December 14, 2011
Saudi King makes minor cabinet reshuffle; no major shift in financial policy seen
Saudi King Abdullah bin Abdul Aziz made a minor reshuffle in the cabinet of the oil-rich kingdom late on Tuesday, the first since 2009, state media reported.
The main ministries of defense, interior and foreign affairs, held by top members of the royal family, remain unchanged, as does the strategic energy ministry.
Analysts said some of the changes had been expected and do not signal a major shift in financial and monetary policy of the world’s top oil exporter, but could indicate a move towards market liberalization, according to Reporters.
In the reshuffle, planning and economy minister Khaled al-Gosaibi was replaced by Mohammed al-Jasser, who had served since February 2009 as governor of the Saudi Arabian Monetary Agency (SAMA), or the central bank.
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Fahed al-Mubarak succeeded Jasser.
The king also removed the minister of commerce and industry, Abdullah Zainel, and replaced him with Tawfeeq al-Rabeeah, while the minister of hajj Fuad al-Farsi was replaced by Bandar al-Hajjar.
Mohammed al-Fayez, who served as civil service minister, was replaced by Abdullah al-Barrak.
The current defense minister, Prince Salman bin Abdul Aziz, a younger half-brother of the king, took office in November, following the death of his brother, the then crown prince Sultan who held the portfolio for decades.
The king also replaced the deputy head of the Shura Council, a consultative body that advises the government on legislative matters.
The current cabinet was formed in March 2007, and should have been replaced in spring this year after serving its four-year term.
In February 2009, the king made limited changes to the cabinet, and appointed the first woman to the post of deputy education minister.
The king holds the post of prime minister.
Saudi Arabia's central bank does not run a fully independent monetary policy as it needs to keep interest rates close to U.S. benchmarks due to its currency peg to the dollar to prevent unwanted capital flows. That makes fiscal policy a key tool to steer the oil-reliant economy.
Monica Malik, chief economist at EFG-Hermes in Dubai, told Reuters that appointing a new central bank governor with a background in investment banking and the stock market could be an indication of Saudi Arabia’s gradual shift toward development of capital markets and liberalization.
“We expect monetary policy, including the peg to the U.S. dollar, to continue following this government reshuffle,” Malik said.
“We also believe that current economic policy will be maintained with focus on economic liberalization, improving investment environment and job creation,” she added.
Saudi Arabia, which has been considering a wider opening of its stock market for several years, has recently indicated details of the proposed framework of foreign ownership, although the timeframe is yet to be finalized.
Hossein Shobokshi, a Saudi columnist, said the new appointments represented a move toward a new generation of Saudi officials: “They are young, educated and proven professionals.”
The kingdom, the only Middle East member of the Group of 20 developed and emerging nations, has earmarked more than $400 billion over five years from 2008 on infrastructure projects. It also plans to boost spending by an estimated $110 billion, or 19 percent of economic output, over several years.
In October, King Abdullah named Interior Minister Prince Nayef bin Abdul Aziz, a half brother of King Abdullah, as new crown prince following the death of Prince Sultan.
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30 November, 2011 Saudi riyal 'remains unaffected by dollar depreciation'
Arab News - During a seminar hosted by Sidra Capital, leading Turkish Economist and Strategist Erda Gercek reiterated that the Saudi currency would not be affected by the depreciation of the US currency. He emphasized that the currency exchange prices in the Kingdom and the world will remain stable thanks to dollar reserves.
Gercek's made the statement at the seminar during which the demise of the dollar and its future as world's reserve currency was presented. Gercek gave an overview of the global financial and economic situation and provided further insight into the future of the dollar and its impact on the riyal.
Hani Baothman, CEO of Sidra Capital, said: "We hosted this seminar in order to shed light on the current volatility in the market as a result of the euro crisis which has ballooned with each passing day, in addition to the festering economic crisis in the United States as a result of its political indecision to tackle the mounting budget deficit and the swelling of its public debt."
He added: "Our aim is to connect with our shareholders and stakeholders in order to provide them with the most relevant and most objective information as it pertains to the persistent doubts about the ability of the US administration to face the challenges ahead and what it means to the position of the dollar as a reserve currency and how that might affect its position against the worlds' major currencies."
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In its New World Economy Report, published by the IMF, the report predicted that the dominance of the dollar in the international financial system will end by 2025, and it will be replaced by a tri-polar system consisting of currencies including the greenback, the euro and the Chinese yuan. IMF report stated that this would happen when the dollar loses its position as an undisputed global currency by that year.
Gercek said the dollar remained the world's main reserve currency and that it would remain so for the foreseeable future. "This is based on structural reasons such as the size of the American economy, which is still the largest in the world, the depth and breadth of America's financial markets, which is still unchallenged and its liquidity remains unsurpassed. More importantly America's institutional framework and its robust strength are still superior, especially in the areas of governance and the rule of law, which are paramount if economic activity is to be created and sustained over the long term," he said.
"US can sustain larger trade deficits than any other country as capital inflows are almost guaranteed," Gercek said. "Reserve currencies come and go, but there is no obvious one to replace the dollar yet. This does not mean the dollar is on a constant depreciation path. Currencies are mostly part of the solution not the problem. And weak dollar is exactly what the doctor ordered for the US economy," Gercek said.
