Strate­gic ties that sta­bi­lize the world

China and Saudi Ara­bia have re­al­ized close col­lab­o­ra­tion will help to se­cure each coun­try’s core in­ter­ests

China Daily (Canada) - - COMMENT -

Rarely in the his­tory of diplo­macy does a new­bi­lat­eral re­la­tion­ship change the ex­ist­ing or­der. But one was sym­bol­ized re­cently in Bei­jing by the meet­ing be­tween Chi­nese Pres­i­dent Xi Jin­ping and Saudi Ara­bian Crown Prince and De­fenseMin­is­ter Sal­man bin Ab­dulaziz Al Saud. Xi hailed Saudi Ara­bia as China’s good friend, brother and part­ner. The crown prince said his visit aimed to en­hance the King­dom of Saudi Ara­bia’s strate­gic part­ner­ship with China.

Though there are ob­vi­ous cul­tural, re­li­gious and his­tor­i­cal dif­fer­ences be­tween the king­dom and China, and their poli­cies on sen­si­tive is­sues such as Syria and Iran may dif­fer, both rec­og­nize that to se­cure each coun­try’s “core in­ter­ests”, close col­lab­o­ra­tion is needed.

Putting prin­ci­ples into prac­tice, a Saudi China In­vest­ment Fo­rum was held in Bei­jing dur­ing the crown prince’s visit. I was priv­i­leged to par­tic­i­pate.

The fo­rum was or­ga­nized by the Saudi Ara­bian Gen­eral In­vest­ment Author­ity, the vi­sion of its gover­nor, Ab­dul­latif Al-Oth­man. “China is a nat­u­ral strate­gic part­ner for Saudi Ara­bia,” Al-Oth­man said. “Our com­ple­men­tar­i­ties should en­hance busi­ness and stim­u­late en­trepreneurs.” Saudi Am­bas­sador to China Yahya Al-Zaid stressed that the cor­ner­stone of bi­lat­eral re­la­tions is co-in­vest­ment from pri­vate com­pa­nies as well as na­tional en­ter­prises.

We be­gan the fo­rum with three premises: mu­tual de­pen­dency on crude oil (Saudi Ara­bia is China’s largest sup­plier and China is Saudi Ara­bia’s largest cus­tomer); eco­nomic de­vel­op­ment as a mu­tual ne­ces­sity to cre­ate jobs and raise stan­dards of liv­ing; and the pub­lic com­mit­ment of both na­tional lead­ers to strengthen and broaden eco­nomic re­la­tions.

The king­dom has the world’s largest oil re­serves; it is the world’s 19th largest econ­omy. Po­lit­i­cally, Saudi Ara­bia claims com­mit­ment to sta­bil­ity and moder­nity. So­cially, to ed­u­ca­tion, sci­ence and tech­nol­ogy, and pub­lic ser­vices. Eco­nom­i­cally, to di­ver­si­fy­ing away from en­ergy and re­struc­tur­ing to­ward knowl­edge-based in­dus­try.

De­mo­graph­i­cally, Saudi Ara­bia’s pop­u­la­tion is al­most 30 mil­lion, with 50 per­cent younger than 25 and 35 per­cent younger than 15. Ge­o­graph­i­cally, the coun­try sits at the cross­roads of Asia, Africa and Europe. Cul­tur­ally and re­li­giously, the king­dom, with the holy cities of Mecca andMe­d­ina, is the cen­ter and most re­spected coun­try of the Is­lamic world.

High-growth in­dus­tries in­clude en­ergy, down­stream petro­chem­i­cals, al­ter­na­tive en­ergy, con­struc­tion and in­fra­struc­ture, man­u­fac­tur­ing, sci­ence and tech­nol­ogy, health­care and med­i­cal. Busi­ness is fa­cil­i­tated by low-cost in­puts (en­ergy and land) and soft govern­ment loans (50 to 75 per­cent of in­vest­ment). SAGIA Gover­nor Al-Oth­man stressed the “ease of do­ing busi­ness”, the “level play­ing field”, and that “no part­ner is needed and no min­i­mum cap­i­tal is re­quired”. Af­fir­ma­tive fi­nan­cial pro­grams sup­port small and medi­um­sized businesses.

