, inequalities in the Kingdom deepened. The tribes who had made up the Ikhwan, in particular, had been left out of the massive distribution of oil rents.

In 1979, Salafi purists led by Juhayman al-Utaybi, a descendent of the Ikhwan, occupied the Grand Mosque at Mecca. They criticised the Saudi royal family for its decadence, for its collaboration with infidels, and for what they saw as its abandonment of Islam. Much of their theology came from Sheikh Abd-al Aziz bin Baz, who had criticised Ibn Saud in the 1940s for allowing the Americans to exploit the Kingdoms oil.

It took French security forces to dislodge them.

As the occupation of the Grand Mosque came at roughly the same time as the Islamic Revolution in
Iran, the House of Saud thought that it would best preserve itself by bolstering its religious credentials once more. King Khalid and after him King Fahd went to the Wahhabi ulema for support, fatefully handing it control over education policy, amongst other things, in the interests of short-term stability.

The third uprising
In the early 2000s, the al-Saud have once again come under fire for their decadence, abandonment of Islam and collaboration with infidel Western imperialists.

A different kind of Ikhwan inspired this most recent crisis, however: today's militants are inspired by an ideology heavily influenced by the thinking of the Egyptian Muslim Brotherhood, in its mid-C20th form when it was more interested in revolution than in elections.

The al-sahwa al-islamiyya, the 'Islamic Awakening' inspired by Qutbist thinking, began in the 1960s but took on new significance in response to the transparent way the al-Saud turned to the ulema to legitimise its rule in the 1980s. For Qutb, the world was immersed in Jahiliyya, the pre-Muslim state of ignorance. Only a revolutionary new Islamic state could resolve the decadence of the world. For the Salafis who had tried time and again to follow in Mohammed's footsteps and overthrow the decadent House of Saud and restore the caliphate, the idea clearly struck a chord.

The House of Saud, nevertheless, left the young sahwa Sheikhs more or less alone, while encouraging the radical young men to whom they appealed to go pursue jihad in Afghanistan . There, the intermingling of Salafi and Qutbist ideas accelerated.

(NB – Osama bin Laden is actually a Deobandi rather than a Salafi, though the two systems share a rejection of the seductive materialism of the West. His closest links are to the Asiris, who were also poorly integrated into Saudi Arabia and marginalised during the years of the oil boom. Nine of the 15 9/11 hijackers were from the Asiri al-Ghamdi tribe).

When King Fahd leant on the clergy once again to sanction the presence of infidels in Arabia to wage Operation Desert Storm, the sahwa reviled the move. In the latter part of the 1990s, many were locked up. Towards the end of the decade, al-Qa'eda started its campaign.

Presque vu?
It's hard to define exactly what the links are between each of these episodes, but there is a pattern. Each of the uprisings used similar language to oppose the power of the House of Saud. All criticised a perceived corruption of Muslim culture by Western interference; all criticised the House of Saud for its decadence and avarice; and all were rooted in communities excluded from wealth and power by the House of Saud. And each time, the al-Saud have sought to deflect this opposition through expressions of piety and by giving more money and power to the ulema.

These dynamics are going to re-emerge strongly over the coming years, but rather than in the streets, the coming battles are more likely to be fought in ministries, in newspapers, in schools and in mosques.
Saudi Arabia is facing an unparalleled demographic and economic challenge which Abdullah will find incredibly difficult to resolve.

Alongside the advent of advanced medicine and (individual) food security with the economic boom of the 1970s came a baby boom. The population grew by just under 5% a year in the 1970s and 1980s. The Ministry of Planning estimates that the Saudi population will increase by 90% between 2000 and 2020. Similar patterns exist in most developing countries. This new generation of Saudis is coming of age right now.

And they all need jobs. The Ministry of Planning also estimates that the Saudi labour force will swell from 3.99 million in 2004 to 8.26 million in 2020.

The problem, again, is the policies that the government has employed to forestall unrest. Most Saudis are employed by the state as high pay, low productivity civil servants. A full 85% of the government's budget currently goes to paying salaries and pensions (pdf). But because the government has not needed to court foreign investment, has not needed taxation for funds, and whose only real economic policy tool has thus far been infrastructure investment, the private sector in Saudi Arabia is weak.

Admittedly, the autocratic nature of the country has made it more stable and hence more prosperous than would be the case were it democratic (pdf): democratic rentier states tend to be incredibly unstable as self-interested groups constantly compete to capture the state and thence pass rents to their supporters. To that extent the autocratic distributive model has worked well.

