In the age of globalization and interdependence, the Middle East and Asia are realizing that they cannot interact only at the periphery. In an effort to step up mainstream cooperation, the two regions are looking beyond oil and exploring opportunities in various sectors. In this backdrop, the visit of Crown Prince Sultan of Saudi Arabia to Singapore is part of a new momentum to forge political ties using the economic path.
The current discussion between the two countries is an extension of the interaction during last year’s Asia-Middle East Dialogue, in which both countries were steering committee members. The dialogue — held for the first time in Singapore and scheduled for Cairo in 2007 — between eminent persons of both regions aims to promote better understanding and throws open the doors for closer cooperation in all areas. Singapore suggests that this goes beyond the “dialogue between civilizations...it is political, economic and social”. By cultivating familiarity and building trust, the two countries now have the opportunity to play bridging roles between the two regions.
The stage is well set for improved bilateral ties, which is grounded in the approximately $7-billion trade. In a convergence of interests, Singapore is reaching out to the Middle East, as Saudi Arabia looks to East Asia as a major site for its investments. As a reputable player in finance, Singapore is showcasing itself as a well-positioned partner for Saudi Arabia to take advantage of and engage in joint ventures in the region. Singapore is also aiming to tap into many opportunities as the Kingdom attempts to diversify its economy. In this process, Singapore has identified three key areas for collaboration — banking, capital markets and fund management.
Singapore must take note that Saudi Arabia has launched a plan that would expand its industrial base. According to the 2005 World Investment Report, Saudi Arabia received $1.9 billion in foreign direct investment in 2004. To attract FDI, the Kingdom is encouraging different kinds of incentives, including a tax credit formula for investments in less developed regions, a re-export zone and more streamlined processing.
Further, Singapore’s business corporations have been presented with a multibillion dollar opportunity to consider mega-infrastructure projects in the Kingdom. The Saudi Arabian General Investment Authority is presently conducting a comprehensive survey of some 400 new investment opportunities across the country and seeking investment worth nearly $800 billion in key sectors such as petrochemicals, natural gas, tourism, desalination, power generation, telecommunications, information technology and railways. In particular, the King Abdullah Economic City (KAEC) launched in December last year, is designed to accommodate investment projects worth $27 billion. Apart from investment and expertise in these areas, Saudi Arabia also wants to tap Singapore’s experience in developing a seaport at the KAEC. The Kingdom has a lot to learn from Singapore in issues related to environment protection and water conservation as well.
Saudi Arabia also wants to work closely with Singapore to launch into the Southeast Asian region and is planning to set up a dedicated investment promotion office in Singapore. Conversely, the Saudi investment agency believes Singapore companies can use the Kingdom to reach out to people in the Middle East
Plans to intensify Saudi-Singapore cooperation during Crown Prince Sultan’s visit include setting up a joint business council, as well as signing double taxation and investment guarantee agreements. Singapore has also been urging Middle Eastern countries to use the republic as a launch pad to embark on projects in the Asia Pacific region. One country which Singapore can help the Saudi market penetrate is China. Singapore has knowledge of the workings of China and its leaders, which the Saudi business community could greatly benefit from.
Beyond all these, Singapore is the epitome of cleanliness, greenery and efficiency. With a population of about four million, the 683-square kilometer city-state or a “red dot” is mostly Chinese inhabited, and surrounded by two predominantly Muslim countries — Malaysia and Indonesia. While Islam is practiced by about 16 percent of the Singapore population, more importantly, it has ensured that the society consisting of Chinese, Malays and Indians live side by side in harmony.
Further, the story of how Singapore moved from “Third World to First” is relevant to many countries in the region, including Saudi Arabia. Singapore’s pressing issues four decades ago — unemployment, housing, education and economic stagnation — are problems of great concern to the region now. Singapore is now the wealthiest among the 10 members of the Association of Southeast Asian Nations. It has a very highly developed market-based economy, and ranks 25th on the Human Development Index. The per capita GDP in 2005 was $30,228 and unemployment rate in early 2006 as low as 2.5 percent. Moreover, the economy of one of the four original East Asian Tigers is expected to grow by four-six percent in 2006.
The unique factor is that its approach to development is dramatically different from Western approaches. It stresses on traditional value systems, which emphasize hard work and family life. Strict laws have often been cited by foreign companies as one of the reasons for investing in Singapore. All these have contributed to Singapore being rated as the least-corrupt country in Asia and amongst the 10 cleanest in the world by Transparency International. In the same vein, Singapore has consistently rejected wholesale Western democratic values, suggesting that there should not be a “one-size-fits-all” solution to democracy, a stand that Saudi Arabia is also voicing along its road to reforms. At the heart of the Singapore model is the social contract, which propagates that if the people are willing to accept more government control, give up some individual rights, and work hard, the government would create the environment that would deliver prosperity and a better quality of life.
In the process of achieving its economic success, Singapore has attached great importance to the development of human resources. The budget allocated to education on average stands at about 20 percent. The education is rigorous and specialized, and it has created high-standard institutions, which Saudi Arabia can benefit from especially in producing a new breed of professionals in the future for the IT and services sectors. In fact, it is encouraging to know that the Kingdom has now decided to send 500 students each year to Singapore universities to study a variety of disciplines.
Singapore could also take advantage of Saudi Arabia’s good ties with Malaysia and Indonesia to overcome its differences with its two big neighbors. Though they have economic and cultural ties, Singapore has a history of diplomatic spats, including a row over Malaysia’s supply of water to Singapore and the construction of a bridge to replace the existing causeway. In the case of Jakarta, a tense relationship has been accentuated since 2002 after Singapore claimed that terrorist leaders are at large in Indonesia. Thus, the relationship between Saudi Arabia and Singapore is set to enter a win-win phase, where both could serve as a springboard not only for each other’s benefit, but for their regions as well.
— Abdulaziz Sager is the chairman of the Gulf Research Center in Dubai.
