OBG talks to Muhammad Al Jasser, Minister of Economy and Planning

Interview: Muhammad Al Jasser

What do you believe is the single most important challenge facing the economy in the next decade and how should it be dealt with?

MUHAMMAD AL JASSER: A sustainable, prosperous and diversified economy requires a future dominated by high-skill, high-wage sectors, as opposed to the current low-skill, low-wage activities that make up many sectors of our economy today. To do this and maintain a competitive edge, we need a highly productive labour force with adequate education, training and information tools.

I am highly optimistic that we will reach those goals, for two important reasons. First, we currently face a “demographic window” of opportunity in which working-age members of society greatly outnumber the other demographic groups. In 2011, the working-age population (15-64 years old) was 60.9% of the total population, while those 65 and older made up 3.5%, and those under 15 amounted to 35.6%. This is the first time in our history that our working age population is the largest. This age structure has the potential to be either an impediment to growth or a driver of growth. But much like the US in the 1950s and 1960s, or China in the last two decades, Saudi Arabia is determined to capitalise on this potential demographic dividend.

Second, we are actually investing heavily in human resource development. Of the SR1.4trn ($385bn) allocated for the implementation of the current ninth development plan, over half, or SR731bn ($195bn), is intended for developing our human capital, including general education, higher education, technical and vocational training, and science, technology and innovation. I am confident that such heavy investment will help us move toward a knowledge-based economy.

How can small and medium-sized enterprises (SMEs) be supported to ensure that they play an important role in the Kingdom’s economic expansion?

AL JASSER: The role played by SMEs in economic development has long been recognised: they are the major employer in the private sector, and in many countries the major contributor to GDP; and their dynamism is one of the most important sources of economic growth.

Successive development plans in Saudi Arabia have recognised this fact and attempted to enact policies that accelerate the development of the SME sector. The ninth development plan, for example, stated two specific areas in trying to develop that sector: urging banks and financial institutions to expand SME financing; and removing administrative, organisational, technical and marketing obstacles facing these enterprises. A number of initiatives have been developed in support of these policies and we are looking into the idea of establishing a new entity for regulating SMEs.

We are currently undergoing an in-depth evaluation of our SME policies over the past decade in order to determine how effective they have been and how they could be improved. These lessons will be incorporated into the 10th development plan.

To what extent do you think that regional instability is affecting the pace of economic integration with the GCC and other Arab countries?

AL JASSER: There is no denying the fact that developments in our region over the past year have had a significant impact on the region’s economy as a whole. But in Saudi Arabia, we have been fortunate that the impact has been minimal. We have been blessed with a wise leadership, fully aware of the systemic importance of our economy both regionally and globally, which has been aggressive in helping to stabilise the world oil market and very prudent in its macroeconomic management. Analysts who, prior to 2008, criticised our prudent monetary policy as too cautious now envy the results of these policies both during and after the financial crisis. As a result, we have managed to pass the 2008 global financial and economic crises without the depression-like impact that both developed and some developing countries experienced. Similarly, the current regional turmoil does not appear to have had any negative impacts on the stability of our economy.