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Saudi Arabia: The opening of a
kingdom
By Syed Saleem Shahzad
KARACHI - The attack on the United States
mainland on September 11, 2001, changed the perspective
of US-Saudi relations based on over 50 years of
friendship. US policymakers now see Saudi Arabia as
spiritual patron of anti-US ideology around the world,
and as the financial artery of these anti-US forces.
The US has put enormous pressure on Saudi Arabia
for policy change. The Saudi government has brought
about change - but not what Americans wanted in
economics and society. Indeed, a closer study of Saudi
policies over the past year suggests that the change is
meant to make Saudi Arabia a society more free from US
influence than it was in the past.
The US
intelligence apparatus has not only recently found
Saudi-connected charity organizations in the US with
links to certain anti-US militant groups, but it has
also reported Saudi funding - most of it provided by
private citizens - going to Islamic seminaries and
trusts all over the world, and friendly Saudi ties with
former top leaders of the Muslim Brotherhood such as Dr
Yusuf al-Qardawi (who lives in the United Arab Emirates
and Kuwait), who actively oppose US policy in the
region.
These issues have introduced a note of
bitterness in Saudi-US ties. In the past, Saudi Arabia
was ready to implement recommendations of the
International Monetary Fund on privatization and foreign
investment, but over the past year the government has
moved to minimize the role of Western institutions and
firms in the economy, instead utilizing indigenous human
and material resources whenever possible.
It was
in this context that Asia Times Online recently
interviewed Nassir M Al-Ajmi, a veteran Saudi
professional manager who served as executive vice
president of the Saudi Arabian Oil Company (Aramco) and
president of the Saudi Railway Organization. Al-Ajmi
also has a keen eye for trends in Saudi society and is
the author of Legacy of a Lifetime.
ATol: There has recently been a great
deal of emphasis on privatization in Saudi Arabia, with
the International Monetary Fund (IMF) recently putting
pressure on the government to set a timetable for
privatization. How do you see this development? Would
privatization be favorable for Saudi Arabia?
Al-Ajmi: Privatization
of Saudi economic sectors
has been the subject of numerous studies and reviews
for the past 15 years. The motivation to
privatize has come about as a natural extension of the
positive and historical transformation of Saudi
society's social, educational, economical and political
institutions and the reality of the national desire to
continuously develop and modernize these
institutions.The drive to privatize has been for the
establishment of an effective process which will satisfy
and maintain sustainable social progress and economic
growth in a dynamic and competitive world economy.
Therefore, Saudi privatization plans have been a
national Saudi idea/goal for quite sometime and were not
due to pressure from IMF or anyone else.
It
should be recognized that privatizing publicly owned
economic sectors and providing services takes time,
careful planning and must take into account the unique
aspects of the Saudi Arabian historical transformation
in terms of social needs, human resources development,
national managerial capabilities, economic evolution and
competitiveness.This disciplined approach to
privatization ensures systematic synergy and should lead
to higher scale of national development, economic growth
and competitiveness.
In my personal and
professional opinion, when a topic such as privatization
is to be considered or studied, great attention must be
given to its theoretical and practical aspects and its
possible direct and indirect consequences on social and
economic assets in the near and future terms. Therefore,
and in order to have a far reaching and more
comprehensive view, I decided to take into consideration
the kingdom's political, social and economic development
since its unification and establishment by the late King
Abd al-Aziz up to its prosperous present.
Any
capable analyst must have noted the huge leaps achieved
by the kingdom within a record and unprecedented period
in terms of the sheer volume, speed and
comprehensiveness of progress. He must also conclude
that security, stability and adherence to Islam have
always been and still are the most important features of
this historical transformation of the kingdom of Saudi
Arabia since its establishment in 1932.
