Ushering in a new era: U.S.-Saudi relations are warmer than ever thanks to the close friendship between Saudi Arabia’s King Abdullah and U.S. President George W. Bush.

ing Fahd of Saudi Arabia died in August 2005, bringing to an end his 23 years of sovereignty. His contributions to the country’s social, political and economic development throughout his life include the modernization of the education system, the creation of a Consultative Council, the restructuring of the kingdom’s regional government, and the accelerated growth of industry and infrastructure. He has helped to make Saudi Arabia what it is today: “a prosperous society which is well-balanced economically, culturally and intellectually”, and remains true to the precepts and traditions of Islam.

His successor, King Abdullah, has played a significant role in state affairs in his role as Crown Prince. The current monarch has upheld and developed closer ties with the West, maintaining a personal friendship with U.S. President George W. Bush and making very clear his commitment to the global war on terrorism. At the April 2005 summit held in Crawford, Texas, Bush and Abdullah established a joint committee of foreign ministers to deal with important strategic issues.

Considered the most modern and open of his 42 brothers, Abdullah is seen as someone who understands the need for reforms in Saudi Arabia. Last year was a benchmark in opening the kingdom up both to its own people and to the international market. A highlight among political reforms has been the introduction of municipal elections, while the country’s interest in attracting foreign investors and partners was made evident by a Saudi trade mission to the U.S. The Saudi government, intent on rectifying some of the negative press the country received in the U.S. in the wake of the 9/11 terrorist attacks, is making efforts to promote student exchanges and facilitate visas for businessmen. On the economic front, the kingdom’s accession to the World Trade Organization (WTO) is opening the doors to a new era of international trade activity.

“The new King is seen as a reformer by the Western media,” says Prince Alwaleed bin Talal, chairman of Kingdom Holding and one of the richest men in the world. “His reign began with an economic boom thanks to oil prices. Further economic and political reforms are inevitable.”

Building a broader economic base
International investors are attracted by increasingly liberalized trade regime and WTO membership

ACCORDING to the Saudi Arabian financial group Samba, the kingdom’s economy could scarcely be doing any better. Oil revenues, the mainstay of the country’s budget, are strong and are likely to remain so. Meanwhile, increased diversification is giving rise to continued private sector growth, more business investment, and high consumer confidence and spending.

The figures for 2005 back up this positive image. Actual government spending for the year of $90.9 billion compared with revenues of $148 billion gave the country its largest surplus ever. Samba estimates that the government reduced its debt by $37 billion, equivalent to more than 29 percent. Real GDP growth reached 6.5 percent while inflation, at 0.4 percent, was insignificant. The country ended the year with a current account surplus of $87.1 billion, and economic growth is forecast to remain strong during 2006 and 2007.

Another highlight of the past year was Saudi Arabia’s accession to the World Trade Organization (WTO) on December 11th as the institution’s 149th member. As the world’s 13th largest merchandise exporter and 23rd largest importer, the kingdom has a major role to play in global commerce. Economic reforms instigated as a result of accession negotiations have led to an increasingly liberalized trade regime and a transparent and stable environment for trade and foreign investment meaning that, among other advantages, WTO membership should help reduce dependence on the oil industry and increase the inflow of foreign direct investment.