In our new series,
“The Middle East and the New Global Economy: The Drive for Competitiveness, Skills and Innovation,” the Middle East Youth Initiative (MEYI) turns once again to our network of scholars to ask how the region is faring. Have chronic unemployment challenges in the region been exacerbated by the economic slowdown? Has the global crisis forced a rethinking of development strategies in the region? Have ambitious programs been put on hold due to declining revenues from commodities, investment, exports and tourism?
Part 2: Diversification and Development in Saudi Arabia
Middle East Youth Initiative (MEYI): The leaders of the Group of Twenty (G-20) nations are convening at a summit in Pittsburgh September 24 and 25. Saudi Arabia is the only Arab country represented in the G-20. What issues do you think are at the top of the agenda for the Saudi government going into this summit?
The leaders of the Group of Twenty (G-20) nations are convening at a summit in Pittsburgh September 24 and 25. Saudi Arabia is the only Arab country represented in the G-20. What issues do you think are at the top of the agenda for the Saudi government going into this summit?
Hassan Hakimian: Saudi Arabia’s presence at the G-20 economic summit indicates how the balance of economic and financial power has been gradually moving eastward: toward China, India, and also the major Gulf oil-producers. Saudi Arabia has been important for a number of years: it is the largest oil-exporting country in the world, it is the largest OPEC [Organization of the Petroleum Exporting Countries] member, and naturally it is a country which has immense regional – and increasing international – significance. The economic performance of Saudi Arabia is also an important factor in any possible global recovery.
From the point of view of Saudi Arabia, attending the G-20 economic summit is important in at least two respects, both indicating Saudi Arabia’s inexorably rising ties with the international economy. First, of course, is oil prices – the prospect for oil price recovery is tied with the prospect for global growth and international economic recovery. Second, considering that Saudi Arabia’s currency is pegged to the dollar, the position of the dollar as an international reserve currency is of considerable importance to Saudi Arabia and its monetary stability. We should also remember that a significant part of the Kingdom’s vast foreign assets, topping about $500 billion, is denominated in low yield but safer U.S. Treasury bills. So, for at least these two reasons, what goes on in the wider international community will be of immediate interest to Saudi Arabia.
[As the Fed and other major central banks begin raising rates, some emerging market central banks would be forced to follow suit. Otherwise, capital would flee and their currencies would plunge in value, further aggravating inflation.] You could have a crisis if investors all decide to run for the exits at the same time.