Bolder, faster reforms needed in Saudi Arabia
RIYADH, May 29 (Reuters) - Saudi Arabia must adopt faster and bolder reforms to meet the challenges of financing several giant projects as it moves towards its longstanding aim of diversifying its oil-led economy, economists said on Tuesday, May 29.
Finance and Economy Minister Ibrahim al-Assaf told an economic forum the kingdom's economy should maintain a robust performance in 2001, matching the 4.5 percent growth achieved last year.
But participants at the two-day conference appeared more conservative on the short-term outlook due to expected lower oil revenues this year and in 2002 before the economy starts feeling the positive impact of recent measures, including opening the gas industry to foreign investment.
"Saudi economic growth will depend on the speed and extent of the liberalization process," said Said al-Shaikh, chief economist at Saudi Arabia's National Commercial Bank.
"With a rapidly changing demographic structure and a tall order on many megaprojects in the areas of utilities, communications and power, Saudi Arabia cannot afford anymore to miss out on globalization...It has no choice but to open up and be more competitive," he added.
Officials and economists said that unemployment was the biggest challenge facing Saudi authorities, with jobless rates among Saudi males estimated at 25-30 percent. More than half of the Saudi population of about 22 million are below 20.
"Concepts have changed. We need to achieve growth rates that are compatible with the population growth," Riyadh Governor Prince Salman told the conference.
Riyadh Bank President and CEO Alan Thompson estimated that Saudi Arabia would need at least $250 billion in investments to finance projects in the power, water, energy and telecommunications sector in the next 10 to 20 years.
Saudi Arabia has recently announced a series of economic liberalization measures aimed at attracting foreign investment and intended to remove some of the obstacles to its entry into the World Trade Organization (WTO).
But Western economists said that many of the required reforms were facing stiff resistance from influential traders and some members of the royal family.
"Some of the reforms are real but the liberalization process is not fast enough. Obviously, there are some vested interests by some powerful people, and reformists may want to be a bit more cautious," a German banker told Reuters.
"I don't expect Saudi Arabia to join the WTO in the foreseeable future," he said.
STOCK MARKET REFORMS
Al-Shaikh said there was a pressing need to regulate the Saudi stock market to broaden the participation of the private sector and help repatriate some of the investments held by Saudis abroad which were put at $500 billion to $650 billion.
Only 75 companies are listed on the Saudi stock market, some 20 percent of listings in other comparable markets, and economists see the flotation of more IPOs as a major tool to generate funds for finance.
Finance Minister Assaf said a law regulating the capital market was being discussed by the Supreme Economic Council, chaired by Crown Prince Abdullah who is seen as the main guiding force behind the reforms.
"The importance of an efficient capital market to mobilize the resources needed for investment cannot be overemphasized," Assaf said. "This law will help in mobilizing resources, enhance transparency and clearly define listing requirements for companies."
By Rawhi Abeidoh
© 2001 Mena Report (www.menareport.com)