JEDDAH, 22 January — The challenges facing Saudi Arabia in its bid to attract foreign investment were outlined by speakers on the second day of the three-day Jeddah Economic Forum at the Lailaty Hall here yesterday.
"Education is the basis for making any country attractive to foreign investment. But governments must provide world class infrastructure for companies that want to come and invest," Lester C. Thurow, professor of management and economics at Massachusetts Institute of Technology Sloan School of Management, said during his lecture on the "Future of e-business."
To play at the highest level, however, a government of a developing country must also spend a great deal of time and money on research and development, he said. "Good government is a platform builder. Without that platform, private companies cannot flourish," said Thurow who also addressed a press conference later.
He was speaking after former French President Valery Giscard d'Estaing's keynote address in which the French leader called for the removal of barriers among GCC states and to take up the challenge of globalization. He also urged them to follow the EU's lead with economic and political union.
D'Estaing told the Gulf states to press ahead with planned financial union through the abolition of all trade barriers, the formation of monetary union, and then a single currency. He also predicted that the euro, though weak at present, would become a strong, stable currency that would increase investor confidence. Here was a lesson for a Gulf union to follow, he added.
According to Thurow, the future of e-commerce is "very bright" and recent fluctuations and downward trends related to the IT stocks is a "passing phase."
What was happening in the e-commerce sector was something like what happened between 1900 and 1925 in the US automobile industry. Starting from 1900, as many as 1,000 manufacturers of automobiles entered the market, but by 1925 only 10 remained in the field. However, the size of the automobile market kept expanding. What is more, the number of US car manufacturers has come down to three.
"E-commerce seems to be passing through a similar situation. Many of the dotcom players are going out of business. Only strong, intuitive and dedicated companies will survive in business and expand the scope of the market," he said.
Economists, according to him, are predicting a 90 percent success despite the concerns of sociologists that e-commerce has "dehumanized" the way of doing business.
Dispelling concerns about e-commerce being expensive, Thurow said: "In fact, it will be much cheaper and affordable because it dispenses with investments in business property, huge stocks, large workforce, and middlemen, and enables faster interaction between manufacturers/suppliers and consumers."
He said e-commerce would be easily acceptable to future consumers because the PC, the tool of e-commerce, would be available at most of the workplaces and educational institutions, and even homes.
Professor Glen Urban, the former dean of MIT and member of the MIT Sloan School of Management, spoke on "The promise and reality of the Internet." He said the Internet had a promising future as it had already revolutionized many industries including stock trading, automobile, travel, telecom/computer and games.
Dr. Abdulaziz Jazzar, president and CEO of International Systems Engineering Co. which was formed under the Kingdom's Offset Program, was the discussant. He is also member of the board of directors of the Riyadh Chamber of Commerce & Industry (RCCI).
Yoichi Morishita, executive chairman of the board of Japan's Matsushita Electric Industrial Company Ltd., spoke extensively on the dramatic changes in Internet technology and its impact on the quality of life in the very near future. He said all electrical appliances should be Internet-enabled through the use of mobile and WAP services. The Internet should be used as a support for communication, he said. He claimed that the world was only seeing the first glimpses of how technology would revolutionize life.
Morishita, who has had a long and illustrious career at the company, has held public offices and has been the vice chairman of the Japan Federation of Economic Organizations, and vice chairman of the Electrical Industries Association of Japan. He has won several national and overseas awards.
Sir Mark Moody Stuart, chairman of the Royal Dutch/Shell Group which is in the process of investing in the Kingdom's gas sector, spoke on "Building connections, meeting challenges and enabling progress." He dwelt on the contribution Shell could make to the Kingdom's economy and emphasized the company's partnership strategy with countries for success in the new world economy.
"Change is nothing new. The world is constantly evolving. Were the changes in the last part of the 20th century really more fundamental than those a century ago? Perhaps not, although they have affected many more people. But change seems to be accelerating. There are many reasons, including the increasing effort devoted to scientific and technological advance. Particularly powerful is the pervasive potential of new information and communications technologies to enable change in almost every area of human activity. The impact of these technologies on business -- the theme of this session -- will be profound," he said.
According to Stuart, although oil will remain dominant and secure as the most efficient source of energy, gas will become increasingly important because of its convenience, efficiency, cleanliness and lower carbon intensity. Gas consumption could more than double in 20 years, he said, adding: "Demand for oil, together with liquids from gas and heavy oil, should remain buoyant.”
Loay Hisham Nazer, executive chairman of the Nazer Group, the discussant who introduced Sir Stuart, is currently a member of Young Presidents' Organization's Regional Board for Asia and the South Pacific. He also sits on the National Health Insurance Committee of the RCCI and the WTO Committee at the Jeddah Chamber of Commerce & Industry (JCCI).
Prince Abdullah ibn Faisal ibn Turki, governor of the Saudi Arabian General Investment Authority, spoke eloquently on "Preparing the climate for a knowledge-based economy; the balance between being an early mover and getting it right" at the forum's inaugural ceremony on Saturday. He wanted Saudis to look to knowledge industries as opportunities to diversify the economy and complement the other economic sectors developed in recent decades.
"To prepare for the knowledge-based economy, the Kingdom today has embarked on a number of initiatives to help lay a solid foundation for the new industries. The initiatives have addressed the issues of digital infrastructure, financial services, inter-trade deregulation and human resource development," Prince Abdullah said.
On the financial services front, he added, the Kingdom is actively working on establishing a framework for the setting up of an electronic clearing gateway, which will enable the use of business-to-business and business-to-consumer portals during financial transactions, he said.
In the area of international trade, the Kingdom was committed to be part of the WTO, he said, adding: "The Kingdom has signed bilateral agreements with several trading partners, including Japan, Australia, Pakistan and Uruguay. Additionally a similar agreement with the EU is imminent."
According to him, the combination of WTO compliance and the advances that we are witnessing in technology will open new markets to us all. Markets that were only accessible to the few, due to either regulations or high barriers to entry will become accessible to many. In the information age, small and medium sized firms can compete with their giant counterparts. There is no shortage of entrepreneur success stories. Business survival is no longer confined to the fittest; survival will be for businesses that are able to adapt to change faster than their rivals. Equally on a macroeconomic level, I believe, the same rules apply. Economies that can adapt to change faster than their rivals stand to gain from being an early mover.
"The speed at which change and technology are racing makes our tasks tougher and more challenging. We need to move forward even though we might not have all the answers. If we wait till all the traffic lights turn green, we'll never go anywhere. It's important that we strike a balance between being early movers in the region and getting it right. This is the biggest challenge in preparing for the imminent arrival of the knowledge-based economy in the Kingdom," he added.
