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EDITOR'S NOTE:
The 13th Annual Arab-US Policymakers Conference (AUSPC) was convened in Washington, DC on September 12-13, 2004 with the theme "Restoring Arab-U.S. Mutual Trust and Confidence: What is Feasible? What is Necessary?" A panel of distinguished leaders from the United States and Saudi Arabia addressed the topics of commerce, economics and energy in an afternoon session. The panel included: Chair, Mr. Brian Malnak, Vice President, Government Affairs, Shell Oil Company; Mr. Brad Bourland, Chief Economist, Samba Financial Group (formerly Saudi American Bank); H.E. Eng. Usamah Al-Kurdi, Member, Majlis Ash-Shura (National Consultative Council), Kingdom of Saudi Arabia, and former Secretary General, Council of Saudi Chambers of Council and Industry; Mr. Clyde V. Prestowitz, Jr., President, Economic Strategy Institute, Washington, DC.
We are
pleased today to present H.E. Al-Kurdi's
discussion of economic and commercial reform.
In the coming days we will feature more
presentations from the AUSPC. For a
complete list of the agenda items presented in
SUSRIS click
here.
The AUSPC
conferences are organized by the National
Council on US-Arab Relations (NCUSAR), a
Washington-based not for profit organization that
seeks to improve understanding of the Arab world
among Americans.
On
September 16, 2004 the Middle East Institute and Foreign
Policy magazine hosted a panel to discuss an
article written by Professor Greg Gause titled,
"How to Reform Saudi
Arabia Without Handing It to Extremists."
Usamah Al-Kurdi participated as a panelist.
SUSRIS presented a report on the event -- it is
available on the Web site. Click
here for more.
The Dynamics of Economic and Commercial Reform: Near-Term Prognoses
Usamah Al-Kurdi
Mr. Brian Malnak: �Our
next panelist is Usamah Al-Kurdi,
who is currently a member of the Consultative
Council in the Kingdom of Saudi Arabia.
He is an executive committee member
of the National
U.S.-Arab Chamber of Commerce.
He's a former secretary general of
the Council
of Saudi Chamber of Commerce and Industry
-- a position I think you held for about a
decade.
So, Usamah we thank you very much.
Usamah..
H.E. Usamah Al-Kurdi: Ladies and gentlemen, thank you very much for being here this afternoon. I'm expected to talk about reform in Saudi Arabia, and I have four points to cover with you. One is reform in general, and then the reform in the social area. Third is reform in the political area. And then, I'll talk about economic reform. If I have time, I'll go into the challenges we face.
Well,
reform is serious business in Saudi
Arabia.
Very few people actually know that
it started in 1993 when the four famous
laws were issued.
The law to create the Shura
Council.
The law to create regional councils
in the 13 different regions of Saudi
Arabia.
What we call the Basic
Law of Governance of Saudi Arabia was
issued that year.
And, the new law stipulating a term
of four years for the ministers in Saudi
Arabia.
So, these four laws were issued in
1993 and ever since I have been following
the different reform steps that were
taking place in Saudi Arabia very closely.
About
two years ago, I think the word reform, in
Arabic of course, was used in the King's
address to the Shura
Consultative Council, making it a fact
in Saudi Arabia.
Again, if you look in the past 10
years, the reform that has taken place in
Saudi Arabia, in my opinion is very
impressive.
This is why I follow it up, and I
try to categorize it.
