Lucien Zeigler | 12.21.2010

The news that Saudi Arabia recorded a surplus higher than economists expected this year is impressive given the massive spending on infrastructure and job growth undertaken by the Kingdom in 2010.

The government predicted a shortfall for 2010, but instead recorded a surplus that exceeded $28 billion according to official estimates.

In an email statement, Banque Saudi Fransi’s Chief Economist John Sfakianakis noted that “the surplus is a combination of higher oil revenues as well as possible lower capex from Saudi Aramco during 2010. Public revenues rose 44.2% from 2009 to SR735 billion, while expenditures climbed 5% to SR626.5 billion. Elevated state spending has played an essential part in maintaining confidence in the economy as the government seeks to re-integrate the private sector into the development process.”

Another “key highlight” for 2010, according to Sfakianakis, was that the Government was able to reduce its domestic debt burden by over 25%. “Domestic debt stands at SR167 billion, or 10.2% of GDP, down from more than 80% in 2003,” Sfakianakis wrote, which “demonstrates Saudi Arabia’s fiscal well-being; as debt problems mount in many advanced economies the kingdom has been able to finance a stimulatory spending programme and slash debt. Higher oil revenue and slow growth in imports allowed for a very comfortable current account surplus of SR260.9 billion ($69.6 billion), triple the year earlier.”

The news is the latest in a string of concrete data that has Saudi economist gleeful at the Kingdom’s economic prospects in the years ahead. While challenges do lie ahead, overall confidence in the Kingdom’s economic stature, as well as general optimism about doing business with Saudi companies, should continue to grow in 2011.

Lucien Zeigler | Arabianomics.com | 12.18.10

When looking back at this week in Saudi news – perhaps the simplest (but most significant) take away is that General Electric (GE) had a big week in Saudi Arabia, and the company is serious about doing business in the Kingdom.

By landing contracts in two different energy subsectors and releasing a major study on the Saudi Healthcare system, GE sees a great opportunity for its company presence in the Kingdom.

The company announced on Tuesday that it “was selected by by state oil company Saudi Aramco to outfit the Shaybah oil field with 11 gas turbine generators and other equipment to boost power supply at the site,” Bloomberg reported.

On Wednesday, GE, in a joint venture with Hitachi, announced that it intends to pursue nuclear contracts in Saudi Arabia as the Kingdom looks to diversify energy sources to fuel its impressive economic growth.

Also on Wednesday, GE released a major study on healthcare in Saudi Arabia, which included a poll of Saudi attitudes about health and their perceptions of themselves as healthy or not. Like in the United States, perceptions do not quite match reality on the matter – like in Saudi Arabia, a large percentage of Americans are overweight. Still, the study revealed an interesting amount of information on the healthcare industry as well as Saudi society.

GE’s stock price remained virtually unchanged this week in trading, but one can expect gains for the company long-term as it continues expanding impressively in Saudi Arabia and elsewhere internationally.

Lucien Zeigler | Arabianomics.com | 12/11/10

Economic diversification is a continued focus by Saudi technocrats and economic leaders, and it is beginning to pay dividends for the Kingdom. According to a purchasing managers’ index (PMI) produced by the Saudi British Bank, non-oil exports have reached a record high in Saudi Arabia.

In other words, perceptions about Saudi Arabia’s economy being totally oil-dependent are quickly becoming outdated.

The non-oil sector growth reflects efforts to steer the Kingdom’s revenue from traditional sources, like hydrocarbon production and export, to fuel the growth of the non-oil economy.

What will help Saudi Arabia further is its ability to overcome two other major challenges on which the Kingdom has made significant headway of late. Inflation in Saudi Arabia continues its slow march downward. The Inflation rate in Saudi Arabia “will continue the downward momentum into 2011 even as economic activity picks up pace, Banque Saudi Fransi said in its latest report on Saudi economy entitled ‘Inflation strain subsides: Outlook highlights lower inflation amid steady economic upturn,” according to this report by the Saudi Gazette.

In addition to curbing inflation and focusing on reinvestment and economic diversification is a continued effort by officials to jumpstart Saudi’s housing market, and as we discussed in a recent post, efforts are underway to regulate the market and allow for many to have access to interest-free financing for housing in Saudi Arabia.

Put together, a multi-pronged approach by Saudi technocrats and leaders to tackle these three challenges is the reason why the Arab world’s largest economy is well positioned in the coming years, and why currently held perceptions about the Kingdom’s economy are becoming outdated.

Lucien Zeigler | Arabianomics.com | 12/10/10

Steve Clemons of the Washington Note wrote on his blog yesterday that the Obama Administration was “lucky that things fell through” in the latest round of Middle East peace talks between Israel and Palestine.  Recently, the Obama Administration withdrew its efforts to dissuade Israel from continued settlement expansion in the West Bank and other areas, and many analysts believe that this move marks the end for the current effort.

