Spending their way out of trouble? Welfare spending and Saudi Arabia's pursuit of an economic 'qualitative shift'
Saudi Arabia said on Tuesday it would take new “qualitative measures” to improve its economic development, signalling a potential shift of emphasis in its drive to raise living standards by spending tens of billions of dollars on welfare.
The huge increase in welfare spending has helped buy social peace in Saudi Arabia and has spared the kingdom the kind of upheaval that toppled governments elsewhere in the Middle East and North Africa during the ‘Arab Spring’ that began in 2011.
But there have been signs that the Saudi government may no longer believe it can simply spend its way out of trouble.
“The 10th development plan should concentrate more this time on the quality of the spending, the quality of the deliverables and the quality of the services that are provided to our people,” Economy and Planning Minister Mohammed al-Jasser said.
“You can spend on education, but then you can measure the quality of the education – what are our achievements in science, maths and reading,” he told reporters on the sidelines of a financial conference.
Jasser did not elaborate further on how such measures might affect economic development.
But his comments suggested the kingdom may change tack somewhat in efforts to address social discontent after its huge increases in spending on housing, schools and hospitals.
“Priorities have not changed significantly … Welfare of the citizens is the paramount concern … Infrastructure will continue to command significant spending,” he added.
Jasser said he targeted annual economic growth of five percent in the country’s next five year development plan for the years 2015-2019.
Saudi Arabia’s 2014 state budget projected spending to rise a modest 4.3 percent from 2013, the slowest rate in a decade, suggesting the kingdom has decided to rein in fiscal policy after the expansion driven partly by the Arab Spring uprisings.
Cumbersome bureaucracy and other obstacles have sometimes hampered the swift utilisation of allocated funds.
For example, King Abdullah announced a plan to build 500,000 homes in Saudi Arabia over several years at the cost of about $67 billion, but the programme proved slow to get underway, partly due to difficulties in obtaining suitable land.
A new scheme launched by the Ministry of Housing in March now aims to break through such bottlenecks.
Majeed al Moneef, secretary-general of the kingdom’s Supreme Economic Council which advises the government on policy, said in a speech to the conference that diversification of the economy away from oil over the years had not been “up to ambitions”.
Addressing this problem will require policies to improve the institutional investment climate, he said, without elaborating.
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