The regional instability generated by the Arab Spring will increase the risk aversion of foreign investors and the risk premium on finance in the Kingdom, according to Richard Banks, director, Middle East, Euromoney Conferences. There is no doubt that the Arab Spring has been impacting the Saudi economy both positively and negatively. Also, the economic slowdown in countries in transition will affect exports from the Kingdom. However, once these economies are back on track (as we believe they will be), this will have a very positive effect on the Kingdom, Banks told Khalil Hanware of Arab News in an interview.
Excerpts
The theme for this year's Euromoney conference is stability, growth and jobs. What is your perception about this?
Stability, growth and jobs are the three most important outcomes of Saudi (and global) economic development. That's why we are focusing on them.
The unemployment problem is persisting in the region. Do you think the Nitaqat program will succeed in the Kingdom?
Nitaqat will help but it is not the only answer. There needs to be cultural acceptance by young Saudis that they must take whatever jobs are available, that they need to upgrade their skills and the employers must agree to train and mentor them.
What job opportunities you expect the Saudi economy will create to accommodate the young population?
Primarily in industry, finance and services. But the private sector must play a very active role in training and, in some cases, education for young employees. The employees need realistic expectations.
The conference is being held in the background of euro zone crisis. What impact do you see of euro zone crisis on the Gulf region?
Already European banks have cut credit lines to the Gulf. This is partly the cause of the regional boom in sukuk issuance — as institutions find other sources of finance. On the downside, sustained European sluggishness or even collapse could negatively affect the oil price and other regional exports.
You are termed as a long-term specialist in promoting flows of capital to emerging markets. Do you believe there is a big shift in emerging market in attracting capital?
Emerging markets still attract an absolutely smaller quantity of capital. But their percentage is growing and growing fast. This will continue.
Saudi Arabia is among the most competitive countries in the G20. What role Saudi Arabia can play in the global development?
The Kingdom can be a stable and balancing force in an unstable region, as also a prudent and long-term investor in global capital markets and as an exporter of hydrocarbons, petrochemicals and associated downstream products.
Where does Saudi Arabia stand in a world that has become a global village where local economies are closely intertwined with the global economic system?
The country has yet to decide in what way it wishes to be part of the global economy. It is already a valuable economic player — but the traditions and culture of the Kingdom are also valuable and must be balanced against purely monetary considerations. This is a vitally important challenge for every country and Saudi Arabia can lead here too.
SMEs are not playing their perceived role and are still facing many challenges. The government has undertaken many steps to boost the SME sector including cutting down on the cost and time to set up a business. What steps are needed to give a boost to SME sector?
Access to finance — equity, debt and more — is the number one need of SMEs. Second to that is training and education. The state can play a role in both these areas — but the private sector must do that as well.
What role you envisage for the private sector in diversifying the Kingdom's economic base?
The private sector is the only sector, which can diversify the industrial base. The government can help but it must be a catalyst and regulator — not an owner or manager of the means of production.
The conference will focus on investor relations in the Saudi equity market. Will this help the Tadawul in the long run?
Without doubt good IR increases shareholder returns — even if it means that buyers know which stocks to avoid. IR is transparency and the more transparent a market is, the better it is for buyers.
Do you see any consequences of the Arab Spring on Saudi economy?
Many. Both positive and negative. The regional instability generated by the Arab Spring will increase the risk aversion of foreign investors and the risk premium on finance in the Kingdom. Also, the economic slowdown in countries in transition will affect exports from the Kingdom. However, once these economies are back on track (as we believe they will be) this will have a very positive effect on the Kingdom.