But, many people think that reform is not going as fast as it should in Saudi Arabia. I really am bothered about this. I don't know if we are going fast enough or whether we should be going slower or not. But, judging by the experience of other countries, I don't think we should be going too fast. We need to judge the pace that we need to follow. We definitely do not need a lot of external pressure. We already have enough pressure of our own. I do not believe in what I call "mass reform." These are what I refer to as the reform initiatives that are being promoted around the world. For reform to work, it needs to be discrete and individual if it is to work. But at the same time, we are learning from the experience of others. We are trying to proceed again at a pace that is acceptable to our society.�
I said I was going to talk about political reform in Saudi Arabia. As I said earlier, the creation of the Shura Council, in my opinion, was a major political reform step. I think just as important was the latest change a few months back, or maybe about 10 months ago, the change to the law of the Shura Council, giving it more power and authority. I may mention the fact that the Shoura Council is now .. about six or seven months ago, became a member of the
International Parliamentary
Union, indicating recognition by the parliaments around the world of the Shoura Council as the parliament of Saudi Arabia. I also might mention for the panelists who were talking on media issues today that one of the resolutions issued by the Shura Council was the need for further freedom of speech in Saudi Arabia.��
Another important, in my opinion, very important development in the political area are the regional elections. I brought with me the schedule of voting in Saudi Arabia. In the municipal elections of Saudi Arabia, in the Riyadh region will take place on the 10th of February, and the Eastern Province and the southern part of Saudi Arabia will take place on the 3rd of March. In the west of Saudi Arabia and in the northern regions, it will take place on the 20th of April. So, this is a very serious plan to proceed with the municipal elections. I see further decisions made regarding elections maybe in the municipal and regional councils and in the Shoura, possibly in the future.�
The attention being given to civil society is quite impressive. Again, I have lists of new civil society organizations that were created in Saudi Arabia and our attention to reform took us beyond our borders. The initiative to reform the Arab situation. The famous Beirut initiative for peace with Israel. And, the Gulf educational initiative and the initiative for
peace in
Iraq. I can't go through all of the list because I have a time limit here.�
So, I am going to move to social reform. As many of you know, we are looking seriously at our textbooks and are trying to remove what we think is not correct; basically that is what we are doing.�
We are paying a lot of attention to human resource development, and a new fund has been created for that purpose. And, if somebody is interested in the issue of labor development, I will be happy to answer questions regarding that. We are paying more attention to the issues of child abuse and domestic violence. We have created our first medical insurance program, and we are reorganizing our charity organizations and focusing them on charity work domestically. At the same time, we created a new organization that is only able to do international charity work -- this is part of our plans to control financing of terrorism. In the social area, we have also created a new fund for small and medium-sized enterprises.��
And to try and answer Brad's question about the budget surplus of Saudi Arabia. Last week, it was announced that something like 60 percent of the budget surplus will be used to pay government debt or public debt, which is all domestic debt. And, 40 percent was going to be used to build what we call development projects, infrastructure projects. Some of it is also going to the housing program. A major part is going to the
Saudi Credit Bank to raise its capital from something like $50 million to something like a billion dollars to try and again support small to medium-sized enterprises as part of our social reforms.��
The issue of Saudization of the labor forces is an important issue in Saudi Arabia, and a lot of resources are being directed to it. So, it receives quite a bit of attention, so much that the Ministry of Labor and Social Affairs have been separated into two different ministries, hoping there will be more attention given to the issue of labor and the issue of indigenization of the labor force in Saudi Arabia. As many of you know, 27 percent of people living in Saudi Arabia are expatriate workers.��
The new census is actually taking place now in Saudi Arabia. I wouldn't be surprised if someone concluded that this may be related to the issue of the elections that are taking place soon. This would be only our third census in the past few decades.�
The role of media .. I was speaking to a newly appointed ambassador of a European country in Saudi Arabia. And, when I learned that he was in Saudi Arabia 10 years ago as a number two man, I asked him, "What is the biggest difference you've seen in Saudi Arabia?" And, he said, "The media." He said he couldn't believe some of the issues that were being debated and discussed in Saudi media. I agree with him. I have been following what is being written and discussed in the media of Saudi Arabia. I really think that we are going places. The media in Saudi Arabia is going places. All the articles are quiet encouraging. The debate that is taking place, especially in the area of the municipal elections -- because it's a big thing now, of course -- is very interesting.�
Now, the main issue of my presentation today is the economic reform, and I have spent most of my time talking about other issues. Let me be very quick here. Basically, this economic reform .. when reform started in Saudi Arabia about 10 years ago, in the beginning there was a lot of emphasis on economic reform and then we've seen social and political reform follow.��
Basically, economic reform took shape through three different axes. One was the axis of issuing new laws or rewriting older laws. So, we saw the labor law being updated. We saw a new law for insurance companies. We saw the financial market laws being issued and a few other laws.
