Dr. Muhammad Al-Jasser, Minister of Economy and Planning, recently spoke to the Young Businessmen’s Committee of the Riyadh Chamber of Commerce and Industry. Though the setting would appear innocuous, Dr. Al-Jasser’s remarks were not. The theme was the Future Vision of the Saudi Economy and they are worth reading in full.
Curiously, reading it called to mind my home-town baseball team, the Washington Nationals, and how encouraging are the current prospects of this long-suffering franchise. Washington only got a team again in 2005; more than 30 years after the Washington Senators left town in 1972 to become the Texas Rangers. Their losing ways continued on their return to Washington but now, after a prolonged re-building phase, the team’s prospects are on the upswing.
Baseball insiders think they will contend for a playoff spot in 2012 and much of this optimism has to do with the Nationals’ extremely talented and remarkably young pitching staff; whose final pieces were assembled over the winter during baseball’s offseason. This group of ‘flamethrowers’ average fastball is speedier (93.4 mph) than that of any starting rotation since pitch velocity was first tracked in 2002. You can’t go far in the Major Leagues without good pitching and, if this staff reaches its potential, the Nationals could be very good for years to come.
This winter King Abdullah also made some changes to his economy, trade and finance ‘staff.’ In December 2011 he implemented a ‘minor’ reshuffle of cabinet and other key posts that included the appointment of Dr. Muhammad Al-Jasser to head the Ministry of Economy and Planning, Dr. Tafiq Al-Rabiah to become Minister of Commerce and Industry and Dr. Fahad Al-Mubarak to succeed Al-Jasser as Governor of the Saudi Arabian Monetary Agency (SAMA).
These three posts are critical to Saudi Arabia’s ambitious plans for economic growth and diversification. The Ministry of Economy and Planning is at the nexus of almost every major domestic ‘priority’ from human resources to industry to education to infrastructure. Likewise, the Ministry of Commerce and Industry is focused on industrial development and exports. SAMA – apart from playing an important role in implementing the fiscal discipline that helped Saudi Arabia weather recent global downturns – is taking an expanded role in the supervision of capital markets. This comes at a pivotal time as Saudi Arabia moves toward greater access to foreign investors as part of a larger plan build its industrial base, boost investment, spark diversification and enhance competitiveness.
While it is unlikely a Saudi official would actually be or wish to be labeled a ‘flamethrower,’ these three are, like the Nationals’ pitching staff, extremely talented and remarkably young (all in their mid-50s). They are being asked to help develop and execute national policy that will go a long way towards determining whether Saudi Arabia’s future – both near-term and post-oil – will be dismal or bright.
His Excellency Mohammed al-Jasser
Dr. Al-Jasser is the most experienced member of this ‘staff.’ It has been about four months since his appointment and his remarks at the Riyadh Chamber of Commerce reflect the serious consideration he and other leading Saudi economic strategists are giving to plotting Saudi Arabia’s path going forward. It’s an impressive discussion and vintage Al-Jasser.
Starting with a description of planning as, “the ‘art of constructing the future out of the present’ and the healthy method to dynamic structuring of the continuous process of reinforcing positive aspects and overcoming hurdles,” he reviews some of the achievements of recent Five-Year Plans; including some specific metrics ranging from cement production to infant mortality to miles of paved roads.
Demographic Window
Al-Jasser then elaborates on Saudi Arabia’s current socio-economic position as entering a ‘demographic window’ which the United Nations defines as:
…the period when the proportion of the population under 15 falls below 30 percent and the proportion of people 65 years and older is below 15 percent. The decline in the proportion of unproductive dependents provides an opportunity to improve the general standard of living since the fall in the dependency ratio results in increased savings and investment opportunities for those in the working age group.
Al-Jasser points out that Demographic statistics in the Kingdom for 1992-2011 confirm the onset of this phenomenon.
The number of children below 15 decreased from 49.2 percent in 1992 to 35.6 percent in 2011 and the number of the working age population (15-64 years) increased from 47.5 percent in 1992 to 60.9 percent in 2011. A slight rise in the 65 years and older group from 3.3 percent to 3.5 percent was also observed for that period. It is evident that this shift in the demographic structure provides the young with the opportunity to save and invest more, so that they can improve their living standard if they employed their full potential and increased their level of education and experience.
