The world is counting its losses but what about the Middle East? Saudi Arabia is doing quite well considering the situation believes Youssef Al Bassam, the Vice Chairman and Managing Director of the Saudi Fund for Development (SFD).
In an exclusive interview with BUSINESS LIFE, Al Bassam recounts the initiatives that Saudi Arabia is undertaking in the region and discusses the financial crisis from an Arab point of view. It is worth noting that Al Bassam is also the Alternate Executive Director and Governor of KSA to the African Development Bank (AfDB), based in Tunis, and the Chair of the Board of Directors of the Arab Bank for Economic Development in Africa (BADEA). He is also the Chairman and KSA representative of the Administrative Committee of Al-Aqsa and Jerusalem Fund.
BL: What are your expectations for 2009?
Eng. Yousef I. Al Bassam: Most evaluations of the majority of global organizations and institutions agree that the estimated Gross World Product (GWP) growth rate in 2009 is negative, bordering around 0.5%-1.5%, which is the lowest since World War II. That can be accounted for in terms of the crises that appeared and spread to the various economic aspects in 2007, and peaked by mid-2008. The crisis is supposed to abate by mid-2009.
Global economy may witness some improvement, especially that the top world economies agreed in the G-20, held in London, to join hands, enhance the principle of supervision and regulation, pump additional funds in the economic activity through government spending, lay down the necessary policies that boost foreign investment and international trade, and consequently, spur international demand, and ultimately find new means of providing liquidity and stabilize the financial system. At present, we admit that the growth restraint is abating. Signs of stability are starting to show. That may mark the start of the economic growth rates picking up again. On that note, US President Barrack Obama referred – in his recent statements – to some positive signs of improvement in the US economy.
BL: What are your plans for the rest of the year for the African Bank for Development? What are the plans for AI-Aqsa and Jerusalem Fund and moreover what are the plans of the Arabian Gulf Fund for the Support of U.N? What are the recent developments at the Saudi Fund for Development and well as the Saudi Export Program of the SFD?
Eng. Yousef I. Al Bassam: The African Bank for Development strategy for the period 2010-2014 comprises projects worth of one billion US dollars with an emphasis on funding a number of projects in the fields of agriculture, food security, energy, education, and infrastructure. The strategy is also scheduled to enhance technical cooperation, and contribute in smoothing trade exchange and encourage Arab investment in African states.
Regarding Al-Aqsa and Jerusalem Fund, a mission was sent to assess the extent of destruction caused by the aggression, so as to evaluate existing needs and determine the contributions of the two funds, for which three actions have already been identified:
i. Offering medical and food aid worth 5 million USD.
ii. Implementing prompt restoration of the various facilities, for which an amount of 29 million USD was allocated.
iii. Undertaking preparations for the comprehensive reconstruction of the economic infrastructure. Projects subsumed under that framework will be determined in coordination with proposals submitted by Arab states and Arab funding institutions.
It is worth mentioning that Al-Aqsa and Jerusalem Fund has approved since its inceptions in October 2000 more than US$900 million to Finance development projects and programs in West Bank and Gaza strip.
Concerning the Saudi Fund for Development, it aims – within the framework of assisting developing countries – to prioritize projects in the domains of agriculture, health and providing electricity to rural areas. To this end, the SFD has signed 16 loan agreements in 2008 totaling SR. 1168 million to finance 16 projects in 15 countries; out of which 7 loan agreements were signed with 7 African countries, and 9 loan agreements were signed with 8 Asian countries.
Regarding national exporting, the Fund finances services to Saudi entrepreneurs whose investments are outside the KSA, provided that they use national products as part of their investments. Facilities offered by the Fund in that regard are as high as 85% of the investment cost, if no less than 50% of the investment input is Saudi products. The SFD signed, through its Export Program (SEP), 13 national product export agreements valued at a total of SR. 839 million during the fiscal year 2008. The Program also issued 4 export-credit insurance and guarantee policies totaling SR. 48.5 million during the year 2008
The Arabian Gulf fund (AGFUND) for the Support of the UN has had landmark achievements in the field of human development, in pursuit of its higher objectives. To that end, the Program adopted the mechanism of partnership for development. It also strove to accelerate progress toward realizing the MDG’s, namely reducing poverty through expanding micro- lending, training the poor and micro-lending employees to manage their own businesses, being an efficient tool in reducing poverty and minimizing its negative impact. That also entails reducing children mortality rates. AGFUND is concerned with the support of sustainable human development efforts targeting the neediest in developing countries, particularly women and children, through support of the efforts strongly affecting the development process, including those aimed at improving the educational and health standards, supporting poverty combating programs and those which support institutional structures. This is done in cooperation with national, international and regional organizations, NGOs and other institutions engaged in development. Also established a number of Arab regional institutions, which included the Arab Council for Childhood and Development, Arab Women Centre for Research and Training, Arab Network of NGOs and the Arab Open University.
BL: What are you expecting from this economic crisis? Was KSA affected by it? What about the financial figures of Saudi Fund for Development?
