The government of Saudi Arabia is reportedly offering to exchange the wealth of allegedly corrupt royals and officials for their freedom. This is a tactic that has been used by post-Soviet regimes, most widely in Georgia under President Mikheil Saakashvili, but also in President Vladimir Putin’s Russia. While it can be effective in supplementing government coffers, it’s not great for a country’s institutions and business climate.
Saudi Arabia ended up with a budget deficit of $96.5 billion in 2015 (at the current exchange rate) and $83 million last year as it fought for oil market share with the U.S. shale industry and maintained low crude prices. Crown Prince Mohammed bin Salman was instrumental in changing that policy to a regime of hyped-up production cuts; now, he appears intent on plugging the deficit with infusions of what King Salman and the prince deem to be ill-gotten wealth to the tune of at least $100 billion. According to reports from Riyadh, people imprisoned in the capital city’s Ritz-Carlton hotel — a group including some of the country’s wealthiest people — are being told to cough up most of their assets, up to 70 percent in at least one case, in exchange for immunity.
There should be no illusions about Prince Mohammed bin Salman’s ostensible attempts to reform his country. It’s a power play in the tradition of other countries with rule of law problems and a symptom of Saudi Arabia’s fundamental disease, not a sign of convalescence. Fair, transparent, competitive trials in specific corruption cases would have been a more hopeful signal to the world.
Read More: https://bloom.bg/2yXDuy4
Source Credit: Bloomberg