Oil Price Bonanza to Kickstart New Saudi Development

Published November 21st, 2000 - 02:00 GMT

Oil-rich Saudi Arabia is set to maximize the huge revenues it is reaping from high oil prices by kickstarting development projects and diversifying the economy. 

"We plan both to relaunch projects that have been put on hold and launch new projects within the next budget," Saudi Defense Minister Prince Sultan bin Abdul Aziz announced. 

High oil prices have allowed the kingdom to "grant large amounts of aid to farmers and continue to pay back its public debts" estimated at around 500 billion rials (133 billion dollars), Prince Sultan said. 

"We hope to pay off all debts within two years," he added, quoted by the official SPA news agency. 

According to a recent Saudi British Bank report, the kingdom's oil revenues for 2000 will be at least 170 billion rials (45.3 billion dollars) and likely put the kingdom on the path of a budget surplus -- for the first time since 1982 -- of almost one billion dollars. 

The report said oil prices, which have peaked at 35 dollars a barrel over past weeks, have averaged 60 percent more than the conservative figure of 19 dollars a barrel on which oil revenues were calculated in the budget. 

Brad Bourland, chief economist of Saudi American Bank (SAMBA), said high oil prices had been a boon for the economy, but warned that the oil-rich kingdom had to quickly implement liberalization policies to attract investors. 

"The government is doing well. Finances have been restored to good health on the back of increased oil revenues, which have not been used for binge-spending," Bourland told AFP. 

"They're doing the right things, replenishing foreign reserves and paying down debts.". 

But he warned Saudi Arabia had to change its traditional public sector-based economy faster. 

"Much of the world is changing faster and better than Saudi Arabia. The kingdom needs to do the same to become more attractive for investors in the competition for foreign investment," Bourland said. 

"The catalyst for real growth will be the gas initiative and the capital flows generated from it." 

Saudi Industry Minister Hisham bin Abdullah al-Yamani said Sunday the kingdom will "invest 117 billion rials (31 billion dollars) in infrastructure projects over the coming 25 years". 

A team headed by Foreign Minister Prince Saud al-Faisal is currently studying 11 bids by foreign oil companies worth more than 100 billion dollars in the 'gas initiative'. 

But the government, its coffers boosted by oil prices hovering around 10-year highs, has repeatedly delayed the issuing of memorandums of understanding. 

"The proposals made by the foreign companies are being studied and the names of those who will be taken on should be announced by the year-end," Commerce Minister Usama al-Faqih said. 

A member of the kingdom's Shura consultative council, meanwhile, said the private sector had to be opened up to satisfy the increasing numbers entering the job market each year. 

"Around 60,000 students finish their university studies every year, of whom only 18,000 find jobs in the public sector," Abdulrahman al-Zamel told Al-Riyad newspaper. 

"There is no real private sector in the kingdom. Around 97 percent of private businesses are small and cannot take on or train Saudi nationals," Zamel said. 

Zamel put the number of unemployed in Saudi Arabia at one million people out of a total population of around 20 million -- RIYADH (AFP)  

 

 

© 2000 Al Bawaba (www.albawaba.com)

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