Mehmood Ul Hassan Khan
Saudi Arabia has been playing a vital role in the socio-economic prosperity of Muslim World since its inception. Time and again, the leadership of Saudi Arabia stressed the need to achieve spirits of harmony, trust and peace within the GCC, and OIC. Its timely diplomatic efforts saved many regional conflicts. Its foreign policy has been based on conflict resolution. Development, diplomacy and human values have been salient features of its regional and as well as international engagements since its independence.
King Abdulaziz Al-Saud established the modern Kingdom of Saudi Arabia in 1932. The leadership of Saudi Arabia gradually institutionalized its macro-economy and achieved and maintained elements of stability and sustainability. Now once a desert nation has become a dynamic country. It is now leader in regional politics. Saudi Arabia is also one of the major players in the world affairs. Its socio-economic achievements mesmerized rest of the world.
A. Robust Socio-Economy
1. Healthy Macro-Economy
Due to strong economic and financial reforms regional socio-economic upheavals could not produce any dint in Saudi Arabia macro-economy. It successfully maintained its biggest economy status of the Gulf Cooperation Council (GCC) and MENA (Middle East and North Africa). The current published report of IMF (January, 2013) has projected healthy and productive prospects for Saudi Arabia’s economy in 2013 and beyond. 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.
According to the latest report of the central department of statistics and information of Saudi Arabia (2012-2013) all the indicators of its macro-economy are in good shape. 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.
2. Fiscal Surplus
According to latest report of its National Commercial Bank (NCB) the largest bank report (January, 2013) Saudi Arabia’s budgeted fiscal surplus for 2013 could end the year nearly 30 times higher because of an expected surge in oil export earnings as a result of high prices. It exporter projected revenue at SR829 billion in 2013 and expenditure at a record high of SR820 billion, with a surplus of SR nine billion. It project a fiscal surplus of SR277 billion or 9.5 per cent of GDP during 2013. Moreover, non-oil revenues are also expected to reach SR104 billion, 3.9 per cent above actual level in 2012.” It would allow Saudi Arabia to record another large current account surplus even in 2013. It forecast the surplus at around $144 billion this year against $179 billion in 2012 and $158 billion in 2011.
Due to its constant current account surplus the country’s net foreign assets would be high and reach to an all-time high of about $710 billion at the end of 2013, an increase of nearly $70 billion from 2012. The assets, controlled by the Saudi Arabian Monetary Agency (SAMA), central bank, had already gained over $100 billion through 2012. Furthermore, the all the major indicators of GDP would remain positive and healthy.
B. External Accounts Management
Due to stable and sustainable macro-economy along with booming exports has increased Saudi Arabia’s net foreign assets. According to Saudi Arabian Monetary Agency (SAMA), central bank latest report (January, 2013) Saudi Arabia’s foreign assets achieved a new height and reached to R372.4 billion ($100 billion) in the first 11 months a monthly average of around SR34 billion, or more than SR one billion a day.
It said, from around SR2,057.8 billion at the end of 2011, the foreign assets soared to an all-time high of nearly SR2,430.2 billion at the end of November 2012. It explained that the assets swelled by nearly SR38 billion over their previous month’s level of SR2,392.3 billion, one of the biggest monthly increases over the past two years. It was achieved having of a massive fiscal surplus recorded by the country through 2012, when it stood at SR387 billion, the second largest fiscal balance after the 2008’s record SR581 surplus.
In 2012 the net foreign assets achieved the second largest rise since 2008 and reached to SR513 billion. The rise in the first 11 months of 2012 was more than the 2011 increase of SR352 billion and more than doubled the assets growth of around SR135 billion through 2010, when they ended the year at SR1,705 billion compared with SR1,570 billion at the end of 2009.
1. Stable Currency
Stable currency plays an important role in the management of external accounts. It encourages exports and imports to do business. It provides strategic cushion to monetary policy experts, banking industry and people alike to avoid volatile situation in the economy. It reduces external debts also.
On the external accounts front despite US dollar instability, the Euro vulnerability and constant decline/devaluation of many international currencies around the globe, Saudi Arabia currency maintained its value. 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.
2. High Inflows of FDIs/FPIs
Foreign Direct Investment (FDIs) is must for achieving and maintaining a stable and sustainable economy. It promotes exports. It generates employments. It produces budgetary surpluses. It enhances industrial output. According to many regional and international reports (2011-2012), Saudi Arabia has been received highest inflows of FDIs for the last so many years. Future prospects for attracting inflows of foreign direct investments are positive even in the days to come. International investors are interested in ongoing various mega projects in the field of construction, infrastructure, communication and the last but not the least oil and gas exploration. FDIs surged in the recent past from $3 billion to $34 billion in 6 years.
3. Diversification of Economy
Saudi Arabia has been rigorously pursuing national drive of diversification of economy for the last five years. Policies are being drafted and implemented to promote private sector. Huge investments have already been diverted into the field of renewables mix of energy. Many mega projects of renewables are going on the country which would reduce its reliance on conventional resources of energy in the future. Industrialization process has been fastened. Steel, chemicals, plastic and promotion of small and medium enterprise are the key pillars of its ongoing industrialization drive in the country.
