Riyadh, Saudi Arabia

Saudi Arabia takes first step towards relaxing alcohol laws

Saudi Arabia has opened an off-licence in the diplomatic quarter of its capital, Riyadh, which is the kingdom’s first commercial outlet for the sale of alcohol beverages since a ban on the public sale and consumption of alcohol was imposed in 1952. We expect further relaxation of alcohol laws, together with the implementation of other social reforms and initiatives, in the years ahead as the government pushes ahead with its transformative Vision 2030 development plan, which includes the creation of a tourism offering that boasts major hotels, resorts, entertainment venues, sporting locations and (currently alcohol-free) restaurants and bars. However, sensitive reforms such as the liberalisation of alcohol laws for non-Muslims will proceed slowly and in a targeted fashion to avoid unsettling more conservative elements of Saudi society.

The new off-licence sells exclusively to non-Muslim diplomats under strict controls and quotas. The shop opening represents a very modest adjustment to the kingdom’s strict prohibition on alcohol and has been positioned as a means to impose more control on the alleged illicit trade in alcoholic beverages through diplomatic missions—apparently alcoholic beverages enter the country through diplomatic consignments and some embassies host off-licences that sell alcohol to their diplomats. The new shop will have a negligible impact on the Riyadh economy and retail sector but could represent an initial move that tests the waters for more significant change in the years to come. More specifically, the kingdom could be taking a very small step towards making alcoholic beverages available to non-Muslim tourists and expatriates as part of its longer-term drive to build an internationally oriented travel, tourism and hospitality industry and establish a highly skilled expatriate business community.

Efforts to boost the hospitality sector

Attracting more foreign nationals to visit, live and work in Saudi Arabia is crucial to the development of the international tourism and business hubs envisaged under the kingdom’s Vision 2030 development plan. In this context, liberalising alcohol laws could be seen as part of wider social reforms that aim to enhance the appeal of Saudi Arabia as a potential holiday or work destination for foreign tourists and skilled expatriates. The availability of alcohol by itself is not a deal breaker for most expatriates and tourists considering relocating to or visiting Saudi Arabia, but overall stringent social regulations are considered problematic and especially when one considers what is on offer in other nearby Gulf Arab states where non-nationals are accustomed to drinking alcohol as part of their lifestyle choices.

Saudi Arabia is competing with other Gulf Arab states to attract foreign tourists and build international business communities, especially the UAE, which has relatively liberal social norms—including permitting the sale of alcohol to drink in licensed hotels and restaurants—as well as comprehensive social offerings and a high quality of life for international tourists and its international business community. Similarly, alcohol can be bought and consumed in public under certain social laws in Qatar, Oman and Bahrain, but not in Kuwait, where the sale and consumption of alcohol is strictly prohibited.

Progress on Vision 2030

Saudi Arabia will push ahead with Vision 2030, which includes the creation of a tourism offering that boasts major hotels, resorts, entertainment venues, sporting locations and (currently alcohol-free) restaurants and bars. The kingdom’s tourism and hospitality sector will aim to serve rapidly growing domestic and regional markets, while building a much larger footprint in the non-Muslim international travel and tourism space. In addition, as part of Vision 2030, the kingdom is actively looking to develop internationally oriented business communities and hubs, which entails employment and social conditions that are conducive to attracting highly skilled foreign nationals. The physical infrastructure to develop these branches of Vision 2030 are well under way, and at the same time the kingdom is implementing a range of social reforms, which have included the opening of cinemas, the hosting of music events, the promotion of large cultural and sporting events, the end of gender segregation in restaurants, the end of a ban on women driving and the removal of female travel restrictions.

What next?

We expect a further relaxation of social norms as the kingdom pursues its Vision 2030 ambitions, which are likely to include a relaxation of alcohol laws. Ultimately, Saudi Arabia may follow the path of its innovative and successful neighbour, the UAE, and make alcoholic beverages available for consumption to non-Muslims in hotel bars and licensed restaurants. However, relaxing social norms runs the risk of antagonising strong conservative forces within the kingdom and the government will tread carefully and implement reforms, especially those surrounding the sale and consumption of alcohol, in a very gradual and targeted fashion.

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