Saudi: no cash from emerging economies until given more clout

By Andrew Torchia
Mon, Jan 23 2012

RIYADH (Reuters) – Big emerging economies such as China, India and Saudi Arabia will not aid the West in its financial crisis unless they are given more influence in running the global economy, a senior figure from Saudi Arabia’s ruling establishment said on Monday.

“The financial crisis and great recession were born in the West, developed in the West yet hit hard throughout the world,” former Saudi intelligence chief Prince Turki al-Faisal said in a speech to a business conference in Riyadh.

He said this showed the need to give emerging economies more representation and more authority in global bodies such as the Group of 20 nations, a forum of the world’s major industrialized countries, and the Financial Stability Board (FSB), which discusses regulation of banks and financial markets.

So far, however, organizations such as the FSB “have yet to take these new realities into consideration,” while the G20 is making little headway in coordinating economic policymaking around the world, he said.

Big emerging economies’ lack of influence in international bodies reduces their willingness to contribute money to fight the global crisis, the prince warned.

The International Monetary Fund is seeking to more than double its war chest by raising $600 billion in new resources to help countries deal with the fallout of the euro zone’s sovereign debt crisis.

“What we can be certain of is that large developing nations will not agree to provide additional funds without a greater say in the IMF, and this applies to all global economic governance organizations,” Prince Turki said.

The prince, who chairs the King Faisal Center for Research and Islamic Studies, a major think tank, no longer holds government office but is still seen as influential, and his position outside government may give him room to speak more frankly in public than current Saudi officials.

He is a former ambassador to the United States and Britain.


His speech criticized Western governments for “leveraging up” their economies over the past six decades and letting their financial sectors spiral out of control, saying the United States and the European Union would continue to struggle with debt problems for five or 10 years.

Much of his criticism echoed comments by officials in China, another emerging economy that is being asked to help fight the global financial crisis.

Oman’s central bank governor told Reuters last week that his country was prepared to increase its contribution to the IMF.

In general, however, officials in the Gulf’s rich oil exporters have indicated they are in no rush to contribute funds to bail out the West, and expect Europe first to do more to resolve its debt crisis.

Prince Turki noted that the Saudi central bank’s holdings of roughly $360 billion in foreign securities, most of them in the form of U.S. Treasuries, helped to underpin the value of the U.S. dollar and the stability of the global economy.

He said his country would continue to play a stabilizing role but added that because it faced its own challenges, including the need to create jobs for a young population and cope with political strains across the Arab world, it would need in the future to focus more of its resources domestically and within the Middle East.

The Arab Monetary Fund, a regional body which lends to governments, and Saudi development funds such as the Islamic Development Bank need to be strengthened to help the Middle East develop economically, he said.

“We will continue to support our neighbors where we are able, including financially, but now we also face new exigencies of our own,” Turki said.

(Editing by Susan Fenton)

  1. #1 by yhsiew on Tuesday, 24 January 2012 - 8:58 pm

    It is important to save for rainy days while we have aplenty to live upon. Unfortunately this is not the practice of the BN government who has a penchant for extravagance.

  2. #2 by monsterball on Wednesday, 25 January 2012 - 1:54 am

    If they don’t change..the Saudis will make the country a Republic.
    You can say…the change is to save their own Royal skins.

  3. #3 by boh-liao on Wednesday, 25 January 2012 - 3:11 am

    Well, they can GIVE their $$$ 2 1M’sia
    NR’s CHARBOR needs more $$$ 2 SHOP
    She denied d report of Andrew Hornery in d Sydney Morning Herald – Y just denied? Y NOT sue them (dis involves NOT just her n NR’s maruah, also UmnoB/BN’s maruah)? When win, use d $$$ 2 REALLY shop in Osland n 2 donate 2 charity
    Didn’t MMK ask her 2 SWEAR on d book dat she no shop there?

  4. #4 by casperclc on Wednesday, 25 January 2012 - 6:11 am

    “CHARBOR” in the above posting by boh-liao is not a Mongolian dish but in reference to NR’s woman/wife/fatter half.

