Reform moves slowly in Saudi Arabia, but after six years of to-ing and fro-ing a royal decree issued by octogenarian ruler King Abdullah in June officially moved the kingdom’s weekend to Friday and Saturday.
The decision to shift its working week brings the world’s largest oil exporter in sync with the GCC’s five other member states. The most recent of these to make the change prior to Saudi was Oman, which on 1 May also ended its attachment to the Thursday-Friday weekend.
The change in Saudi Arabia, which by coming into effect on 26 June was de facto immediate, promises to have far-ranging implications on everything from stock markets, to international trade, to employment policy.
While the suddenness of the king’s announcement on the matter will likely have caught some observers off-guard, the switch is the result of years of negotiations within Saudi’s political machinery.
“Once you saw that Oman switched, it was inevitable that Saudi was going to switch,” says Kevin Connor, co-ordinating partner at US law firm Squire-Sanders’ Middle East and North Africa practice, which is based in Riyadh. “If you look at it in the broad spectrum of what’s been happening in the kingdom — it’s part and parcel of the overall approach of the government, and you can see what’s been happening.” The reforms Connor refers to include Saudi’s Nitaqat programme, designed to boost employment among citizens, as well as the easing of restrictions on Saudi women finding work.
As it stands, the change in weekend technically only applies to the kingdom’s public sector, although this in itself encompasses a huge number of related entities, including the stock exchange, the financial sector regulator, and even Saudi Aramco, the world’s biggest oil company, which is owned by the state.
Connor, who believes the switch is “hugely positive”, says his office will be moving to the new weekend immediately and expects others in the private sector to follow suit. “Most of the [reasons] relate to communications, economics, productivity, and being able to effectively interface with the global community,” he explains. “Can you imagine the banks open for that additional day? Just think about the volume of transactions, buy/sell orders, logistics, and another day connected to not only the Gulf, but the rest of the world.”
King Abdullah would appear to concur with this school of thought, with the royal decree stating that the change would seek to “put an end to negative effects and lost economic opportunities”.
Connor says that some companies could struggle with the shift initially, such as those in the construction industry with large labour pools and complex supply chains that require alignment, but he expects professional services firms to largely welcome the change. “You’re going to find some immediate alignment across a lot of sectors — it just makes a lot of sense,” he reckons. “For our clients, they expect us to work Thursdays, because it’s just unusual [not to].”
Much attention has been to Saudi Arabia’s crackdown on illegal expatriates in recent months, which has seen more than 200,000 foreign workers leave the country so far. This, along with the country’s Nitaqat employment programme, is largely seen as an effort to re-address a startling demographic imbalance in the workforce.
More than 10 million workers in the Saudi labour force are from overseas, primarily other Arab and south Asian countries, while the official unemployment rate among citizens runs at twelve percent. It is, however, believed to be substantially higher among youths and females.
The shift to a unified Gulf weekend could indirectly boost employment prospects for young Saudis by virtue of generating more economic activity. “The change to the weekend won’t directly impact employment, but it will basically make the economy much more efficient, which you’d like to think would have a wider impact on productivity throughout the economy,” believes Trevor McFarlane, research director, MEA, at Dubai-based Gulfstat.
McFarlane says the requirement to create jobs for Saudis has accelerated in light of the Arab Spring unrest elsewhere in the region over the past two-and-a-half years. “There are changes that need to be made, and all of this feeds into the narrative that Saudi is quite serious about competing, and trying to reform its economy, which it needs to do,” McFarlane adds.
It is anticipated that not everyone in the kingdom will be cheering over the decision to shift the weekend back one day though. The country’s conservative religious establishment has consistently opposed any change in weekend, seeing this as pandering to the West. In 2007, when the plan was first mooted, local conglomerate Al Jeraisy Group’s chairman Abdulrahman Al Jeraisy was famously quoted as saying that taking Saturday as a day off would “be copying the Jews and the Christians”.
McFarlane agrees that the move will ruffle feathers among the kingdom’s most pious. “It will rub the conservative establishment up the wrong way. It’s a very delicate, evolving process in Saudi policy-making. They’re trying to balance the business community’s needs against Saudi’s special relationship with Islam,” he explains.
McFarlane predicts that the Saudi government may in the near future make a concession to the country’s religious establishment in order to neutralise any ill-will towards the weekend policy. “For future policymaking... it tends to be two steps forward, one step back in a way. They’re going to have to placate or mollify the religious establishment over another issue in the future,” he believes.
Following the news of the weekend change, Saudi Arabia’s benchmark Tadawul All-Share Index pared 0.8 percent. Still, some analysts see the switch as being a positive indicator for the market in the long-run.
“There isn’t a lot of international participation in the Saudi [stock] market as of yet. There are international participants via [stock] swaps, but the Saudi market has yet to open up fully. The effect will probably be a bit more muted than people think,” explains Amer Khan, a fund manager at Dubai-based investment bank Shuaa Capital.
However, Khan believes that the change is one required step in opening up equities ownership on the Saudi bourse to foreign investors, which he forecasts could happen as soon as this year. Saudi’s stock market, which indexes about $400bn worth of equities, could attract up to $30bn in fresh investment if and when it opens to international investors, according to US hedge fund Passport Capital. “It’s indicative of how Saudi Arabia is keen on coming online with the rest of the world and opening up its markets to the world’s investors,” Khan adds. “This is also indicative of how quickly things can get done if the Saudi authorities choose to do them.”
The authorities’ keenness on opening up the market will have only been sharpened by June’s decision by equities index MSCI to upgrade Gulf neighbours Qatar and the UAE to emerging market status, Khan adds.
The immediate impact of the change will be felt by the kingdom’s export firms, however, with those in the huge petrochemicals industry likely to be most appreciative of the new working week. “Saudi has a very large export sector, and it’s essentially only online with the world for three days [per week]. If companies have clients in the Far East or North America, with the time zones and everything it became an even bigger issue [due to time differences],” Khan says. He adds that the same impact will also be felt by Saudi-based import firms, such as those that buy food and beverages. “Saudi Arabia, it being a net food importer, will obviously benefit because they’ll be able to do business for longer with their suppliers.”
While the shift in weekend in Saudi Arabia will have a magnitude of effects on economic and business matters, it also worth taking into consideration the change it may make to typical Saudis’ travel and leisure habits.
According to data from Dubai’s Department of Tourism and Commerce Marketing, more than 870,000 Saudis stayed in hotels in the emirate during 2011. Guy Wilkinson, managing partner of hospitality consultancy Viability, says the impact on tourism trends will not be so profound though.
“Previously Saudis coming on holiday here would knock off on Wednesday evening and be here in time for [Thursday] morning, and be wending their way back on a Friday night. Now they’re going to be shifting to knocking off on the Thursday and going back on the Saturday night,” he says. “Whether it’ll actually increase the amount of visitors in Dubai, I’m not sure.”
Wilkinson admits though that the huge number of Saudis staying an extra night in Dubai could add pressure on a hotel industry that is generally mostly booked up on weekends as things stand. “Most hotels in Dubai, apart from during the Ramadan season, are full on a weekend anyway with intraregional travellers — although it may bump up the bottlenecks that occur on a Saturday,” he reckons.
Like much of inner workings of Saudi Arabia’s policymaking machinery, the true impact of the country’s latest reform looks likely to keep everyone guessing.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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