IN THE WRONG LANE
Saudi Arabia recently announced a new round of bonuses for government employees, a direction that experts believe is opposite to what it should be doing in this time of cheap oil.
ONLY TWO MONTHS AFTER he ascended the throne of the Kingdom of Saudi Arabia, King Salman issued a surprise decree that saw several of Saudi Arabia’s state-owned companies paying out hundreds of millions of dollars as two-month bonuses to their employees.
For the state employee, some largesse from the new king was expected, but not many expected it to be a full twomonth bonus. Saudi Electricity, the region’s biggest utility company, for example, distributed SAR545 million (Dhs533 million) among its Saudi employees, capping the per person bonus at SAR50,000.
This move came barely a week after King Salman issued another decree to pay a two-month bonus to civil servants and pension to retired government workers, a move seen by many as acknowledging the country’s bureaucracy after his accession to power.
These payments are not an exception – in the past, many emirs and kings in the Middle East have marketed the start of their reign with such lavishness.
THE TIMING
However, the circumstances in which King Salman took the throne can be anything but enviable in the context of the current economic scenario.
The price of crude oil has almost halved since the later half of last year. In June 2014, a barrel of oil was trading at $115 before it sank to a six-year low of around $45. Although it has since partially recovered to $60, a further fall is not unexpected.
The fall, which was a combination of multiple factors including slowing demand, was ostensibly further precipitated by the OPEC meeting in November, where the cartel decided to maintain their supply quota of 30 million barrels a day.
Saudi Arabia, as the swing producer in the cartel, has always had the final voice in OPEC’s decisions and many experts theorised that the oil-rich country made this decision with an eye to cramp US shale oil producers – who produce oil