Map of the territory and area covered by present-day Saudi Arabia. (Photo credit: Wikipedia)
Back in 2011, a colleague and I researched and wrote a report on the consulting market in the Middle East & Africa – the "MEA" part of "EMEA." One of the amazing takeaways, given the vast amounts being spent on consulting by the governments of the ME region, was precisely that almost all the consulting spend was coming from public coffers. At the time there were huge investments being made across the board in nearly all industries and sectors. This was part and parcel to an effort to transform and diversify the local economies, particularly in the Gulf Cooperation Council (GCC) region countries. Massive sovereign wealth funds fueled (no pun intended) by revenues from oil were being used to buy economic assets abroad and bring them home, and fund the building of infrastructure to run these assets – utilities, roads, bridges, airports, seaports, etc. More than that, the governments of the Gulf region were investing heavily in local human infrastructure, using consultants to create schools and hospitals (and all the attendant systems needed to run, staff and connect them). It was a greenfield investment bonanza.
And consulting services across the board were being engaged. It was an all-out effort. Just about every firm, even some otherwise US-based ones, were opening offices in Dubai, or Abu-Dhabi, or Riyadh. In speaking with consultants, they clearly felt local governments were committed to modernizing and genuinely improving their people's lives.
Last month, Saudi Arabia stated explicitly what it has been slowly doing ever since the 2008 economic crisis, that it is trying to diversify its economy and move towards (much) less dependency on oil revenues. Last week King Salman, barely a year on the throne, shook up the Saudi government dramatically, placing some reformers in key positions. To be sure, oil prices are helping, but he's serious about these reforms.
Now, back when we were working on that report, we had opportunity to speak with some consulting clients and others peripherally involved in the consulting work, and there were some strong doubts that this could all succeed. We heard from a few sources that average Saudi citizens –especially the country's large crop of young, under-employed people – still strongly preferred public sector careers over private sector, because the public sector offered better job security and benefits. Also, the private sector was only fairly meekly represented, with a large "gray area" of semi-private companies with clear or less clear links to the government. There were a lot of family-owned businesses but with some exceptions, these were not in the growth mode that their Multilatina peers in South America were embracing. It seemed that whenever we dug, behind just about every consulting project lay government involvement and funding.
An important question is whether a free market economy can be designed and built from the top-down – but this is not an economics blog, so we'll side-step that one. (Although I will point out that the Saudi royal family reportedly are big fans of the "Chinese model" – of fostering a free market economy while still managing to keep a non-democratic government in the driver's seat.)
From the consulting perspective, however, an important take-away is that even when the most high-end strategy firms are involved, their role is still ultimately tactical. I want to be clear that I think the work that is still ongoing in Saudi Arabia and the region is very valuable, and in fact it goes to the heart of what consultants do best – making things work better, more efficiently, more profitably, and more responsibly.
The question is, to what extent is consulting to the region's public sector (and its many-tentacled reaches into the private sector) helping these countries move closer to achieving their economic goals, versus possibly prolonging the problem?
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