Opportunity Arabia 7 Conference – Middle East Association
September 23, 2010
London
“The New Face of Saudi Arabia”
Dr. Florence Eid
Dr. Florence Eid: Thank you very much.
I’ve never done this before. Today I’d like to speak about women – not the whole time, just a little bit, to illustrate some of what’s going on in Saudi Arabia.
There are two faces to Saudi Arabia today. One is the face we already know and presented to us by Liz very thoroughly. There is a whole new face emerging in the Kingdom as a player in international markets alongside the movers and shakers and the economies we track very carefully as business people and as financial experts in markets. The BRICs [Brazil, Russia, India, China] emerging markets, etc. We track these markets very, very carefully because they are the new engines of growth and there is a face to Saudi Arabia that is emerging that sits very nicely alongside these economies and it’s just emerging and I think we are discussing Saudi Arabia today at a very interesting time.
There is another face to Saudi Arabia that is emerging and it’s that the kingdom is starting to leverage the other half of its labor market in a very intelligent and able manner. And this work is not mine, I should tell you. There is a report that was published just recently by the Hadijah Center out of Jedda. Some of you will know this already say the Hadijah was one of the prophets wives. She was older than the prophet, a business women, very able, very proactive. And the center in the spirit of who this women was has produced a very good report on women in Saudi Arabia and I’d like to summarize to you some of what they have concluded because it’s very telling about what’s going on in the Saudi economy.
But first let’s talk economics and what I will do is put the economy of the kingdom in perspective in terms of the remainder of the Middle East North Africa region and then compare it with the emerging markets just to illustrate some of what’s going on.
If we look at where Saudi Arabia sits compared with the remaining countries in the region, Liz has already mentioned this number, the GDP of the kingdom is gigantic. And if you look at how much it’s grown between 2000 and 2010 the growth rate here is really quite impressive. We’ve seen a similar growth rate in the rest of the region. This average for the Middle East/North Africa region includes Saudi Arabia. So if we stripped out the Saudi number from this average we would get an even smaller number here. This is something we’re all aware of, it gets repeated all the time, but it’s nice to see in a picture to put things in perspective.
The same story follows with respect to the equity market. If you look at where the market was in terms of capitalization in 2005, $651 billion. It proceeded to rise from here of course before the correction, and then – this is where it is today – gigantic. With respect to the GCC. If we threw in the average for the remainder of the countries, this number would become even smaller.
And finally, in terms of a regional comparison, if you take a look at what we call balance sheet comparisons, at how much debt Saudi Arabia has compared with the remainder of the region, again the numbers are very impressive. This is what explains why it is that two years in a row the Saudi economy has published record budgets, despite the fact that the world was in recession and growth had slowed significantly in the Kingdom. The reason is because they have a very strong balance sheet and they can afford to expend domestically because their international liabilities are quite low by comparison to the rest of the region and to the rest of the world economy. And we’ll look at that in a minute.
If we compare Saudi Arabia to emerging markets, EMs and the BRICs, the famous BRICS, Brazil, Russia, India and China, in terms of GDP per capita again you get a really impressive contrast. This is Saudi Arabia’s GDP per capita in the year 2000, this is where it stands today, and the average for emerging markets is right there. It’s easily half of where it is in Saudi Arabia. And if you look at the BRICs, which includes China, this number is much, much smaller – 5.4 thousand dollars, versus 15.3 for Saudi Arabia.
So the strength of the economy becomes very apparent when you conduct these comparisons. If we try to compare reserves, again, Saudi Arabia has a fairly impressive level of reserves compared with emerging markets and compared with the BRIC countries, starting from a similar base in the year 2000. But the real comparison is not Saudi Arabia today compared with Brazil today, because many of you know that Brazil started to take off prior to or with the Plano Real, which was instituted in the early 90s, and Russia started to take off after the fall of the Berlin wall. China’s reform process has been underway for a good 15 years, and India certainly a good 15, 20 years.
So if we just take a step back and look at these BRIC countries a decade ago, compared to Saudi Arabia today – if we give Saudi Arabia the benefit of one decade, because we all know Saudi Arabia really started reforms in earnest, and the heavy investment period over the past five years – if we just give it the benefit of one decade and we compare the 90s to where Saudi Arabia is today, the comparison is really quite impressive. This is the level of reserves Saudi has today. And this is where these countries used to be ten years ago.
Likewise with the current account and external debt picture, Saudi Arabia’s current account is in surplus and it’s much higher than what you get in terms of an average for emerging markets, and likewise for the BRICs, and likewise its external debt compares very positively to what we find in these remaining parts of the world. And this all has come on the back of very low inflation over a period of a decade and price stability, which has inspired and encouraged investment. So the average inflation rate in Saudi Arabia over the decade has been 2.2%, compared with 11.1% for emerging markets, and compared with the BRICs at 8.4%.
