saudi delegation to asia an opportunity to be part of new world order in trade
Last Updated : GMT 06:49:16
Arab Today, arab today
Arab Today, arab today
Last Updated : GMT 06:49:16
Arab Today, arab today

Saudi delegation to Asia an opportunity to be part of new world order in trade

Arab Today, arab today

saudi delegation to asia an opportunity to be part of new world order in trade

Frank Kane

The top-level Saudi Arabian delegation that will spend the next month touring some of the most important Asian economies is a straw in the wind of changing global trade patterns and a sign of the importance the Kingdom lays on the rising economic power of the East.

It comes at a crucial time for Saudi Arabia’s Vision 2030 reform plan and the National Transformation Program (NTP), which as I wrote last week have got off to a good start in their first full year. But the Asian tour also takes place amid more uncertainty and volatility in the world’s markets.

Much of this is focused on the Asian countries the Saudi party will be visiting, and much of it has to do with the new radical approach to world trade under US President Donald Trump.

It is no coincidence that, despite the fact there is a new president in the White House, Saudi Arabia has prioritized a trip to Asia over a visit to Washington.

Shifting East

The signs are that Trump’s anti-global, protectionist ideology will be followed by concrete measures to reduce the role of the US in world trade. This will have the effect of accelerating the eastward shift of power in the global economy.

The opportunity facing Saudi Arabia is to catch this wave and be part of the new order of world trade. The process is already well underway. According to the CIA World Factbook (still regarded as authoritative, even in the era of “fake news”) the US ranks only third in the table of export markets for the Kingdom, behind both China and Japan, two of the countries the delegation will be visiting.

With Saudi exports still dominated by oil and refined products — 80 percent of the total — it is natural that crude oil supplies will be at the top of the agenda in the talks. Both Beijing and Tokyo have an interest in guaranteeing secure energy supplies to fuel their economies and will be keen to tie up long-term deals with the biggest oil producer in the world.

Saudi Arabia, for its part, wants to find more reliable partners than its traditional customer, the US. The shale-fueled Americans are nearer to oil self-sufficiency than at any time in their recent history, and could be in a position to carry out President Trump’s wild threat to stop importing oil from the Middle East completely. Saudi Arabia has a duty to secure more dependable markets.

China craves energy reliability

The biggest prize is China, which long ago overtook the US as the world’s biggest energy consumer. China has been increasingly looking to Russia as its oil supplier, so the challenge will be to persuade Beijing that Saudi Arabia can provide better quality crude, at a more competitive price, without the geopolitical strings that go with Russia.

China needs the comfort of energy reliability as it faces economic challenges on several fronts, as it continues along what Goldman Sachs calls its “bumpy deceleration” in growth. Beijing is committed to a gross domestic product (GDP) growth target of 6.5 percent this year, and hitting that will require fine-tuning of policies toward infrastructure versus consumer spending, as well as continued scrutiny of the financial system. Consistency of oil energy would remove one variable from the complex Chinese economic picture.

Japan, the third biggest economy in the world and Saudi Arabia’s second biggest export market, could also be on the cusp of change. After decades of the deflationary doldrums, there are signs that “Abenomics” — the economic policies pursued by Prime Minister Shinzo Abe — is working, and there could be some measurable growth this year. Like China, energy-importing Japan needs continuity of supply to underpin this possible recovery.

The Tokyo Stock Exchange is also one of the great financial markets of the world, and could be the favored location in the Asian time zone for future possible share listings by Saudi companies.

The other two main stops on the Saudi tour are Malaysia and Indonesia, which have both traditionally had strong ties with the Kingdom. Both are oil producers, but are still net importers of energy, so while the dialogue may involve energy exports, it is also likely to center on production and exploration techniques and investment. Both are relatively high-growth economies benefiting from the eastward economic tilt.

It is not all about oil, however. Saudi Arabia is at the early stages of a long-term strategy for economic transformation and it wants to explain and elaborate on its plans with the most important trading centers of the world, which these days lie to the east.

President Trump may turn his back on the world, but the world will just shrug and get on with business.

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saudi delegation to asia an opportunity to be part of new world order in trade saudi delegation to asia an opportunity to be part of new world order in trade

 



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