Riyadh looks to Asia for a new economy

Riyadh looks to Asia for a new economy

Simone Cantarini [Agenzia Nova]
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Saudi Arabia, the main producing country in the area and the only economy in the Gulf with ample room for potential growth, looks to the East to support its ambitious program of economic reform

With an economic growth exceeding 6 percent, Asia has now become the main point of reference for the economies of the Gulf countries, not only as regards the demand for oil, but also in terms of trade and investments. While boasting historic economic ties with western countries, especially with the United States, Saudi Arabia, the main producing country in the area and the only economy in the Gulf with ample room for potential growth, looks to the East to support its ambitious program of economic reform, “Vision 2030‘, aimed at restructuring the country’s system by detaching it from its dependence on the oil industry. Deputy Crown Prince Mohammed bin Salman’s journey to China and Japan, which began on August 27 and ended on September 2, a few days before the G20 in Guangzhou, attests to this new course, defined by the leading Saudi state newspaper – “Arab News‘ – as “a giant step in the implementation of Vision 2030‘. The increasing interest in the resumption of relations with Asian countries, shows that the West is no longer the only lighthouse for the Saudi economy, and the role that was once played by U.S. and European countries is now partly covered by Chinese, Japanese, Indian and South Korean companies. Data from 2015 are an example of this new situation, with as many as four Asian countries (China, Japan, India and South Korea) among the top five of Riyadh’s trading partners, while the only western country on the list is the United States. Washington is now the third main partner for Saudi exports, after China and Japan, which cover, 13.1 percent and 10 percent, respectively, of Saudi exports, mainly linked to the hydrocarbons sector.
The scenario is also similar as regards the origin of imports, with Beijing at the top of the list with 20 percent, followed by the United States with 15.4 percent, India with 13 percent, Germany and South Korea with 11.5 and 8.9 percent, respectively. Imports from Japan also play an important role in the Saudi economy and between 2014 and 2015 they grew by 1 percent, standing at around 6 percent of the total, largely due to vehicles (approximately 32 percent of the total).

The influence of oil prices

With an economic growth exceeding 6%, #Asia has now become the main point of reference for the #economies of the #Gulf countries

The long-term persistence of a climate of low oil prices is forcing Riyadh to radically change its economic prospects, launching into a race to raise investments and gather new skills, in order to develop industry, services and infrastructure. The Saudis seem more confident in the soundness of their agreements with the Asian giants – less prone to criticism with regard to their respect of human rights and geopolitical events – rather than with their historic western partners, especially given the current adverse climate in the Saudi kingdom, often accused of supporting terrorism, in order to establish its own hegemony in the Middle East. There are many factors contributing to Riyadh’s change of direction towards Asia: the relaunching of the U.S. oil industry through the exploitation of unconventional oil fields, considered by the Saudis as the main cause of the excess crude oil supply and the resulting fall in prices; the situation of the European Union’s economic crisis, which has led to EU growth rates of less than 2 percent; the migration crisis underway in the European continent and the consequent rise of populism; the threat of terrorist attacks in European capitals. Another key factor, which could accelerate Riyadh’s search for new partners in Asia, is the recent decision of the U.S. Congress to approve laws allowing the families of the victims of the September 11 attacks to sue the Saudi government. Observers are convinced that Riyadh fears the static nature of the west and would have now realized the importance of the Asian market and relations with the giants of the continent, even on a political level. The journey of Mohammad bin Salman, the new face of the Saudi establishment, appears to confirm this tendency. The deputy crown prince began his trip in China and Japan on August 27, accompanied by a large delegation which included the attendance of the Minister of Foreign Affairs, Adel al-Jubeir, as well as the Ministers of Energy, Khalid al-Falih, Finance, Ibrahim al-Assaf, and Trade and Investment, Majid al-Qassabi.