Saudi Arabia: Continuing Prosperity – Prince Turki Al-Faisal

Published: September 12, 2011

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Editor’s Note:

This week SBRIS is attending the Saudi-European Economic Forum and the 66th edition of Accenta, one of the most comprehensive trade fairs in Europe, held in Ghent, Belgium. This year the Kingdom of Saudi Arabia is Accenta’s special guest country, marked by the centerpiece Saudi Arabia pavilion. It features cultural exhibits as well as booths and displays offering business opportunity information and exchanges.

Flanders Expo Center in Ghent, Belgium is home to Accenta 2011 and the Saudi-European Economic Forum. (Photo: SBRIS)

On September 10, 2011, first day of the Accenta, a high level delegation of officials and business people from Saudi Arabia, including Minister of Commerce and Industry Abdullah Alireza, participated with Belgian and European Union counterparts in the Saudi-European Economic Forum. The closing plenary session featured a panel on the bilateral relationship between Saudi Arabia and Europe and the Kingdom’s role in the world. The panel’s keynote speakers were European Commission for Trade Karel de Gucht and Prince Turki al-Faisal, Chairman of the King Faisal Center for Research and Islamic Studies. Prince Turki regularly discusses Saudi Arabia’s foreign policies and relations, much of which has been chronicled on SUSRIS.com, a companion Web site to SBRIS. [Links below to many of these presentations.] This June at a visit to RAF Molesworth, UK, he presented “A Saudi National Security Doctrine for the Next Decade” which provided a broad view of the Middle East region and the world from Riyadh’s perspective.

Today we are pleased to provide for your consideration Prince Turki’s remarks as delivered at the Forum in which he lays out a comparative assessment of Saudi Arabia’s prosperity, its advancements in global economic rankings and ways in which this success has been used to the benefit of its citizen and the international community. We look forward to hearing your comments on this important discussion.

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Saudi Arabia – Continuing Prosperity
Prince Turki AlFaisal
September 10, 2011
Saudi-European Economic Forum
Ghent, Belgium

[Greeting in Arabic]

Prince Turki Al-Faisal at the Saudi-European Economic Forum in Ghent. (Photo: SBRIS)

Ladies and gentlemen. Let me start by saying I will not be as brief as Commissioner Gucht. Because the story I have to tell needs more depth and more breadth. It is a story of a comparison between Saudi Arabia and not only the neighboring countries of Saudi Arabia but also the so-called BRIC countries [Brazil, Russia, India, China].

All of the figures and facts about Saudi-European trade and commercial and other activities are at your beck and call on Web sites of various embassies and other such recording capabilities so I will not repeat them. But let me start by saying that His Excellency’s brief presentation put the spotlight on the fact that Europe needs the Gulf as much as the Gulf needs Europe. There is much support to be gained from each other. And while I shall speak of the importance of the larger global economy I shall also in the course of my presentation outline the Kingdom’s place in the Middle East and North Africa in general as well as any comparisons between the Kingdom and other important nations.

Of course, when speaking of the Saudi economic picture, it is most pertinent to begin with energy. Currently, Saudi Arabia possesses nearly 25% of the world’s proven oil reserves and is the world’s largest producer and exporter of petroleum. The Kingdom currently produces 9.5 million barrels per day and has a spare production capacity of over 2.5 million barrels per day – nearly 90% of the global total and enough to replace the OPEC number two and number three producers in almost no time at all. This spare production capacity is the result of dozens of years of multi-billion dollar investment in Saudi oil infrastructure, and it is palpable and undeniable evidence of Saudi Arabia’s long-term interest in a stable and secure oil market.

The Saudi European Economic Forum featured a panel on bilateral relations with (L-R) European Commissioner for Trade Karel de Gucht, Saudi Ambassador to Belgium Faisal Trad, and Prince Turki Al-Faisal. (Photo: SBRIS)

It is worth noting in talking of reserves that we have recently heard mention from other countries of having oil in the ground that far exceeds what can be found in Saudi Arabia. However, these claims are entirely about unproven reserves, so they are completely hypothetical and, in my opinion, entirely unfounded. Were Saudi Arabia to go down the path of claiming unproven reserves, there would still be no competition. For instance our Kingdom currently has 264 billion proven barrels of oil beneath it. Were we to begin making claims about unproven reserves, we would be able to announce the possession of over 700 billion barrels. But let us not go down that path. No other country can claim anywhere near the quantity of proven or unproven oil reserves as Saudi Arabia.

Unlike many of the regional governments currently facing unrest, the Kingdom has a strong record of fiscal responsibility and economic diversification. We have become an important provider of petrochemicals and financial services in our region. Revenues from energy exports have been able to fund trading markets and development projects that benefit the Kingdom’s surging population. Also of major importance are the estimated $600 billion in foreign reserves amassed during King Abdullah’s rule. This figure sets Saudi Arabia as the third largest holder of foreign reserves, behind China and Japan, though with a population much smaller than these two countries, the Kingdom is the largest foreign reserves holder on a per capita basis within the G20.