Who Implements Saudi Economic Policy?
Before launching into what must be done with regard to economic policy and its key elements – fiscal, monetary and structural – Al-Jasser outlines who is implementing that policy:
The Ministry of Finance, with the backing of the Supreme Economic Council, takes the responsibility of designing and implementing fiscal policy through the government budget. The Kingdom is in an excellent position, with government spending at its peak and government debt at its lowest level (declining from 100 percent to six percent of GDP) together with comfortable reserves even if oil revenues fall.
The Saudi Arabian Monetary Agency shoulders the responsibility of designing and implementing monetary and banking policy, which is also robust and enjoys high credibility.
The Ministry of Economy and Planning, in cooperation with other ministries and government agencies, and with directives and support from the Supreme Economic Council, takes the responsibility of structural economic policy by drafting five-year development plans and the necessary economic policies to achieve their goals.
Pivotal Points
Developing his ‘Future Vision’ theme, Al-Jasser calls out three ‘pivotal points’ that Saudi Arabia must work towards:
Human resources: Improvements in the quality, productivity and innovative capability of the workforce in the industrial and technological fields have become a pivotal point in keeping pace with the breathtaking scientific developments in a world that is becoming faster and smarter. The necessary capability of the future will not be restricted to knowledge acquisition. It will also require knowledge production, reflecting it in goods and services. That is the decisive factor in the progress of nations and their culture.
Diversification of the economy: This is the main tool for consolidating the foundations for sustained and comprehensive economic development, using a broad and diverse productive base with high linkages and active involvement of large, medium and small enterprises in production, operation and investment based on the Kingdom’s comparative advantages as well as advanced technologies. This will tend to favor high value-added products for export, and will result in more balanced development of regions in the Kingdom.
Strengthening Competitiveness: The economic and technological developments the world has witnessed since the early 90s and the accompanying economic and commercial openness in the wake of globalization have brought about new challenges to the Saudi economy and its growth. These challenges include penetration of local products to foreign markets, increasing competition in the local market between domestically produced products and imports, and stiffening competition worldwide to attract foreign capital. This requires the establishment of the basic components of the knowledge-based economy and the expansion of its scope.
His Excellency Tawfiq al-Rabiah
Al-Jasser closes by noting that the ‘center of gravity’ for Saudi Arabia’s economic future lies in enhancing labor and total factor productivity. Serious and significant progress in these areas will lead to a cascade of economic positives for Saudi Arabia.
With regard to other members of this ‘staff,’ SUSTG recently profiled Tawfiq Al-Rabiah (New Saudi Minister of Commerce and Industry HE Tawfiq al-Rabiah Active in New Role) and he was also featured in a recent Arab News item (Al-Rabiah moves to push foreign trade and investment). Dr. Al-Rabiah previously headed the Saudi Industrial Property Authority (Modon) where he championed Saudi Arabia’s economic cities and aggressive industrialization efforts while spearheading cutting edge initiatives such as the Smart Industrial Cities. He is also pushing to make the Saudi commercial offices worldwide more active and professional so they are better able to promote Saudi exports. Interestingly enough, he is widely connected through his Facebook and Twitter (20,000 followers) accounts.
His Excellency Fahad Al-Mubarak
Dr. Fahad Al-Mubarak, unlike Drs. Al-Jasser and Al-Rabiah, had not served in the government. When appointed he was Chairman of the Saudi Stock Exchange (Tadawul) and Chairman and Managing Director of Morgan Stanley Saudi Arabia. He has also served as a member of the Saudi Arabian Consultative Council (The Shoura Council) for six years, during which he served as the Vice Chairman of its Economic and Energy Committee. His deep and extensive private-sector experience with capital markets is expected to be called upon as Governor of SAMA. As noted, SAMA will be working with closely with the Saudi Capital Markets Authority to continue to open up the Tadawul to increased foreign investment. A recent SUSTG Analysis piece by Hussain Abusaaq discusses this prospect (The Opening of the Saudi Stock Market: What to Expect).
As with Major League pitchers, it is impossible to predict the future of public servants. But this staff, like that of my Washington Nationals, is very promising.
