Saudi Arabia’s Sustainable Socio-Economy Prosperity
Mehmood Ul Hassan Khan
Comparative study of the modern economic history of the world reveals that economically strong and socially vibrant and united nations tend to succeed in the times of national and international crises. It is the lesson of modern human civilization that socio-economic development holds the key of national pride, security assurance and onward march in all the fields. Stability and
sustainability of the socio-economic growth is the strategic assets in the times of ongoing global economic meltdown and financial crux.
Since King Abdulaziz Al-Saud established the modern Kingdom of Saudi Arabia in 1932, its transformation has been marvelous in many ways. The successive visionary leadership has succeeded to turn the native country from a desert nation to a modern, dynamic state which is now one of the major players in the world affairs. Its socio-economic upward march is unprecedented.
Macro-Economy Stand Tall
Despite regional political uncertainty and societal chaos Saudi Arabia maintained its biggest economy status of the Gulf Cooperation Council (GCC) and MENA (Middle East and North Africa). Even ongoing global economic recession and financial crunch could not pose any threat to its macro-economy stability and sustainability. Many regional and world economic and financial institutions and research centers are also of the opinion that Saudi Arabia would be answer to ongoing economic recession and liquidity shortage. Endorsement from the IMF and World Bank, all show the levels of socio-economic prosperity in Saudi Arabia. The Saudi American Bank Group (SAMBA) data shows that its GDP surged from around $447.8 billion in 2010, rocketed by about 28.8 per cent to $576.9 billion in 2012, an increase of 129.1 billion.
Salient Features of Federal Budget 2012
The government of Saudi Arabia announced a $187 billion surplus budget 2012 which projected rightly its wise leadership strong commitments towards the wellbeing of its people. Saudi Arabia being the largest economy of the Gulf Cooperation Council (GCC) and MENA (Middle East and North Africa) has been initiated many diversified but integrated policy measures to lessen the spillover repercussions of regional deteriorating law and order and alarming political uncertainty since 2009.
The Kingdom announced building of hundreds of thousands of homes which would be instrumental to reduce any future inflationary pressures in the country. According to the finance ministry, it had allocated 250 billion riyals from the 2012 budget surplus to fund the construction of 500,000 homes. Furthermore it would generate more employment opportunities in the country.
According to the budget the GDP would achieve 6.8 percent in 2012. It would be country’s fastest expansion since 7.7 per cent in 2003. The finance ministry forecasted revenues to reach at 702 billion riyals ($187 billion), while expenditures are projected at 690 billion riyals. Figures of the different sectors of the macro-economy strongly indicated that overall growth was higher than expectations because of robust development in the private sector and industrial sectors.
The budget also showed that the government sector grew 6.7 per cent during the current fiscal year while the private sector achieved 8.3 per cent. During 2011 revenues reached to 1.1 trillion riyals while expenditures totaled 804 billion riyals or 224 billion more than had initially been forecasted.
King Abdullah initiated a $130 billion public spending plan that largely benefited the kingdom’s lower income population. The funds were aimed at building hundreds of thousands of housing units, as well as creating jobs, raising salaries and offering unemployment benefits.
Moreover, during the current fiscal year the government of Saudi Arabia introduced many meaningful social development schemes/projects/programs for the overall wellbeing of its people due to which its expenditures reached to a record 804 billion riyals (Dh787.01 billion) this year, a 39 per cent increase. In 2011 the concept of social nets was redesigned and succeeded to achieve desired dividends afterwards.
Healthy Macro-Economy Indicators
According to the latest report of the central department of statistics and information of Saudi Arabia (2012) all the indicators of its macro-economy are in healthy shape and progressing higher and higher by each passing day. The report shows that its GDP increased 6.64 percent from a year earlier in the fourth quarter of last year, accelerating from 5.1 percent growth in the third quarter. The said report further said private sector growth, at 9.9 percent, outpaced the state sector’s 3.6 percent expansion. Private sector GDP amounted to SR112.91 billion in the fourth quarter compared to SR102.75 billion in 2010. Moreover, the construction sector expanded 13.3 percent because of a real estate boom and heavy government spending on infrastructure.
