I – Virtue and Vice

Attempting to bring standup comedy to Saudi Arabia, Yaser Bakr sketches the scene at his country's first aquarium. The dolphins are the star attraction but after a few days in Saudi Arabia, they're swimming up to shows 15 minutes late, growing too fat for their hoops and their smiley faces turn serious.

It's a recognizable stereotype. In place of in-flight entertainment between Cairo and Riyadh, an imam intones to images of a mosque and Koranic script. The call to prayer echoes around the immigration hall as we line up at passport control. Women, dressed head to toe in black, are in a separate queue. When we've stood for over an hour the officer in front of us shuts his booth for a break. We're left waiting until he decides to return half an hour later. The men huff but no one dares speak out loud.

This is the border crossing I've been dreading the most since filling out my visa application: name, religion, sect, mother's maiden name. As an agnostic Ashkenazi Jew I seek advice from an agency in Riyadh. “They shouldn't discriminate, but if you want it processed quickly …” So I write: “Christian, Church of England, Lieberman.” Oy vey!

I'm silently rehearsing my lines as I finally reach the officer. I hand over my British passport and the man jabbers at me in Arabic. I tell him I don't understand. “Why come if no speak Arabic?” he sneers while stamping my passport.

At baggage reclaim the conveyer belt has long since spat out my suitcase, so I grab it from a pile and head for the customs gate. The warning that anyone found with drugs faces death is a tad disconcerting given my case has been left unattended for over an hour.

Outside a London black cab awaits with all the leg room to park your luggage at your feet. But the familiarity ends there as we career off, jerking between traffic lanes, my suitcase swinging around on its wheels.

A white train on a mono rail glides serenely by in the desert, its two carriages empty. I wonder aloud why I didn't get the train from the airport to town. I'd have had a long wait, says the cabbie. The mono rail is for a women-only university.¹ The government is just starting work now on a train line to connect its cities.²

Infrastructure in the world's largest oil-exporting nation is surprisingly lacking. There's less rail track here than in Syria, a country a tenth of the size. Internet connectivity lags the likes of Bulgaria and Belarus. From time to time raw sewage seeps onto Jeddah's streets.^3–6 The wait I experienced at Riyadh airport is nothing unusual.

The government is responding, spending at least $7 billion on a Riyadh to Jeddah railway, $22 billion on the country's first metro system for Riyadh and $70 billion on four “economic cities” or smart zones with fast internet connections.^7–9 Tens of billions of dollars more are going on projects to boost the capacity of airports and improve water and waste sanitation. The money being shelled out is itself a draw for investors scouring for the winners of contracts and the potential unlocked when an oil-enriched population becomes better connected.

When it comes to health infrastructure, however, Saudi Arabia is already streets ahead. The World Health Organization ranks it above the USA, Canada and Australia for access to medical services. Hospitals are signposted on every road in the center of Riyadh and Jeddah.^10,11

Saudis need all of their 500 hospitals and more. Nearly a quarter of Saudi adults are diabetic, the biggest proportion globally. For every 1000 Saudi babies, 81 have birth defects. Only Sudan ranks higher.^12,13

While the incidence of diabetes is put down to sedentary lifestyles and unhealthy food, medics attribute birth abnormalities to marriages between cousins. A third of Saudi weddings are between first cousins and more than half are between blood relatives, according to the Reproductive Health Journal.¹⁴

Adding to the hospitals' workload is some of the craziest driving. Giant SUVs weave and clunk over metal studs inset in the roads in the vain hope of triggering awareness as drivers switch lanes. Saudis pull in front of hapless taxis without a signal. The cabbies – mostly immigrants from south Asia and north Africa – don't dare honk. A Saudi taking umbrage could seriously complicate their life. At one point I'm in a taxi stuck in traffic when a Saudi in a jeep rolls back and hits us. My Indian driver curses under his breath and drives on.

Immigrant workers typically pay a few hundred dollars a month to a Saudi who acts as their official sponsor and in theory as their employer. Many sponsors simply collect multiple fees while keeping the immigrant's passport as a guarantee they won't abscond. Domestic maids work to a similar arrangement.

