A group of intellectuals and academics attended a forum organized by Asharq Al-Awsat, a sister publication of Arab News, in Riyadh recently to discuss Saudi-US relations after the Sept. 11, 2001 events from a Saudi perspective. In this, the second of a four-part series, Tariq Al-Homayed, the Jeddah-based managing editor of the paper, writes on finance and business.

In the second session devoted to finance and business, the discussion was focused on the volume of Saudi money invested in the United States, the future of Saudi investments abroad, the possible repatriation of Saudi money and the effect of capital on the decision making process.

Financial consultant Bishr Bakheet put the amount of Saudi money invested in the stock markets, treasury bonds and bank deposits abroad at $800 billion. But in the absence of any official statistics or a defined mechanism regulating this activity, he said it is very difficult to arrive at a reliable figure. According to him, the US stock market accounts for 70 percent of the investments, or $500 billion to $600 billion.

Bakheet cast doubts on the amount of money reported to have been withdrawn by Saudi investors from the US. The claim that hundreds of billions were withdrawn remains just a claim, he insisted.

Dr. Marwan Samman, advisor to the governor of the Saudi General Investment Authority, agreed by saying that the Kingdom lacks the mechanism to suddenly absorb such an enormous inflow of money.

Businessman and writer, Hussein Shobokshi said neither the Saudis nor the Americans are able to determine the exact figure. Such investments, he explained, may be conducted through companies in Britain or Latin America. These are mostly stopovers that leave no trace.

Quoting American centers that monitor money transfers, Dr. Nasser Al-Tayyar, chairman of Al-Tayyar Group, said the Saudi money withdrawn from the US could be in the range of $100 million. Al-Tayyar is a strong opponent of withdrawing Saudi money from the US, and argues that in the long term it is the Saudis themselves who will suffer. The US, he said, is a huge market that must be accessed by Saudis.

Investors, said Ala’a Al-Jabri, director of international relations at the National Commercial Bank, usually look for two things: The safety of their money and a handsome return. These seem not to have been on offer in America following the Sept. 11 attacks.

Bakheet said the American stock market had been shrinking and was threatened with collapse long before the Sept. 11 attacks.

Given such circumstances, it was natural for money to leave the country.

Shobokshi agreed, saying the current American administration inherited an economic recession the signs of which appeared in the last years of Bill Clinton’s tenure.

As global investors, Saudis follow their interests, going where there is maximum profit, he explained. So there is no harm in Saudi money being invested or withdrawn as directed by the conditions of the market.

Dr. Al-Tayyar stressed the need for Saudis to invest in America, saying that investment shouldn’t always be taken to mean oil. Saudis, he said, have missed many opportunities before, especially in such vital areas as hotels, tourism and aviation.

Citing Kuwaitis as an example, he said although the volume of Kuwaiti money abroad is less than that of Saudis, the Kuwaiti presence in Western companies is more prominent and their influence much greater than that of the Saudis.

Kuwaitis now own banks and hotels abroad and this prominent presence allows them to have a strong say in the decision-making process.

Al-Tayyar cautioned against confusing patriotism with investment, saying that what matters at the end is economic feasibility.

The forum then moved to the issue of “economic boycott” and over 90 minutes the attendees debated the merits of applying it as a weapon.

The participants agreed on the need to make use of the tool as a symbolic measure. However, Al-Jabri called for any boycott to be carefully planned to serve a clear purpose which should not be launched from a patriotic and nationalist platform. Traders and even politicians in many parts of the world promote the boycott because they are driven by illogical or unrealistic objectives, he added.

Dr. Marwan Samman said all the parties who may be affected by the boycott should be taken into consideration because ultimately it is the Saudi consumer who will suffer. Any damage suffered by local traders will be passed on to the consumer.

Shobokshi asked whether we would be able to cope with a boycott of American goods, saying it is a question that remains to be answered. It is important not to generalize but rather to draw a distinction between boycotting goods and boycotting companies. The Saudi-US relations as a whole continue to suffer from this generalization with the Americans labeling all Saudi people as terrorists. “Some American firms considered as strategic partners in the region are doing less business transactions with Israel than they do with Arab countries. Diabetic patients in Saudi Arabia account for 42 percent of the total population and there are two American firms that make insulin. Can we live without this medication? I don’t think so,” said Shobokshi.

A company like Caterpillar that helped build Jubail and Yanbu industrial cities and many hospitals, schools and airports in the Kingdom should not be treated as firms like Starbucks and Marks & Spencer who provide support to Israeli, he said.

What matters, explained Shobokshi, is internal reform and transparency to serve our own interest and not the interest of America or any other party. Dr. Samman was of the view that the boycott exists only to send a message to the American government that there is public discontent over its policies on the Palestinian question.

He rejected using the boycott as a weapon that could backfire on the Saudi and Arab markets at a time when these markets need more investment and higher growth rates.

The boycott wasn’t the only topic that generated heated debate. Transparency, too, was the focus of discussion, with the participants calling for more resilient and open regulations to attract capital and steer investment in the tourist sector.

Shobokshi said that they had asked the minister of finance and national economy four times in the past to approach the media to explain the state budget, but the ministry “continues to deal with us in secrecy.”

In what was seen as an unprecedented move, the Shoura Council recently started debating the budget.

The participants also called for transparency when it comes to issuing tourist visas by Saudi embassies abroad to encourage tourism and infrastructure projects.

Dr. Al-Tayyar said in other parts of the world it was the ambassadors and consuls who promote tourism by encouraging people to visit their countries. Some neighboring countries even gave investment opportunities to foreign companies to encourage domestic tourism.

Al-Jabri stressed the need for flexible laws to attract investment, referring to reports that Manhattan and City Bank have cut down their investments in the Kingdom.

“Even when raising the slogan of patriotism and nationalism to attract capital, this must be backed by flexible laws that help investors make gains,” he added.

“Money settles where there is a safe haven.”

(Part III on Monday)

Opinion 16 March 2003