This
unique historical transformation has been the subject
matter of several local and international studies which
testified to its distinction and uniqueness. To study
any of the aspects of such great historical
transformation with a view to planning development and
modernization, one must acquaint oneself with the stages
of development of the field concerned, while zeroing in
on the negative and positive indicators which should be
considered for setting present and future strategies. If
I take economic development as an important aspect of
the kingdom's historical transformation, I must consider
the chronological link between discovery and
exploitation of the kingdom's oil resources and the
historical transformation of its economy. In my view,
the historical development of the kingdom's economy has
passed through four major stages during the period from
the end of World War II to the present, as follows:
The first stage (1945-1974). This stage was
characterized by total dependence on oil revenues in
financing social and economic development projects. The
state, represented by its working sectors, was the main
and only moving force for the wheel of development and
building of the initial foundation for urban projects;
educational and health institutions; water, sanitary
drainage and power projects; and some highways. There
was no private business sector to speak of other than
the Arabian American Oil Company [forerunner to today's
Saudi Aramco] and a few contractors and suppliers who
operated through Aramco and some government departments.
The role of the private sector in terms of effective
participation during that period was very limited.
The second stage (1975-1985). This stage was
given several names, such as the "boom period", "the
gigantic projects stage", "infrastructure construction
stage", "the five-year plan stage", and other similar
names suggestive of the magnitude of that stage and the
nature of the mammoth economic and industrial projects
carried out.
It was characterized by dynamic
strategies based on short, medium and long-term plans to
implement huge strategic projects of large capacity
aimed at the realization of comprehensive goals which
were designed to achieve national economic
diversification and minimize dependence on oil as the
sole source of income. Political, economic and social
analysts unanimously agreed that this stage was
considered the biggest ever historical transformation
since the unification of the kingdom.
That
period witnessed the inauguration of gigantic projects,
such as the tapping of natural gas, of which billions of
cubic meters used to be flared daily; the construction
of huge industrial cities in Jubail and Yanbu; the
gigantic kingdom-wide road network; universities;
research centers; science institutes; urban expansion;
medical institutions; huge modern airports; agricultural
projects that covered extensive areas all over the
kingdom; and other large pioneering projects.
Another most prominent feature of this stage was
the establishment of public and private economic and
social institutions and the contribution of the state to
developing the private sector and expanding the base of
its organization to include all economic and industrial
fields.
The third stage (1985-1995). During this
stage, the gigantic projects constructed in the second
stage were opened and put on-stream. This stage was also
considered an extension of the expansion of the social
and economic structure bases and concentration on
development of the national human resources for
effective participation in social and economic life,
satisfaction of the kingdom's labor needs and
replacement of foreign manpower. During this stage, the
private sector was developed and its base further
expanded. Banks were established and streamlined and
financial and administrative regulations were developed
to organize their operations. This stage, however,
experienced international economic recession, depressed
oil prices, the Gulf Wars between Iraq and Iran, the
Iraqi occupation of the state of Kuwait and the negative
political and economic aftermath of those setbacks from
which the kingdom emerged more coherent in all
political, social and economic fields.
The
fourth stage (1995 to the present). This is the stage of
economic maturity experienced by the kingdom of Saudi
Arabia today, in which the economic, financial and
commercial centers of Saudi society have entered the
fields of production, marketing, distribution and
exportation at the local, regional and international
levels. With this positive transformation and economic
maturity, the kingdom of Saudi Arabia has achieved the
strategic goals which Saudi planners and strategists
have charted and vigorously sought to implement during
the second and third stages.
It is only natural
during this stage that the concepts and methods used to
establish, manage and operate our public or private
economic institutions and sectors be reconsidered. It is
also natural that the requirements of this stage will
differ from those of the establishment and construction
stages and that certain changes be introduced in the
goals and strategies in order to avail ourselves of
contemporary ideas and new technology.
By
privatization we mean the trend to place some of our
commercial organizations for subscription in which all
categories of the society will share in the ownership of
commercial enterprises with a view to expanding
ownership, financing and management base, thereby
creating an integrated interactive society where the
individual stands beside the government in shouldering
his share of the national responsibility to build a
contemporary economic society dominated by honest
competition, creativity, integration and creation of
fields and opportunities for a dynamic and prosperous
society.
