RIYADH, 10 November 2004 — The year 2005 would pose serious challenges to the Saudi economy. One of them is to put the enormous liquidity in the Saudi economy — estimated at over SR450 billion in terms of bank deposits and investments — to work for the economy.
“Unless we create adequate investment outlets, at least part of this liquidity could seek other avenues abroad,” Osama Al-Kurdi, member of the Shoura Council, told Arab News. He added that research should be undertaken to identify additional investment outlets to prevent the flight of capital.
According to the World Tribune.com (Oct.4, 2004 edition), hundreds of Saudi companies have moved to Dubai since 2002. Most of the companies were said to have taken advantage of the liberal investment regulations in the free trade zones and industrial areas of the UAE city.
More than 1,400 companies have registered with the Dubai Chamber of Commerce and Industry since mid-2002, Middle East Newsline reported. Of these companies, 761 came from Saudi Arabia. Saudi companies have reportedly invested several billions of dollars into Dubai. Officials said they have been joined by Western companies that relocated from Saudi Arabia.
Al-Kurdi said one of the priorities could be to work out strategies for the 20 areas identified as possible candidates for privatization. “These areas, I believe, could serve as major outlets for investment of these funds. But we need to speed up the work for privatizing these sectors in order to prevent the flight of capital from the Kingdom.”
The Shoura Council member said that besides diversifying the investment channels, another area of concern was the liquidation in part of the government debt estimated at SR660 billion. This has been made possible thanks to the surge in oil revenues as a result of which the forecast budget deficit of SR30 billion will be offset by a surplus of SR56 billion, according to a study prepared by the National Commercial Bank.
“Speeding up the privatization program will help repay at least part of the government debt,” Al-Kurdi observed. “The oil price is expected to remain reasonably high next year as well. This will provide additional liquidity to the government in handling the government debt.”
He pointed out that while the oil sector was the engine of economic growth, its potential for creating job opportunities in that area was limited. “This is another challenge for the Kingdom-mobilizing the oil revenues to create job opportunities in other sectors as well as supporting the socio-economic development of the Kingdom.”