    And one thing NR wishes he could do just like predecessor Mr.Clean @ anak Alim ex-PM Dollah Badawi is to wish his CHARBOR falls off the face of the earth and take on another wife.

    *Word of caution to players involved – in M’sia and only in M’sia, there are days when our UTK boys decide to blow up Mongolian chicks for no rhym or reason.
    ** Also, public can expect judges to choose to limit number of defendant while trying cases straight off as the first line of proceedings.

    Only in M’sian courts will a defendant be prosecuted for wrongful death without satisfying the two criteria essential for successful prosecution ie both intent and willful act (mens rea and actus rea) and judge, not bothered to find out why – and I really wonder how the two UTK fellows(completely masked and faces not revealed throughout entire trial) on death row are dealing with the injustice !!!.

  5. #5 by sheriff singh on Wednesday, 25 January 2012 - 9:53 am

    Europe is not too big to fall. If the markets decide it must fall, then let it fall and let the strong survive. All these artificial propping up without treating and fixing the weaknesses must stop. Don’t throw more good money after bad. Let those with deep pockets like China, India, Brazil etc buy up Europe and kick the as-es of the inefficient and lazy b-ms.

  6. #6 by sotong on Wednesday, 25 January 2012 - 10:02 am

    While their countries suffered due to gross mismanagement, many Europeans are doing very well in other parts of the world.

  7. #7 by dagen on Wednesday, 25 January 2012 - 10:15 am

    Borrowing (after a while) creates a dependancy habit. Creating wealth means a lot of effort must be expanded on available resources. Borrowing, in contrast, is a great deal easier and faster too. Servicing interest payments will never be a problem during the good times.

    So you see borrowing will grow as a matter of habit. Easy mate. Intersts? No problem!

    But of course no orgy no matter how good can last forever. For instance look at umno. The end of umno’s 50-yr long orgy (a world record?) too is in the horizon. So there, nothing can be permanent. Neither can the good times. When bad times take over from the good ones servicing interests will become an ordeal. That is obvious. Who doesnt know?

    Yeah, who does not know? The trouble is the mechanics of change from good to bad times is nothing like a clean and clear on / off switch over. It will progress in a transition from good to less good and too even less good and finally to no good before people begin to realise that thing are actually a little bad and so on. By then, its already too late for some people. For these people I say that their borrowings have in collective terms hit “critical mass”. They either default or they could borrow more to cover their existing liabilities. Such borrowing is no longer a habitual reaction. It is a survival response. Beyond that, it will be desperation.

    We can see it in US and EU. In fact I can also see the same thing happening in umno malaysia. The present 53 (wot?) 54% (of gdp) debt level could just means that the country is near the treshold of critical mass.

    However, many EU nations could still survive (albeit horribly) with a 100plus % debt level over their heads. So arent we safe? After all we have a comfort zone of some 46/47%. There is no magic in the 100% figure, I say. Each country has its own peculiar condition. Unlike those countries, malaysia suffers two severe haemorrghe (1) brain drain (2) capital flight. All the highways and all the tall buildings and all the infrastructures and facilities we see in the country would become useless if these two problems continued.

    And under umno they will surely continue. First, because umno, while it is still in gobermen, discourages brain gain. Secondly, umnoputras are shipping out money big time because they fear the consequences that may follow the demise of umno after GE13.

    Stop the rot!


  8. #8 by monsterball on Wednesday, 25 January 2012 - 11:03 am

    Saudies are not Europeans.
    They are Arabs….supposedly closest to God…and our UMNO b buggers claim most of them that their great great grandfathers are Arabs..and not Chinese…Indians and Thais.
    Mahathir claimed he is not half Malay….half Indian.
    It seems UMNO b crooks not only dressed with false titles..cheat and steal..but their bloodline are purest of all ….amongst all Malays.

  9. #9 by dagen on Wednesday, 25 January 2012 - 1:53 pm

    No No No. Umnoputras are different. They are GOD. The only GOD who may drive super luxury cars with totally blacked out windows and sell super luxury bungalows in great haste.

