The Arab Spring Re-emerges

Faced with the accelerating evolution of the unprecedented changes in a century, globalization has gone through a process of division and reorganization. The paper “Reflections and Exploration on Issues Related to Economic Globalization” preliminarily discusses the evolution of global trade value chains and the corresponding global reserve currency system. Against the backdrop of increasingly intense competition among major powers, it is crucial to promote the accelerated evolution of global trade and currency systems, in which the Middle East-Islamic world will become an important force in the reorganization of the world pattern. As the theme of the Boao Asia Forum suggests – unite and cooperate to meet challenges, promote development through openness and inclusiveness, and create an inclusive global economic growth model. The paper “Currency Stability, Inequality and Business Cycle Research” preliminarily discusses a framework for inclusive growth. Under this framework, how the Middle East and China can achieve integration under different currency systems is particularly important. Putting knowledge into practice, I decided to go to the Middle East for further study. In the following series of articles, we will describe our experiences and business opportunities in the Middle East.

On January 22, 2023, I landed at Jeddah Airport in Saudi Arabia, embarking on my journey in the Middle East. As early as 2016, when the Saudi Crown Prince launched the “Vision 2030”, I heard about a series of potentially implemented, seemingly crazy reform plans. In 2018 and 2019, my friends and I tried to establish partnerships with Saudi friends, but with no progress. Looking back, there were several reasons: 1. The business and financial systems in the Islamic region were not in line with the global system, making it difficult to understand the business models and local operations; 2. High cultural barriers made communication with locals challenging; 3. The digital transformation of the Saudi market was insufficient, leading to significant price differences in various regions. With these doubts in mind, I believe it is necessary to explore the Islamic region firsthand.

The first thing after arriving in Saudi Arabia was to learn about the Quran. Why is it essential to learn about the Quran first? There are two reasons: first, to break cultural barriers and dispel long-standing misconceptions; second, to understand the ultimate goal of a series of reforms in Saudi Arabia, we must understand the underlying cultural environment. Only then can we be qualified to discuss whether a new wave of change will emerge in the Arabian land.

The second thing was to observe Saudi Arabia’s economic situation on the ground. From the main economic indicators, inflation did not get out of control and was mostly below the economic growth rate. The unemployment rate was also maintained at a reasonable level (note that many local residents in Saudi Arabia did not work in the past due to oil and cultural issues). The absolute population has grown rapidly over the past decade. Lastly, 100% of the population has access to electricity and the internet. Overall, this is a powerful economy, and with the help of natural resources, its resilience is much higher than other economies. In reality, during my two-week journey, I could feel the rejuvenating power everywhere I went.

The third step is communication. To better help me understand the culture and the goals of the reforms, my friend specially invited several friends, including some from Saudi Aramco, as well as university professors who study religious culture, import and export traders, etc.

Seeking transformation is necessary for high-quality and sustainable development. In the past (before 2016), Saudi Arabia’s economic growth was entirely dependent on energy. The astonishing foreign exchange reserves created by energy exports enabled the entire country to quickly switch from poverty to “lying flat.” For a long time, the domestic labor force primarily relied on imported labor, employing workers from countries like Egypt and Indonesia. Under such circumstances, the economy showed strong but disorderly growth. Although the economic growth rate was increasing rapidly, there was no innovation in science and technology, and a large number of goods and services relied on imports. Secondly, the rapid growth of the energy-dependent economy caused the loss of market pricing mechanisms within the economy. Price confusion for goods was typical, and arbitrary pricing occurred for a large number of imported goods. Corruption and other issues became increasingly serious, the Crown Prince and his stakeholders quickly amassed wealth, and the actual social inequality became increasingly severe. However, since the king directly distributed money to the people, the phenomenon of inequality was not directly felt by the public. Combined with the imbalance of market pricing mechanisms, the gap between ordinary residents was not apparent. For the Crown Prince and his interest groups, it is more about occupying resources (land, oil, natural gas, etc.), and these dividends need to be released gradually over time. However, all of this was seen by Mohammed bin Salman, who, after taking office in 2017, launched a series of radical reforms and actively promoted the implementation of the Vision 2030. One of the major goals of the vision is to gradually get rid of energy dependence and follow a green and sustainable development path driven by technological innovation and economic growth.

The concept of inclusive growth. Geographically, centered around the two holy cities (Mecca and Medina), Islam spans the Red Sea, stretching to the north of 12 degrees north latitude, north to Istanbul, and east to Indonesia and other Southeast Asian countries with a large number of believers. In terms of religion, Islamic culture is mainly based on Shia and Sunni sects, forming two major forces. For all believers, Saudi Arabia is the birthplace of religion and the core of cultural origin. Therefore, the Saudi royal family believes that the “unification of the Peninsula’s glory” will be a future ultimate goal. As the first country to become wealthy, they should lead other countries towards common prosperity. This is why, in recent years, Saudi Arabia’s relationship with Egypt has become increasingly close, and the recent handshake between Saudi Arabia and Iran also fully illustrates the vision of shared prosperity under God.

Challenges faced:

The US-Saudi relationship faces challenges. In February 1945, President Roosevelt and King Abdulaziz met on the USS Quincy at the Suez Canal, initiating the US-Saudi partnership. Saudi Arabia allowed the United States to extract its underground oil resources, and the United States provided security guarantees to avoid harm from neighboring countries and other powers. In recent years, this relationship has gradually developed cracks. The United States is frustrated with Saudi Arabia’s human rights record and unstable oil market, and Riyadh is beginning to believe that Washington will not continue to guarantee regional security. In the summer of 2022, when President Biden tried to assure Arab leaders of the US commitment to security in the Gulf region, the Gulf states did not side with Washington. Subsequently, Saudi Arabia may face security and defense issues in the Gulf region.

Reform pressure – public. Mohammed bin Salman expressed in Vision 2030 the reduction of public spending and the encouragement of citizens to start their own businesses. As mentioned earlier, this shift represents a 180-degree turn for residents who have long been without work and enjoyed high welfare benefits. The direct decline in social welfare will force residents to go out and compete directly with foreign workers. However, from the current situation, citizens are gradually stepping out of their homes and accepting new work and life.

Continuous fluctuations in oil prices. Significant reform plans require substantial financial support, especially when facing resistance and difficulties during the reform process. Having ample financial resources becomes extremely important. However, from the second half of 2014 to 2022, oil prices experienced significant fluctuations, with prices lower than in previous periods. To cope with the downward pressure on oil prices, Saudi Arabia was forced to cut fiscal spending and subsidies in 2016. In the future, the uncertainty of oil prices may impact the progress of reforms.