| Editor's
Note:
The
Saudi-US Relations Information Service
is pleased to provide its readers with
participants' remarks from the April
27, 2004 conference hosted by the Center
for Strategic and International
Studies and the U.S.-Saudi
Arabian Business Council.
The conference addressed U.S.-Saudi
relations and global energy security
with high-level speakers from the
United States and Saudi Arabia.
The conference explored the link
between affordable energy and economic
growth. It
is important to bring you the comments
of leaders from Saudi Arabia and the
United States on these important
issues.
The
following are introductory remarks
made by Eric Peterson, Senior
Vice President and Schreyer Chair
Holder, CSIS, and
His Excellency Dr. Ibrahim Al-Assaf, Minister of
Finance, Kingdom of Saudi Arabia.
Click
below to read previous transcripts
from this conference:
U.S.-Saudi
Relations and Global Energy Security
Eric Peterson,
Senior
Vice President and Schreyer Chair
Holder, CSIS: Good afternoon, ladies and
gentlemen. I'm Eric Peterson. I'm
Senior Vice President and Director of
the newly formed Global Strategy
Institute at CSIS. It gives me great
pleasure to moderate this discussion
this afternoon on the broader issues
associated with the challenges of
energy and the global economy.
Our two
speakers require no introduction so
I'll be very short. I understand that
the full description of their
backgrounds is available to you. But
I'd like to begin by introducing His
Excellence Dr. Ibrahim Al-Assaf who is
Minister of finance of the Kingdom of
Saudi Arabia.
Dr. Al-Assaf
was appointed Minister of Finance and
National Economy in January 1995. From
July 1995 until October of 1995 he
served as the Vice Governor of the
Saudi Arabia Monetary Agency. In
October 1995 he was appointed Minister
of State and a member of the Council
of Ministers.
Dr. Al-Assaf
earned a Bachelor's degree in
economics and political science in
1971 from King Saud University in
Riyadh. He received a Master's degree
in economics from the University of
Denver in 1976; a PhD in economics
from Colorado State University.
In his
capacity as Minister of Finance Dr.
Al-Assaf serves as Chairman of the
Board of the directors of a number of
institutions including the Public
Investment Fund, the Pension Fund, the
Saudi Fund for Development, the Real
Estate Department Fund, the Saudi
Industrial Development Bank Fund, and
the Saudi Arabian Agricultural Bank,
among
others.
He
also serves as Vice Chairman of the
Supreme Economic Council's permanent
committee and the higher committed,
Preferred Minister of Reform. These
are only a few of the remarkable
credentials that Minister Al-Assaf
brings to the table. I hope you'll
have a look at the full bio that we've
made available to you, but it is now
my pleasure to welcome him to this
podium.
Mr. Minister?
[Applause]
His Excellency Dr. Ibrahim Al-Assaf, Minister of
Finance, Kingdom of Saudi Arabia: Ladies
and gentlemen, it's indeed an honor to
address this distinguished assembly.
I would like
first to thank the Center for
Strategic and International Studies
and the U.S.-Saudi Arabian Business
Council for arranging this meeting.
I am
confident that this occasion will help
promote greater cooperation and deepen
the special relationship between our
two countries.
It's also
indeed my pleasure to sure this
session and the podium with my dear
friend Jim Wolfensohn, and I would
like to take this opportunity and in
front of this distinguished gathering
to thank him very much for his
relentless efforts and energy to help
developing countries including Arab
countries and especially the
Palestinian people in the West Bank
and Gaza.
Ladies and
gentlemen, I would start by
reiterating the same points raised by
previous speakers and emphasizing the
longstanding and important
relationship between the United States
and Saudi Arabia that started with one
commodity, oil, and developed to a
comprehensive business relationship
between our two countries.
This
relationship obviously helped both
sides. Of course Mr. Jum'ah mentioned
some of the relationships as far as
the oil industry but also in other
areas as well. And it helped Saudi
Arabia to develop its oil industry,
develop also the private sector, and benefited
the business community.