Surge in Exports and Productive Channels
According to the report (2012), Saudi Arabia’s exports increased by 32 percent to reach SR38.61 billion compared to SR29.30 billion in the same period last year while the weight of the imports of Saudi Arabia amounted to 4507,000 tons against 3135,000 tons in the same period of last year, an increase of 44 percent. Saudi Arabia’s non oil exports in February 2012 amounted to SR14.31 billion, an increase of SR2.98 billion representing 26 percent. The report said exported weight reached 3878, 000 tons compared to 3408,000 tons in the same period last year, an increase of 470,000 tons representing 14 percent. The report said that it exported plastic products in the amount of SR4.47 billion (31 percent), re-exported goods amounting to SR1.68 billion (12 percent), foodstuffs valued SR886 million (6 percent), ordinary minerals and their products fetching SR627 million (4 percent), and other goods totaling SR1.37 billion (10 percent).
Current Account Surplus: A Rarity
From Greece to Great Britain, Spain to Switzerland, USA to Uganda and from Netherlands to Nepal, countries around the globe have been experiencing acute decrease in their current account surpluses. Unemployment, lay-off, poverty, recession and spells of socio-economic doom and gloom is everywhere in the world especially in the USA and the EU. On the contrary, the SAMBA report (2012) showed Saudi Arabia achieved one of its highest current account surpluses of around $156 billion last year compared with $69 billion in 2010, an increase of nearly $87 billion.
Better Foreign Exchange Management
Despite US dollar instability, the Euro vulnerability and constant decline/devaluation of many international currencies around the globe, Saudi Arabia currency maintained its value. Its net foreign assets, managed by the Saudi Arabian Monetary Agency (SAMA), also surged by nearly $94 billion to their highest level of $560 billion at the end of 2011 $466 billion at the end of 2010. The report expected them to continue their climb to reach $682 billion at the end of 2012 and nearly $779.9 billion at the end of 2013 against an oil price of $100. The report also showed that surge in nominal GDP boosted Saudi Arabia’s per capita income to around $20,244 in 2011 from $15,246 in 2010 and expected it to edge down to $19,449 in 2012 before recovering to $19,923 in 2013.
Hub of Foreign Direct Investments
According to many international reports (2011-2012), Saudi Arabia has been received highest inflows of FDIs for the last so many years. Its mega projects, oil exploration and rapid expansion in social sphere are forcing international businessmen and investors to make lavish investments in the country. FDIs surged in the recent past from $3 billion to $34 billion in 6 years.
Resilient Banking and Financial System
Ongoing global economic recession and financial liquidity crisis could not pose any threat to banking and financial system of the Kingdom. According to the latest published report of IMF (August 2012), there is no danger of liquidity crunch in Saudi Arabia and its banking system is healthy and productive.
According to the latest figures of the Saudi Arabian Monetary Agency (SAMA), its Arabia’s banks netted more than SR21 billion in the first seven months of 2012 as lending continued to gain momentum and allow them to net one of their highest incomes in many years. The figures indicated the Kingdom’s banks could be heading for one of their best financial years following negative profit growth during 2009-2010.
At that pace of earnings in the first seven months, analysts expect full year net profits of the Kingdom’s 12 commercial banks to largely exceed SR30 billion and the level could be one of the highest incomes in the Saudi banking history.
It showed the banks’ net earnings stood at SR21.34 billion during January-July, an average of more than Srthree billion a month. It showed banks earned SR3.46 billion in January, SR3.1 billion in February and SR2.6 billion in March, a quarterly income of nearly SR9.3 billion. The income in the second quarter stood at SR8.8 billion while it stood at SR3.23 billion in July.
Saudi banks have the second largest asset base in the Arab region after UAE banks, with their combined assets standing at SR1.62 trillion (Dh1.60 trillion) at the end of July against about Dh1.72 trillion for UAE banks in June. Its Non-Performing Loan (NPLs) ratios are lowest in the region.
Diversification of Economy
Saudi Arabian government has initiated many mega projects in order to achieve its desired targets of further diversification of economy. The SME sector represents nearly 96 percent of total businesses in the Kingdom and its share accounts for 28-33 percent of GDP. Saudi banks provided $247 million loans to 1,113 small and medium enterprises (SMEs) during the period 2006-2010. Many mega projects of renewable energy, food security and water are being carried out in different parts of the Kingdom, which is hopefully would pay dividends in the days to come.
Robust Social Development
According to the latest report of the CBRE (2012), the 2012 budget allocated $45 billion for the education sector, $23 billion for healthcare and $9.4 billion for transport. Its allocation for the development of non-oil infrastructure increased 7 percent. About $67 billion has been allocated for the construction of 500,000 housing units. These housing units, which are intended to meet the needs of the lower income sector.