��
The second axis through which economic reform was taking place was the creation of new economic organizations that are designed to support economic development. So, we saw the Supreme Economic Council, which is playing a very active role as a fast-track way to take financial and economic decisions. We saw the creation of the tourism organization, and Peter, if I can see your hand raised there, he's doing some work promoting tourism in Saudi Arabia from the United States. We saw the creation of the
Investment Authority [SAGIA] and a few other similar organizations.�
The third axis of the creation or opening up of new investment possibilities -- these include power generation and water desalination. Now, it's possible for the private sector to invest in higher education. We saw railroads; we saw mining being a major area of possible investment in Saudi Arabia. �So, you see those three axes as being applied to the reform of Saudi Arabia. Of course,
as Brad
said, it's nice to be in the comfortable times when the price of oil is $44 now. But, I sincerely believe that economic reform will continue in Saudi Arabia regardless of the price of oil. We have seen the privatization take hold, and we've seen the government issue a strategy and issue a list of 20 sectors where privatization is taking place. And, this is an area where I really think we can speed up the process a little bit.��
Saudi Arabia is a member of the Gulf Cooperation Council Customs Union and the free trade area of the Arab countries. Saudi Arabia last year exported a total of $100 billion and imported only about $30 billion worth of goods and services. The current account was in the positive to the amount of $30 billion. This was the highest current account we had in Saudi Arabia in the past 20 years and not only because of the price of oil but also the return of many investments and financial assets into Saudi Arabia as a result of the 11th of September contributed to the economic growth of Saudi Arabia.
�
The last thing I want to mention to you is the opening up of investments not only for Saudis but also for private sector companies, which included the area of gas, and this is the first time the area of energy was open to foreign investors in a very long time. The international competition was quite strong for the license of the second GSM operation in Saudi Arabia. I expect to see quite a few foreign companies come into Saudi Arabia to invest.
The number of challenges we face is not simple. The list is long. It's going to take a lot of work on our side to achieve it, but in my opinion, to continue with this reform, is going to be the most important challenge. I think followed very closely to that is creating jobs. The disadvantage of an economy like Saudi Arabia's is that the economic growth is not always associated with job creation. So, maybe privatization is our way to create more jobs for Saudis.
�
Ladies and gentleman, thank you very much.
Questions for Usamah Al-Kurdi in the question and answer session:
Mr. Malnak: ..What is the rationale for staggering the municipal elections in Saudi Arabia? Will women vote in the municipal elections?
H.E. Usamah Al-Kurdi: I think the need to stagger these elections is simply because the government bureaucracy did not start as early as they should have. When the decision was made to proceed with municipal elections, it was decided that it would take place in a year of the date of that decision. I guess they just did not work fast enough so they had to stagger it like that. Besides, we have 178 different municipalities. I appreciate the need to stagger something like this, not even that, the experience learned from one process is important to be used and applied in the following program. So, we saw dividing Saudi Arabia into three different areas. If they stick to the schedule they have announced, I think that would be an excellent thing.
Now, will women vote in Saudi Arabia? I don't see it happening this time. But, I wouldn't be surprised if it happens the next time. Considering the environment in Saudi Arabia, and what I call now the many steps to empower women in Saudi Arabia, steps have been taken to empower women in Saudi Arabia. I don't see a problem with this happening soon thereafter. If you remember what I said earlier about the need to take things one step at a time, I think this is probably one area where I think we are doing the right thing, at least in this initial stage.
Mr. Malnak: ..Please comment on the state and quality of Arab education, including Saudi Arabia. Are Arab youth being prepared for smart work force?
[Mr. Brad Bourland
responds]
H.E. Usamah Al-Kurdi: No, I don't think we have good quality education in Saudi Arabia honestly -- because there is a major, as Brad said, a major mismatch between the need of the labor market in Saudi Arabia and the curricula of the different educational institutions, and I'm not talking here about universities only. The single thing in my opinion that might jeopardize the efforts to Saudization or the indigenization of the labor force is this one. But, only about two or three years ago, did I start hearing people in the educational sector seriously think about the need to educate as per the requirement of the labor market rather than the need to educate for the purpose of education. So, the area of training in Saudi Arabia has grown tremendously over the past few years. Saudis are realizing that if they want to get a job, they need to get their degrees; and certificates are not enough for them to get jobs. So, they are going into training programs.
I mentioned earlier the human resource development fund has been created for that purpose. We need a lot more effort in developing our educational institutions to try and satisfy the need of the labor market even further. Thank you.
