Non-profit sector a new focus for Saudi Arabia

The kingdom’s far-reaching Vision 2030 is a committed push to realign the economy. The government wants to open up sectors away from energy and a recent change in the law and shift in strategy is designed to help to bring that about.

The Kingdom Tower lit up in Riyadh. The Vision 2030 transcript splits its planning ecosystem into three main sectors: the government; the private sector; and the non-profit sector. Simon Dawson / BlooShow more

As part of its hugely ambitious Vision 2030 plan, Saudi Arabia says it plans “to raise the non-profit sector’s contribution to GDP from less than 1 per cent to 5 per cent” over the next 13 years.

The government, Riyadh has stated, “will encourage the non-profit sector to apply proper governance standards, facilitate high quality training to staff and promote a culture of volunteering and full-time careers in the sector” – as part of its push to tackle unemployment through this hitherto under-utilised avenue. How to implement the plan is more complex.

The Vision 2030 transcript splits its forward-planning ecosystem into the traditional three main sectors: the government; the private sector; and the non-profit sector. Foundations, cultural groups and health clubs, for instance, are also referred to within this third space, indicating that all organisations that have any influence in benefiting societal or environmental well-being are to be involved, including those that do not have a purely profitmaking agenda.

The key idea, suggests Asya Alashaikh, the chief executive of Tamkeen Holdings (formerly TamkeenCSR), is for the non-profit sector to step up and contribute more by playing a role in tackling the very real issues the country is facing, such as health care, education, employability, youth character development and special needs. Also included is improving transparency and corporate sustainability, as is the case, says Ms Alashaikh’s, with her company, which works with clients to develop the principles of corporate social responsibility (CSR) and sustainability into their core strategies.

Non-profit is a major plank of the vision. “The government in Saudi Arabia, in its Vision 2030, articulates clear targets for the development of non-profit organisations,” Ahmad Telfah, the chief economist at Riyad Bank tells The National. “Currently there are about 1,000 non-profit organisations in the kingdom – less than 10 per cent of them are seen as contributing to the long-term growth of the country. The government’s objective is to improve the performance, efficiency and transparency of non-profit organisations to increase their benefit for GDP.

“The government is currently in a process to adopt different initiatives to increase the impact of non-profit organisations in economic activities,” Mr Telfah says. The ability for organisations to now gain a licence to operate as a non-profit has also opened up more opportunities for entrepreneurial creativity. While traditional foundations, such as the King Khalid Foundation, continue their work on the ground, social enterprises are also dotting the landscape now. The wheels were set in motion after the Shura Council, similar to a parliament, passed a law paving the way for civil society organisations to operate in the kingdom at the end of 2015.

“The approval of this law is a significant milestone for the country, especially those who were trying to serve as the third sector,” says Ms Alashaikh, who counts her company as among this group. She estimates that since November 2015, when the cabinet approved the law, several hundred non-profit organisations or social interest groups have sprung up, encouraged by the new legislation. Ms Alashaikh also served as a consultant to the Shura Council, from 2010 to 2014 – before women officially became a part of the consultative body. For the past decade she has been working for sustainable development in the kingdom and now plans to register her firm’s Tamkeen Foundation as a non-profit.

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Non-profits

What: The kingdom wants entities not purely involved in making money to take more of an active role in the economy.

Why: Riyadh is looking to to tackle societal, environmental and commercial issues to benefit growth across the country.

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In 2006, when Ms Alashaikh founded the company, there was no legal framework under which to register a sustainable development entity. “The whole idea of my organisation was to function as a non-profit, creating awareness around various manifestations of sustainability, such as corporate social responsibility, governance, transparency, disclosure and so on,” she says. But instead of registering as a civil society organisation she had to register with the ministry of commerce and industry as a company, with an additional consultancy licence.

“If I had looked at it as a business, I would not have started something like this,” Ms Alashaikh says. “The monetary gains were not my objective. I just wanted to raise awareness and practice around all principles of sustainability.”