The result is that the Saudi government has been able to spend tens of billions in the last several years alone to build universities, schools, hospitals, rail links, and housing developments. King Abdullah recently announced a financial amelioration package, which had been in development since December 2010, to coincide with his return from abroad. These include the over $150 billion in extra expenditures that will benefit the poor, aid the unemployed, provide housing assistance, and support a real estate fund and bank of credit. Another program will raise the salaries of public employees and military personnel and give part-time public-sector employees full employment and benefits. Another aim is to help those impacted by inflation. All these programs will be augmented by a further series of initiatives that will be announced later this year and included in the 2012 budget, with a focus on social security, unemployment, and housing. It is precisely these types of programs that were lacking in those countries that have witnessed revolution or are now facing unrest.

And speaking of other countries, I shall now broaden my scope to discuss Saudi Arabia in terms of its place not only in the Middle East and North Africa region but clearly, with its consistent stability, predominant energy reserves, and eminent position in the Arab world, Saudi Arabia stands in a leadership position vis-a-vis the other countries in the region, even if with some of them tensions may continue to negatively affect possible positive relations. Stability is perhaps the paramount reason for the Kingdom’s ability to continue to grow and help foster prosperity around the world. Even in these complex times when numerous governments are facing overthrow and unrest, the people of Saudi Arabia have shown an overwhelmingly supportive spirit toward their leaders in an expression of growing nationalism and contentment.

Prince Turki Al-Faisal delivered remarks titled, "Saudi Arabia: Continuing Prosperity," at the 2011 Saudi-European Economic Forum. (Photo: SBRIS)

But it is when one looks at the economic health and size of Saudi Arabia that the true picture emerges of just how pivotal the Kingdom is to the region. The total 2011 projected GDP of the entire MENA region is $2.5 trillion generated from a population of over 380 million people. Saudi Arabia’s GDP of around $580 billion therefore represents 21% of the total regional GDP and over 25% of the Arab world’s economic output. This from a country with a population of 25 million people, or only 6.5% of the total population of the MENA countries. Clearly, relative to its size, Saudi Arabia holds a considerable position in the overall economic scene in the Middle East and North Africa.

Looking at some specific comparisons based on projections by the International Monetary Fund, the differences become even starker. The largest GDP in the region belongs to Saudi Arabia at $580 billion, followed by Iran, UAE, and Egypt. Together these four countries represent over 57% of the total regional GDP. Yet consider the great difference that Saudi Arabia holds in comparison to these other countries. First, Iran and Egypt are both much larger nations than the Kingdom in terms of population, so their per capita GDP is substantially lower. Further, Saudi Arabia is a stable nation with massive foreign reserves, a steady economic growth pattern, consistent governmental budgetary surpluses, and high returns on a well-secured export commodity. Compared to Iran and Egypt, the Kingdom is a picture of health and stability. And such is the case when comparing Saudi Arabia to almost every other nation in the region. And while the Kingdom is not without its challenges, its overall historical pattern is one that has been spared the any number of difficulties that have faced or are now facing other nations in the region.

And it is for this reason that Saudi Arabia has taken such an active leadership role in the Middle East and the Muslim world. No other nation really stands ready or capable of taking on this difficult position. At an economic level, Saudi Arabia is alone in providing significant investment into its neighboring economies, something that has become increasingly important in the past year as various governments and societies have faced challenges of stability and order. For example, since the beginning of 2011, the Kingdom has announced aid packages of over $4 billion to Egypt and over $1 billion to Jordan as well as being the main funder of aid packages to Bahrain and Oman that will give $10 billion over 10 years to each country in the hopes of helping those nations transition smoothly out of their current states of turmoil. The Kingdom is also the largest contributor of aid to the Palestinian people.

I wish to conclude my talk with some comparisons between Saudi Arabia and a few other specific nations. These comparisons, perhaps more than just mere isolated statistics, accurately show just how successful the Kingdom has been in creating a secure and prosperous economy. The nations I will concentrate on are a few of those “rising economic powers” so often spoken of these days – Brazil, Russia, India and China.

I will first compare the countries in order of per capita GDP. First is Saudi Arabia with a GDP of around $580 billion giving a per capita GDP of $21,685. Russia has a GDP of around $1.9 trillion and its per capita GDP is $13,543. Brazil has a GDP of around $2.4 trillion and its per capita GDP is $12,423. China, with a GDP of $6.5 trillion, has a per capita GDP of $4,833. India has a GDP of $1.7 trillion, giving it a per capita GDP is $1,382.

But it is not just the sheer volume that Saudi Arabia excels – it also exceeds at creating a business environment that is healthy and welcoming to growth. In fact, the World Economic Forum’s listing of the most competitive economies ranks Saudi Arabia as number 21 in the world and the World Bank listed Saudi Arabia as the 11th most business friendly nation in the world. These positions place the Kingdom far above any of the BRIC nations, all of which rank relatively low in comparison to Saudi Arabia. Further, in a recent Bank of America/Merrill Lynch report on the long-term growth outlook for the European, Middle Eastern and African regions, Saudi Arabia was one of three nations listed (along with Turkey and South Africa) as having the greatest growth potential.