Labor laws give both the employer and worker the right to end a contract at a month's notice, but in practice the odds are stacked in favor of the sponsor. A story in the Saudi Gazette tells of 31 mostly Sri Lankan maids held in detention after quitting their jobs and requesting deportation. The maids won't be allowed home until they compensate their sponsors for the cost of their recruitment. The Riyadh Shariah court set the payment at 43,000 riyals ($11,500) each for three of the maids. It would take them five and a half years to earn that much. The article didn't say why the women had quit.^15–18

According to Human Rights Watch, maids are extremely vulnerable to abuse and exploitation. If they run away, they may face spurious accusations of theft, witchcraft, adultery or fornication, offences punishable by imprisonment or death. They struggle to access lawyers and translators and may be prevented from contacting their embassies.¹⁹

Life for immigrants became more precarious when the government tightened the visa rules to prevent workers moving between sponsors. The authorities deported a million foreigners in 2013, chartering up to a dozen planes a day for Ethiopians alone.²⁰

The regulation is part of a wider campaign to get more Saudis earning their own living. Economists estimate between 60 and 70% of working age Saudis don't have a job and those who do are mostly employed by the state.²¹ The spoils of oil have made many reluctant to work, cosseted by wealthy relatives and government benefits paying up to 2000 riyals ($533) a month, more than triple the average maid's wage.²²

For women, jobs have been limited by religious decrees restricting their interaction with men.

At the Al Faisaliah mall in Riyadh's iconic tower topped with a golden glass ball, ladies and family zones enable women to shop without the risk of encountering an unmarried man. Yet, for Saudis who actually want to meet a member of the opposite sex who isn't a cousin, the malls are as good a hunting ground as any. With shops staying open late into the evening, the amorous take their chances.

Forty-five minutes before midnight a 20-something Saudi man in a white shirt and casual gray blazer presents a dozen red roses to a woman dressed in full abaya and niqab. The woman looks ecstatic as she reads the card with a girlfriend. Romeo turns on his heel and scurries down the nearest escalator. A security guard witnessing the scene radios for help. Two bearded men wearing the traditional full-length thawb and carrying prayer beads appear. The guard points in the direction Romeo headed and the religious police scuttle after him, trying to maintain a dignified pace without running. Having lost him they quick-march to the taxi rank to wait there on the chance he'll need a cab to get home.

The next morning I head away from the shiny shopping malls to the historic clay and mud-brick Masmak Fort, whose capture in 1902 by Ibn Saud began the rule of the House of Saud.

I'm stopped by a guard at the giant palm-trunk gate. “Sorry, it's families only today, come back tomorrow.”

I tell the guard I'll be in Jeddah tomorrow and anyway it clearly said on the website that this was a men's day. He tells me to come back at 9:30 am to give the women an hour to take their leave. It's an interesting area and a clear blue-sky morning so I'm happy to wander around.

Outside, a small crowd is gathering. Facing the group of men are guards in beige uniforms with revolvers and batons. Next minute, three police cars and a white van arrive, sirens flashing. A dozen Saudis with red and white ghutrah on their heads stand in the middle of a square. One has a meter-long curved sword like a samurai. A prisoner in a brown thawb is led out. He kneels. The sword comes down on the back of his neck. His decapitated body is covered in a blanket and taken away on a stretcher to the white van. The guards brush their hands to show the crowd there's nothing more to see.

I talk with a young Saudi as the crowd scatters. I'd seen him discussing what was happening with the guards. The prisoner was Mohammed Ramadan, aged about 26, from Pakistan. “He was found with alcohol,” he tells me.

As the white van and police envoy whisk by, the Saudi introduces himself as Salman, flashing a smile with teeth clasped in a silver brace. Salman works for his father's money-lending firm and was on his way to drop off a check. The business conforms to Shariah rules barring the payment or receipt of interest by providing the refrigerator, mobile phone or car the borrower wants to purchase rather than the money. The client pays Salman and his dad a price 20% higher after ten months.

