Ha­lal busi­ness, Is­lamic fi­nance, tourism among sec­tors

New Straits Times - - Opinion - mush­tak­parker@ya­hoo.co.uk The writer is an in­de­pen­dent Lon­don-based econ­o­mist and writer

The chal­lenge is how to mean­ing­fully cap­i­talise on this bi­lat­eral feel-good fac­tor and to trans­late it into real eco­nomic ben­e­fits, thus el­e­vat­ing re­la­tions be­tween them to the next level.

THE his­toric four-day state visit last week by Saudi Ara­bia’s King Sal­man Ab­du­laziz AlSaud to Malaysia — his maiden visit to the coun­try — the first des­ti­na­tion of a five-na­tion Asian tour, could have far-reach­ing im­pli­ca­tions for the fu­ture of SaudiMalaysian re­la­tions. But, with an im­por­tant caveat — that of fol­low-up and sus­tain­abil­ity.

The two na­tions roughly with the same pop­u­la­tion and de­mog­ra­phy of be­tween 25 and 30 mil­lion — one, the home to Is­lam’s holy cities of Mecca and Mad­i­nah and the world’s largest oil pro­ducer and ex­porter, and the other a bea­con of sta­bil­ity and de­vel­op­ment, and ar­guably one of the few seem­ingly func­tional democ­ra­cies in the Or­gan­i­sa­tion of Is­lamic Co­op­er­a­tion (OIC) coun­tries, have tra­di­tion­ally punched be­low their weight, both in global and pan-Is­lamic af­fairs.

As the Saudi monarch and Prime Min­is­ter Datuk Seri Na­jib Razak con­curred, re­la­tions be­tween the two coun­tries are at an “all-time high” and no doubt they signed sev­eral agree­ments on se­cu­rity and de­fence co­op­er­a­tion, es­pe­cially in com­bat­ing ter­ror­ism; in boost­ing bi­lat­eral trade and in­vest­ment, labour and hu­man re­sources, as well as sci­en­tific and ed­u­ca­tional co­op­er­a­tion.

The chal­lenge is how to mean­ing­fully cap­i­talise on this bi­lat­eral feel-good fac­tor and to trans­late it into real eco­nomic ben­e­fits, thus el­e­vat­ing re­la­tions be­tween them to the next level.

There are 10 ar­eas where the two coun­tries can make a sig­nif­i­cant im­pact not only on their own economies and so­ci­eties, but also well be­yond their bor­ders.

These are oil and gas, petro­chem­i­cals, Is­lamic pen­sion funds, sov­er­eign wealth funds (SWF) man­age­ment, haj man­age­ment, Is­lamic fi­nance, tourism, ha­lal busi­ness, the es­tab­lish­ment of a Saudi-Malaysian Co­op­er­a­tion Fund, and pro­mot­ing a pro­gres­sive Is­lam based on the con­cept of Wasatiyyah (mod­er­a­tion) and per­haps a re­vived ver­sion of Is­lam Had­hari (a mod­ern hu­man­ist and sci­en­tific con­cept of Is­lam), which was once mooted by then prime min­is­ter Tun Ab­dul­lah Ah­mad Badawi.

Both coun­tries, ei­ther to­gether or in­di­vid­u­ally, al­ready have en­trenched strengths in the above ar­eas. As such, mean­ing­ful co­op­er­a­tion is a no-brainer. What it re­quires is the po­lit­i­cal and tech­no­cratic will and the req­ui­site al­lo­ca­tion of re­sources to fol­low through with im­ple­men­ta­tion, per­for­mance eval­u­a­tion and im­pact as­sess­ment.

In the oil and gas, and petro­chem­i­cals sec­tors, the two coun­tries are both oil and gas pro­duc­ers. Saudi Aramco is an iconic global oil com­pany, the largest in terms of net worth es­ti­mated by the Saudis of US$2 tril­lion (RM8.9 tril­lion) and the largest ex­porter of oil. Petro­liam Na­sional Bhd (Petronas) is the sev­enth largest oil com­pany in the world with joint ven­tures in a num­ber of coun­tries, in­clud­ing South Africa, where its joint ven­ture with SASOL, En­gen, is a ma­jor player in sup­ply­ing both petrol for cars and avi­a­tion fuel for air­ports and air­lines in Sub-Sa­ha­ran Africa.

