Economy Robust Enough to Absorb Terror Shocks, Says Expert

RIYADH, 2 June 2004 — The Saudi economy in general and the oil industry in particular are strong enough to withstand the shocks inflicted by a string of terror attacks that began in May 2003 and increasingly target the oil business, a financial consultant said.

Motasher T. Al-Murshed said one effect was the depreciation of the dollar against major currencies which would drive up the cost of imports.

However, it would be a transitory phase. The decision of a majority of Japanese firms and Russia’s Lukoil to remain in the Kingdom was some indication of this, he said.

Al-Murshed attempted to allay concerns of the international community that Al-Qaeda is out to wreck the oil industry.

“If the terrorists think that they can paralyze the oil industry by targeting Western expatriates working there, they are greatly mistaken,” he said.

More than 90 percent of the Saudi Aramco staff are Saudis rather than foreigners, and the company had “back-up facilities and technical expertise to keep the oil industry operations going to cope with any emergency,” he said.

Thus when the Japanese pulled out of an oil refinery in Al-Khafji at the end of their contract, Aramco took over without a hitch.

He said major factors contributing to the escalating oil price are the growing demand in the US for refined fuel needed by the armed forces in Afghanistan, Iraq and elsewhere, as well as increasing oil import needs of China and India to fuel their economic growth.

Al-Murshed said the Saudi stock market index surged by 125 percent during the last three years, while money supply registered a nine to 11 percent increase. “These are clear indications that the Saudi economy remains buoyant. One of the major factors for the high liquidity in the market is due to the fact that Saudi investors have started withdrawing some of their capital from abroad and are investing in the Kingdom in the wake of the privatization programs.”

He said more overseas funds will be channeled back into the Saudi economy, especially as the National Company for Cooperative Insurance (NCCI) and Maaden are on course for privatization.

Other indicators of investor confidence are the licenses the government has given to Deutsche Bank of Germany, BNP Paribas of France and JP Morgan Chase Bank of the United States to start operations in the Kingdom, Al-Murshed added.