EDITORIAL: Give Saudi Arabia a helping hand with reforms to break oil dependence
TOKYO (The Japan News/ANN) - From the perspective of Japan’s energy policy, deepening strategic ties with a major power in the Middle East is extremely significant.
During visit to Japan, Saudi Arabia’s King Salman bin Abdulaziz held talks with Prime Minister Shinzo Abe. Both leaders signed the “Japan-Saudi Vision 2030,” a document with economic cooperation at its core.
The two nations will expand cooperation in a wide range of fields, including manufacturing, agriculture and energy. The document also spells out the launch of special economic zones in Saudi Arabia in which deregulation and the introduction of preferential tax treatment will be advanced, a step to encourage Japanese companies to enter Saudi Arabian markets.
Saudi Arabia is the world’s largest exporter of crude oil, and supplies 30 percent of Japan’s oil imports by volume. Reinforcing the bilateral framework for cooperation is very important for securing a stable supply of energy resources.
It is understandable that Abe said, “We would like to more aggressively develop relations with Saudi Arabia, the cornerstone of stability in the Middle East.”
The first visit to Japan by a Saudi king in 46 years is part of an Asian tour that includes stops in nations such as Malaysia and China. This unusually long foreign trip, on which the king is being accompanied by about 1,000 people, clearly aims to have the different nations vie with each other so Saudi Arabia can draw out as much cooperation from them as possible.
King Salman has been working on reforms intended to help Saudi Arabia break free from its oil-dependent administration of the state. This is because Saudi Arabia’s finances have been hit hard by a rising population and falling oil prices, so it faces pressure to reform the system, in which plentiful oil money has been distributed to the citizens.
Stability vital for reforms
In April 2016, Saudi Arabia started a structural reform plan designed to free the kingdom from dependence on oil, to invite investment from other nations and nurture a diverse range of industries. The plan is spearheaded by the king’s son, Deputy Crown Prince Mohammed bin Salman. This appears to indicate the sense of urgency over the possibility that the stability of the royal family’s rule could be jeopardized if it stands around doing nothing.
Japan should provide its experience, technology and capital to actively support Saudi Arabia’s national transformation. That will open the door to a new era for the bilateral relationship in which the nations move from simply being oil trading partners to strategic partners on multiple levels.
Japanese companies also are looking at the development as a new opportunity for business. If Saudi Arabia wants to encourage these firms to enter its markets, it needs to improve the business environment that has stymied foreign capital, such as employment restrictions and complex permit and license procedures.
How Saudi’s reforms will turn out can be influenced also by the regional situation in the Middle East. The king’s Asian tour shows an intention to diversify Saudi Arabian foreign policies.
The administration of former U.S. President Barack Obama moved ahead with steps to improve ties with Iran, a rival of Saudi Arabia. This chilled Saudi-U.S. relations. As the Middle East policy of the administration of President Donald Trump remains unclear, Riyadh is seeking to switch from an unquestioned pro-U.S. position.
During his talks with the king, Abe called on Saudi Arabia to ease tensions with Iran. Saudi Arabia must be aware that a fight for dominance between both nations invites confusion in the Middle East and can be a factor that obstructs its reforms.