[Editor's Note: This is a cross-post of my piece at the Information Chaos blog ]

“Netanyahu and Abu Mazen can’t blame Hamas on these talks failing. There are no radicals (other than a few in the Israeli Cabinet) who can be pointed to. The Palestine-side of the equation of Salam Fayyad, Mahmoud Abbas, Mohammed Dahlan, and others is about as American-compliant and moderate a team that could be imagined. And yet a deal could not be achieved.”

Clemons urges a reset button for the situation, and argues that this is the chance for Obama to propose an American-backed proposal with new ideas.

“That’s the course the administration has been privately flirting with a long time — but has been too shy or too timid to offer.  Netanyahu’s failure to perform, his rejection of President Obama’s effort at seduction, now opens the door to better, healthier possibilities.”

I agree with Clemons, so without further ado, I humbly present my suggestions for Obama to reach a final status agreement:

• Bring Republican support on board early, but head efforts by Bill Clinton (Clemons mentioned in his blog post that he recently spoke with Clinton about the peace process). Bill Clinton as former President and Hillary as Secretary of State could be an unstoppable team, especially considering that Bill was so close at the end of his Presidency in 2000.
• Stamp your peace proposal as the American position key to US national security interests, and tie Israeli aid to the ratification of the final peace treaty. Israel should not receive guaranteed arms and aid if it will not abide by our terms of peace, which is clearly diverging toward that of the Palestinian people in pursuit of statehood.  Make this clear to the Israeli government and people.
• Include all nations willing to get behind a plan, and give prominence especially to Latin American leaders who have backed the Palestinians by declaring their statehood.
• The Arab Peace Initiative is a fair starting point; Seriously, give it a look – it’s fair. Obama has already backed it in principal.
• Sell the American-backed proposal as a catchy one-liner. “Path to Statehood Plan” or something similar could help US citizens reshape their views of the conflict as a freedom movement. The people of the United States need to be persuaded for the new proposal to have merit, especially as the crucial 2012 Presidential election looms.
• Plea to American Jews and Israeli expatriates specifically living in America to view the conflict as much as possible through an impartial lens, which is understandably difficult given the unspeakable crimes committed against Jews in the last century. Reiterate that American continues to ensure the survival of the Jewish state, and explain to them that you wish the same for the people of Palestine.
• Score incremental but important victories at a to give optimism and momentum to the new peace process.

I welcome any changes or additions.

Lucien Zeigler | Arabianomics.com | 12/7/10

Over at informationchaos.com, I wrote about some of the challenges facing Qatar following its selection to host the World Cup in 2022. The choice is significant because it is the first time the World Cup will be in the Middle East, and in the Arabian Peninsula nonetheless.

As Matthias Krug wrote in this great piece for the BBC News, the “Middle East has finally been given a chance to break…dusty stereotypes.”

An important note is that the selection by FIFA of Qatar in 2022 does not in itself help anyone overcome any stereotypes they may have about the Middle East. It represents a chance for Qatar to show the world that the Middle East is a modernizing and stable place.

The United Arab Emirates had that chance and apparently dazzled the various Western cultural ambassadors at the Formula 1 race held there last month. But the World Cup is a bigger affair, and will require a lot of infrastructure development, heightened security, and improved freedoms for visitors to Qatar. It is indeed a major challenge.

In response to my article, a comment left indicated that FIFA had essentially sold out by awarding Russia and Qatar the chance to host the World Cup, given their human rights record. While I do not deny those records, I noted it is hardly the first time that international games were awarded to countries with less than stellar HR records:

“Two nations were chosen for the World Cup games that are not democracies. This is hardly new or significant. It is the second time an international body has chosen non-democratic nations recently. The International Olympic Committee chose non-democratic nations to host the world games in China (Beijing 2008) and Russia (Sochi, 2014).
The question of how much a country’s political system should be considered in choosing Olympic Games, World Cup tournaments, or any other international games is understandably difficult given our urge to promote democracy whenever possible. However, it would be unfair to deny internationally stable and secure nations the chance to host and entertain the world.
The Olympic Games and the World Cup are a chance for all nations to come together, and it does not always have to be in the nation that the United States would choose (but we often get our way – the US has hosted 8 Olympic Games and the World Cup). That’s what makes international games so interesting. It’s about the athletes and their stories, and their chance to compete for their country. The games are a chance for humans to share one thing in common – one set of rules, judged to the fairest degree possible…”

It will be tremendously interesting to see how Qatar develops as the World Cup draws near, and how that affects other GCC states.