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Saudi Arabia Found in America the Appropriate Partner - ASHARQ AL-AWSAT English
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Opinion

Saudi Arabia Found in America the Appropriate Partner

Saudi-US ties have never been better. Saudi Arabia will be President Donald Trump’s first stop in his first overseas tour. The Saudis have laid out a massive red carpet for Trump and his business delegation with multiple events. It’s emblematic of the importance the Saudis have bestowed on Trump and the rebirth of its relationship with the US. It’s not unusual for a US president to visit Saudi Arabia — President Barack Obama, who was viewed cautiously by Riyadh, came more times than any of his predecessors. It is, however, a first for a US president to be visiting the kingdom on his maiden trip. Business comes first.

Bilateral trade between the two nations is strong, amounting to almost $40 billion in 2016, according to the US Census Bureau. In fact, last year was the first time in 21 years the US sustained a trade surplus with Saudi Arabia, mainly due to lower oil prices.

For Trump, Saudi Arabia is a long-term business partner offering enormous potential for US companies as the Middle East nation prepares for its post-oil future. Attracting US investment is vital for its foreign-direct investment programs and successful implementation of Saudi Vision 2030. Taking a leading position in Saudi Arabia’s business opportunities is on the table with officials planning to privatize four sectors this year, including Saline Water Conversion Corp., a power generation company under Saudi Electricity Co., grain silos and sports clubs.

During Deputy Crown Prince Mohammed bin Salman’s March visit to the US, Trump supported the development of a new US-Saudi program in energy, industry, infrastructure and technology valued at more than $200 billion in direct and indirect investment over the next four years. Trump, in turn, has said he intends to push for $1 trillion in US infrastructure investments over the next decade, with $200 billion coming from taxpayers and the rest from the private sector. Saudi Arabia, through its Public Investment Fund invested $3.5 billion in the US ride-share company Uber Technologies Inc. in 2016. Assisting Saudi Arabia in the successful transitioning of its economy beyond oil is a boon for all.

Saudi Arabia’s economic direction is clear: rid itself of oil dependency, while becoming a logistics hub, develop upstream and downstream mining capacity, deepen the tourism sector, build up the indigenous entertainment sector and increase local military manufacturing capacity. Officials and ministries are far more accountable via several new institutional mechanisms than at any time in the past. There is a sense of hope among young people that the country is changing and is addressing issues such as labor and female participation.

The Saudi Aramco initial public offering is another opportunity. It showcases the importance of US financial services in what would be the largest IPO thus far, expected to reach $100 billion. There is much to like, as a possible dual listing in Riyadh and on the New York Stock Exchange will only help to deepen the solid business relations of the two countries. The NYSE is the world’s largest stock market and includes oil majors such as Chevron and Exxon Mobil among its listings. Saudi Arabia has provided ample business to US investment banks and financial advisers working on the Saudi Aramco IPO. Two of the three leading underwriters are US firms — JPMorgan Chase and Morgan Stanley — the third is HSBC. A New York listing will bolster Trump’s business first motto.

For the Saudis, there is much to like in Trump. In Riyadh, the Obama administration was seen as being too pro-Iranian, confusing, and raised doubts about the wider role of the US in the Middle East. Trump represents the opposite.

The strategic-military relationship is central to the Saudi-US partnership. For decades the US has been a crucial supplier of land and aerial equipment. Saudi Arabia wants more sophisticated equipment and Trump has promised to stimulate the US economy by generating more manufacturing jobs.

Saudi Arabia is looking for partners as it constructs its post-oil economy and it’s almost certain that it found it in America’s Trump.


Bloomberg

John Sfakianakis

John Sfakianakis

John Sfakianakis is chief economist at Banque Saudi Fransi in Riyadh, Saudia Arabia.

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