Trying my best to affect only a passing interest, I express mild surprise that we've just witnessed a man being executed simply for possessing alcohol. “He was found drunk,” says Salman. “He was not good man to have here.”

In a souq across the street, every fifth stall sells ceremonial versions of the swords used in the beheading along with tunics and incense. At the end of the road a soldier stands guard on the back of a pick-up truck, thumbing his gun on a pivot. Nearby is a police station. Opposite, a line of old men sit at typewriters, slowly punching with an index finger letters for anyone in need of official paperwork.

I walk back toward the fort. The execution area, marked by removable tiles underfoot and a large drain, has been hosed down. A plaque above reads General Presidency of the Promotion of Virtue and Protection from Vice.

When I get back to my taxi, the driver is excited. “In 15 years, I've never seen a head cut,” he says. “You were very lucky.”

The killing is reported the next day in the Arab News as a snippet at the bottom of page 3: “A Pakistani was executed for smuggling drugs into the Kingdom. Mohammed Asharaf Ramadan was caught attempting to smuggle into the Kingdom an amount of heroin that he swallowed, the ministry said in a statement carried by the Saudi Press Agency. The Kingdom executed 78 people last year.”

As we drive away from the place I now know from locals as “chop-chop square,” young boys in T-shirts and girls in abayas run along the road with fish loose in their hands they've just stolen from the back of a truck stuck in traffic. We turn left into a neighborhood of crumbling mud-clay houses with missing roofs and floors.

Begging in a wheelchair by the side of the road, wearing a white thawb and red-checkered ghutra, is Mohamed Abdullah Sheri. He's over 80 and paralyzed. With a miswak chewing stick, he points to the ruined house he says he lived in for decades with his mother and father since the era of King Faisal – three reigns before King Abdullah took the throne in 2005. The family used to come and go between here and their native Yemen to trade. Recently the government evicted him because the building isn't safe, so he moved to another tumbledown nearby with his three sons and five daughters. None can find work, he says. “Still, Allah will give.”

A few kilometers west in Diriya, the capital city under the first Saudi monarchy in the 1700s, the same mud-brick buildings are being ripped down for palaces. They're homes for some of the country's thousands of princes including the most senior, Crown Prince Salman Bin Abdulaziz Al Saud – who succeeded his half-brother as King in 2015 – flanked by a wall stretching hundreds of meters and topped with barbed wire and CCTV cameras.

Close by in the heavily guarded diplomatic quarter, Patrick and his partner Robert entertain with sparkling wine and a fine 12-year-old single malt whisky. From here, Riyadh doesn't seem like a hardship posting though it's classified as just that. Patrick is soon to move on to his next assignment. I ask what he'll miss most about Riyadh. There's a long pause. “I'll tell you what I'll miss least – having to be so careful when we go out together, having no intimacy.” Homosexuality is punishable by death under Shariah law.²³

The next day in Jeddah I'm at the swanky Al Nakheel restaurant. Men chug on giant hookahs with maroon pipes the size of bicycle tire tubes. Women smoke smaller pipes flavored with water melon. Their hair and faces are uncovered. Abayas are worn loosely over jeans. They sit chatting with single male friends.

I think of the religious police, the mutaween, in Riyadh monitoring the shopping mall. “They wouldn't dare come in here,” explains Zeinab, a marketing manager for an international conglomerate.

For the more liberal Saudis in Jeddah, the breakthrough came with the advent of smart phones and social media. If the mutaween came here, videos of them would be posted all over the internet, says Zeinab. They'd end up looking foolish.

Zeinab believes in Islam, she just doesn't think the religion obliges her to hide her face. After all, she argues, female pilgrims entering the holy city of Mecca are required to have their faces showing before Allah. “Covering the face is covering my identity and I don't believe Islam wants me to live my life faceless.”

