x Abu Dhabi, UAESunday 21 January 2018

Prince turns focus on bailouts

When he was the head of Saudi Arabia's intelligence service, Prince Turki Al-Faisal rubbed shoulders with politicians and political outcasts alike over a 24-year career.

When he was the head of Saudi Arabia's intelligence service, Prince Turki Al-Faisal rubbed shoulders with politicians and political outcasts alike over a 24-year career.

As a son of the late King Faisal, he is one of the most senior members of the Saudi royal family. To what extent he speaks for the Saudi leadership is unclear, but when he talks, people inside and outside the kingdom listen.

These days he is more occupied with the growing global war for jobs than the war on terror, chairing the King Faisal Center for Research and Islamic Studies. Yesterday, he launched a salvo against multinational donor organisations holding their hats out for financial support from Gulf states without offering a meaningful seat on the board of the global economy.

It is a refrain that will chime with many of Saudi Arabia's neighbours in the region, as public spending increases after a year of political upheaval in parts of the region.

The kingdom alone is spending almost US$400 billion (Dh1.46 trillion) in a five-year plan aimed at reducing an unemployment rate among young Saudis.

The corridors around the conference hall hosting the Global Competiveness Forum in Riyadh are lined with paintings of horseracing - the sport of kings.

Inside the hall, the talk is more about horse trading - specifically what the Saudis and their Gulf neighbours can expect in return for bailing out bankrupted states in the euro zone.

"The financial crisis and Great Recession were born in the West, developed in the West, yet hit hard throughout the world," he reminded an audience that included the leaders of some of the world's largest corporations. The lecture did not stop there as Prince Turki pointed to the role of Islamic finance in Saudi Arabia and elsewhere in the Gulf acting as a brake on the runaway lending that led to the global financial crisis.

"Our success and resilience, I believe, is due in large part to the kingdom's culture of Islamic finance - most notably Islam's insistence on debt being tied to real equity and real assets: a genuine connection between risk and reward that enforces participants to maintain reasonable levels of leverage."

Gulf states are seeking greater global prominence in a trend that extends from culture to sport as well as finance and economics. Qatar, the home of Fifa World Cup 2022, has spent billions of dollars earned from gas exports on acquiring trophy assets abroad while also raising its political profile as both a mediator in regional political conflict, and in the case of Nato's air campaign in Libya, even a participant in it. The UAE is also investing heavily in its cultural projects while projecting itself as a global leader in developing green energy technologies.

Sovereign wealth funds from Kuwait to Abu Dhabi have gained an increasingly prominent role as funders of last resort for both corporations and governments.

According to a report from Georgetown University's Centre for International and Regional Studies, the Gulf states bought some $912bn worth of foreign assets in the five years to 2008.

The Saudi Arabian Monetary Agency currently holds about $650bn worth of overseas assets, much of which is tied up in US treasury bills. Prince Turki and others in the kingdom see these holdings as underpinning the stability of the greenback, and by extension the global economy because of the dollar's role as the reserve currency of the world. As such, Saudi Arabia and its neighbours deserve greater representation in world financial affairs.

"This is inevitable, and only fair when considering the role of financiers of last resort that our countries have played in the past few years and will continue to play in the coming years," he said.