MBS’ Anti-Corruption Drive: Hitting Bureaucrats for Six?
The crown prince’s campaign to rid the Kingdom of corruption shows no sign of abating
In January 2019 the Saudi royal court released a statement claiming the government had recouped over USD 100 billion through settlements with some of the country’s foremost royals, businessmen and politicians. This figure is widely disputed by many Saudi watchers, who claim the amount raised was significantly lower than this. Nonetheless, the so-called anti-corruption purge appeared to have come to an end, and one could be forgiven for thinking that Saudi Arabia’s crown prince and de facto leader, Mohammed bin Salman (known as MBS), was satisfied that he had both consolidated power and completed an impressive round of fundraising.
Recent developments suggest that MBS is not satisfied, however, and signs are emerging that he is genuine about tackling corruption across Saudi Arabia – not just generating funds for the state coffers or strengthening his power base. Reflecting this, at the end of August 2019, MBS appointed Mazen al-Khamous as the new head of the Anti-Corruption Commission (or Nizaha – as it is referred to locally – meaning “integrity”). Al-Khamous was given a very clear instruction by the crown prince: to eradicate corruption among mid and low-level public servants.
Recently, big names such as Microsoft and Ericsson have been forced into major settlements with the US authorities to resolve alleged FCPA violations in Saudi Arabia. MBS’ latest strategy – if implemented effectively – will be a big step towards making foreign businesses more compliant.
The First Phase
Most of the 381 who were detained in 2017 have since been released after settling with the Saudi government, with settlements coming in the form of handovers of real estate, stakes in companies, cash and other assets. Those released early included billionaire businessman Prince Alwaleed bin Talal, who owns Riyadh-based conglomerate Kingdom Holding and – according to the Financial Times – whose Saudi assets remain frozen (Alwaleed, like many of the other high-profile detainees, is widely reported to remain subject to a travel ban); and Saleh Kamel, the chairman of the sprawling Dallah Al-Baraka Holding whose family is understood to have ceded shares in media group MBC to the government.
Roughly 60 detainees have had their cases referred to the public prosecutor after failing to reach an agreement with the state and are believed to remain under house arrest. The signs are that most of those still in detention are Saudi officials, with speculation that individuals such as Adel Fakieh, the former Jeddah mayor and minister of economy, and former chief of the royal court, Khalid al-Tuwaijri, are yet to secure their release. The current whereabouts of these individuals are unclear.
A Saudi-based reporter observed to us that some of those yet to reach final agreements with the state, including reportedly Bakr bin Laden, the former chairman of Jeddah-based construction giant Saudi Binladin Group, may be “encouraged to invest” in the upcoming Aramco IPO to placate MBS. Watch this space.
Phase II – Corrupt Bureaucrats and Nizaha
Having largely dealt with the Saudi elite, recent reports suggest the government has now turned its attention to fighting graft within the bureaucracy. The main tool MBS is using to achieve this is Nizaha. In September 2018, the government amended a law that effectively allowed the commission, then headed by al-Khamous’s predecessor Khalid al-Muhaisen, to investigate allegations of corruption against current or former ministers beyond the original 60-day statutory limit. Several months later, the MBS administration suspended 126 local government employees on suspicion of corruption and abuse of power – a day before announcing the USD 100 billion recoupment.
Nizaha’s increasingly busy schedule seems to be reflecting MBS’ recent pivot: early this year it released figures showing that it had received over 15,500 corruption complaints in 2018, a 50% increase on the previous year (ordinary Saudis can lodge corruption complaints with Nizaha through a mobile app). Nizaha claimed to have conducted investigations into roughly 60% of these cases.
The inside view
Notably for MBS, the Saudi public (particularly young Saudis) appear to be increasingly receptive to the crown prince’s calls for a more transparent and accountable bureaucracy. Indicative of this, a young Saudi associate of Wallbrook, who eyes the kingdom closely, believes “there is a real effort” going on inside the country to tackle corruption.
Yet many of our sources close to Saudi political and business circles remain sceptical of MBS’ intentions and of Nizaha itself. A senior British former diplomat with decades of experience covering Saudi Arabia and two separate postings in the kingdom, described the new policy as “gesture politics”, before adding: “Nizaha is usually brought in to placate ordinary Saudis and to give the illusion that something is being done to combat low-level embezzlement, when in fact it isn’t.” Another former foreign government official with operational experience in Riyadh who we spoke to was similarly sceptical, saying: “practices have not really changed”.
View from the outside
If Nizaha does prove to be effective in combating corruption among Saudi bureaucrats, the government’s new policy should, in theory, create a more navigable environment for investors: foreign businesses would not be confronted with the choice of paying inducements to civil servants to accelerate regulatory processes or staying honest but having to wait at the back of the queue.
What remains to be seen is whether public servants with strong patronage links to the royal family will be subjected to the same scrutiny as ordinary officials. And it is unclear whether MBS’ latest crackdown could also catch foreigners in its net as part of follow up investigations overseas. One thing is becoming more apparent, though: MBS is serious about corruption and the arrests in November 2017 of almost 400 businessmen, royals and politicians might have been only the tip of the iceberg.