Rigorous efforts are going on to implement a massive public transport system for all the major cities. The transport solutions will include both buses and trains and will be first implemented in Riyadh, where phase 1 completion is expected in 2017. Around 80 percent of the metro network will be underground and will be served by 34 stations.
The capacity of Riyadh’s international airport is anticipated to triple to 25 million per annum by 2015 as part of the first phase of planned aviation sector expenditure totaling $53 billion.
On tourism front, Saudi Arabia currently has around 53,000 branded hotel rooms (about the same as Dubai), although 32,000 of these are in Makkah and Madinah. In 2011, the Kingdom hosted 15.4 million foreign visitors, of which 10.6 million were traveling as pilgrims.
According to the report of forum (2012) titled, “Saudi Arabia: A New Regional Role, A New Identity.” “Today women are in government positions ranging from ministerial levels to the Shoura Council, over 100,000 young Saudis are on scholarships overseas, and the media is now free to challenge government performance”. The latest Fitch Ratings (2012), shows the Kingdom’s political and financial stability. The Kingdom is determined to continue modernizing its infrastructure and accelerating economic activities in order to realize diversification of the sources of income.
Right from the beginning and especially with the start of unpleasant political upheavals and societal debacle in the Middle East, the wise leadership of the Kingdom has played tremendous role of conflict resolution, peace, harmony and humanitarian assistance in the region
(a) Tunisia & Libya
Diplomacy achieves miracles. It prevents war and lessens conflicts. It projects the importance of negotiations, peace and harmony. In this context, Saudi Arabia untiring diplomatic efforts saved Tunisia from further socio-economic degradation, political impasse and the last but not the least ethnic division. It played an important role in marginalizing Libya’s war theater and succeeded to bring some hope of better future and prosperity for its people.
(b) Yemen & Sudan
The Kingdom played crucial role in preventing Yemen’s horrendous happenings. It played leading facilitating role in turbulent Sudan reconciliation process. Saudi Arabia succeeded to thwart its people from further cleansing. Its timely action in Bahrain saved it falling in the hands of infiltrators.
(c) Egypt & Palestine
Egyptian resurgence became cool with the socio-economic assistance and political suggestions of Saudi Arabia. Its strong political commitment is now all out for the Palestine drive for the UN slot in September 2011.
(d) Strategic Expansion
Riyadh encouraged strategic expansion of the GCC by allowing Jordan and Morocco to join the GCC. Saudi Arabia and UAE played leading role in the recently, held 120th GCC ministerial session. It is hoped that Saudi Arabia’s meaningful diplomatic endeavors and purposeful policy initiatives would succeeded to create strategic equilibrium in the region in the days to come.
(e) Global Inter-faith harmony Drive
The visionary leadership of the Saudi Arabia introduced “Dialogue between the Civilizations” for achieving greater peace and harmony in the world. It was the logical reply of Samuel P. Huntington’s “Clash of Civilizations Theory” which proved to be ice-breaker.
(f) Syria & OIC
King Abdullah Bin Abdulaziz, addressed summit of the Organization of Islamic Conference (OIC), held in Mecca and said that the violence that is claiming Muslim lives across the globe was due to division of the Islamic world. “Because of division, the blood of the Muslim nation is shedding,” King Abdullah said the summit’s opening speech. He called for cooperation between Muslim states as a way to safeguard “the dignity and history of Muslims.” He also called for the establishment of a center of dialogue between Islamic doctrines.
Saudi Arabia even now is trying its levels best to achieve durable peace and political stability in Syria. In this connection most recently, Organization of Islamic Countries (OIC) meeting was arranged in Mecca. All the 56 participating countries demanded Syria to restrain from using violence against its helpless people. The OIC ultimately suspended Syrian membership and asserted its diplomatic pressure to reach an amicable conclusion.
It was arranged on the special instructions of Custodian of the Two Holy Mosques King Abdullah of Saudi Arabia who called an emergency Islamic summit in Makkah to focus on Islamic unity and solidarity and address major issues facing the Islamic world today.Makkah summit is the fourth emergency conference to be convened by OIC since it was formed in 1969. The third extraordinary OIC summit was also held in Makkah in December, 2000 on King Abdullah’s initiative. It adopted a ten-year action plan to strengthen the 57-member organization, the second largest after the UN.
