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Saudi told: ‘focus on knowledge-based economy’
Editor of The Economist John Micklethwait offers his take on the Kingdom's economy.
May 31, 2010 3:13 by Samuel Potter
Saudi Arabia’s economy has weathered the global financial crisis very well, but it needs to diversify to achieve long-term economic growth, according to the editor of globally renowned magazine The Economist.
“Saudi Arabia’s economy is a massive reliable modern economy for the short-term, but for long-term economic prosperity it has to reduce dependence on oil,” said John Micklethwait, editor in chief of the leading weekly news and international affairs publication.
Micklethwait, who was in the Kingdom last week, said education is key to the economic development of Saudi Arabia. “Saudi Arabia should focus on a knowledge-based economy for future development,” he said.
He added that Saudi Arabia’s economy is stable at present because it does not have too much debt like other countries.
Micklethwait said world oil prices are falling now. Last week oil prices dropped below $70 a barrel but later recovered slightly. London’s ICE Brent crude settled at $74.02 per barrel on Friday.
“Any fall in oil prices will affect Saudi Arabia because at present it depends too much on oil income,” he said.
Though Saudi Arabia embarked on massive spending plans to spur growth, it needs to create a knowledge-based economy to provide jobs for the growing youth population, he said.
He did however predict that oil prices would go up again as there is a huge demand.
Micklethwait said Dubai is undergoing a crisis at present, but it will rebound because the country is creating a “nonoil future.” He said Dubai has an advantage because it is in the center of the world, which he claimed would definitely help boost its trade.
“Dubai is a regional hub for trade for Africa, the subcontinent (India and Pakistan) and the Middle East.”
He said the Gulf Cooperation Council (GCC) economies in general seem to be doing much better now than in the 1990s, as they have adopted long-term strategies for economic development.
Micklethwait was also confident that the euro would come out strongly if debt rescheduling in Europe goes smoothly, when asked whether the currency would survive the European debt crisis.
The euro has come under severe pressure because of a massive Greek debt crisis, but it can count on good support from other euro zone members.
Germany is still strong and has assured that it will do anything to keep the euro floating.
The euro was trading at $1.2266 on Friday.
“I feel that the euro will face some problems in the short-term, but definitely it will bounce back once the debt crisis subsides,” he added.
Micklethwait said the world economy will also recover this year as emerging economies, such as BRIC (Brazil, Russia, India and China), are doing fine and the US economy is also gaining momentum.
Gold prices are also going up and reached an all-time high recently. Micklethwait said whenever there is an economic crisis, gold prices surge because investors see it as a safe haven. He said gold has always proved to be a safe investment in times of financial crisis. Gold was fetching over $1,200 per ounce in London and New York on Friday.