Interview with Saudi Arabia's Finance Minister

Q. Saudi Arabia has embarked on a number of major reforms in the last few years, especially in the economic sphere. How do you assess what has been accomplished so far, and what do you think the Saudi economy should look like five years from now?

A. The reform process started a few years ago, and we are moving in a very calculated and determined manner to introduce reforms in all sectors and areas - physical, structural and legal - to get the economy onto a sustainable growth path.

The way I see things is that the economy will be more efficient and more balanced in the future, in the sense that the private sector will have a greater share in the economy, bearing more responsibility in terms of both growth and employment in the kingdom.

I could easily say the same thing about the diversification of exports. We are moving in a determined manner to make it easier for our producers to compete in international markets; we are also making it easier for foreign companies to invest in Saudi Arabia.

This involves reforms to the tax system designed to ensure that the financial system is efficient and that our exchange rate is competitive. I'm confident that the reforms in these areas will improve our growth rate and competitiveness in the years to come.

Q. Which major reforms that have been made in the last three years would you point to as key?

A. The reforms closest to my heart are the ones we at the finance ministry initiated or have been mainly responsible for. I will mention three areas: firstly, capital market flow.

We are looking forward to launching the market and the regulatory authority. This will usher in the diversification of market products and make it possible to invest or raise funds through diversified means.

Secondly, the insurance law in the kingdom. As you know, we haven't had a genuinely regulated insurance industry before. Now, with this new legislation, we will be able to set up new insurance companies.

This will add to the depth of the market and the ability of people to use their savings in different ways and to make insurance products available to businesses as well as to individuals.

Thirdly, the tax law, which has just been upheld by the council of ministers. It took us more than five years to get it through.

This is an extremely important law, which not only means that we now have a much lower tax rate, but also includes other important elements. All this will prove very attractive to the business community, and especially to foreign companies.

Q. What happens if there is a good stock market with an efficient regulatory body, but no one wants to go public? How can you address that?

A. No one can force anyone to go public; that's a decision that is up to them. But the tools will be available to help in that process, to make going public transparent and clear to both sides, to companies as well as prospective shareholders.

As you know, this is just one side of the objectives of the capital market law. The other side, of course, is to enable even private companies to raise funds in the market through bonds, Islamic instruments and other means, rather than by either increasing capital or borrowing directly from the banks.

Q. You recently asked the international agencies to rate Saudi Arabia with a view to borrowing. What does this imply about the state of the kingdom's economy?

A. To start with, I think that the solicited sovereign rating has now become a necessity for all countries, even developed countries.

Not to facilitate borrowing on the part of the country itself - and I want to stress that it is not the government's intention to borrow from the international market - but to make it easier and less expensive for the private sector in Saudi Arabia to borrow from inside or outside the country.

A sovereign rating will facilitate the process for private companies who, of course, can now apply for their own private ratings under the umbrella of the sovereign rating system, which will help them raise funds from both inside and outside the country.

Q. Bahrain is still the financial hub of the region, Dubai is developing projects to compete with Bahrain, and the major market is in Saudi Arabia, which is reforming. What does the future hold for the regional economy?

The future holds many positive things for Saudi Arabia. With the regulated capital market, the insurance law - bringing with it the development of the insurance industry - and the new tax law, we see Saudi Arabia's financial sector expanding tremendously in the future. We have also made calculated moves to encourage foreign banks to set up in the country.

With all these reforms that are now taking place, I can tell you with certainty that we will be there, we will be growing, we will still be a major market, and more business will be generated from inside Saudi Arabia.

Q. Do you see Riyadh or Jeddah becoming the financial hub for the region? And which will take the prime position?

They will both be major centers. I don't want to sound like we're competing with Dubai and Bahrain. I think all those centers, including Riyadh, Jeddah and Dammam, will be expanding in the future in line with the expansion of the region's economies and the new opportunities that come out of that.

Q. The Western media see the reform process in Saudi Arabia as being too slow. Others, especially at home, say that it is progressing well. How do you explain this difference - in the perception of the reform process - between outsiders and insiders?

A. Well, I would point out that I mentioned in a recent statement that we need to do more work on explaining exactly what we are doing in Saudi Arabia.

We are moving at a good pace. But it seems that we have not gotten that message across, that we have not done enough to let the international community know about what we are doing.

Maybe this interview will help. We'll be doing more interviews and issuing more statements on the pace of the reform process to help get the message out there to the international community and the international media.

Q. How can you get your point across to the international community that you have moved forward, that changes have taken place and that more changes are on the way? Will simply issuing statements get the message across?

A. Let me just go back a little bit and say that the companies that are dealing with Saudi Arabia directly, and that have done so for a very long time, know that we are moving forward. They can see proof of that on the ground.

But we do need to explain our position to those who are not familiar with the Saudi market. However, there is no doubt that major companies that are interested in the development of gas, industrial petrochemicals and water desalination know that we are moving forward.

Obviously, though, we want to inform those who are unaware of our reform program that we are determined to forge ahead with it.