Women came closest to burning their niqabs on Saturday, 26th October, 2013. Saudi Arabia is the only country in the world to ban female drivers. In protest, a social media campaign called on women to get in cars and drive, wherever they happened to be, and to post their pictures on Facebook and Twitter.²⁴

Like most Saudi women, Lamis doesn't have a driver's license, so she hopped in a car with a girlfriend who had a foreign permit and they drove around their neighborhood in Jeddah. They saw a policeman at one point and sped up. Luckily he didn't chase them.

“You just don't know what would happen if they stopped you,” says Lamis. “Fifty lashes? No one wants to be the example.”²⁵

The single biggest humiliation to both Zeinab and Lamis is the guarantor system, which requires a husband or father to give written permission for a woman to leave the country. If there's no father or husband, a mother must ask her son for permission. Twenty-four-old Lamis has permission from her father automated on her passport. Even so, when she booked a holiday in Turkey last year, officers refused to let her travel without written consent. She had to wake up her father who drove to the airport to say she could go.

Zeinab and Lamis are among 20 women in an office of 120. They sit at desks alongside the men. Down a corridor is a separate room with 20 desks and computers lying dormant. If the mutaween come knocking, the women will scurry to their office and fire up their computers.

Their company is further ahead than most. Along with Saudization of the workforce, the government is trying to tackle unemployment by removing the stigma of women working. The Saudi Gazette, which, like all domestic media, is monitored by the Ministry of Information and Culture, complains of female hospital receptionists having to contend with daily abuse from men hostile to being served by a woman, and all for a wage of 2000 riyals, equal to unemployment benefit. The same month the paper appointed its first female editor-in-chief.

Ten kilometers from Jeddah at the private Dream Beach, where the Red Sea, alive with rainbow coral, laps white sand, Naziya sits in a wetsuit with a girlfriend smoking from a hookah.

Naziya quit her job as a hospital receptionist three years ago and has been trying to find work ever since. Of Yemeni descent, she was married in her teens to her father's friend. They argued every day because she refused to wear her niqab. When they divorced, Naziya, 29, moved back with her family. She gets to see her two children once a week after school when her ex-husband allows her to visit.

For comfort, she bought a puppy Rottweiler, but her mother says the dog is haram and so they argue every day about whether she can keep it. When she walks to the supermarket she gets scolded by the mutaween and called a bitch by local boys for not covering her head.

“I hate Saudi Arabia,” she says. “I would live anywhere else, I don't care.”

Source: CIA World Factbook, December 2014

1. Population data from July 2014 estimates.

2. GDP at purchasing power parity (PPP) exchange rates is the sum value of all goods and services produced in the country valued at prices prevailing in the USA, based on 2013 estimates.

3. GDP per capita (PPP) divided by population, based on 2013 estimates.

4. Inflation rate shows the annual percentage change in consumer prices in 2013.

5. Unemployment rate shows the percentage of the labor force without jobs. Data from 2013 estimates, except for Nigeria (2011) and Kenya (2008).

II – Socialist Monarchy

Topping the bestsellers list at the Jarir book store in Riyadh is the story of a jinni who falls in love with a girl as they communicate through a Ouija board.

H W J N – pronounced as “Hawjan,” the imaginary name of the spirit – was banned for several months pending investigation by the witchcraft division of the Commission of the Promotion of Virtue and Prevention from Vice.

Author Ibraheem Abbas successfully argued that jinnis are mentioned in the Koran and the books were returned for sale.

For business development manager Safi Al-Safi, it's another chapter in the constant evolution of what's acceptable. He avoids playing music in the shop for fear this would be frowned upon. Only recently it wasn't lawful to allow a woman to serve male customers; now he's hiring his first female cashier.

“Society is changing very, very fast,” says Safi. Women can have face-to-face interaction with customers as long as it's in an open area.

Bringing the female half of Saudi Arabia's 30 million people into the formal economy represents a massive opportunity to fund manager Sean Taylor. Women earning their own money means increased spending on consumer items from food and fashion to laptops and mobile phones. Jarir – which, along with selling books, is Saudi Arabia's biggest retailer of smart phones, tablets and laptops – employs only four women among its 200 managers. All are in roles where they don't interact on the shop floor.