Of course as
I mentioned the beginning was with the
oil and we invested the returns from
the production in oil to the benefit
of our people and to the development
of our economy. And I would like to
say that as our economy grows, so the
opportunities for increasing
investments and exports by U. S. firms
also will develop. And it is from this
perspective that the impact of the
rise of oil prices in global economy
should be viewed. Indeed the impact of
higher oil prices in consuming
countries could be partially or fully
offset by the higher exports to oil
producing countries as well as
increased investment opportunities.
Here it's
worth noting that increasing oil
prices over the past year should be
viewed in the context of the broad
based rally in commodities. Indeed, a
number of commodities have risen at a
much faster pace than oil. For example
coal rose by more than 60 percent,
while metals rose by more than 50
percent. It's also important to note
that the rise in oil prices have been
offset in part by the depreciation of
the [inaudible].
That said,
oil revenues fluctuations remain a
major challenge. Sharp swings in oil
prices are clearly harmful to
economies of both the producers and
consumers. Saudi Arabia therefore
remains fully committed to making
every effort to maintain stability in
oil prices and I don't need to
elaborate on this because Minister
Naimi already eloquently addressed
that.
To this end
oil policy would remain focused at
meeting our development needs while
helping to ensure the supply of oil
necessary for global prosperity.
Our success
in reducing oil price swings will also
require strengthening the dialogue
between the producers and consumers,
especially under the framework of the
International Energy Forum which has a
Secretariat in Riyadh.
Efforts to
address the geopolitical uncertainties
in the Middle East are also a
priority. In addition, it's important
to reduce the limits of refining
capacity, and again this is something
that has been discussed earlier, and
discourage speculation in the oil
market, especially by hedge funds.
Let me also
add to this, and here I'm referring
back to our discussions earlier this
week in the International Monetary and
Financial Committee of the IMF, where
the discussion focused to some extent
on the oil prices and their impact on
the world economy. There one of my
colleagues from one of the developed
countries stressed the point that
stability is good for both producers
and consumers, and I intervened and I
told him that I strongly agree with
him, and because this is a stated
position of my country. However I
would like, and I plead with him and
his colleagues from the major
consuming countries to remember these
words when the price of oil declines.
Not only to remember it when the price
of oil increases. I hope that will be
the case. [Laughter]
But I also
immediately followed that by saying I
hope we will not see this in the near
future. [Laughter]
As far as
these fluctuations, one has to think
that not only the OPEC countries and
oil producers have to make the
efforts, but I guess in these cases
major consuming countries should think
of their own policies and instruments
that are available to them to address
these higher prices, and here I have
in mind looking back to the tax
regimes on oil products.
As we know,
the taxes and oil products and oil are
very high and the crude component of
that is really small. So even
consuming countries have a way to
mitigate the increase of oil prices
and I hope this will be one element
that they should be looking at.
I would like
to also address one point from my
perspective as a Finance Minister and
also as a member of the Board of Saudi
Aramco and the Supreme Petroleum and
Mineral Council. Here while, and I
want to address the issue of the
excess capacity. Of course as a
Finance Minister it's very challenging
to see these investments in excess
capacity,
but again because of the points that
were mentioned by Minister Naimi, this
is a commitment by the government to
invest in that capacity, even during
the very difficult times in our fiscal
situation. So we have proven that
commitment during good as well as
difficult times.
Another area,
and again Abdallah Jum'ah addressed,
but I wanted to allude to that from my
perspective, is that unlike the other
producing countries where they fell in
the trap of perhaps treating their oil
companies like any other entity, we
are lucky in Saudi Arabia to treat our
oil industry as a real business
without the intervention by the government,
and I'm sure Abdallah Jum'ah will
remind me of this whenever he requests
some funding for some of his projects
if we hesitate to approve them, but I
wanted to say it in front of this
distinguished audience.
Going
forward, the outlook for our economy
is bright, for this year and over the
medium term. We expect private
investment and growth to gain momentum
in view of the improved global
economic outlook and the government's
continued commitment to broaden
microeconomic policies and structural
reforms.