A decade later, she feels there is much more awareness of CSR. “Now I feel like I’m not alone in my cause for a deeper focus on values such as inclusion, long-term planning, visioning, efficiency, stakeholder engagement, measurement and evaluation,” she says.

Today organisations such as Ms Alashaikh’s working in the third sector have greater freedom to operate. In the medium term the changes are designed to engender a more efficient, transparent and productive private sector – and the public sector in the longer term. Organisations across the spectrum will emerge, says Ms Alashaikh, ranging from those pushing for better public services or improved workers’ rights to those championing environmental guidelines or accountability; to those partnering the private and public sectors to facilitate all of the above.

This last category is where Ms Alashaikh sees her contribution and where, she says, much potential for wide-ranging impact resides. “We need to spread awareness and show how the private sector can supplement the efforts of the government in development, especially fields like education, health care and transportation.

“Yes, these are government responsibilities before anything else – and the government has always treated it that way. The private sector, too, has its role to play in each field – leveraging its experience and efficiencies to complement the government’s.”

Partnerships is where Ms Alashaikh’s sees her main sphere of influence. Her consultancy is leading the Saudi partnership with the Switzerland-based World Business Council for Sustainable Development (WBCSD) – an organisation run by the private sector and led by more than 200 chief executives working to find solutions in their fields. A set of sustainable development goals (SDGs) form the WBCSD’s framework. Goal 17 of these SDGs is Ms Alashaikh’s primary focus: “partnerships that contribute to the other 16 SDGs”.

Among key milestones in Ms Alashaikh’s push for sustainability was the country’s first corporate sustainability conference, which she co-organised with the Saudi capital markets authority in 2014. “We were able to convince the nation’s market authority of the link between disclosure and prosperity, and how our work encourages the private sector to be more accountable and transparent via voluntary disclosure.” She stresses that the aim was not to preach philanthropy but focus on disclosure, on using reporting standards such as the Holland-based Global Reporting Initiative’s set of triple bottom-line reporting guidelines. In an environment where mainstream financial disclosure still puts many ill at ease, these discussions were a big step. With the 2015 Shura Law’s passing, today more and more organisations can join the cause – contributing to a more streamlined and holistically beneficial business environment.

Since the 2014 conference, both governmental and corporate priorities have changed.

Although the new business arena is designed to boost the private sector, today, Ms Alashaikh says it is a painful transition. “There is much rhetoric around SMEs’ [small and medium enterprises] contributions to the country but all this new regulation is forcing SMEs to close down,” she says.

“Now that we are moving away from one source of income, the private sector seems to be struggling,” Ms Alashaikh adds. Many private-sector players were reliant on government projects. Others lacked the tools, the efficiencies and the competitiveness to function in the environment they now find themselves in: diminished government contracts, the lifting of subsides, localisation pressures, and more. From an environment of ease and pampering to the current transitional phase, some businesses are finding themselves unable to cope, she says.

Ms Alashaikh points to one such example, Savola, a large Saudi firm. The group’s major holdings supply Saudi Arabia and the Mena countries with edible oils, sugar, fresh dairy products and restaurants serving fast foods. The a couple of years ago the company launched Pandati, a network of small convenience stores in local neighbourhoods. Now a reported 132 stores have been forced to close since last year – taking with them hundreds of jobs – as the retail sector slumped.

In another bid to engage the Saudi population in determining the future of the country, the government plans to “rally 1 million volunteers per year – compared to 11,000 now”, boosting positive socio-economic activity in general, Mr Telfah says.

In an environment where key commercial matters are still considered off-limits to discuss openly, the 2015 law can open doors to a much more open public debate – around all topics.

One fear that lingers though, still often unsaid, is the that the proliferation of non-profits may “water down” cultural and religious values. How will the government discourage global operators from introducing practices that may not line up with local principals, for instance?

As with every aspect of the Vision 2030 plan, only time will tell.

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