With regards to America's political standing, its dominance coincided with its emergence as the world's sole and undisputed power with the collapse of the Soviet Union in 1990. As such, and after the Bretton Woods system that came into existence in 1946, the dollar replaced the sterling pound as the world's reserve currency.
However, with the slow rise of other regional powers, notably China, India and Brazil, a multi-polar world order is likely to emerge over the course of the next few decades. With that rise and as a result of America's persistent budget deficits, mounting public debt and balance of payment problems, coupled with political indecision to solve its chronic structural problems, the supremacy of the dollar will likely slide in tandem with its retreating political and financial dominance.
The American dollar is described as Triffin Paradox, which refers to the conflicts of interest that occurs as a result of short-term domestic and long-term international economic objectives, given its position as a national currency and the international reserve currency. It is used as an international source of liquidity; as such the United States needs to run trade deficits to provide liquidity to the rest of the world and this has helped global growth over the last 30 years. Global imbalances and low US savings were obvious side effects of this policy.
Gercek discarded the rumors that America is printing more money. He indicated that the US currency's strong position comes from exchange of reserves in dollar between central banks and commercial banks. Thus, the American government is simply balancing its inflows and outflows.
He clarified that emerging markets cannot simply be bystanders to this process by hinting or engaging in a “currency war.” They were part of the problem during the buildup to the global imbalance. Now they need to be part of the solution and accept that the old model of mercantilist growth is no longer an option. Interconnectedness will make sure "one for all and all for one." Failure to see this will have dire repercussions for all.link
2011-11-29 Saudi Arabia Urges Citizens To Leave Syria, Turkey Could Use Iraq As Trade Route
Regional pressure mounted against President Bashar Assad's regime on Tuesday as Saudi Arabia urged its citizens to leave Syria and Turkey said it could use Iraq as an alternative trade route. That would cut out Syria entirely as Damascus faces broad economic sanctions over its deadly crackdown on an 8-month-old uprising.Russia's foreign minister, however, gave the regime a boost, warning against imposing ultimatums on Assad's government.
Activists said at least 11 Syrians were killed by security forces in a series of raids and house searches on Tuesday, five in the tense Damascus suburb of Rankous, five in the central city of Homs and one in the town of Saraqeb in Idlib.
Syria has been a main transit route for Middle East trade, which Damascus hopes will help cushion the effects of tough new sanctions from the Arab League and Turkey. The Arab sanctions were expected to bite far more than existing sanctions from the U.S. and the European Union, which had far more limited trade with Damascus.
Syrian Foreign Minister Walid al-Moallem said the Arab sanctions amounted to "economic warfare" and warned Damascus could use its strategic location to inflict economic damage of its own.
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"Sanctions are a two-way street," Moallem said in a televised news conference Monday. "We don't want to threaten anyone, but we will defend the interests of our people."
But Turkey's transport minister said there are alternatives to Syria, although he gave no specifics about when such a move might be taken.
"We are planning to conduct transit transport through Iraq, by opening new (border) gates, if the situation with Syria worsens," Binali Yildirim told the state-run Anadolu Agency on Tuesday. He said Turkey would increase the number of border gates with Iraq in such an event.
Turkish Foreign Minister Ahmet Davutoglu, speaking at a joint news conference with Luxembourg's foreign minister Tuesday, would not reveal what sanctions Turkey is contemplating implementing against Syria, but said they would never include cutting water or electricity supplies.
Responding to a question, he said the possibility of establishing a buffer zone inside Syria was not on the agenda, but did not completely rule out the possibility.
"Let's hope that the decisions by the Arab League and that the calls made on Syria find a response and that more bloodshed in Syria can be prevented," he said. "However, if the repression continues, Turkey is ready for all kinds of scenarios but this does not mean that we will use the military option."
Syria has seen the bloodiest crackdown against the Arab Spring's eruption of protests, with the U.N. reporting at least 3,500 people killed since March.
Deaths in Egypt, Tunisia and Yemen have numbered in the hundreds. Libya's toll is unknown and likely higher than Syria's, but the conflict there differed because it descended early on into an outright civil war between two armed sides.
The U.N.'s top human rights body will hold an urgent meeting Friday to discuss the situation in Syria, Western diplomats in Geneva said. It will be the third special session of the Geneva-based Human Rights Council since the uprising against Assad started in March.
Diplomats told the Press on Tuesday that more than 20 of the council's 47 members have signed the call to hold the meeting. They spoke on condition of anonymity as an official announcement wasn't due until later Tuesday.
Assad is depending on strong support from Russia and China to withstand the sanctions and growing isolation.
Last month, Russia and China vetoed a Western-backed U.N. Security Council resolution condemning the bloodshed in Syria, arguing that NATO misused a previous U.N. mandate authorizing use of force in Libya.
On Tuesday, Russian Foreign Minister Sergey Lavrov angrily dismissed calls for an arms embargo, calling them "unfair," and echoing regime allegations that militant groups opposing the government have been armed from the outside.
"The most important thing now is to stop acting through ultimatums and try to use political means," said Lavrov.
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December 14, 2011
