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Saudi Arabia: Prince Says Country Working To Promote Foreign Investment

Prince Abdullah bin Faysal bin Turki is one of the key advocates of economic reform in Saudi Arabia. He also has served as chief of the Saudi Arabia General Investment Authority, a government body charged with attracting foreign investment. In a recent interview with RFE/RL correspondent Peyman Pejman, Prince Abdullah discussed his country's financial future.

Riyadh, 31 March 2004 (RFE/RL) -- Prince Abdullah bin Faysal bin Turki says the common perception of Saudi Arabia as a wealthy state is wrong.

While it may be rich in oil and gas reserves, Prince Abdullah says Saudi Arabia still needs hundreds of billions of dollars in aid and investment in the coming decades to upgrade its infrastructure.

"Saudi Arabia is not rich in the sense of the per capita GDP share. Many people have the image of Saudi Arabia as being a very rich place with rich people because of a handful of individuals who became very famous in jet-set places. Maybe also, people remember the period of the '70s when oil prices were very high. And, therefore, this image stuck," Prince Abdullah says.

The world's largest oil exporter had a per capita income of about $16,000 in 1981 -- one of the highest in the world. Since then, a booming population and shrinking oil prices have brought that figure down by around half.

Saudi oil production has also dropped during the same period. At the height of the oil boom in the 1970s, Saudi Arabia produced about 12 million barrels per day. That figure was about 8.8 million barrels per day last year, and average production is expected to fall below 8 million barrels per day in 2004.

Prince Abdullah says there are two main reasons why Saudi Arabia had not kept pace with international development -- the kingdom's geography has discouraged contact with the outside world, and until recently, the government controlled the purse and decided how much to spend and on what.

"For us, it has been a big transformation because, for 30 years, since we started our modern economic development, everything has come through government departments because the government had the oil wealth. So, it was a very difficult transformation and attitudes have been very difficult. We were totally outside world development for almost 1,000 years because nobody was interested in the desert. We weren't even worth occupying by the Turks. They just had a garrison. So very few people in Saudi Arabia had contact with the outside world. Suddenly, in the middle of the 20th century, we discovered the modern world, and we've tried to catch up. Some people say successfully, some say not," Prince Abdullah says.

But that is changing. Prince Abdullah says the Saudi government is now encouraging a much wider role for the private sector and has been open -- if slow to react -- to suggestions for removing legal and financial barriers that discourage private and foreign investment.

Many of the country's main industries -- power, water desalinization, oil and gas -- need massive upgrading in the coming years, and Prince Abdullah says the Saudi government now realizes it cannot do the job alone.

"We need [investment] in what is called infrastructure, utilities and general services area, which are necessary for operating a market society, between now and the next 20 years -- about $1 trillion to $1.3 trillion. [But] what is more important, really, is not the purely economic issue but actually now for the dignity of daily life, you need to have an economic environment, a market environment, an investment environment, that allows people to benefit from what's going on in the world. And the only way you can do it now is by thinking about the private sector, by thinking about market economics."

Prince Abdullah says the Saudi government now realizes that some degree of privatization is necessary before foreign companies decide to invest hundreds of millions of dollars in government-owned infrastructure industries. But he says Saudi Arabia has a sound economic foundation, good liquidity, and tight monetary rules.

According to the Saudi Arabia Monetary Agency, private Saudi investors poured in hundreds of billions of dollars into the economy between 1998 and 2003.

That is not to say, however, that Saudi officials and businesspeople are blind to the massive legal and financial hurdles facing investors -- be they Saudi or foreign. Complaints are often heard about how hard it is to change conservative administrative and financial attitudes in the kingdom.

But there is widespread belief that Saudi Arabia cannot return to the prosperity of its golden years without serious changes from the inside.