  10. #10 by Loh on Wednesday, 25 January 2012 - 8:23 pm

    Mamakthir’s words
    ///1. Ever since the Europeans and this includes the Americans, lost to the Eastern countries in the manufactured goods markets, they have switched to the financial market. Through the many products they created in this market they seem to be able to grow and maintain their wealth and prosperity as shown by such indices as the GDP and Per Capita income.///–Mamakthir
    Is it true that the West lost to the East in manufactured goods that they created financial market or was the financial market a development along with other economic activities? Have the West lost out or did they simply move out their activities because of cheap labour, or tax incentives?
    Mamakthir had his letter entitled “The west needs to go back to the capitalist basics” published in Financial Times on 12 January 2012. Unlike other letters published by FT, there has been no comment to that letter. The west must have accepted his views completely!
    ///2. But the business is spurious. The financial market is basically about gambling. Ever since America decided that the market should regulate itself, that there should be less Government, all kinds of unacceptable practices have been allowed. Short selling expanded from shares to commodities to currencies, Banks lend more money than they have and allowed highly leveraged borrowings by hedge funds and currency traders. They indulge in sub-prime loans, securing these imprudent lending by mortgaging and insurance.///–Mamakthir
    Insurance is also gambling to those who have stamp size knowledge. If the financial business is spurious, then financial crisis would not bring about economic crisis. Economic development would have remained at a lower level without financial market. The functioning of financial market is not perfect which resulted in problems facing the world now. But is it irrelevant?

    ///3. In real business the costs in the European countries are unduly high because of high salaries and wages for workers’ pensions, bonuses, short working hours, long paid holidays, unemployment and other social benefits. The standard of living may be high but European products cannot compete with the products of the East in world markets.///–Mamakthir
    The west respects human rights and workers’ welfare that makes owners of business pay their employees the benefits commensurate to their contributions to the earnings of the enterprises. The east depends on cheap labour to compete in the world market. The blood and sweats of their workers contribute to the wealth of business owners. The voters allow elected representatives of pseudo democracy such as Malaysia to behave like absolute monarchy. But unlike absolute monarch the Pseudo-king does not have interest of the nation at heart.

    ///4. The currency trading today, for example is said to be worth four trillion dollars a day, equal to the total productivity of Germany in one year. Whereas producing goods and services by Germany spins off all kinds of supporting and other businesses as well as millions of jobs, currency trading spins off no businesses nor create any real jobs. All the dealing involves only the entry of figures in bank books. The earnings are real enough and can contribute to GDP and Per Capita growth. But the picture of economic growth indicated by these indices is false as the wealth belongs to a very small percentage of the population.
    5. The sums involved are however huge, running into hundreds of billions and even trillions of dollars. When the bottom fell out, the losses are equally huge, sufficient to bankrupt even the biggest banks. Even countries can go bankrupt. ///–Mamakthir
    US Dollars printed by the US without any backing are tradable with any other currency which is backed by gold. Ringgit would be worthless if it is not backed by other currency or gold. There is nothing Malaysia can do about it except to get jealous. That is how it is.
    ///6. When you lose money, you become poor. Countries are the same. When they lose money or they borrow beyond their means and cannot pay, they become poor.
    7. The problem is an unwillingness to admit that they, the Europeans, the Americans, the icons of the free market and economic prosperity are now poor. As a result all the manoeuvres so far are aimed at staying rich, at maintaining a lifestyle that is untenable.///–Mamakthir
    The western countries may be poorer now but the people are capable to produce goods and services that the East want. That is because they have human capitals and human resources. The people around the world are attracted to live in countries in the west, and only those who are considered an asset are acceptable. In Malaysia UMNO government gives foreigners IC to vote for them, and it pushes out trained human resources to ensure that they do not vote against UMNO.

