As the Saudi Arabian government initiates measures designed to make its economy more amenable to foreign business interests, other, more ominous developments are occurring that may serve to keep Westerners a safe distance from the kingdom.
The latest incident involved David Brown, a Scottish expatriate who works as a customer services manager for Coca-Cola International. Brown was severely injured by a bomb that exploded in his face as he reached to remove a small package that was on the windshield of his car. It was the third attack on British nationals living in Saudi Arabia in less than a month. On November 17, a Briton was killed when his car exploded in November in Riyadh, and a few days later three Britons and an Irish national were injured when a bomb ripped their car apart.
To date, Saudi security officials appear to have made little headway toward uncovering who is behind the spate of attacks. But members of the kingdom’s large expatriate community are being urged to be especially cautious in carrying out their daily routines. The U.S. embassy in Riyadh has also issued an advisory, suggesting to the 40,000 Americans in the country to avoid leaving their cars unattended, as there are indications that unnamed individuals may be planning attacks against U.S. citizens and interests in the Gulf region and Turkey.
The attacks have not only embarrassed the Saudi Arabian government, but they are likely to wrest a severe economic price. They come at a time in which Saudi Arabia is courting Western capital. Recent reforms that have been enacted or are presently under deliberation include: foreign ownership of Saudi property; amendment of sponsorship laws for expatriate workers; revised laws and tax holidays for foreigners; and proposals to permit foreigners to invest in the stock market through local mutual funds.
Moreover, Saudi Arabia has finally opened its $100-billion energy sector to foreign firms. A select group of 11 oil and gas companies submitted their final proposals for upstream oil and gas projects at the end of August, and the Kingdom has pledged to sign memoranda of understanding by the end of this year. The largest of the projects is the Haradh development, which will bring together seven companies. The two other projects—Kidan/Shaybah and the Red Sea area development—will each involve four companies. These will become the first three major undertaking with foreign investors ever since Saudi Arabia nationalized its energy sector in the 1970s.
In an effort to diversify its petroleum-dominated economy, Saudi Arabia is also offering trade financing of up to 85 percent and other facilities to boost non-oil exports. Under these new rules, the state-funded facilities would be offered for Saudi exports comprising a minimum of 25 value-added locally, and priority would be granted to Saudi companies with a high percentage of local personnel and to export operations with lucrative financial returns.
Saudi Arabia’s non-oil exports, which including petrochemicals, rose to SR 5.9 billion ($1.6 billion) in the second quarter of 2000, 10 percent more than during the corresponding period last year. But crude petroleum and petroleum exports continues to dominate economic activity, and provide more than 90 percent of state revenues.
With oil prices high, the Saudi budget surplus has expanded to SR 67 billion ($17.8 billion), equivalent to 11.7 percent of GDP. Real GDP has grown by approximately 3 percent in 2000, up from 0.5 percent in 1999. As it so happens, the government had originally budgeted for a deficit in 2000, based on a conservative outlook for oil prices.
Past experience has demonstrated that Saudi Arabia is inclined to slow its economic reform agenda when oil prices rise. But this time, things appeared to be different. Despite the windfall surplus, Crown Prince Abdullah, the kingdom’s de-facto ruler, had appeared set on removing bureaucratic red tape and easing restrictions on foreign investment. His reasoning, evidently, was that the inevitable large movements in the oil prices will always translate into significant variability in the state of Saudi Arabia’s balance of payments. Economic restructuring and diversification are necessary, he believed, to avoid the worst excesses of commodity-induced swings and to create employment opportunities for the hundreds of thousands of young Saudis entering the labor force each year.
Diversification will be possible in part by exposing Saudi Arabia to the global economy. But, as the past month has shown, it is a double-edged sword. For open-doors do not only allow in capital but workers as well, and that is not always to the liking of groups, who for religious, political, cultural or purely xenophobic reasons would like to see foreigners—and particularly Westerners—kept out.
The problem is that if investors are nervous about a putting their feet in the kingdom, they may feel the same way about their money. – (Albawaba-MEBG)