And finally, the market cap picture which I showed you at the beginning compared to the MENA region looked very large compared emerging markets it actually is small. And if you’re a trader you salivate when you look at this because this means that the opportunity is right here – the upside is here. I’m being followed today by some excellent speakers who are going to speak in detail about everything going on in Saudi Arabia, among which a discussion about the opening up of the Saudi market. But in comparison with the past three years, or three years ago, great strides have been made – over the past two years, particularly, in terms of opening up the Saudi market and there’s much more to come over the next couple of years.
Now, what about the other half? Better, not better, I don’t know. Three messages come out of these pictures here. The first one is that Saudi ladies are jumping into, engaging in the economy very, very rapidly and as a large component of Saudi ladies in the labor market today who are very new entrepreneurs.
The second is that there doesn’t appear to be much conflict between family and being a businesswoman.
The third is that those with experience have a high level of experience compared with the rest of the region and the fourth point is that they have their finger on the pulse. They are focusing on their economy, which is very interesting if you think that this is a new phenomenon – these ladies know exactly what is going on in their country. And so if you take a look at this bar over here, these tall bars are the proportion of Saudi women who have no previous experience so there are a lot of new entrepreneurs jumping in. This says a lot about the current environment in Saudi Arabia.
The rest here is the proportion who have some work experience or a lot of work experience. When all of this is aggregated, it compares very nicely with the rest of the region, in particular Saudi Arabia – this black bar over here – is right behind Lebanon. The average number of years of experience is eleven, compared very nicely with Lebanon which by any measure has been an open economy in the region for quite awhile.
The number of ladies who are in business today who also have children, the bar is very high, compared with the rest of the region. Most of them are focusing on business, on expanding their businesses locally first and then regionally.
And finally most of them are extremely optimistic about prospects for growth of their businesses. And the level of optimism in Saudi Arabia today is higher than the level of optimism anywhere else in the region. And very interestingly, finance is the least of their problems. It’s not a surprise that in Saudi Arabia finance is not a big problem but you would think that new entrants to the labor market who are ladies would have a bit of a problem getting finance. It appears that they have less of a problem obtaining finance than people in the rest of the region do.
So I find these results very, very interesting. I can’t take credit for them. The first part was done by a firm, the second part was plagiarized from the Hadijah Center, but I think it’s excellent work and I was very happy to see it. I published, in April of this year, an article called “The New Face of Saudi Arabia”, expressing some of these things on the back of a fabulous conference organized in Chicago by the Saudi Government. I grew up in Saudi Arabia and the changes are magnificent today. And then a few months later there was this report published on women in Saudi Arabia and I was just delighted and wanted to share some of it with you. So thank you for your attention and this kind invitation to speak today and I hope you enjoyed this.
Munro: Thank you very much Dr. Eid, and you can see from that what a very solid financial base there is in the kingdom to support this very ambitious development program. It is a healthy scene but I think comparative and in actual terms, no doubt about it.
We’ve seen through a succession of these conferences we’ve kept in touch with the development of the female business scene in the kingdom. It is significant and it is increasingly confident. It doesn’t parade itself, for obvious reasons, but it is there and I’m glad to know that in the trade missions going out from this country over recent years there is an increasingly feminine participation representing UK firms in those groups. I think David Lloyd will bear out. I remember in about 1989 getting a letter from a firm of entertainment promoters saying did I think there was a market for go-go dancers in the kingdom. You’ve got to start somewhere I suppose. But we now do have in our own site as well a serious and significant feminine participation in our own commercial endeavors and outreach towards the kingdom. And that is certainly reciprocated on their side.
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Dr. Florence Eid
CEO, Arabia Monitor
Florence Eid is the Founder and CEO of Arabia Monitor, a research and advisory firm focused on the Middle East and North Africa (MENA) region. Previously she was Managing Director for MENA at Passport Capital, having established and headed their Mayfair office. Prior to that Dr. Eid was Vice President and Senior Economist for the MENA region at JPMorgan and Professor of Finance & Economics at the MBA level, the American University of Beirut. She holds a Ph.D. in Organization Economics from the Massachusetts Institute of Technology (2000), and has held Visiting Professorships at INSEAD and HEC-Paris.
Florence has worked for the World Bank on Latin America and North Africa, the Ford Foundation in New York and with Save the Children in Beirut. She has been a contributing author to the World Economic Forum’s Arab World Competitiveness Reports (2003, 2005). She has served on a board of SHUAA Capital and is a Trustee of the American University of Paris, a Patron of the Contemporary Arts Society in London, sites on the Advisory Board of QFINANCE – Qatar, and is a member of the Young Arab Leaders, the Young Presidents Organization and L.I.B.A.N. Florence appears periodically on CNBC Europe, CNBC Arabia, CNN and the BBC.
Source: Middle East Association
http://www.the-mea.co.uk/
