Italy’s finance minister sees increased economic cooperation with kingdom

Pier Carlo Padoan, the Italian economy and finance minister, believes Italy and Saudi Arabia have clear opportunities to increase cooperation in industry and manufacturing as the Kingdom seeks to implement the diversification away from oil dependency set out in the Vision 2030 strategy.

Speaking exclusively to Arab News, Padoan — who was a prominent member of the economic thought-leaders who gathered at last month’s Future Investment Initiative (FII) in Riyadh — said: “Due to its increasing population, the Saudi economy will need labor-intensive operations on the ground. As the second-largest European manufacturing country, Italy has much to share with Saudi Arabia.

“I believe that industrial cooperation will increase over the next few years because it is a clear opportunity for both countries,” he added. Total trade between Italy and Saudi Arabia amounted to €6.75 billion ($8 billion) in 2016, and looks set to increase this year after strong first half figures.

As an academic economist, Padoan established a reputation as an expert on the economy and finances of the EU, advising the Italian government on ties with the bloc at some of the crucial debates about further integration at the turn of the century.

His global credentials were established with work for the International Monetary Fund, the World Bank and the Organization for Economic Cooperation and Development (OECD), which qualified him for the top economic job in Italy under Prime Minister Matteo Renzi in 2014.

When Renzi resigned after losing a referendum in 2016, Padoan’s expertise was deemed valuable enough to be called on to continue in the post by the new prime minister, Paolo Gentiloni.
Padoan is an undoubted, but not uncritical, supporter of the European project, and he believes the EU can be a support for Saudi Arabia as it goes through economic transition.

“The EU has much to share, but it also needs to expand its economic ties in the region, while the Kingdom would benefit from industrial know-how coming from Europe. International trade always proves instrumental to increase exchange of know-how and help understanding each other. Such cultural integration would be beneficial for both parties, the Kingdom and the EU, not only in terms of their economies,” he said.

As an experienced professional economist, his assessment on whether the Kingdom can achieve its ambitious plans is illuminating. “The adoption of a long-term strategy based on diversification is a good choice. Even if Saudi Arabia would not hit all the targets, I’m confident many goals will be achieved along the route for a diversifying economy. Demographic trends suggest that economic diversification will be key to benefit increasing segments of the Saudi population,” he said.

At the FII, Padoan shared a stage with Liam Fox, the British minister for international trade and a leading supporter of the UK’s decision to leave the EU, dubbed the Brexit. Padoan took issue with Fox over the decision, and underlined what he regarded as its long-term negative consequences. “Once Brexit is complete, the EU and Britain will never be the same again. London will remain an attractive place to live, but it will not be the same.

“Also, because of Brexit, the EU will accelerate moves toward further integration. I am not happy about this, but it will happen,” he added. Padoan has been critical of the EU’s financial policy in dealing with Italy’s indebted banking system, clashing with the European Central Bank’s plans to make banks increase provisions for non-performing loans.

In Riyadh, he said that the EU needed to add to its “financial architecture,” pointing out that two new bodies had recently been established in the EU to examine ways of reforming its basic economic model. “We have now a very rich window of opportunity to direct the future of the European project,” he said.
Padoan also pointed out opportunities for the EU and Saudi Arabia to cooperate further in security.

There are people from this region (the Middle East) struggling in Europe today, with the flow of immigrants. We have an opportunity to integrate the EU with the rest of the Mediterranean,” he said.
Asked about his vision of the global economy in the next decade, he said that he echoed the views of the IMF and the World Bank. “Above all, I would like to see economic policies designed to achieve more inclusive growth.”