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Sat 26 Feb 2011 02:07 PM

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Saudi’s social welfare bill marks attempt to ward off unrest

$10.7bn roll-out of state benefits may pacify Saudis as Arab uprisings spread

Saudi’s social welfare bill marks attempt to ward off unrest
A picture shows the front pages of Saudi newspapers featuring a story on the return of King Abdullah bin Abdul Aziz in the Saudi capital Riyadh (Getty Images)

A top analyst said Saudi’s decision to earmark $10.7bn of funds for education and social welfare was partly motivated by a desire to sidestep the uprisings sweeping parts of the Arab world.

John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, said the King’s motives were “50-50” – partly as a gift to his people upon his return to the country after seeking health treatment abroad, and partly to alleviate unemployment and stave off the anti-government unrest that has befallen Saudi’s neighbors.

“Half of the story is the King is returning, so it’s a homecoming gift, and the other half is due to events that are happening in the wider Middle East,” he said.

Notably, the provisions include a pledge to provide unemployed Saudis with financial support for one year, the first unemployment aid of its kind in the country.

“I didn’t expect that they would take such a bold step on the issue of unemployment benefits – it’s the first time Saudi has put together such a program,” John Sfakianakis, chief economist for BSF in Riyadh, told Arabian Business. “That was the surprising element.”

As of 2009, there were 448,547 unemployed Saudis, a rate of 10.5 percent.

That number climbed to 27 percent for under-30s, with 39.3 percent of youth between the ages of 20 and 24 without work.

The government did not say how much each unemployed person would be eligible to receive. Banque Saudi Fransi put the figure at SR1,200-1,500 per month.

The social security budget was raised by SR1bn, according to a statement read on state-run television. King Abdullah also ordered the creation of 1,200 jobs in supervision programs and made permanent a 15 percent cost-of-living allowance for government employees, according to the statement.

The King released a total of 19 orders on Wednesday, which BSF estimates will cost the Kingdom about SR135bn.

It more than doubles a 2008 plan of SR66bn, which had been intended to alleviate the impact of inflation at three-decade peaks on the population.

The royal order will also allow all Saudi students studying abroad at their own expense to join a state scholarship programme, lessening the financial burden on middle income families.

Up until now, the King Abdullah Scholarship Program has sent more than 90,000 Saudis to pursue graduate studies abroad, mainly in the US and Europe.

The King has also pledged to set aside an additional SR100m for students in need of financial support.

The incentives could stop Saudis from protesting like their counterparts in Bahrain, which has concluded a week of violent anti-King protests.

“Regional popular unrest acts as a lever for expediting crucial social and economic reforms,” BSF said in a note.

“This is a step towards the right direction,” Sfakianakis said. “Before there were no unemployment benefits.”

With the reforms and with its massive crude reserves, Saudi could position itself as one of the most stable Arab countries during a period of unrest.

As oil prices reached a two and a half year high of more than $96 a barrel amid uprising in Libya, BSF said Saudi “can comfortably finance social policies designed to ease the burden of high property prices and housing market imbalances, while helping its young population cope with a mounting unemployment challenge.”

ahmed 7 years ago

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