Saudis invest $6bn to train professional elite

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Saudi Arabia has spent $6bn this year on foreign study scholarships for almost 250,000 students and family members, its finance minister said, part of a huge public spending programme being rolled out amid turmoil in the wider Middle East.

Ibrahim al-Assaf, finance minister, said the education investments, while expensive, could help transform Saudi society by giving a needed boost to its cadres of trained engineers, lawyers, doctors and information technology specialists.

The largesse comes as the oil-rich kingdom grapples to implement an estimated $130bn spending package announced after – but not, officials say, in response to – the uprisings in the Arab world.

Saudi Arabia has not experienced mass revolts but it has faced protests in its eastern region, a youth unemployment problem and attacks by activists on what they say is the slow pace of political reform.”

Mr Assaf said in an interview that he did not “think the comparison is even there” with Arab countries where people have risen up against their leaders, partly because of economic grievances.

“The wealth [in Saudi Arabia] has been spread over the population … when it comes to housing, when it comes to welfare, when it comes to free education, free health, scholarships outside for all citizens,” the minister said.

Mr Assaf said the number of students on an overseas study scholarship named after King Abdullah, the Saudi monarch, had grown from a few thousand some years ago to about 120,000 this year, accompanied by about the same number of dependants. The minister said the spending – averaging about $25,000 per person this year – covered not just tuition fees but also other items such as living allowances, medical insurance and flights to and from home.

The scholarship programme was aimed at correcting a past failure to focus “on the right skills and the right education”, Mr Assaf added.

Some observers say the scholarship programme could have a big impact on the country’s political direction when the students come home.

The programme runs alongside large new investments in infrastructure and social benefits announced early this year whose long-term cost is unclear. A programme to build 500,000 houses is expected to begin next year.

One foreign businessman eager to be involved in the new projects said: “There is a feeding frenzy of companies and princes working out how the money will flow.”

Unemployment benefit payments of 2,000 riyals a month are due to be implemented after the start of the Islamic new year this week, while public sector workers have received a bonus equal to two months’ salary.

Economists say the kingdom also faces other significant drains on its finances, such as its notoriously heavy domestic energy consumption. Subsidies keep petrol so cheap that residents can fill the tank of a small car for as little as $10.

The largesse has led some analysts to forecast that even a country as oil-rich as Saudi Arabia, the world’s largest exporter of crude, would need international prices to stay near current highs of about $100 a barrel to sustain the spending boom.

The break-even oil price the kingdom requires to balance its budget will jump from $68 a barrel last year to $88 this year and $110 in 2015, according to estimates in March by the Institute of International Finance, a leading industry group.

Mr Assaf said estimates of a future budget break-even price of $80 a barrel or more were “not accurate”, adding that this year’s spending was “abnormal” because of the investment announcements. Analysts say Saudi Arabia also enjoys a huge cushion from it massive foreign exchange reserves.

Paul Gamble, head of research at Jadwa Investment, a Saudi bank, said: “They are going to last a decade comfortably – over which time they can change policies.”

http://www.ft.com/cms/s/0/20821c1a-16ba-11e1-bc1d-00144feabdc0.html#axzz1ej3I2Zvm

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