Limiting the Shadow Economy

Al-Riyadh, Saudi Arabia, November 25

The topic of black markets has recently come to the fore of Saudi news. For example, tickets to the final match of the Asian Champions League, held between Saudi Arabia’s Al-Hilal and South Korea’s Pohang Steelers clubs, ran out within two hours of opening. Within just a few minutes of the sale ending, many of these tickets, which originally sold for 200 riyals, appeared on online platforms, where they were offered for 2,000 riyals. Those who managed to buy tickets tried to sell them again for 10 times their value, outside the official economy and without value-added tax. While this kind of activity does not constitute a crime in itself, and there is no Saudi system that criminalizes such behavior at present time, the tickets were still resold without permission from the relevant authorities. Therefore, the websites that published second-hand tickets bear legal responsibility for the transaction. In my view, this only goes to highlight the importance of linking each ticket purchase with a national identity number to prevent similar cases from repeating themselves in the future. The phrase “black market” was coined by the American Economist magazine in 1931, against the backdrop of illegal economic activity that took place during World War II, when Allied countries regulated the prices and quantities of foodstuffs, fuel, and other basic commodities. This led those with wealth to bypass the rationing by purchasing goods informally from others. Today, more than half of the world’s population works in undeclared professions besides their declared official jobs. Even with the introduction of laws that make informal labor punishable as a criminal offense, especially in America and Europe, such behavior continued to this very day. The black-market activity represents some 70% of the economy in developing countries and 10% of the economy in first-world countries. It is considered the preferred method of transaction for criminal gangs, terror groups, and drug traffickers. Indeed, the shadow economy would rank second among the largest global economies. During times of war and crisis, the shadow economy may turn into a parallel economy in countries that suffer from pervasive corruption and high inflation rates. The Kingdom of Saudi Arabia has worked on implementing electronic billing and anti-commercial fraud systems, in addition to launching a national program to combat informal labor. What we need in the coming months and years is the adoption of an ambitious national plan that draws upon the British and American experiences, and reduces the shadow economy to rates ranging between 9% and 12% of gross domestic product, much lower than the 35% rate prevalent in the kingdom today. –Badr Bin Saud (translated by Asaf Zilberfarb)