Eng. Yousef I. Al Bassam: As I mentioned above regarding predictions for 2009, the crisis is currently going through a phase of reaching the bottom. We hope the economic growth would pick up again. The entire world was affected by the crisis, whether directly and powerfully, or indirectly and slightly. In fact, with globalization, the economy nowadays is one single whole, with reverberations echoing from one side to the other. The impact on KSA was minimal and indirect. To prove that, the latest budget was the biggest in the history of the KSA. Saudi Arabia is still pursuing its investments and spending on vital projects. Indirect consequences were felt through the KSA’s dealings with the outside world, as demand on Saudi exports dropped, foreigners’ remittances to countries overseas also declined, which were, in total, of a limited impact.
As far as the Saudi Fund for Development is concerned, it maintained its financial activities for the year 2008, whether in terms of the size of development projects in the world, or financing and guaranteeing Saudi exports.
BL: Will the world witness a new war?
Eng. Yousef I. Al Bassam: No one wishes for a war to break out in any part of the world, which is often triggered by the absence of understanding and the appearance of a conflict of interest. I believe the world is prepared for further dialog and rapprochement.
BL: What are your comments on the GCC economies and how do you compare them to those of the Middle East and North Africa (MENA) region?
Eng. Yousef I. Al Bassam: The GCC economies have come to witness major changes over the past few decades. GCC states exerted efforts to enhance their economic basis, and reduce dependence on oil as a source of revenue. At present, we can see the fruit of those efforts manifested in the growth of the Gross Domestic Product (GDP) of the GCC states, and the contributions of the diverse sectors in it. There is no doubt that the joint efforts of the GCC states, e.g. the customs union, unified economic policies, setting a time-frame for issuing a single currency, and realizing economic integration, will open the door for more progress in the GCC economies. Since the GCC states and MENA are both in one and the same region, there is certainly a mutual effect, as witnessed by previous economic progress. I believe that MENA states will witness periods of economic boom and thriving internal economic cooperation, and will make good use of the resources available in both areas, which will positively reflect on relations and the economy.
BL: With the rising turbulence in the international markets, how safe would you consider the investment industry?
Eng. Yousef I. Al Bassam: : Every crisis that emerges in the world calls for further regulation of the investment industry. I think that this crisis will strength the regulation of the investment industry, which is bound to have a favorable impact eventually.
BL: Don’t you agree that after this financial crisis bridges must be built and confidence restored between investors and financial institutions?
What is the best way towards this step?
Eng. Yousef I. Al Bassam: I think that there are bridges of confidence between investors and the financial institutions. The emergence of this crisis will reinforce those bridges and restore confidence between both parties. Financial institutions need to adopt more precautionary measures. Investors, too, need to conduct more research and look for successful investment potential, which can convince institutions to financing them.
BL: Is it true that it takes a new financial system, a new credibility, a fresh start to change the whole equation in the banking industry?
Eng. Yousef I. Al Bassam: The banking industry evolves with the passing of time. It makes use of the crises to lay down regulations aimed at bettering banks performance. As such, this crisis will further regulate the banking industry.
BL: Is the U.S. mission accomplished to build a new Iraq?
Has the Saudi Fund for Development any plans for the reconstruction of Iraq?
Eng. Yousef I. Al Bassam: The construction of a new Iraq requires the concerted efforts of Iraqi citizens so as to achieve security first, and then build the various economic sectors. The KSA has previously designated one billion USD for the reconstruction of Iraq.
BL: Do you agree that we are facing a new world of challenge, uncertainty and new business exploration?
Eng. Yousef I. Al Bassam: Every new day brings along new challenges. Man is seeking to build this world, despite the disasters man does face from time to time. Man is instinctively looking for new investment potential so as to turn it into a reality for the welfare of mankind.
BL: Who started up this crisis?
Is the globe on the brink of financial collapse?
Eng. Yousef I. Al Bassam: The world is endeavoring to solve this crisis, regardless of who started it, which is the bright side of things. We have previously witnessed similar crises, though of a lesser degree and smaller magnitude. Yet, the world managed to come out of them even stronger. I think that the joint efforts exerted by countries or institutions or sectors will help us out of the present crisis.
BL: China using the global economic crisis to assert itself on the world stage?
Eng. Yousef I. Al Bassam: : Every country is seeking progress. The whole world, including China, is currently striving to come out of this crisis, and restructure its economy. I suppose that the negative repercussions of the current crisis have overshadowed even the Chinese economy.
BL: How can the region save its workforce?
Will KSA and Lebanon be saved from this financial crisis and how?
Eng. Yousef I. Al Bassam: : Regarding the rates of employment and unemployment in the KSA, statistics have shown no marked decline on account of the financial crisis. As noted earlier, the present crunch has no direct impact on the Saudi economy. Concerning the workforce in Lebanon, there is no doubt that the Lebanese economy has its own conditions and factors which would allow it to dodge the negative impact on employment. The Lebanese economy also boasts sectors that are capable of giving it a future impetus such as finance.
