Saudi peace plan will pay economic dividends

Amid the diplomatic and political commentaries that followed Crown Prince Abdullah's Saudi peace initiative last week, the business and economic implications of this masterly reshaping of the Middle East's geopolitics were often ignored.

For make no mistake, it would be naïve to think that the two were not interlinked. The Saudi peace plan with its revolutionary recognition of Israel and creation of the Palestinian state is very much tied to current economic developments.

In order to develop its huge gas reserves Saudi Arabia signed an outline agreement with eight major oil companies last June. The deadline for the final deals has already slipped from December to this month, and the Saudi authorities badly want to get this $25 billion project started. What better way to firm up Big Oil than to offer the diplomatic solution of a lifetime to the United States whose post September 11 Middle East strategy is looking for a new direction?

However, from the business viewpoint this clearly marks a turning point, and one in which a window of opportunity opens that the brave can jump through.

A Middle East at peace with itself and modernizing with Western technical and financial assistance will be a very different place from the state-dominated, turbulent situation that has dominated the past few decades. There will be the chance of a lifetime for business and commercial interests to create genuinely pan-Arab companies and organizations.

In a sense this is already happening. Dubai retailer Majid Al Futtaim, for example, is opening shopping malls in Cairo and Alexandria. But there could be an awful lot more of such regional consolidation and modernization as the old order loosens its grip. Regional banks, to take one sector, would surely gain from consolidation.

Who will be the winners and who will be the losers in this brave new Middle East? Surely it will be the modern and efficient companies that will gain, and those companies supported by state interests that will fail. Indeed, part of the economic reform process will be the break up and privatization of the latter. The appointment of an advisor to formulate a telecommunications strategy for Bahrain's new liberal order is just a taste of things to come.

So make no mistake when Saudi Arabia moves to champion a new peace settlement that heralds a major shift in business opportunities which nobody can afford to ignore.