Saudi Arabia’s arrests of several princes, ministers, and businessmen on Saturday is positive in terms of tackling corruption in the Kingdom, but could trigger some uncertainty among investors, analysts told Argaam.
Eleven princes, including billionaire Prince Alwaleed bin Talal, as well as dozens of other prominent figures were detained by the Saudi government on Saturday, in a sweeping crackdown that took local and international observers by surprise.
The news came after King Salman ordered the formation of an anti-corruption committee, to be headed by Crown Prince Mohammed bin Salman. The entity will be able to investigate cases of corruption, issue arrest warrants, impose travel restrictions, and freeze portfolios and accounts, the Saudi government said.
The new anti-corruption drive is a “logical step forward” for Riyadh in terms of boosting transparency and realizing ambitious economic reforms, said Cyril Widdershoven, geopolitical analyst and director of Dutch consultancy Verocy.
“More transparency and less corruption is needed not only to weaken the old guard, but also to improve overall standing in the financial world, as the Kingdom is targeting an inclusion in the MSCI emerging markets index,” he told Argaam.
The arrests aim to achieve two key goals, he added: remove potential opposition, and demonstrate that Crown Prince Mohammed bin Salman’s willingness to put his words into action.
Saudi Arabia, the world’s top oil exporter, has been severely affected by the plunge in crude prices, forcing the country to overhaul its economy through ambitious fiscal reforms and privatization of state-owned entities.
However, if the Kingdom hopes to attract investors, it will also need to be tough on corruption, said Omar Mahmood Mohamed, a GCC analyst based in Bahrain.
“One of the key aspects of a stable, prosperous and business-friendly environment is having a zero-tolerance policy when it comes to corruption. Crown Prince Mohammed bin Salman is doing exactly what he said he would do, not very long ago,” Mohamed said on Twitter, adding that Saudi Arabia has faced a “massive” amount of corruption over the past few decades.
Regional and global realities mean that the Kingdom and the GCC have no time for gradual change, but must make bold moves instead, he said.
Among the officials detained yesterday was Prince Miteb bin Abdullah, former head of the Saudi Arabian National Guard, who has been replaced by Prince Khalid bin Abdulaziz bin Ayaf.
Commenting on the move, Mohamed noted that a change of military leadership would also be positive for Saudi Arabia.
“For decades, the control of the various divisions/entities of the armed forces has impacted operational competency. Different figures of authority competing with each other rather than coordinating under a single command has had a negative impact,” he said.
Other analysts, meanwhile, raised concerns about the sudden nature of the arrests.
While the Saudi Crown Prince has previously hinted at a tougher stance on corruption, the arrests on Saturday are “a dramatic and surprising development,” said Graham Griffiths, senior analyst at Control Risks.
“It will be very difficult for the government to demonstrate that this is purely about anti-corruption: why were these figures targeted and not others? Given the overlap of politics and business in the kingdom, the weakness of anti-corruption frameworks, and the climate of doing business that has prevailed for decades, any campaign emerging as suddenly as this has and targeting such a large number of highly influential businessmen and politicians is bound to be regarded as selective or politically charged,” he added.
Moreover, it is unclear whether Saudi Arabia’s court system will be able to handle such a magnitude of corruption-related trials of influential figures since there is no track-record in this regard, Griffiths told Argaam.
“Should the government prove serious about eliminating corruption, this would clearly have a positive long-run impact on the investment environment. In the short-term, however, these developments are almost sure to add to international investors’ apprehensions with respect to the Saudi market,” he added.
Write to Jerusha Sequeira at jerusha.s@argaamnews.com
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