Mr. Malnak:� ..In 2002, Crown Price Abdullah brought forward a broad and visionary regional peace initiative, which was adopted by the Arab League. Could this be a basis for regional peace today, including an end to violence in Iraq and Israel and Palestine? Is the Abdullah plan part of the reform process?
H.E. Usamah Al-Kurdi:� I think the major indication as I said earlier, reform that is taking place in Saudi Arabia has went beyond the borders of Saudi Arabia. I mentioned a few examples of this. The latest was the initiative for peace in Iraq. Now, I think the initiative in Beirut was an opportunity that has again been missed for peace in the Middle East as did the Saudi initiative at the Arab Summit in Fez. Was it 20 years ago or maybe even more? So, we have something at hand that in my opinion resolve the Israeli issue.
When I heard candidate Kerry talk about the dependence on foreign oil in the United States and the problems that caused the increases in price and threatens supplies from the Middle East, I remind myself when I say but these problems are in the hands of the United States. I mean they can take care of these problems. If the United States were serious as we heard earlier today, the issue in Iraq would finish, and the Palestinian-Israeli issue will be taken care of. So, there would be no problem with supplies from the Middle East. While thinking about the security of supplies from the Middle East, the United States also needs to think that it can play a major role in resolving these issues and thus resolve its security of supply problem.
But yes, I think there is a possibility. There is an offer on the table submitted from Saudi Arabia and agreed by the Arabs. But, like many such suggestions or ideas thrown at the Sharon government, nothing happens because they have a completely different agenda, but I don't want to dwell on that. Thank you very much.
Mr. Malnak:� ..What is the status of WTO negotiations, and will accession to the WTO change much in Saudi Arabia?
[Mr. Brad Bourland
responds]
H.E. Usamah Al-Kurdi:� I agree with Brad, and I would like to add three very specific benefits I think we will see.�
First, I don't think there will be an immediate impact after Saudi Arabia accedes to the WTO because I think we already applied many of the WTO rulings. I think in some cases maybe even more than countries that are already members to the WTO.
�
Let me quickly list three areas that I think of specific interest to Saudi Arabia. One is foreign investment. When we are a member in the WTO, the business and investment environment in Saudi Arabia becomes a lot more transparent as seen by these investors. When I say that, I don't necessarily mean funds coming into Saudi Arabia but investments that bring in know-how, technology and maybe even marketing skills. The second area that I think will dramatically affect the economy in Saudi Arabia is market access. We will be able to export to a lot more countries with reduced customs tariffs or any other conditions that many countries have on imports. I think our accession will open up more markets for our products, and I'm not necessarily referring to oil in this case. About 10 percent of Saudi Arabia's exports are non-oil, and I'm talking petrochemicals, pre-engineered buildings to Vietnam, flowers to Holland, peanuts to the United States, and air-conditioning units to China. I see that developing even further. The third area, despite what I said about the openness of the Saudi market, I think it will help reform, as Brad said, to have more transparency in the economy and in general. Thank you.
Mr. Malnak:� Since the establishment of the Shoura Council has there been any disagreement between the Council's recommendations and government decisions?
H.E. Usamah Al-Kurdi:� Well, I refer to the latest change in the Shura law. Previously, our resolutions went to the King as is the case with resolutions with the Council of Ministers. The law then said that the King will issue the law as he sees fit. The new law says that if the government and the Shura disagree, then the issue is brought back to the Shura for further study and evaluation before the decision of the Shura goes back to the King. In my opinion, this means that there is more emphasis on the resolutions made by the Shura than resolutions made by the government. And, yes, we did have quite a few differences. Thank you.
About Usamah al Kurdi
A member of Saudi Arabia's Consultative (Shura) Council, an important force for change in the Kingdom,
Usamah Al-Kurdi served as Secretary General of the Council of Saudi Chambers of Commerce from 1997 - 2001. He is a Member of the Board of Saudi Arabian Airlines and was Vice President of the Saudi Consulting House, a forerunner of the Saudi Arabian General Investment Authority (SAGIA). Mr. Al-Kurdi also served on the boards of Saudi Arabia's National Industrialization Company and the Royal Commission on Jubail and Yanbu (industrial cities).
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