Saudis have more to offer Egypt than mere investment
Newly elected Egyptian President Mohammed Morsi will visit Saudi Arabia on Wednesday as his first visit as head of state. At the top of the agenda will likely be a patching up of relations between the two Arab heavyweights, strained by the fall of President Hosni Mubarak, as well as the promised multibillion dollar loans to help to shore up Egypt's deteriorating fiscal position.
Mr Morsi will undoubtedly make the usual head of state rounds: a visit with King Abdullah, discussions with Foreign Minister Prince Saud Al Faisal and perhaps a meeting with the new Crown Prince Salman bin Abdulaziz. Regional geopolitics will probably be the focus.
Although it's unlikely, Mr Morsi should make two other visits: Saudi Aramco, the national oil company, and the Saudi Arabian General Investment Authority, SAGIA.
It has become clear that Mr Morsi's most important task will be the creation of jobs. Unemployment and underemployment played a critical role in the embers that caught fire in the 2011 uprising that overthrew Mubarak.
Post-transition instability has not improved the situation; rather, it has exacerbated Egypt's jobs crisis.
Both visits could provide perspective for Mr Morsi in this monumental task of job creation.
First, Saudi Aramco. What could Saudi Aramco possibly teach Egypt about job creation? After all, Saudi Aramco is an oil and gas company, the largest in the world, blessed with bountiful resources. Egypt's oil and gas resources are minuscule by comparison.
The history and practice of Saudi Aramco provides three important lessons: wisely leveraged foreign investment (in this case, American) can transform an industry and a country; the training and development of employees should be a top priority of large state-owned enterprises; and large state-owned enterprises can be a positive force, not a drag on the economy.
For the Saudis and Americans, this was a marriage of mutual convenience, each side benefiting, neither exploiting the other.
In Egypt today, a rising tide of xenophobic, anti-American and leftist-infused rhetoric caricatures foreign companies as bloodsucking exploiters. These views are often the fantasy of academics with little experience in the real world. In the real world, marriages of mutual convenience can benefit both sides - as long as the developing country receiving investment leverages it wisely, and its officials do not steal the funds and deposit them in Swiss accounts.
The US oil companies that built Aramco and handed it to Saudi Arabia in 1980 helped create one of the most efficient, successful and dynamic energy companies in the world - one that creates jobs all along the supply chain in Saudi Arabia and drives innovation.
Of Saudi Aramco's 56,000 employees, more than 80 per cent are Saudis, which belies the notion that GCC states need an army of expatriates to keep their companies successful. Saudi Aramco spends a whopping $800 million (Dh2.9 billion) a year on training and development of its staff - more than $2 million a day.
Saudi Aramco employees are a breed apart from the rest of the kingdom's working population. Perhaps that is why King Abdullah tapped Aramco, not the Education Ministry, when he wanted to build a world-class science university - an admitted stretch for an oil and gas company. But Aramco delivered and King Abdullah University of Science and Technology has emerged as a leading research centre in Asia.
Of course, few companies are blessed with such cash resources, but the example could be emulated by large, state-owned enterprises in Egypt. Such enterprises in the Middle East are often viewed as lumbering and wasteful - which they often are. However, as a new World Economic Forum study points out, they are also vital to job creation efforts.
"Large employers can play a decisive and central role in fostering the development of skilled national workforces," the WEF report, titled The Role of Large Employers in Driving Job Creation in the Arab World, notes. "These employers, whether state-owned enterprises (SOEs) or private family-owned conglomerates, dominate the national economies … Their size, in local and international markets, gives them important skills development capabilities."
Large employers also see that it's in their interests to develop new graduates' skills, which often fail to match the needs of the private sector. There are plenty of college graduates; lack of education is not the issue. Smarter education is. With proper incentives such as tax breaks for funding business education and entrepreneurship initiatives, large companies could support an education renaissance in Egypt.
And what about SAGIA? The Saudi General Investment Authority has been on the front lines of Saudi Arabia's decade-long effort to improve its regulatory climate for business and attract foreign investment. The results have been dramatic. Today, according to the World Bank's Doing Business Report, Saudi Arabia is the 12th best place to conduct business in the world, ahead of Canada, Switzerland, Australia, Japan, Taiwan and other successful economies. This is a remarkable achievement.
Where does Egypt stand? Number 110.
To be sure, these are two isolated examples and not reflective of all of Saudi Arabia, which has its own youth unemployment problems. But both Saudi Aramco and, more recently, SAGIA are playing a vital role in Saudi Arabia's economic growth story. These are lessons worth heeding.
Afshin Molavi is a senior adviser at Oxford Analytica and a senior fellow at the New America Foundation in Washington DC
On Twitter: @afshinmolavi
Updated: July 9, 2012 04:00 AM