Sean, 47, brings a deeper understanding than most foreign investors of the changes happening in Saudi society. The son of a mining industry executive, he lived here for eight years as a child.

“Saudi Arabia went from being liberal when we first arrived to very strict,” says Sean. “I don't feel now there's a tension on the streets or in the malls like there was then.”

After serving in the British army, Sean returned to the Middle East in 1997 to create the first fund for foreign investors focused on Arab countries – the SG Arab Fund. He went on to run emerging and frontier market hedge funds for GAM before joining Deutsche Asset & Wealth Management in 2013, taking over a 7.5 billion-euro portfolio as the head of emerging market equities.

Walking around the store, he stops to pick up a book entitled Behavioral Attitude – The Cause for High Unemployment in Saudi Arabia.

“This shows you the degree of openness in discussing the challenges,” says Sean. “You wouldn't think it, but the Saudis are in many ways much more open than other countries in the region.”

The book argues for a transition from the traditional notions of virtue that contribute to unemployment. “Saudi tribal societies regard being a barber, a butcher or a painter as contemptible,” writes Abdullah M. Anazi. “A Bedouin who digs a well to provide clean water for his family will reject doing something similar for money.”

Saudi aversion to the trades and paid labor is reinforced by family wealth and state handouts. The government subsidizes everything from health to bread and petrol in a system described as a “socialist monarchy” by one banker we met. Healthcare is free, even to the extent of air lifting patients to Germany if necessary for specialist treatment.

The subsidized fuel prices are the lowest in the world at 0.45 riyals a liter, or 12 US cents. That compares with 90 cents in America and $2.20 in Germany and Britain.¹ Water is more than twice the price at 1 riyal for a 600 milliliter bottle.

Cheap fuel encourages Saudis to drive GMC 4x4 monster trucks, air-condition their grocery stores to wintry levels and leave the air con running at home for weeks while on vacation abroad. Energy consumption will only rise further as the population – two thirds of which is under the age of 29 – expands by 2% a year (Figure 8.1).² A report by Citigroup warned the country risks having to import oil by 2030 as Saudis might consume their entire output.³

“There is a new lifestyle of ease,” writes Anazi in his book. “Real economic growth and development can occur only when the people, society and the government succeed in changing Saudi youths' work attitudes.”

Jarir's chairman is doing his bit. Having taken over the business from his father who built Jarir from a book stall, Muhammad Alagil refuses to employ his own children or family members until they have worked “successfully” for at least three years outside the company to encourage their financial independence. They can take up any other vocation, he says.

To break down class barriers and align the interests of staff with the company and its shareholders, all managers work on the shop floor for at least six months. Their bonuses are directly determined by takings in the stores. If revenue grows above 10%, the 40 or so top managers earn a 50% increase in their bonus.

“As a family we have made enough money not to work, so it's all about reputation and ethics for us,” says Alagil. “Part of it we learnt from the US.”

Under the government's program to encourage more Saudis into the workforce known as Saudization or nitaqat, companies are graded on a scale of red, yellow, green or excellent depending on the proportion of their workforce that are nationals. Red companies – those with a low proportion of Saudis – won't be allowed to renew work visas for their foreign employees while yellow companies can renew for up to six years. “Excellent” companies can expect strong state support.

Exactly what percentage needs to be Saudi depends on the sector and number of employees. A company with 10 to 50 security guards, for example, should have 75–84% Saudis to score green. A company with the same number of delivery drivers – a job deemed less desirable – will go green at 10–19% Saudization.⁴ Companies with more foreigners than Saudis are liable for a levy of 2400 riyals per foreign worker. Studies show the overall cost to the private sector will run into billions of dollars.⁵

Sean is skeptical. “The analysts are all wrong on this.”

“Absolutely!” says Alagil. “We have an expat salesman who's paid 3500 riyals a month but on the top of that we pay him tickets home, housing and other perks, taking his pay to 4500. When we hire a Saudi we pay him the same amount but as cash. Maybe we have a difference of 500. But people get it wrong. They just look at the payslips and see 3000 for an expat and 4500 for a Saudi.”