These good
prospects should further enhance the
opportunities for U. S. companies and
we will continue to have a high
priority for maintaining a stable and
enabling microeconomic environment.
Monetary
policy will remain focused on ensuring
low inflation and nominal exchange
rate stability vis-a-vis the U.S.
dollar, and for the fiscal front we
continue to aim at balancing the
budget and improving the structure in
order to place the debt ratio on a
declining trend over the medium term.
To this end efforts are ongoing to
improve the budget implementation and
further strengthen the expenditure
controls.
We will also
continue to stress the cost recovery
of government goods and services with
regard to protecting the most
vulnerable segments of our population.
On the
revenue side we will persist in
broadening the revenue base, improving
the efficiency, and strengthening the
administrative capacity. Besides
maintaining macroeconomic prudence we
have embarked on a second generation
of reforms to accelerate growth and
address the job needs for the rapidly
growing population. Since the late
1990s the forecast of reform has been
on institutional, legal and regulatory
environment to help ensure an even
friendlier environment for the private
sector.
To this end a
number of institutions were developed
to better address economic issues,
promote domestic and foreign
investment, and develop the tourism
sector.
Let me just
quickly mention a few of these. The
first one is the revised tax law where
the tax has been reduced to 20 percent
from its original rate of 45 percent,
as well as having an indefinite loss
carry forward for investors and also
to have the tax law as a transparent
one.
Another
development is that of the capital
market law as well as the insurance
law, and we believe because of these
developments and three major reforms
we will have an exciting period ahead
of us, especially in the financial
sector.
Of course if
we want to provide jobs for our
growing population we need to get the
right skills to do that and the
government has been engaged over the
last few years, but especially the
last year, in implementing a number of
comprehensive policies to address that
including a decision to train 10,000
Saudis every year in special areas as
well as opening 20 technical colleges
for our students and more vocational
training centers. I'm saying this to
show how we are shifting more and more
to providing the skills that the
economy needs rather than the liberal
arts and others that are low demand.
We are moving with these areas. In
addition to what I just mentioned we
have now a human resource development
fund that provides funding for
training and whether they are
individuals or institutions. And just
very recently we have had a ministry
dedicated to labor issues. We hope all
these efforts will focus on the
development of the skills needed for
our economy.
Saudi Arabia
continues also to be at the forefront
-- this is another issue I would like
to address and I'm sure it will be
something the audience would like to
hear, addressing Saudi Arabia's at the
forefront of dealing with
international efforts to combat money
laundering and financing terrorism.
Here we have adopted a number of
policies earlier on to prevent that.
Many year ago actually we have that,
and [Governor Siari] of course on top
of that as far as the regulations to
know your customer, to monitor and
prosecute illegal transfer of money.
We have adopted also a new law in
money laundering and financing
terrorism. This is one of the toughest
in the world. In addition to that just
recently we have decided to have one
agency to be in charge of charities
outside Saudi Arabia. No individual or
institutions can transfer money to
charities outside Saudi Arabia except
through this agency.
No one is
allowed to collect money in Saudi
Arabia except after the approval of
this agency and making sure that the
money will go to the indicated
charities outside and make sure that
the governments of the recipient
countries also are agreeable to the
funding. Again this is something that
I don't think there is any country in
the world that has adopted such strong
measures to cut the financing of
terrorists.
I'm glad to
say because of this we have received
high marks from the [FAT] and we had a
joint report on our policies to
address financing of terrorism and the
results of the evaluation were very
positive on this. Again, Saudi Arabia
was one of the first countries to move
or to have these joint reports.
Let me for
the sake of brevity stop here and I
will be pleased to receive any
questions that you have. But I just
want to conclude by saying that the
long relationship between our two
countries have been mutually
beneficial for the two peoples and two
governments and I'm sure there are
more benefits ahead with the
development of Saudi Arabia and the
involvement of the American private
sector in that development.
Thank you
very much.
[Applause]
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