4. Social Development
Social development is must the overall high ratios of GDP %. It plays an important role achieving dreams of qualitative life. It promotes healthy activities in the society. It secures easy access of clean drinking water. It facilitates education, healthy and shelter to its people. Saudi Arabia has been giving priority to social development of its people right from the day. Every year, in the federal budget huge funds are allocated for 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.
5. Better Public Transport Facilities
Efforts are also being made to introduce 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. To enhance the aviation and tourism industries the capacity of Riyadh’s international airport will be increased to triple to 25 million per annum by 2015 as part of the first phase of planned aviation sector expenditure totaling $53 billion.
C. Healthy and Productive Banking Industry
The modern economy rests on the finances sanctioned by the banks. It provides the fuel/finance to run industries/factories and mobilizes domestic saving as well as. Global banking industry has been not in good shape since 2009. It is now passing through very tough time. But it is not in case of Saudi Arabia. Its banking industry has been resilient since 2009 and maintained the best banking industry in the region. Its stimulus plans geared the banks profits.
According to latest report of the JPMorga (January, 2013) its banking industry income increased up to 808 million Saudi riyals in the fourth quarter of last year, a 22.2 per cent increase compared with the same period a year earlier, on the back of a 16.1 per cent rise in operating income. Last month, the Saudi council of ministers approved 820 billion riyals in expenditures for 2013 a spending increase of 18.8 per cent compared with its budget for last year.
Saudi Arabia has already allocated huge funds for building projects and infrastructure in an effort to generate more jobs. Construction industry is robust. Infrastructural development is at its peak. The combination of both boosted the overall profitability ratios of banks. Another report of HSBC (2013), shows that the Saudi economy is well placed to maintain momentum. Expansionary fiscal stance would be maintained throughout 2013 for the overall wellbeing of its people. HSBC (2013) admits that the Saudi Arabian economy grew at more than 6 per cent last year, more than double its five-year average, led by the non-oil sector. Fitch Ratings said last month that government spending underpinned the private sector, with construction growing faster than any other industry. Bank lending and strong consumer and corporate confidence should also support the private sector.”
D. Diplomatic Triumphs
Diplomacy is the last resort to achieve unthinkable. It provides durable solutions. It deescalates violence and use of power. It brightens the chances of peace and harmony. In recent years, Saudi Arabia diplomatic role has been paramount in the region and around the globe. Saudi Arabia stood first to abridge widening societal division in Tunisia. It helped Tunisia to sail from hot waters to shores of political stability and economic prosperity. It saved millions of poor people from the easy prey of war in Libya. It gave message of hope and better life to its people through its peaceful engagements.
The Kingdom prevented Yemen from complete political chaos and socio-economic meltdown. Its diplomatic endeavors protected millions of Sudanese from destruction. It launched reconciliation drive in Sudan. Its proper response and timely course of action saved Bahrain from the hands of ill designers.
Egypt regained political transition with the good wishes of the Kingdom. Lavish socio-economic assistance was also provided to put Egyptian from failing in the deep seas of poverty, unemployment and societal alienation. Palestine has been one of the main pillars of its diplomatic struggle since from the first day of its independence. Its political, moral and humanitarian assistance has been beacon of light to struggling people of Palestine. Palestine’s recent strategic recognition at different international forums especially at UN is the result of Saudi Arabia’s continued deliberations. Visionary leaders of the Kingdom also encouraged achieving strategic expansion of the GCC by allowing Jordan and Morocco to join the GCC. Saudi Arabia even now is trying its levels best to achieve durable peace and political stability in Syria.
To initiate “Dialogue between the Civilizations” was one of the biggest achievements of its pragmatic diplomacy in the last decade. It promoted spirits of 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.
E. Global Humanitarian Aid
Respect for humanity irrespective of color and caste has been one of salient features of its unending global humanitarian aid campaign. Saudi Arabia stood first to rescue the struggling people from natural catastrophes and national emergencies around the globe. It 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.
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.
F. Arab Development
During the 3rd Arab Economic and Social Development Summit in Riyadh Crown Prince Salman Bin Abdul Aziz, Deputy Premier and Minister of Defense, emphasized that the initiative of Custodian of the Two Holy Mosques King Abdullah to increase the capital of Arab financial institutions and joint companies by at least 50 percent reflects the King’s keenness in further boosting efforts for Arab development and bringing about direct and immediate benefits for Arab citizens.
In a final declaration, the leaders of 19 countries and the Palestinian Territories vowed to conclude preparations for a greater Arab free-trade zone by the end of the year. Leaders also endorsed a proposal by Saudi Arabia’s King Abdullah to help increase capital across the Arab world’s financial institutions and businesses.
The Saudi foreign minister Saud Al Faisal said his country pledged US$10 billion (Dh36.73bn) to back the initiative, saying that the new capital was meant to help banks and firms finance efforts to “meet the growing needs of the goods and services by Arab citizens, and provide them with more job opportunities”.
G. Achieving Peace in Afghanistan
From the early days of former Soviet Union invasion to 9/11 episode, the Kingdom has been active to achieve durable political solution in Afghanistan without becoming part of great game. Time and again, it facilitated the peace process in Afghanistan and hopefully all efforts of Saudi Arabia and Pakistan would bring desired results in the days to come.
Saudi Arabia is a dynamic country. Its public is politically motivated and articulated. Its economy is robust. Its society is harmonious. It always ready to do more good things for its people, region and the world alike. Saudi Arabia is the inspirational force for all the Muslim World.