Widening the base of participation
through privatization of economic and investment
enterprises may be achieved by using either the
financial capabilities of the private sector and
national manpower or foreign capital investments which
will bring along the administrative, financial and
operating capabilities and expertise and which usually
serve as a positive vehicle for the transfer and spread
of advanced technology. What matters, however, where
privatization or any other field is concerned, is the
realistic definition of strategic goals, accurate
prioritization, and careful preparation of execution
plans in order to achieve targeted goals.
Today,
the Saudi economy in the public and private sectors has
reached a mature stage in terms of infrastructure and
productivity and has achieved a measure of internal
integration. Saudi commercial sectors have no choice but
to enter the fields of domestic, regional and
international interactions and competition. This makes
it imperative that we re-examine our applicable methods
of management, financing and operating the economic
sectors and that we gradually guide them to operate in
accordance with strictly commercial practices. The way
to achieve these goals is to implement operating
procedures which allow for administrative flexibility,
expediency in taking advantage of opportunities, taking
the right decisions at the right time, adoption of
advanced management and operating technologies, and
reliance on planning and programming, with due
observance of ongoing evaluation, follow-up and
administrative accountability.
ATol:
Regarding privatization, one of the options currently
being considered by the Saudi government is the handing
over of some Aramco operations to the private sector
(foreign investors). Your thoughts?
Al-Ajmi: I would like to briefly state
the indisputable fact, that the trend to privatization
and operating on a strictly commercial basis does not in
any way mean that the government will abandon its
responsibility for actual participation in financing,
directing and implementing vital economic and social
projects and services. Quite the contrary, privatization
as a commercial tool and vehicle is a natural extension
of the kingdom's historical economic transformation.
Saudi Arabia welcomes international investment and
participation, but will not allow takeovers of national
assets by international companies. International
participation via joint ventures and capital
investment is welcome, but handing over national assets
- such as parts of Aramco's operations to foreign entities
- would not be in the best interest of Saudi
Arabia and I do not believe such move will take place.
ATol: There are analyses in the media
speculating that the present 15 percent unemployment
rate will be translated into political turmoil in the
kingdom. What is your perception?
Al-Ajmi:
As for unemployment, there are signs of feigned
unemployment in Saudi Arabia not for lack of positions
but due to fast population growth, existing
social/cultural/moral taboos toward certain occupations,
present employment practices, the unrestricted influx of
foreign labor and the selectivity which regulates female
entry into the national workforce.
Based on an
estimated growth rate of 3.0-3.7 percent, the total
population could reach 34 million by the year 2020.
Growth of this magnitude in such a short period is
enough to frighten any nation because it puts tremendous
pressure on social and economic institutions and
threatens to lower the national living standards and
stop economic growth.
Such growth, unless
properly planned, could result in unemployment, urban
problems and a destabilized social structure. Saudi
Arabia is now living in the "black gold" era, and as we
reap its social and economic benefits, it is important
to know where we come from, where we stand and where we
are going. We should recognize clearly that our economic
and social prosperity is totally dependent on a single
natural resource. Oil and oil derivatives in the form of
energy and financial capabilities have been the
foundation of our social and industrial development,
urban modernization, business and commercial activities,
water and agricultural projects, and the source of our
national economic growth and investments.
Future
prospects will focus on the implications of Saudi
Arabia's population growth, displacement of foreign
labor by Saudi nationals, the effective utilization of
natural and productive economic resources and future
investment strategies. As oil and oil-based industries
represent the Saudi economic lifeline it is imperative
for Saudi Arabia to begin restricting foreign labor
influx and expedite industrial diversification for
economic security and the gainful employment of its
expanding populations.
Increasing home-grown
industries, goods and services must accompany population
growth if Saudi Arabia is to expand its industrial base
and become a finished product exporter instead of a
crude oil and raw material exporter. The Gulf region has
nearly 700 billion barrels of oil reserves and nearly
1,500 trillion cubic feet of gas in reserves and will
remain as the main source of world energy. Most of these
energy reserves are in Saudi Arabia and its Gulf
Cooperation Council (GCC) partners.