Far from being stung by higher labor costs, Jarir's earnings have soared. The company translates a book every 30 hours to produce a range of new titles for its stores. But its biggest income is from selling Apple iPads and Huawei tablets, along with Samsung mobiles and iPhones. Jarir has increased net profit by at least 15% and dividends by 17% every year since 2008, helping the company lure mutual funds targeting high income to its shares, says Alagil.

For Sean, that all translates to a positive score on a key investment metric: return on equity. Jarir has earned the equivalent of at least half the value of its equity each year. A figure above 20% is a positive indicator under Mark Mobius' guidelines.

One reason for the high number is the company doesn't need to spend much of its earnings paying interest on debt, says Alagil. Jarir's borrowing was equivalent to 22% of its equity as of September 2013.⁶ Anything below 100% gets a tick under the Mobius criteria.

Demand for Jarir drove the share price up 55% in 2013 and 28% in the first eight months of 2014. The rally increased the valuation to 27 times expected annual earnings.

“Retail companies seem a really good bet and Jarir seems like a core holding,” says Sean. “The whole Saudization process and employing women can only help boost consumer spending.”

IV – Opening Bell

Saudi Arabia is the odd ball in a book about frontier markets. The typical Saudi earns more than the average Spaniard, Italian or New Zealander. The country's stock exchange at over half a trillion dollars tops most emerging and developed nations (Table 8.1).

Source: The World Factbook, CIA. Available at: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html

It's excluded from the emerging markets universe for one reason: foreigners haven't been allowed to buy shares.

At least, not directly.

To invest in companies, fund managers like Sean have had to go through a local brokerage, which buys the securities and then issues so-called participatory notes. The buyer of these p-notes will collect dividends and capital gains just like they owned the underlying stock.

But while p-notes are held by some big investors like Franklin Templeton, most steer clear of them largely because of the extra risk of having to entrust millions of dollars of assets with a local broker.

The other problem is that p-note holders have zero say in the company's affairs. Unlike shareholders who have a vote on everything from board appointments to mergers and remuneration, p-note owners don't even have the right to attend the annual meeting.

The alternative to p-notes is to enter a contract in which the counterparty agrees to pay an amount equivalent to any gain in the shares and the investor stands to lose should the stock go down. But these swap agreements would have the same problems for fund managers wary of p-notes, as it would mean taking on board the risk of the counterparty failing to pay up and zero voting rights.

Saudi Arabia is gradually opening its door. The government introduced p-notes in 2008 as a first step – bringing in foreign capital without the risk of ceding control over the economy. Then, in 2013, it shifted its weekend from Thursday and Friday to the Middle East standard of Friday and Saturday.¹ This meant only one day rather than two when trading activity isn't aligned with the rest of the world.

Now we're entering the third phase. The Capital Market Authority announced plans in mid-2014 to open the Saudi bourse to qualified foreign financial institutions.

The market still won't look like the US or western Europe. Like Vietnam, the kingdom may impose restrictions preventing foreign investors buying a big enough stake to control a company. Voting rights might also be limited. Buyers could be required to pay immediately for their shares rather than having a couple of days to settle as is the norm in markets operating under T+2 rules.

Even so, the announcement triggered a surge in the Saudi Tadawul All-Share Index to a six-year high on anticipation of foreign demand once the market opens up. Overseas investors owned just 1.6% of the capital listed on the stock exchange in 2014. The proportion could easily triple to 6%, according to Habib Oueijan, who manages one of the largest private portfolios in Saudi Arabia as the head of public equities at Olayan Saudi Investment Co. in Riyadh.

Oueijan is in a good position to know. Back in the 90s he was working for the World Bank's private-sector financing arm, the IFC, setting up the equivalent of the FTSE 100 Index or Dow Jones Industrial Average for emerging markets including Egypt and Saudi Arabia.

Indexes have become a critical part of the investment decision process. Some fund managers follow rules preventing them from deviating too much from the securities included in a benchmark index. The MSCI Emerging Markets Index is the gauge tracked the most by investors in developing countries along with the smaller and newer MSCI Frontier Markets Index.

