January 7, 2016

WITHOUT TAXATION THERE IS NO REPRESENTATION:

Saudi Arabia Has Bigger Problems Than Iran (Tobin Harshaw, 1/07/16, Bloomberg View)

Facing this budget crunch, the young prince did what you might expect from a modern monarch: He called in the consultants. With advice from McKinsey & Co., Mohammed bin Salman has outlined a plan that will impose taxes and cut billions in electricity, gasoline and water subsidies, particularly among the wealthiest. The government has begun issuing sovereign bonds, its first since 2007, rather than further draw down its $635 billion in reserves. Some state-controlled functions, such as airports, will be privatized.

Above all, the plan calls for diversifying the economy away from oil, which provides 80 percent of budget revenue. The imported number crunchers say a "productivity- and investment-led transformation" could add 6 million jobs by 2030. Sure. Mohammed bin Salman wasn't alive to see all of them, but there have been at least 10 previous official development plans for the kingdom since 1970, and each has put economic diversification at the top of the agenda.  

Perhaps 11th time will be the charm. Maybe the Saudis and their Gulf allies can forge a truce in Yemen that lasts more than a couple of days. Perhaps rising Sunni rivals such as Qatar, which notably did not break off diplomatic relations with Iran this week, can be brought into line at the emergency meeting of the Gulf Cooperation Council scheduled for Saturday.

But none of this will ease the royal family's existential fears, or its horror over the Arab Spring of 2011. Particularly chilling was fall of Egyptian dictator Hosni Mubarak, abandoned by his longtime U.S. allies.

The House of Saud has long kept the populace in line by spreading out oil riches, what the scholar Toby Craig Jones calls "the very social contract that informally binds ruler and ruled." Now, a population of which a large majority is under 30  will be the first in memory to face economic privation. It may want a greater say in its future.

"Part of the leverage the regime has had on their people is that they don't impose taxes and therefore people don't expect representation," said Robert Jordan, a former U.S. ambassador to Riyadh. "But once they pay taxes, you're likely to see an increase in political unrest."

Posted by at January 7, 2016 5:56 PM

  

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