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Hind Al Soulia - Riyadh - Next November will be the first time the annual G20 meeting will convene in an Arab country.
First-time. File photo shows Saudi Crown Prince Mohammed bin Salman bin Abdulaziz at the G-20 summit in Osaka, Japan, in June 2019. (DPA)
WASHINGTON - In assuming the Group of 20 presidency on December 1, Saudi Arabia has taken centre stage in a high-profile role that Riyadh says will demonstrate its hefty economic clout alongside leading global financial and trading powers.
The Saudi government is relishing the opportunity to shine in 2020 as it oversees this elite financial forum.
Under that spotlight, however, Riyadh should expect closer scrutiny on how its economic transformation programme Saudi Vision 2030 is faring as the kingdom struggles with high budget deficits and slow movement on reducing its oil revenue dependency.
Saudi Arabia distinguishes itself as the only Arab country among the G20 membership. History will be made when it hosts the G20 Leaders’ Summit in Riyadh next November — the first time the annual meeting will convene in an Arab country.
The G20 is an outgrowth of the G7 and G8 groups, created to respond to the 2008 global economic crisis, with the inaugural summit in Washington that year. The G20 is an international forum for economic cooperation and dialogue, bringing together finance ministers, central bank governors and policymakers from 19 countries and the European Union. The 20 members collectively account for 90% of the world’s GDP and 80% of global trade.
For Saudi Arabia, membership in the G20 is significant in the prestige gained from being on the same economic playing field with the likes of the United States, Russia, China, the United Kingdom, Japan, Australia, South Korea and Canada. The Saudi government’s ascension into the World Trade Organisation in 2005 was another important milestone in building the kingdom’s international economic profile.
Riyadh’s membership in the G20 reflects the key role it plays as a leading oil producer and a pricing force in the global energy markets. Saudi King Salman bin Abdulaziz Al Saud has stated that Saudi Arabia’s G20 presidency is proof of the kingdom’s vital role in the global economy.
Saudi Crown Prince Mohammed bin Salman bin Abdulaziz highlighted the significance of Saudi Arabia’s unique location with Riyadh assuming the group’s presidency: “The Kingdom of Saudi Arabia is at the crossroads of three continents — Asia, Africa and Europe. In hosting the G20, the kingdom will have an important role to play by sharing the perspective of the Middle East and North Africa region.” Riyadh has chosen the theme of “Realising Opportunities of the 21st Century for All” for its G20 leadership year.
In selecting Saudi Arabia for the 2020 presidency, G20 members recognised efforts by Riyadh to introduce fiscal reforms to wean is citizens off the long-entrenched, cradle-to-grave welfare system and grow the Saudi private sector as part of its 3-year-old economic transformation programme.
A statement released in December 2018 by the G20 Troika — Argentina, Japan and Saudi Arabia — representing the then-outgoing, incoming and future G20 presidencies: “Saudi Arabia is undergoing major economic and social transformation guided by its Vision 2030, which is closely aligned with core G20 objectives of achieving macroeconomic stability, sustainable development, women empowerment, enhanced human capital and increased flow of trade and investment.”
Vision 2030 has progressed slowly, affected by delays in the limited sale of state crown jewel Saudi Aramco. The Saudi Aramco initial public offering (IPO) has been the centrepiece of Vision 2030, with original Saudi government estimates of up to $100 billion of proceeds from a domestic and foreign floating of up to 5% of Saudi Aramco shares to go towards strategic investment opportunities both at home and abroad.
A much-downscaled IPO now expects to garner a fraction of the predicted sales revenues — $25.6 billion — when 1.5% worth of shares in the Saudi state oil and gas giant begin trading on the domestic stock exchange December 11.
The kingdom faces financial challenges exacerbated by low oil prices and continued high public expenditures. Saudi Arabia boosted government spending in 2019 to encourage growth in its private sector but the International Monetary Fund warned that Riyadh needed to make important budgetary adjustments, saying: “The fiscal pendulum has swung too far towards supporting near-term growth and reform implementation.”
Next year’s spending is to be cut from an estimated $280 billion in 2019 to $272 billion, with the government crediting the decrease to an uptick in private sector spending. The kingdom’s budget deficit is expected to widen to nearly $50 billion in 2020 from around $35 billion this year because of anticipated lower revenues. The Saudi government is touting real GDP growth of 2.3% in 2020 compared to an anticipated 0.09% growth this year.
The Saudi government would greatly welcome a substantial boost in foreign investment in its economy to help stimulate growth. UN statistics indicate that despite the flow of foreign direct investment (FDI) into the Gulf country more than doubling to $3.2 billion from 2017 to 2018, it is a far cry from Riyadh’s peak FDI level of $39 billion recorded in 2008.
Jareer Elass is a Washington-based energy analyst, with 25 years of industry experience and a particular focus on the Arabian Gulf producers and OPEC.
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