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The oil-rich kingdom where camels are still a safer investment than shares

The oil-rich kingdom where camels are still a safer investment than shares

19 July 2006

4:47 PM

19 July 2006

4:47 PM

It’s not that the Saudis aren’t pleased to see foreign visitors, it’s just that they use the first possible opportunity to issue a death threat. ‘Traffickers will be killed’ promises the landing card distributed before we touch down in Jeddah. It’s a reminder of Saudi Arabia’s tough stance on crime and its direct approach to business, even drug-smuggling business. But for those blue-chips interested in rather more mainstream corporate endeavours, opportunities in Saudi Arabia are booming.

The oil-rich kingdom is offering more than £624 billion worth of contracts in defence, transport and infrastructure to international firms. Despite the worst stock-market crash ever seen in the Arab world — the Tadawul All-Share index lost $400 billion of its value in three months earlier this year — the Gulf’s largest economy is still buoyed by the rising price of oil. While the West pays record amounts to fill up, gas stations on the Jeddah highway offer fuel at 65 halalas (9p) a litre, a price which is fixed throughout the kingdom. Saudi Arabia is blessed and cursed by oil, because wealth insulates the country from change, and enables it simply to buy its way out of trouble, removing the need to compete with its neighbours or Western allies.

To understand Saudi Arabia’s business challenges it is important to appreciate how the place is governed. It is not an absolute monarchy, but is run by a gaggle of elderly princes. King Abdullah — ‘O Long Lived One’ as his sons affectionately call him — came to the throne last year and is every Saudi’s favourite great-uncle, regarded as shrewd and incorruptible. (He is also more modern in outlook than his predecessors, and the proud owner of a Winnebago camper van.) His reforms include abolishing the title of Majesty and forbidding Saudis to kiss his hand. He has also begun to address women’s issues in a country that has roughly the same degree of gender equality as 17th-century England. A more modern approach to women is crucial to Saudi’s economic growth, because business and tourism depend on it. Currently, all women have to cover themselves in abayas (a type of black cloak) and sit in segregated areas in offices. None are allowed to drive, ever. But progress is being made. King Abdullah has signalled his desire to see women take more part in public life. In recent months two women have been elected to sit on Jeddah’s chamber of commerce, some will be allowed to work in embassies abroad, and women shop assistants have been introduced — a welcome development for ladies who had previously been obliged to buy their bras and panties from male assistants. Women driving is an important issue for business, because it affects how Saudis manage their lives. Less well-off families can’t afford drivers, so the paterfamilias has to come home early from work and drive his wife to collect the children and pick up the shopping.


Change has to advance by stealth. The conservative majority dictates that women should not drive with the same illogical reasoning that it opposed telephones, cinemas and education. Saudi Arabia still has no cinemas. The key problem for the king, who is also prime minister, is that he cannot go head to head with the religious establishment. He needs its support. He needs the majority with him to push through reform of the security and education systems before he can tackle what many see as essential changes that will drive business forward.

Jeddah is on the west coast of the kingdom and is considered to be the California of Saudi Arabia. Foreign merchants have been trading here for centuries, so the population is used to different cultures and there is an openness that you don’t get in Riyadh, where money and religion dominate. The religious police are more relaxed and there have even been a few rumoured sightings of women drivers. But Jeddah society is not so enlightened that its people are ready to consider paying taxes; the oil boom takes care of all that for them. So it is strange that a delegation from Jeddah’s mayoral office made a trip to London recently to examine Ken Livingstone’s congestion charge. The trip was short, as were the subsequent deliberations — Jeddah will not be getting a taxable driving zone. Indeed, the city has not yet even tested the humble parking meter.

Many private investors here lost their dowries in the stock market correction. And many prefer to trade in a more historic form of local wealth, the camel. Almost every city in Saudi Arabia has a camel market. Jeddah’s is in the east of the city, surrounded by steep hills to discourage escapers. The principles are much the same as in any bourse. The seller exhibits his wares, the buyer conducts due diligence, negotiations follow and money changes hands. The animals are sold in three categories: for food, transport and racing. In the first category, the female is bought for milk and the male for meat — an expensive delicacy at about $1,500 but one that needs to be well marinated. Cargo-carrying camels are more expensive and racing camels the most highly prized of all. Some can run for 30km without stopping, in races as prestigious as the Derby. There is no equivalent of the FTSE-100 to rank the best camels, but sales volumes peak during the holy month of Ramadan when demand for slaughtered meat spikes. There appears to be no market regulator, and the animal rights brigade has yet to, ahem, get the hump about this ancient trade.

Gordon Brown’s visit to the British Embassy Club in Riyadh last November will not be quickly forgotten. Fresh from attending the opening of the International Energy Forum Secretariat, the Chancellor arrived at the club in the middle of a televised British Lions rugby  match. One of his flunkies commandeered the television, switching it to a Chelsea match on Brown’s instruction and emptying the room of assembled ex-pats, among whom any support for Brown was swiftly extinguished. One minister unlikely to suffer the same fate is Margaret Beckett. The British community in Saudi Arabia is not expecting to see much of the new Foreign Secretary, having been told that she ‘doesn’t much like travelling’. It’s a shame; as a keen caravanner she’d feel right at home in King Abdullah’s Winnebago.
 
Rupert Steiner is City editor of the Business.


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