(g) Aid for Rohingyas
The Kingdom stood first to donate $ 1 million to support rehabilitation programs of the UN High Commissioner for Refugees (UNHCR) for Rohingya Muslims in Myanmar. The UNHCR official appreciated the generous support and referred to a recent order by Custodian of the Two Holy Mosques King Abdullah to provide assistance worth $ 50 million to Rohingya Muslims in Myanmar.
(h) Global Humanitarian Assistance Drive
Humanitarian assistance has been one of the key elements of Saudi Arabia’s foreign policy since its inception. According to global aid report, Saudi Arabia’s official development assistance (ODA) was equal to 0.7% of Saudi Arabia’s gross national income (GNI) in 2009. 85.1 percent of Saudi Arabia’s official humanitarian aid was spent in poor states in 2009. It donated humanitarian aid up to US$256m in 2010.
Saudi Arabia global humanitarian assistance drive has been reaching out to the shores of Tanzania to the deserts of Sudan and Yemen. It has been active on the mountains of Jordan to the plains of Syria to serve the naked humanity. It has been offering its services of medication, airlift and military medical hospitals to the struggling people around the globe.
Pak-Saudi Arabia Bilateral Relations
According to finance ministry of Pakistan, Saudi Arabia is among the 15 export partners of Pakistan and bilateral trade volume has gone above US$ 4 billion per annum and which would be further increased in the days to come. There are lots of business delegations from Pakistan are going to visit Saudi Arabia in the near future and hopefully, chances are brighter for the further enhancement of trade volumes afterwards.
The 1.5 million Pakistani workers have a very strong presence in Saudi Arabia and have been contributing foreign exchange to Pakistan. According to latest report of the SBP (2012), last year remittances from Saudi Arabia to Pakistan were estimated at $ 2.7 billion and it is set to cross the $ billion this year.
Right from the beginning, the leadership of both the countries have been doing great in further strengthening of bilateral relations. Both the countries share similarities on different regional and international important issues. Time to time generous socio-economic aid of Saudi Arabia has been welcomed in the country.
Saudi Arabia extended gigantic support in the times of national catastrophes in shape of lethal earthquakes (2004) and devastating series of floods (2010-2011) in the different parts of the country. The Kingdom also pledged $700 million for Pakistan in the Tokyo Donor.
Saudi Arabia was one of those first countries which recognised Pakistan after 1947. Whether it was wars combats of 1965, 1971 or sanctions after nuclear tests, Saudi Arabia stood first and tall to salvage Pakistan.Most recently, Pakistani Prime Minister Raja Pervez Ashraf visited Saudi Arabia and held a meeting with Custodian of the Two Holy Mosques King Abdullah. The two leaders discussed bilateral relations, situation in the region and international issues. Saudi Arabia pledged that it would help Pakistan in resolving the energy crisis.
During the meeting the king told the prime minister that his country will extend full cooperation and assistance to resolve energy crisis in Pakistan, adding that the relevant Saudi minister will also visit Islamabad in this regard.
National Crises and Kingdom Generous Response
In all our national crises, our strategic ally Saudi Arabia stood first and tall and extended generous humanitarian assistance. During the national crises of earthquakes and series of floods, it promptly arranged air-bridge and transported relief goods in far-flung areas of the country. Its rescue & search team played extraordinary job in locating and saving the precious lives of people. It advanced machinery and associated paraphernalia helped the struggling and stranded people and spread rays of hopes and life. The government and people of Kingdom donated billions of rupees to assist the victims of floods in different parts of the country. Its mobile field hospital, dedicated doctors, paramedical staff, different medication campaigns provided the basic health care facilities to these affected people.
Supervisory Role of Saudi Embassy of Pakistan
The Embassy of Saudi Arabia in Pakistan is doing great job and rigorously engaged with many ongoing mega projects of social development i.e. education, health, housing, infrastructure, clean drinking water and electrification in different parts of the country. During 2012, both countries inked two loan agreements amounting to $172 million for import of urea fertilizer $100 million and initiating development projects $72 million. Both loans would have multiplier effects on the socio-economic conditions of these social economic sectors. It would reduce high ratios of poverty. It would generate more employment in these troubled areas. It would support business activities in these areas and improve their living standards by providing better education, health and housing facilities. By signing of the two agreements, Saudi Arabia has become the only country that has fully disbursed the entire amount of $700 million committed at the Friends of Democratic Pakistan (FODP) forum two years ago.
