Tuesday, August 09, 2005

Foreign Direct Investment??? Who ever heard of such nonesense!

I just read this hilarious article! Saudi Arabia apparently is going to get around $360 billion dollars of investment in the near future - all of which will be coming from foreign banks and investment portfolios.

Okay, the reaction you should have had as you read that sentence was:
"WOW! Foreign investors really like the fact that Abdullah is now "king," and have decided to pour their monies into Saudi Arabia."
However, that reaction would have been misplaced. It appears that while most of the countries in this world have to work their butts off to create conditions that would attract foreign direct investment and economic growth, which would lead to more comfortable standards of living, all the Saudis have to do is snap their fingers!

You see, the $360 billion is actually Saudi money that was invested overseas. It appears that those who make the decisions in that Kingdom have decided that "the conditions are now ripe for investments."

All that money... all that power... imagine! The Saudis don't even need foreign investors. In my opinion, that autonomy is one of the main reasons that kingdom's society is so backward and underdeveloped.

Oil: the curse of the Middle East!


Ramzi said...

We spend a lot of time and effort to try and coax the Lebanese abroad to invest in their country, in the spirit of "ask not what your country does for you..." only to rob them blind when they do bring their money back.

If "all the Saudis have to do is snap their fingers" then great!

I don't think that's the reason they are backward and that is not the crux of the curse either Raja.

Raja said...

Ramzi, to live a certain way, you need to finance it. If the Saudis were resource-poor, they would have had two choices:

1. either live the way they wish, under miserable material conditions

2. reform, and change their behavior/traditions so that they are more competitive, and attract investments that would improve their living conditions. This applies to everyone by the way, including Lebanese (who think they're smartest people in the world). Lebanon's oil is its remittances. Lebanese society is as dysfunctional as the Saudis, and had it not been for the money being sent home from places like Saudi Arabia and the United States, the people would have been forced to find a way to work better as a means of at least feeding themselves.

With regards to Saudi Arabian society, let me give you some very concrete examples:

a. Saudi Arabia's literacy rate is lower than some sub-saharan countries

b. Half of the country's population are FORCED to sit at home and contribute to society exclusively by producing and raising children (preferably boys).

c. Of those who are "educated," all that a significant portion know how to do is recite the Koran forward, backward and which ever way their Wahhabi instructors feel will distinguish them.

All of these societal restrictions and shortcommings cost money and resources (think of "opportunity cost" as well). Do you think Saudi society would have been able to do those things if they could not afford to? The "curse" of oil gives them that luxury. It allows Saudi society to consume more than it produces - i.e. to have a negative net-output. In fact, a visualization of Saudi society could be your useless, illiterate uncle who lives off family heirlooms and has a terribly annoying self-riteous attitude. Again, Lebanon is similar to a lesser extent because of remittances.

If Saudis actually had to work for a living, I guarantee you that they'd be very different. They'd have two choices: either live like their ancestors in the desert with their camels, or adjust to the modern world as a way to improve their standard of living. Unfortunately though we have a society that not only is utterly backward, but also uses its extreme wealth to export that backwardness all over the entire friggen earth!

Thank you OIL!!!!

hummbumm said...

The remittance issue for lebanon is has come up with regards to Mexico. Mexico gets more remittance from the US than oil revenue, but with that outlet for employment and a source of revenue, it delays the needed political and economic reform necessary for Mexico. Ditto lebanon, where there is no pressure on the govt enacting sound economic policies as everyone is already assuming they will eventually leave anyways. As to Saudi, you are dead on. It is no coincidence that in Saudi, Iran and other oil rich countries taol of reform peaked in 1999 when oil was at its lowest but has since faded, as the money flows in