One reason for these top rankings might be the amount that Saudi Arabia spends on education in comparison to these other nations. Currently, Saudi Arabia spends 9.5% of its GDP on education, whereas India spends 4.1%, Brazil and Russia spend 3.8%, and China spends 2.2%. This spending has not only been in primary education, but in institutions of higher learning, which Saudi Arabia continues to build at a pace and scale far beyond most other nations.

Saudi Arabia’s exceeding prosperity vis-a-vis the BRIC nations can also be seen in a comparison of account surpluses, price stability and equity market capitalization. The Kingdom will have an account surplus of almost 20% of GDP in 2011 while the BRIC nations will have an account surplus of around 4% of GDP. Saudi Arabia had 2.2% inflation between 2000 and 2010, although this year it has grown more than that, while the BRIC nations experienced an average of 8.4% inflation in the same decade. And Saudi Arabia, which has less than 1% of the total population of the BRIC nations, had an equity market capitalization of $319 billion in 2009, which was 1/5th of the equity market capitalization of all the BRIC nations combined.

Prince Turki Al-Faisal (Photo: SBRIS)

It is economic prosperity like this that makes Saudi Arabia to the MENA region what China is to Asia – an economic powerhouse that is driving regional growth. Of course, the Kingdom is not immune to economic problems. Greater efforts at fighting poverty and youth unemployment, as well as investing in infrastructure, public services, and economic diversification are still drastically needed. All Saudis receive housing assistance and free health care and education and relatively few live in poverty. Nevertheless, there is a widespread acknowledgement that the standard of living is not commensurate with a country as resource rich as Saudi Arabia. For this reason, the leadership has undertaken various economic reforms. A plan is in development to raise the minimum salary for civil servants to $1,500 per month. Business start-ups in new manufacturing sectors are receiving tax breaks and investment aid. The bureaucracy is being streamlined to improve the delivery of health care and other services. And several years ago, the government launched an office with the mandate of reducing the number of Saudis who live under the poverty level, which is $1,015 per month, from 13.3 percent in 2010 to 2.2 percent in 2020. Another initiative will successfully reduce to zero the 1.63 percent of Saudis living in “extreme poverty” (less than $450 per month) by the end of this year. Compared with the world poverty line of $1.25 per day, the Kingdom is doing very well. But because Saudi Arabia is no ordinary country, such numbers have been met with large-scale government action.

Ladies and gentlemen, I could go on for hours recounting the economic success of Saudi Arabia, but I sense I have made my point. Yet while making it has led me to present economic figures as competitive marks in some sort of global race, the reality is in fact much different than that. In short, we are all in this together.

The health of one economy benefits the health of all others. That’s why Saudi Arabia has such a long and lavish history of sharing its wealth with others and working with other countries to help them achieve the kind of prosperity now common in the Kingdom. It is a practice very much based on something my grandfather used to say, “A man is not rich if his neighbors are poor.” And with our evermore-connected global economy, we are truly all neighbors now. So may we in the spirit of good neighbors all continue to work together toward our mutual success.

And may I say to this group and those in Europe who are still pondering the benefits of investing in Saudi Arabia and other Gulf States please come and put your money in a safe place.

Thank you very much.

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HRH Prince Turki Al Faisal Al Saud

Prince Turki Al-Faisal

Prince Turki is Chairman of the King Faisal Center for Research and Islamic Studies and is one of the founders of the King Faisal Foundation. He served as the Ambassador of the Kingdom of Saudi Arabia to the United States of America from September 13, 2005 until February 2, 2007. He also serves as a member of the Boards of Trustees of the International Crisis Group and the Oxford Center for Islamic Studies and is co-chair of the C100 Group, which has been affiliated with the World Economic Forum since 2003. Prince Turki was appointed an Advisor in the Royal Court in 1973. From 1977 to 2001, he served as Director General of the General Intelligence Directorate (GID), the Kingdom’s main foreign intelligence service. In 2002, he was appointed Ambassador to the United Kingdom and Republic of Ireland by then Custodian of the Two Holy Mosques King Fahd bin Abdulaziz.

Born on February 15, 1945 in Makkah, Saudi Arabia, Prince Turki began his schooling at the Taif Model Elementary and Intermediate School. In 1963, he graduated from the Lawrenceville School in Lawrenceville, New Jersey and subsequently pursued undergraduate studies at Georgetown University in Washington, D.C.

The King Faisal International Prizes, awarded by the King Faisal Foundation, are presented to “dedicated men and women whose contributions make a positive difference.” These annual prizes, which are awarded in five fields of endeavor – Service to Islam, Islamic Studies, Arabic Language and Literature, Science, and Medicine – have been likened, for the Arab and Islamic worlds, as similar in stature to, and nearly as coveted as, the more renowned and longer established annual Nobel Prizes. The King Faisal International Prizes, in addition to being bestowed upon Arabs and Muslims, have been granted to outstanding achievers from virtually all corners of the world.

For more information: www.kff.com

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