Saudi Arabia
provides investment incentives to foster national
economic growth, expand private business activities and
increase the level of nationally produced goods and
services. These include low-cost real estate for
industrial development, freedom of capital movement,
easy and reasonable loan terms, tax holidays and
exemptions, accessible and cheap power and industrial
fuels, and the proximity of abundant supply of
hydrocarbon for industrial fuel and feed stocks. Both
national and international investors could not find a
better environment in which to invest. Furthermore,
Saudi Arabia's position within the Gulf region, the Arab
world and the Middle East as a whole - as well as its
economic potential, political stability and modern
infrastructure - make it an ideal investment target for
international joint ventures.
Such joint
ventures and investments should be dictated by
demonstrable needs and selected on the basis of proven
capabilities in such areas as the transfer of modern
technologies, technical skills and accessibility to
worldwide marketing and distribution networks. These are
the criteria upon which to base strategic investment
planning and economic decisions.
ATol:
Saudi non-governmental organizations played a major role
during the Afghan war in the 1980s. These agencies
continued to play a critical role after the end of the
communist regime in Afghanistan. Saudi NGOs were also
very active in Bosnia, Palestine and other Muslim
region. Their role was never criticized in past. Why do
you think these agencies are under fire from the US
after September 11?
Al-Ajmi: In order to
respond to your question, I find it necessary to take a
detour through the aftermath of September 11 and discuss
certain aspects of Saudi-American relations. The vast
majority of Arabs and Muslims was horrified and saddened
by the September 11 criminal attack and considered it as
a gruesome act foreign to our honored culture, our
peaceful and tolerant faith and hospitable way of life.
Arabs and Muslim nations without exception
condemned the September 11 criminal attack and stood
ready to support the war on terrorism. But in spite of
all that, American foreign policy and news media toward
Saudi Arabia and other Muslim nations have become
offensive and painfully insulting to the citizens of
Saudi Arabia, their national pride and their educational
and charitable institutions.
President Bush
emerged as a powerful and angry giant whose view of the
world has been limited to two dimensions: a black and
white vision, a morality of right and wrong. Under the
current American administration, Muslims in general and
Arabs in particular - including their national
governments and national institutions - have been
victimized and damaged by American foreign policy, news
media and stereotyping.
The long-standing
Saudi-American friendship and special relations have
been severely tested, and it is up to people of good
will in both societies to defeat the forces of evil on
both sides. The people of good will must express their
determination to maintain and advance Saudi-American
relations through cultural tolerance, mutual respect
human understanding, fair play and mutual cooperation.
Goodness must prevail over evil and true friendship must
arise above differences.
Based on the
aforementioned review of Saudi-American relations, I
will now address the above stated questions. Saudi
Arabia is a nation established on charitable
foundations. Its altruistic faith, benevolent government
and charitable societies will continue to aid, support
and foster humanitarian assistance to needy Muslim
nations and Islamic organizations regardless of outside
political pressures or economic downturns.
ATol:
Saudi investors are reported to have
withdrawn funds from the US in protest of a lawsuit
filed by relatives of some September 11 victims alleging
Saudi collusion with terror. In return, Saudis allege
defamation. How do you see this development?
Al-Ajmi: I do not believe that Saudi
investments in the United States are in danger of
confiscation and I have no factual information that
Saudi investors are withdrawing their investment funds
from the US financial markets. On the other hand, the US
markets have done poorly for the past two years and I
would not be surprised to see Saudi investment funds
coming back to Saudi Arabia where the financial markets
are comparatively doing better. Would it help Saudi
economy? Yes it would.
ATol: Recently,
Saudi Arabia has restored business ties with Iraq. How
do you see this development?
Al-Ajmi:
Iraq is a dear sister Arab country and a neighbor
and I view and welcome as positive and rational any move
to restore full relations and free movement of goods and
services.
(©2003 Asia Times Online Co, Ltd. All
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