    ///8. The only real way out is to accept a lifestyle that is associated with lower incomes. But the people are demanding to live the rich life they were used to before. The austerity programs are rejected with demonstrations and strikes. And these simply aggravate the situation.///–Mamakthir
    Only Najib called for people to change lifestyle in facing inflation but not leaders in the west. The demonstrations were part of democracy since they are unlike Malaysians who are forbidden from showing their opposition to institutionalized corruption or manipulation of electoral process in general elections. The governments in the west are informed of the wishes of the people all the time and they do not have to buy votes at the end of their term.

    ///9. If wages and salaries as well as bonuses and other perks are lowered, then the production of goods and services by the workers would cost less. The goods will be able to compete again in the markets against those of the East. Real businesses would then be able to be resuscitated.///–Mamakthir
    This is a good example of how to spread poverty to working class around the world. That would make owners of businesses rich. That might not even stop Malaysians emigrating.

    ///10. At the same time the financial market should be curbed. Operations out of tax havens should not be allowed and all accounts must be submitted to the authorities. Currencies should be pegged to a new independent trading currency based on a specific amount of gold or other precious metal. The fluctuation in value would be minimal, making doing business less uncertain.///–Mamakthir
    With currency pegged to gold or any other precious metal, then the increasing world population would have a reducing share of a fixed, however large the quantity of gold or precious metal, amount of currency. Either the people have to get poorer by the day or more currency notes would have to be printed and the value of gold inflated.
    Economic activities would be restricted to the movement of limited amount of money with every piece backed by a fixed amount of metal.

    ///11. With the lower cost of production there will be no necessity to outsource in Asia. The industries of Europe would be revived and contribute towards overcoming unemployment and early settlement of debts. Real wealth would be generated.///–Mamakthir
    The east will continue with the old machineries to produce the same goods. New industrialization in the east can begin at a higher level!

    ///12. The Europeans also spend far too much on weapons. Research, development and upgrading swallow up huge amounts of money. As the weapons become more sophisticated the costs go up sky high. Where before a fighter plane would cost a million dollars, now they cost 50 to 100 million dollars.///–Mamakthir
    The west produce modern weapons and the east contribute lives to prove their utility. The billions in dollar are cost to the east to support their development. But if the weapon costs only pennies, how can the government pay huge amount for services contracts?

    ///13. Yet these weapons are quite useless in fighting the guerrilla wars they are likely to face. And they dare not have wars with countries with the same military capacities because it would be ruinous for everybody and would probably spell the end of the world.///–Mamakthir
    The weapons might be useless to defending Malaysia but they are toys to keep the military occupied. Besides without the weapons, how does the defense ministry justify ancillary expenses?

    ///14. Their military budget contributes to the wastage of funds as the likelihood is that the weapons would never be used for the purpose they are developed, certainly not on the scale they are being prepared for.///–Mamakthir
    The west use the weapons as a sale advertisement, and the East save up to buy them. Malaysia would not think twice to make money in the same business activity, had it the capability. But we have exported our human resources.

    ///15. Everything points towards a new Bretton Woods. The world’s economy has become much more liked and integrated that a new set of monetary, financial and banking system needs to be negotiated and devised, taking into consideration the views and problems of the poor countries as well. There should be no thoughts about hegemony; military, political or economic.///–Mamakthir
    Those who have the knowledge and ability and are in the position to effect changes to improving financial market are not asleep. If IMF has no solution, Mamakthir would not have!

  11. #11 by Loh on Thursday, 26 January 2012 - 12:08 am

    USA is not afraid of foreigners buying their companies so long as the investors are not sovereign funds that might move portable assets which include intellectual property away. Individual investors would soon become Americans. America is not bothered about the origin of their citizens. Thus allowing companies in USA to collapse only draw rich foreigners to become Americans.

    Britain does not call its Rolls Royce national car. Yet Proton after its sale to Bumiputras remains a national car waiting either for bailed out in cash or in government regulations.

    The west bailed out banks and financial institutions to prevent economic chaos but Malaysian PM bailed out companies to prevent his son going bankrupt. Though the action is the same, the number of beneficiaries differs.

    Germany needs a common EURO currency to sell its products. They should therefore bankroll IMF to ensure that EURO does not breakup.

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