contraction in the oil sector because of reduced production out of the Kingdom and lowering world oil prices. In August 2014, SABB reported their PMI results for July 2014 in which the Saudi non-oil sector achieved the fastest pace of growth since September 2012, in sharply improving environments of operating conditions.16 The SABB Emerging Markets Index (EMI), an SABB/HSBC report taken from PMI surveys, reported for August 2014 a 17-month high in the growth of the non-oil sector on backs of stronger output, employment, and new orders.
Does the growth and success of the Saudi private sector owe an overwhelming debt to the Kingdom's development planners? How integrated has the Saudi private sector been into the Kingdom's push for development and diversification away from a purely oil-based economy?
Having worked in both government and the private sector, I am acutely aware of the disconnect that often occurs between government, when it envisions positive change for its constituents and then creates and uses methods to pursue such change, and the private sector, which is often compelled to adhere to new policies as unwitting or reluctant agents of change. On more than one occasion working for government, I witnessed the creation of government-redesigned programs and services without the slightest input from the government workers and their managers on the ground charged with delivering and executing the new initiatives. In these instances, on many occasions there was also a complete lack of consultation with the constituents themselves, private-sector companies for whom the new programs, procedures, and services were being created. Planning for change and the effort put into its execution are always best accomplished through collaboration and close consultation between both the affected and those affecting. In Saudi Arabia today, there is ample evidence to suggest that the Saudi government has achieved and continues to maintain a sincere and active engagement with the country's private sector. There appears to be real collaboration and coordination between government and business on numerous fronts when it comes to the expansion and diversification of the Saudi economy and the development of a knowledge-based economy.
When examining the question of whether the Saudi private sector has been adequately incorporated into the economic development plans of the Kingdom, it is instructive to review how the Saudi government has interacted with the community and their pronouncements concerning their role.
Since oil revenues began streaming into the Kingdom in the 1930s, the private sector has been the beneficiary of patronage in the form of contracts doled out by King Abdulaziz and his successors. In part to reward loyalty to his leadership during the challenges faced while he was unifying the country, and in part to grow nascent manufacturing and trading communities across the Kingdom eager to capitalize on the government's spending priorities, the king and his sons succeeding him, awarded contracts to what were then primarily small Saudi businesses to construct government buildings, roads, build bridges, schools, and airports, and to supply goods and services to a young nation. With the exception of the larger merchant firms of Jeddah and a few in the western province, many of the old family-owned businesses began operations and expanded between the 1930s and 1960s as a result Aramco contracts, partnerships with foreign firms in fulfillment of government contracts, and through other government spending that had knock-on effects on the developing Saudi economy. Although business leaders were rarely offered government jobs or asked to help steer economic policy decisions, the business community's value as perceived by the nation's rulers and their economic planners was growing.
At the time the first Five-Year Development Plan was delivered, the Saudi government said about economic change and the role of the private enterprise:
The commitment of Saudi Arabia to a free economy derives from the teachings of the nation's religious code and its long-standing social traditions. It is supported by growing evidence that economic and social change cannot be imposed on the country by the actions of the government alone, but must come about through increasing participation of all elements of society in both the process of development and its benefits. Only by continuously encouraging private enterprise – large and small companies, family businesses, and individuals – to pursue those activities that they can undertake more effectively than government agencies, will the economy be able to benefit to the full from the ability and initiative of all of its people. 17
The Ninth Development Plan echoed the First Development Plan when positioning the private sector in high prominence in setting the Plan's main directions toward shaping its economy. Under its “Main Directions” section, the Plan stated its objectives as:
[The] objectives further include development of national human resources and raising their efficiency, enhancing contributions of the private sector to the development process, supporting the move toward a knowledge economy, raising the rates of growth and performance efficiency and competitiveness of the Saudi economy in an international environment dominated by globalization and heightened competition based on science and technology achievements. 18
Governments have always made decisions that affect businesses and businesses have always had to comply with any requirements emanating from those decisions. It is when those decisions lead to laws and regulations that, in their view, are unnecessarily in a state of discordance with making profits that businesses voice concern. It is also when the implementation of those laws and regulations is clouded by uncertainty in the application and process that the business community often registers its dissatisfaction. Normally, businesses voice dissent less with the laws and regulations themselves, as opposed to how they are applied and over what turn out to be unintended consequences borne by them.
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