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To: IndioBlues who wrote (55718)	11/30/1999 11:16:00 PM
From: Tomas	Read Replies (1) \| Respond to of 95453

Saudis start to admit economic realities - Financial Times, December 1 By Robin Allen On the internal web site of the World Bank and the International Monetary Fund, staff members can find statistical information on the public finances of member states simply by accessing the relevant page. Except for Saudi Arabia, whose page is blocked to anyone without special clearance. To the Saudi bureaucracy affairs of state remain private matters, to be discussed only with a select few insiders. It therefore came as something of a surprise when Crown Prince Abdullah, the 76-year-old first deputy prime minister recently delivered a blunt appraisal of the nation's economic health. These have been reinforced by stark assessments of the country's declining competitiveness by the Jeddah-based National Commercial Bank (NCB), and by warnings of structural weaknesses from the International Monetary Fund. After a decade of swollen current account and budget deficits and with a stagnant oil-dependent economy, the Saudi public is being confronted with harsh realities: the state no longer has enough money to look after its 12m citizens in the style to which they have become accustomed over the past 25 years. Structural changes, they are being told, are inevitable and the reasons for them compelling. Saudi Arabia's combined public and private sector investment in 1998 amounted to SR81.8bn ($21.8bn), only 16 per cent of gross domestic product, 40 per cent less than the average for all developing countries and much of it inefficient. Over the past 18 years, according to the NCB, real economic growth has averaged a mere 0.2 per cent - nowhere near enough, according to US analyst Anthony Cordesman, to sustain 1.89 per cent annual growth in population. Over the same period, annual per capita income, according to the NCB, has fallen by 55 per cent to $6,441 compared with an average 160 per cent rise in Asian countries which never had Saudi Arabia's abundant oil assets. By contrast, US banking analysts say the value of liquid portfolio investments held in western equity markets by 80,000 wealthy Saudis, less than 1 per cent of the population, had reached well over $500bn by last September. US officials cite an unprecedented spate of bank robberies since last December in Riyadh and provincial cities as evidence of growing poverty across the country. Even this year's buoyant oil prices will not be enough to bring the current account back into surplus. The IMF predicts another, albeit smaller, current account deficit of $3.7bn this year against $12.9bn last year. Saudi Arabia is having to borrow overseas to finance the purchase of civilian aircraft. The borrowing last week of $1.94bn for the Saudi Arabian Airlines now brings total foreign debt to $9bn - though this is still only 7 per cent of GDP. The only bright fiscal note of the year is a smaller projected budget deficit. According to Middle East Capital Group, the deficit could be SR25bn, 43 per cent down on last year, while recent increases in utility and telephone charges, petrol prices, employment visa fees, and the introduction of an airport tax will yield an extra SR600m. Last December, with oil prices falling below $10 a barrel, Prince Abdullah warned assembled monarchs and princes at the Gulf Arab summit in Abu Dhabi that "the days of abundant oil revenues are over and will not return". Undeterred by last summer's oil price recovery, Prince Abdullah, half- brother of the ailing monarch and prime minister King Fahd Bin Abdul, shrewdly chose the end of August, a time when the Saudi elite prefer to be on holiday, to set up the Supreme Economic Council. The council initiated proposals to make the kingdom more attractive to foreign investors. These include allowing foreign investors to own land and shares, cutting tax rates on foreign companies, improving transparency in share trading, updating labour regulations; and possibly allowing western energy companies into the sacred preserves of upstream oil. But analysts say these measures will not be enough without reform of the civil service, not least to control the growth of recurrent expenditure. However, there are social and political dangers in trimming public sector salaries, which have remained unchanged for 22 years. The sweeping nature of Prince Abdullah's initiatives, many US and Saudi analysts agree, has profound implications for the country's social and political structure. "Managing change in an autocratic system," said one US official, "requires consummate political skill."