WASHINGTON, 5 March 2006 — Saudi Arabia will attract more investment to strengthen and diversify its economy by relaxing equity caps on foreign business ownership, US Commerce Secretary Carlos Gutierrez told businessmen last week during a trip to Riyadh.
Such a move would “signal investors that the Kingdom welcomes even more foreign investment, and therefore it will compete for capital with larger economies.”
Even though the oil sector will continue to play a key role in the Saudi economy, Gutierrez said, growth would be more secure if the government can diversify markets to create more employment opportunities outside this sector.
He said that some democratic reforms, more education opportunities, stronger rule of law and other changes also would help attract capital and create jobs.
Gutierrez’s week-long visit to the Middle East follows Saudi Arabia’s accession to the World Trade Organization and President George W. Bush signing a Free Trade Agreement with Bahrain.
The commerce secretary also made sure he acknowledged accomplishments Saudis have made: He applauded the Saudis for launching economic reforms that led the country to recent membership in the WTO, which he called an “important step” toward economic reform and increased transparency.
Gutierrez said the country’s accession to the WTO, which he called the crowning achievement of the reform process, would benefit people and the economy only if the government implements its accession commitments.
Saudi Arabia currently allows full foreign ownership of property and licensed projects, but not in several important sectors, including oil exploration and production, pipelines, media and publishing, and some services, where foreign ownership is restricted.
Under the WTO accession agreement, the country has agreed to relax foreign investment restrictions in insurance, banking and telecommunications services.
A stronger business relationship between the United States and Saudi Arabia, he said, is in the interest of both countries.
Riyadh was the first stop in the commerce secretary’s trip to the Middle East, which also included Bahrain, Egypt and an unscheduled trip to Afghanistan, where he applauded that government’s efforts to open its markets to foreign investment.
Throughout his travels he repeated his mantra of promoting stronger commercial ties between the United States and the region, encouraging economic reforms, and promoting investment, private sector development and better protection of intellectual property rights (IPR).
In Bahrain, Gutierrez spoke of the significance of IPR for the US economy and other countries. He said that, in the long run, even fast-growing developing countries would lose if they have weak IPR enforcement.
Gutierrez said the US free trade agreement (FTA) with Bahrain, signed into law by President Bush in January, would be implemented once the government in that country makes a few modifications to its laws concerning IPR protection.
President Bush signed the United States-Bahrain Free Trade Agreement Implementation Act into law Jan. 11, opening tariff-free bilateral trade in all industrial and consumer goods and creating new opportunities for trade in services and agricultural goods.
White House Press Secretary Scott McClellan said the new agreement as a significant step toward Bush’s goal of creating a Middle East Free Trade Area (MEFTA) by 2013.
“Through MEFTA, the United States seeks to expand trade with and investment in Middle East countries to further their domestic reforms and the rule of law, protect intellectual property, and create a foundation for economic growth and prosperity,” he said.
The US and Bahrain governments signed the agreement on Sept. 14, 2004, and the United States Congress approved the agreement in December 2005.
Bahrain is the third Arab country to enter into a free-trade agreement with the United States after Jordan and Morocco. The United States is set to sign another free-trade agreement with Oman next week and is negotiating a similar agreement with the United Arab Emirates.