But it is a strategy that only really works well for small rentier states, where the mineral wealth is far greater than the capacity of the population to spend it. In Saudi Arabia, population growth has outstripped the growth in oil rents over the last 25 years. Real GDP per capita in the Kingdom is back where it was in 1973.

Until now, the government's strategy has been to court foreign investment, and then slap quotas on companies forcing them to employ Saudi nationals – the euphemistically named 'Saudisation' policy. It is essentially parasitical in nature, an outsourcing of the same unproductive rent distribution that characterises the public sector. Foreign companies tend to agree, albeit sotto voce: nationals employed under Saudisation targets are all-too-often seen as a fixed cost, a bureaucratic expense of doing business in the country.

More importantly, the policy just doesn't work. For one, the public sector continues to pay more to Saudis than the private sector (where wages are driven down by expat labour). Increasing the costs of hiring expats may make wages converge, but is unlikely to solve the other problem: a worldview inconsistent with the needs of the modern economy. Work, for far too many in the Gulf, is something expats do: employment (in the public sector) is nationals' entitlement, and is more likely to be obtained through wasta than through merit.

Look at Bahrain (pdf), for example – a much more open country than Saudi Arabia: 70% Bahrain University entrants can't pass a TOEFL (English language) test; more than 70% have only basic algebra; and 39% of students in tertiary education are studying subjects with limited relevance to the economy. Across the GCC, education systems emphasise rote learning and the authority of the text over critical thinking, problem solving and rational enquiry. A factory-line approach to education reminiscent of Dickens' Professor Gradgrind has emphasised material inputs over learning processes, leaving Gulf students woefully unable to cope (pdf) with the exigencies of our de-Taylorised, knowledge-based modern economy.

To their credit, many members of the Kingdom's elite are aware of the challenges that must be overcome. Some have called for massive investment in education, particular in hard sciences and education. But they are up against the entrenched interests of the sahwa and the ulema, whose knee-jerk aversion to the introduction of Western-inspired education policies is but another expression of the globally felt but locally expressed anxiety faced with the interdependence and intermingling wrought by globalisation.

The problem is that, for all its money and influence, the House of Saud is remarkably weak. In nation-states, bureaucracy is strong and pervasive, and a sense of common nationality binds us together with that strong underlying sense of community that is the main bulwark of the political system.

In Saudi Arabia, religion is the only thing that has bound the state together. It would be wrong to talk of the Kingdom as a nation-state: tribal identity in the Kingdom – which is still incredibly strong - was only trumped by Islam. The shared identity that binds Saudis to each other is the umma. But, as in Western nation-states, the threatened and the marginalised try to exclude, rhetorically, their enemies from that shared identity. Hence the Kingdom's cycle of religious dissent. Moreover, the bureaucracy is weak and inefficient and does little to increase Saudi labour productivity.

This is why progress is likely to be halting. The al-Saud are dependent on the ulema to bind their state together, but must fight against the ulema to avert the greatest threat to the Kingdom's stability. The reformation of the Kingdom's education system could well involve a profound cultural shift, a re-evaluation of the bases of the shared Saudi identity. It is a shift that will not go uncontested, and the struggle will be long and difficult. While the gathering insurgency, beginning in the 1990s and reaching a bloody crescendo with the events of 9/11 and the Khobar bombings has convinced Abdullah that the Kingdom is in crisis, it took an exceptionally public tragedy to give him the opportunity to take action against the religious establishment's stranglehold on the education system: the horrible deaths of girls trapped in a burning school.

More UAE IPO news

From Shuaa, August 3

UAE's Ministry of Economy and Planning has halted the licensing of 15 newly incorporated companies that were planning to open their shares to investors through initial public offerings until the new company law is issued.

I wonder if this is a way of trying to take some of the heat out of the market.

Monday, August 01, 2005

'Italy bans burqas'

According to a piece in The Australian the Italians have just banned burqas. I hadn't realised that this was in the pipeline. It is part of wider anti-terrorism legislation, which prohibits anyone from covering their face in public.

I have a feeling that some in the Middle East will interpret this as yet another Western attack on Islam. I'd point out that it doesn't ban chadors, only burqas, and that the burqa is more of a cultural thing than a Muslim thing (they're not the norm in all Muslim countries, after all). I'd also point out that it seems to be primarily a security consideration, given that it's a blanket ban on face coverings.

Somehow I don't think it will make any difference, though, particularly as there will inevitably a small minority of xenophobic nutcases in the West who will applaud this move because of its effect on the burqa, further fuelling Muslim fears.