Saudi Arabia has been excluded from both because of its ban on direct investment. When it opens up, the country is likely to go straight into the larger MSCI Emerging Markets Index, says Oueijan. It should make up at least 3% of the index, equivalent to Turkey and Poland combined, based on the current market size and the amount of trading, he says. MSCI says Saudi Arabia could become eligible for the index in 2017 and account for about 4% of the measure (Table 8.2).²

Source: Data compiled by Bloomberg as of December 2014

With the market opening up, investors will rush for the biggest companies first, says Oueijan. “They'll go for the blue chip companies that are well researched.” (Table 8.3).

Source: Tadawul All Share Index, data compiled by Bloomberg as of December 2014

V – White Balloons

It's like a pressure cooker: If you just release it,

it might explode in your face.

Yaser Bakr, Saudi Comedian

Like the dolphins losing their smiles in his joke, Yaser Bakr found his humor fading as he went from class clown to devout Muslim adult with a management job and family responsibilities.

Then social media exploded.

“It became my outlet,” says Yaser.

With few competitors for Saudi gags, Yaser quickly amassed a big following on Twitter.

In Saudi Arabia especially, being big in social media is far more powerful than appearing on TV. Saudis download more YouTube videos than any other nationality.¹ Fifty-one percent of Saudis with internet access are active on Twitter, the highest rate worldwide.²

Yaser went from joking online to standup and finally quit his job as a vice president for Group 4 Securicor in late 2012 to set up the nation's first comedy club.

His shows have two big differences from the routines in other countries. The first is alcohol.

“That's something we struggle with,” says Yaser. “It's much harder to get laughs here simply because people are sober.”

The second is that improvised comedy just doesn't work. “We didn't go through the open mic structure of anyone coming up and giving his bit because of all of the sensitivity,” says Yaser. “We have auditions first and then if we think the act is solid from a comedy point of view, we can make it safe to be presented to the audience.”

The comics, so far, are all men.

Yaser, bearded with a shaved head and wearing a traditional thawb, does a routine as the hen-pecked husband. “I think my marriage is great until noon when she wakes up …”

While Saudi men have all the rights and there are countless instances of domestic abuse, it's the woman who has the real power, according to Yaser.

“The running joke is always of the wife as the boss – we call our wives the Ministry of Interior – so if someone isn't in the kind of marriage that's more of a partnership, where the woman has as much say as the husband, he might look at his marriage differently after the sketch.”

Keeping the religious and political authorities on board requires treading a fine line. “What we do is self-censorship. We try something new and quietly we're freaking out, just hoping no one gets angry, and if no one does, then you know that that's OK. If you get a very negative reaction from everyone then you know that this is a red line.”

I tell Yaser my personal comedy moment: seeing a man photographing his wife whose face was completely covered. “We wouldn't joke about it,” he says, “because it's everyday life.”

“But we would definitely be the people laughing hardest at an expat seeing this because we'd remember how weird this would look.”

We drive in Yaser's massive GMC Sierra truck as the sun sets on Jeddah's Al Corniche beach. We're about to witness the city's first mass-participation expressive arts event. The idea is everyone draws or writes their dream or feelings on a piece of paper which is then stuck to a balloon.

Some artists have been helping illiterate migrant workers write their name for the first time in their lives. They draw childlike match-stick men with a strip of blue sky and yellow circle sun. Young girls draw hearts, hoping it will fall to the right guy. A thousand white balloons float to the sky.

From there we head to an exhibition for Jeddah Art Week. In one corner, a collection of mirrors gives the effect of seeing yourself from every angle. Felt-tip pens are strewn about the floor, inviting the visitor to draw or write their own thoughts and ideas. Like the balloons, this could be politically provocative. Yet the writing on the wall is a bunch of names and kisses – no complaints about human rights or demands for change.

“Society here was very conservative,” says Yaser. “They put a lot of rules in place that we got stuck with for now. Everyone wants to change them. But it's like a pressure cooker: if you just release it, it might explode in your face.”