All eyes are on the World Economic Forum in Davos. It is the first time that the leaders of the world business community have come together since the economic crisis hit. Ironically, because of it, attendance is greater than ever. Two-and-a-half-thousand international business leaders have descended on Davos — plus a record 41 political leaders. They are desperate for ideas to pull the world out of recession.
That makes the theme at Davos, “Shaping the Post-Crisis World,” seem all the more bizarre. The crisis is far from over. Confidence remains shattered and broken. If anything, the situation is worsening. Tens of thousands of job cuts have been announced in the past few days alone, as major names go for retrenchment. A quarter of a million jobs have gone in the first four weeks of the year — and that is merely with leading companies. Most people work in small- and middle-sized companies, and the picture there is infinitely worse.
So do the Davos organizers know something that the rest of us do not with their talk of “post-crisis”? Or is this yet further confirmation that they have lost the plot? The hope has to be in the politicians, rather than the business community, which is why it is encouraging that so many political leaders are at Davos. As has been seen, it is governments that are trying to lead the way out of the crisis with massive bailouts to banks and businesses. It is major government projects that will be the path to new growth. Businesses will profit from government contracts — and that will be the key to fresh confidence.
That has been the Saudi way. For the past 30 years, growth has been government-led. That has produced success for the private sector. Wealth has been gained from government development contracts. When, a couple of days ago, Prince Miteb, the municipal and rural affairs minister, told delegates at the Global Competitiveness Forum in Riyadh that the country’s development plans would not be affected by the global recession, he was not putting a brave face on things. Saudi Arabia has, like everywhere else, been sorely affected by the recession; the Saudi Basic Industries Corporation saw fourth-quarter profits last year drop 95 percent on the same period in 2007. Other companies have seen profits fall. But that will not stall growth. The coffers are overflowing thanks to sky-high oil prices last year. The budget surplus at the end of December was SR590 billion. With expenditure this year projected at SR475 billion, the government is in the happy position of being able to fund all its spending plans without having to sell a single barrel of oil this year if it does not want to.
Saudi business has some additional advantages. Saudi banks, unlike those in the UAE, did not go into dubious, complex financial instruments nor are they heavily exposed in the property market. There is no sudden credit crunch either, for the simple reason that Saudi banks did not provide much in the way of credit in the first place. All that helps. But the road out of recession is government spending. That is Saudi Arabia’s way. So when Davos is over and business attention turns elsewhere, the likelihood is that it will turn toward Saudi Arabia. With so many projects planned and funds available, this is the land of fresh opportunity, of contracts to be won. International business will not ignore that.
