Shake Up

What's behind Saudi cabinet reshuffle?

Cabinet change signals a focus on public sector and shows the rapid advance of young technocrats.

Saudi Arabia’s Foreign Minister Adel bin Ahmed Al-Jubeir arrives to address the 72nd United Nations General Assembly at U.N. headquarters in New York, US, September 23, 2017

Ministerial reshuffles are common in Saudi Arabia, but there is always something to read into them. The latest change is no exception, and telegraphs the current priorities of the leadership and its impatience in implementing the reform agenda.

A royal decree this week changed the position of Sulieman Al Hamdan from Minister of Transport to Minister of Civil Service, and elevated Nabeel Alamudi from head of the Ports Authority to the post of Minister of Transport.

Al Hamdan has a private-sector background and has been exceptionally successful in directing reform in the transport sector. His involvement in the aviation sector is especially of note, as the changes that have been made to that sector under his tenure are likely to strongly resemble those that will be rolled out to the broader economy over the coming years.

Al Hamdan only held his post of Transport Minister since 2016, but he began his public-sector work as the head of the General Authority for Civil Aviation (GACA) in 2015. Before this post at aviation industry regulator, he served as President and Group CEO of NAS Holding, the owner of Flynas, the first budget carrier and the largest private carrier in the Kingdom.

In his role at GACA, Al Hamdan oversaw the implementation of historic and sweeping reforms, including the entrance of three new budget carriers into the domestic market. Some of the Kingdom’s first PPPs for infrastructure were also completed under his tenure, notably the Medina airport, which was financed and constructed by TAV, a Turkish airport construction group. It is the only private airport in the country, but will not be the last as a number of other concessions have already been given.

Al Hamdan also laid the groundwork for further privatization by corporatizing airports through companies like the Riyadh Airports Company (RAC), which now has its own independent management and book-keeping. Such structures are essential for attracting private interest. There have been clear signs that similar steps will be taken for other infrastructure, including ports, roads, and water and waste facilities.

Some reshuffles are clearly responses to failures by ministers to reach their goals. However, officials in the Ministry of Transport insist that Al Hamdan has consistently hit KPIs that were set for the ministry, and that in fact he was being moved to the Ministry of Civil Service in the hopes that he could take on formidable challenges in the public sector.

Saudi Arabia is leaning more heavily on its vast number of civil servants in order to implement reforms. The Saudi public sector is not only bloated, but also woefully inefficient, and many commentators fear that it is not up to the task of putting the Vision 2030 program into action. Al Hamdan’s appointment seems to suggest that the top leadership shares such concerns, but he will have his work cut out for him in increasing efficiency and reducing cost across the public sector.

His successor at the Ministry of Transport is Nabeel Alamudi, a young technocrat who was previously head of the Saudi Ports Authority. His rise is representative of the elevation of a new generation of leaders in the Kingdom. He was educated abroad at Stanford and Harvard, and worked at Saudi Aramco for many years before turning to the public sector. His approach at the Ports Authority was marked by a focus on technology and efficiency.

The ports sector in Saudi Arabia is notoriously inefficient and poorly structured despite years of investment. Ports have been built across the country’s coasts for decades without a clear plan, and the major ports at Jeddah and Dammam are hampered by snails-pace customs clearance and visa restrictions, as well as overlapping regulatory regimes, excess paperwork, and inadequate supporting infrastructure. In sum, these issues have sometimes conspired to make ports in the UAE a destination for many imports destined for the Saudi market.

In an interview with TBY in 2016, while he was head of the Ports Authority, Alamudi spoke about his efforts to apply many of the changes already seen in the nation’s aviation infrastructure to its ports: “We are going to look at a corporatization of the assets that remain within the Saudi Port Authority. That corporatization structure will allow the government, through these companies, to operate on a more efficient basis, will be better in terms of capital efficiency and operational efficiency, and will allow more commercial flexibility in dealing with the concessionaires.”

He also spoke extensively about working closely with Saudi Customs, now headed by Ahmed Al Hakbani, another young technocrat, to speed the importation of goods. Between them, the two men created a program to clear containers in only 24 hours that was piloted at King Abdullah Port, the nation’s only private port.

So, Saudi Arabia’s most recent ministerial reshuffle seems to have nothing to do with failure and everything to do with a leadership that is anxious to complete an ambitious agenda. Many of the issues that these two men will spend their time tackling are rarely discussed in an international media that is obsessed with Saudi Aramco’s IPO and with the recent lifting of the ban on women driving, but that does not make them any less important. Improving the country’s public sector and its transport infrastructure is serious business, and much else depends on the success of those efforts.