Furthermore, it also pledged an additional $400 million at the Pakistan Development Forum (PDF). The $100 million credit for urea fertilizer import was part of that commitment while for remaining $300 million Pakistan has selected some social projects, which have been sent to Saudi Arabia for assessment. Moreover, to fulfill the requirements of agriculture, Saudi Arabia has provided Urea loan which is for a short period at an interest rate of London Interbank Offered Rate (Libor) plus 1.25 per cent. Under the agreed loan/program, the Trading Corporation of Pakistan (TCP) will import urea from Saudi Arabia and provide the fertilizer to National Fertiliser Marketing Limited (NFML) for its fair distribution. It also shows strong commitment of the Saudi Arabian government towards supporting the Pakistan government in promoting the well-being and economic prosperity of its people. It is hoped that urea fertilizer credit facility ($100 million) would benefit the agricultural sector of Pakistan, boost food production and maximise farmer income with the use of qualitative Urea fertilizer.
The second loan of $72 million would be spent for reconstruction in the Malakand Division, Bajaur Agency and North and South Waziristan. In this connection, the reconstruction activity, including repair of roads, would contribute to increasing agricultural productivity and enhance educational and health standards for the people of the region. Rehabilitation work includes construction of 283 KMS of major roads and 887 KMS of other roads along with 43 bridges and 78 culverts.
The last but not the least, the loan will also be used for construction of main and branch canals with flood protection work, water storage, supply of lift pumps, construction of educational facilities in South Waziristan, North Waziristan and Bajaur and rehabilitation of power network and transmission lines.
Since form the beginning, both the countries maintained close military ties. The government of Pakistan provided extensive support, arms and training to the military of Saudi Arabia. Pilots of the Pakistan Air Force flew aircraft of the Royal Saudi Air Force to deter a raid from South Yemen in 1969. In the 1970s and 1980s, approximately 15,000 Pakistani soldiers were stood tall in Saudi Arabia. Saudi Arabia showed great interests to purchase of Pakistani ballistic missiles capable of carrying nuclear warheads. Pakistan and Saudi Arabia have information mechanism on different subject relating to defense production, security apparatus and above all martial training etc.
During 2012, Chief of Army Staff (COAS) General Ashfaq Pervaiz Kiyani visited Saudi Arabia and met with many high officials and discussed matters regarding cooperation in the areas of counter terrorism, extremism and organized crime. Both countries expressed their desire to further broaden cooperation to fight the menace of terrorism and extremism bilaterally as well as globally. Prince Mohammad appreciated the efforts of the Pakistan army and those on deputation serving in the Kingdom for their contributions in promoting Saudi-Pak defense ties. The prince also appreciated the efforts of Pakistan toward the capacity building of Saudi security forces.
Both sides had identified certain specific areas of training and professional development for their armed forces. It was agreed that “a comprehensive training program for defense personnel and a plan to hold more joint defense exercises will form the essential components of an expanded joint defense initiative to be promoted by Riyadh and Islamabad”.
During 2012, both the countries had joint military exercises aiming to enhance existing bilateral relations and to benefit from each other’s experience in counter terrorism operations. Pakistan-Saudi Arabia alliance would guarantee larger regional reconciliation and stronger ties of survival, production, socio-economic prosperity and above all security.
Saudi Arabia has achieved highest GDP ratios in 2011 in the GCC and MENA. The prediction of GDP in 2012 puts it in the driving seat i.e. 6.8 percent. Its current account surplus is unmatchable in the region. Its attraction of FDIs inflows is incomparable among the regional countries. It has been sustaining its largest economy status in the GCC and MENA for the last 40 years and hopefully it will for all the time to come.
Its diversification of economy drive would bring desired dividends in the days to come. Its pursuance of renewable energy resources, development of SMEs and gradual empowerment of women are all signs of robust socio-economic prosperity in the years to come. Custodian of the Two Holy Mosques King Abdullah has shifted the paradigm and initiated social-oriented projects and programs for the wellbeing of its people. His visionary leadership has also succeeded to stop any further mayhem in Tunisia, Sudan, Libya, Egypt and Bahrain.
Pakistan and Saudi Arabia must cooperate in the fields of security, renewable energy, oil & gas exploration and water and food security issues