JEDDAH, 21 January — Saudi Arabia must urgently address key social and economic issues such as unemployment and diversification of the oil-based economy, Prince Alwaleed ibn Talal, chairman of Kingdom Holding Company, said here yesterday.
Prince Alwaleed was delivering his keynote address on the day two of the three-day Jeddah Economic Forum (JEF) at Hilton Hotel here.
In a broad-ranging and exploratory question and answer session that followed his speech, Prince Alwaleed tackled some of the key issues facing the society and how the economy should be managed to ensure the Kingdom’s economic future. The moderator was Amr Dabbagh, chairman of Jeddah Marketing Board.
“Our nation faces three main challenges — economic diversification, economic growth and job creation,” Alwaleed declared and explained how sharp swings in the price of oil caused gyrations in the economy.
“We must diversify the sources of income by seeking dramatic improvements in non-oil GDP growth,” he said.
The Kingdom faced other challenges, too, such as the budget deficits and the consequent public debt. “As we saw in the US through the 1990s, economic growth solves many ills,” he said.
“We’ve to diversify (the economy). Indeed this has been clearly spelled out as one of the ‘general objectives’ of the Seventh Five-Year Development plan,” the prince said.
“Our one percent average annual rate of growth over the past decade is woefully inadequate to meet current needs, let alone to cope with our galloping demographic growth, currently estimated at an annual rate of 3.5 percent making it one of the highest in the world,” he said.
The Saudi labor force is growing faster, at about 4.5 percent per year. “In fact we’ll need more than the expected six percent growth in GDP to expand the essential infrastructure to accommodate this population growth,” Alwaleed said.
“The employment challenge is especially daunting given the oil-dependence. Consider this: 40 percent of our GDP (the oil sector) is produced by 1.5 percent of our labor force. The remaining 98.5 percent of the work force is relatively unproductive,” he told the gathering.
“Any one of these three challenges constitutes a key variable for the rest. Dependence on the uncertainties of a volatile oil-market, with its fluctuating price structures, places our economy always in danger of falling short of its goals. And without diversification, we can never hope to reach the needed level of growth. And without non-oil growth, we cannot create the job opportunities at a pace that would match our population growth,” He added.
He concluded his address with a quote from Crown Prince Abdullah, deputy premier and commander of the National Guard: “The Kingdom has taken a strategic decision to attract national and foreign investments...The Kingdom is an ideal investment destination, keeping in view its political stability, population density and growing consumer market.”
Alwaleed was also a panelist in a discussion on “Is there a safe haven for global investors.”
Saleh Kamel, chairman of Dallah Albaraka, taking part in a separate panel discussion on “Safeguarding the global financial system” rejected Western charges that Islamic financial institutions were involved in funding terrorism. “Islamic banks have become a target of deliberate and unfair campaigns in the wake of the Sept. 11 terror attacks on the US.
“Islamic banks are neither charities nor fronts for terrorism. They are banking units operating under the instructions of central banks...and are subjected to various forms of supervision,” Kamel said.
“Over the past 30 years, some 200 Islamic banks and financial institutions were established and are today managing some $700 billion on the basis of Shariah. In fact, Islamic banks are held to standards of transparency even higher than those applied to traditional banks. The banks are also subjected to various levels of both internal and external auditing and monitoring,” he added.
Prince Sultan ibn Salman, secretary-general of the Supreme Commission for Tourism, has said the Sept. 11 attacks on the US have “changed some dynamics of the travel and tourism industry.”
A comprehensive tourism plan would be completed by the commission in April and approved by the government soon afterward, he said participating in a panel discussion on “Tourism and travel in today’s world” on the opening day of the third three-day Jeddah Economic Forum at Hilton Hotel on Saturday. “The plan will address almost everything, like licensing, infrastructure, manpower and more. Our main focus and challenge will be local tourism,” the prince said.
Travel in the Middle East-Gulf region has been increasing rapidly, Khalid Kanoo, chairman of Bahrain Chamber of Commerce and Industry, said. “Regional travel has increased threefold since Sept. 11,” he added.
John Van Maanen of the MIT Sloan School of Management was the moderator. Kanoo said air traffic from the Gulf Cooperation Council states to North America dropped by more than 80 percent and to Europe by 35 to 40 percent.
Regional tourism is growing faster than international travel since Sept. 11, according to Kanoo.
Professor John Quelch, senior associate dean at Harvard Business School, said vacationers in the US now preferred short trips closer to home because of the fear factor. “Travelers in the Middle East also prefer to stay within the region.”
Jean-Claude Baumgarten, president, World Travel & Tourism Council, said the industry’s revenues had dropped from 25 to 40 percent from Sept. 11.
“The industry will rebound as it did after the 1991 Gulf War and the oil crisis, but governments must play a major role in restoring confidence,” he said.
Today, the final day of the JEF, Neil Bush, brother of US President George W. Bush and chairman and CEO of Ignite! Inc., will deliver his keynote address on the global energy markets and on the role of leadership in times of crisis.