For prospec­tive in­vestors, SAGIA fa­cil­i­tates the commercial as­sess­ment and in­vest­ment process. Op­er­ated like a busi­ness, SAGIA ra­di­ates an en­tre­pre­neur­ial spirit— Al-Oth­man was a busi­ness­man (CFO of Saudi Aramco). The king­dom’s two ma­jor cor­po­ra­tions, Saudi Aramco, the world’s largest oil com­pany, and SABIC, a leading petro­chem­i­cal com­pany, have in­no­va­tive pro­grams to as­sist lo­cal businesses. Aramco Ex­ec­u­tive Di­rec­tor Ahmed Al Subaey high­lighted Aramco’s pol­icy of man­dat­ing lo­cal con­tent in pro­cure­ments, such as sign­ing long-term con­tracts and set­ting fa­vor­able pric­ings. Aramco may even con­sider mi­nor­ity in­vest­ments, Al Subaey said. In ad­di­tion, the Coun­cil of Saudi Cham­bers, can in­tro­duce lo­cal businesses and pro­fes­sion­als.

SaudiMin­is­ter of Com­merce Dr Taw­fiq Al-Rabiah high­lighted the in­creased an­nual trade be­tween China and Saudi Ara­bia, from un­der $300 mil­lion in 1990 to $73 bil­lion in 2012, and how the king­dom’s in­dus­trial plans res­onate with Chi­nese in­ter­ests. The pres­i­dent of King Ab­dulaziz City for Sci­ence and Tech­nol­ogy, Dr. Mo­hammed Al-Suwaiyel (who speaks Chi­nese), ar­rayed a long list of high-tech re­search in the king­dom, in­clud­ing wa­ter de­salin­iza­tion and a just-signed aero­space agree­ment with China, through which Chi­nese rock­ets will carry Saudi satel­lites into or­bit.

Ques­tion: “Why is Saudi Ara­bia, with its huge amounts of cap­i­tal, seek­ing for­eign in­vest­ment?” Money alone can­not cre­ate value, the Saudis ex­plained; tech­nol­ogy, knowhow, mar­kets and man­age­ment en­able the king­dom’s es­sen­tial eco­nomic trans­for­ma­tion.

One Chi­nese com­pany com­plained that by Saudi Ara­bia us­ing Western stan­dards to set tech­ni­cal spec­i­fi­ca­tions, the Chi­nese were dis­ad­van­taged, even if they of­fer lower prices. Also noted were Chi­nese losses in a large, fixed-price rail­way con­struc­tion project. That re­al­world is­sues were dis­cussed openly and can­didly re­flected the se­ri­ous­ness of the fo­rum.

I stressed that com­pa­nies should fo­cus on commercial cri­te­ria, not on po­lit­i­cal di­rec­tives, though the sup­port of both gov­ern­ments could help re­duce the risk of in­vest­ments and thus im­prove the risk/re­turn ra­tio.

One ques­tion thrown at me was whether closer col­lab­o­ra­tion be­tween Saudi Ara­bia and China would ”threaten” any other coun­try (mean­ing, with a wispy thin veil, the US). I replied that theUS wel­comes en­hanced in­ter­na­tional sta­bil­ity and en­cour­ages China and Saudi Ara­bia to as­sume more of the bur­den of re­spon­si­bil­ity in world af­fairs.

Su­laiman Abab­tain, pres­i­dent of Aram­coAsia, said “we look for­ward to deep­en­ing our par­tic­i­pa­tion in­China’s so­ci­ety as well as in­China’s econ­omy”. Quot­ing Aram­coCEOKhalid Al-Falih, Su­laiman said: “We do not just sell oil toChina, but we are longterm strate­gic part­ners with­China.”

Dis­clo­sure: I fa­cil­i­tate busi­ness be­tween China and Saudi Ara­bia. Sure, I see commercial op­por­tu­ni­ties, but more than that I sup­port the strate­gic re­la­tion­ship— for the pros­per­ity of both coun­tries and for the sta­bil­ity of the world. The au­thor, an in­ter­na­tional cor­po­rate strate­gist and in­vest­ment banker, is the au­thor ofHowChina’s Lead­ers Think and the bi­og­ra­phy of for­mer Chi­nese pres­i­dent Jiang Zemin. He is a com­men­ta­tor on BBC, CNN, CCTV, Bloomberg and other me­dia.

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