Saudi Aramco could tap into this to ex­pand the SaudiMalaysian foot­print in Africa, per­haps through a more sym­bi­otic ap­proach than their con­tro­ver­sial western and Chi­nese oil ri­vals. This co­op­er­a­tion model could be re­peated in Cen­tral Asia and Asean.

The US$7 bil­lion in­vest­ment agree­ment penned by the two com­pa­nies whereby Saudi Aramco would ac­quire a 50 per cent stake in and de­velop and man­age an oil re­fin­ery in Pengerang, Johor, un­der the Re­fin­ery and Petro­chem­i­cal In­te­grated De­vel­op­ment (Rapid) project, is a ma­jor step in the right di­rec­tion.

Sim­i­larly, Sabic, the Saudi petro­chem­i­cals util­ity, is the world’s largest pro­ducer and ex­porter of sev­eral chem­i­cals, in­clud­ing down­stream and ter­tiary prod­ucts. One of its main mar­kets is East Asia, in­clud­ing China, Ja­pan and South Korea. Here, again there are po­ten­tial syn­er­gies and per­haps an am­bi­tion to de­velop the Iskan­dar De­vel­op­ment Re­gion into a petro­chem­i­cal hub — akin to what Jurong In­dus­trial Port with its re­finer­ies used to be in the 1980s and 1990s.

Saudi Ara­bia has two large SWFs in the SAMA Foreign Hold­ngs and Pub­lic In­vest­ment Fund (PIF). Malaysia’s Khaz­anah Na­sional Bhd, though with more mod­est funds, has been a trend­set­ter in as­set al­lo­ca­tion, in­clud­ing in Sukuk is­suance where it has pi­o­neered rais­ing funds in Sin­ga­pore dol­lars and Chi­nese ren­minbi to fi­nance in­vest­ments in China and Sin­ga­pore. Here, PIF and Khaz­anah can join forces to pro­mote the con­cept of a supraSWF, funded by SWFs from OIC coun­tries, which would in­vest only in these coun­tries.

In haj man­age­ment, Lem­baga Tabung Haji is the proven best. Saudi Ara­bia is the host coun­try. If the two coun­tries co­op­er­ate to ex­port the Tabung Haji model to pop­u­lous Mus­lim na­tions and oth­ers, such as China, Rus­sia and In­dia, the sav­ings, eco­nomic and haj ex­pe­ri­ence can ben­e­fit mil­lions. Ev­ery year, I get emails and calls from or­di­nary ha­jis who ef­fec­tively had a “bad” haj be­cause of the bu­reau­cracy in send­ing coun­tries and un­scrupu­lous mid­dle­men who fleece the hap­less pil­grims.

The three ar­eas where Malaysia is a world leader is in the US$2 tril­lion plus ha­lal busi­ness, the US$2.3 tril­lion Is­lamic fi­nance in­dus­try and in tourism. The po­ten­tial to up­scale this to global pro­por­tions, in­clud­ing brands and qual­ity, is huge. Malaysia and Saudi Ara­bia are the two largest Is­lamic fi­nance mar­kets, in­clud­ing for Sukuk and as­set and wealth man­age­ment. Saudi Aramco it­self has just man­dated banks to ar­range its maiden SR6 bil­lion Sukuk. Here, Malaysia can play a huge role in im­part­ing its ex­pe­ri­ence.

The above ini­tia­tives could be fur­ther boosted by the es­tab­lish­ment of a Saudi-Malaysia Co­op­er­a­tion Fund, whose man­date would be to pro­mote and in­vest in joint ven­tures be­tween the pri­vate sec­tor in the two coun­tries in strate­gic medium-sized in­dus­tries, partly aimed at im­port sub­sti­tu­tion and job cre­ation, es­pe­cially aimed at the youth.

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