THE worldwide credit crunch might have shaken the stock markets globally, but the local business community of expatriates is ostensibly unflustered. Gulf stock markets suffered heavy losses before rallying back this week after governments in the region cut interest rates to make lending cheaper – a tactic, they say, would bring in billions of dollars into the financial system. “Those looking for easy money can easily lose any that he has by buying American bonds,'' said Khalid Aziz Shah, CEO of Raqam International Labels and Ribbons. “The Kingdom has the best booming market which has a high potential. I would suggest investors to invest in the local market,” he said. “Effects of the credit crunch on the Saudi economy have certainly been far less than those on other markets. Even if the situation deteriorates, the Saudi government backed by its strong economy will provide maximum support to its investors to deal with it,” said M. Mumtaz A. Kahloon, CEO of CityLink Establishment for Cargo, Travels and Tours. Equity markets of Gulf Cooperation Council (GCC) have lost considerable value this year and the investor's confidence has considerably weakened after many Saudi and Gulf investors suffered heavy losses when some American and Gulf banks used their funds to buy risky mortgage bonds just before the sub prime mortgage crisis erupted in the United States. The Saudi stock market rose after the central bank cut the repurchase (repo) rate by half a percent to five percent in a move to free up credit and prevent the Saudi market from being sucked into the global financial crisis. The Saudi Arabian Monetary Agency (SAMA) has also played a crucial role in protecting local banks from the regional and international crises. Mohammad Al-Jasser, Deputy Governor of SAMA, said the Kingdom's economic institutions will not be directly affected by the global crisis as these are not exposed to the troubled international financial institutions. Shamshad Ali Siddiqui, Managing Director of Amaq Contracting and Secretary General of Pakistani Investors Forum in Riyadh, feels that the local business community has no reason to be distressed due to the ‘bursting' of the global financial bubble. “However, those who have hugely invested in the American and European companies and banks may have to see red,” noted Siddiqui. Zulqiurnain Ali Khan, CEO of Zultec Group, said that some businessmen may have to face repercussions. “Knowing the risk factors and past experiences, we are not investing in the high-return and high-risk areas,” he said. According to the Jeddah Chamber of Commerce and Industry (JCCI), the banking sector in Saudi Arabia has had an increase of 37 percent and the deposits increased by 22 percent while their profits have risen to 4.2 percent. Despite an increased rate of inflation in the Kingdom as compared to recent years, Siddiqui said the local markets still offer favorable opportunities to the business community. “The construction business is booming across the country and is bound to remain so for the next 10 to 15 years, thus requiring at least one million more foreign workers to take up these projects,” he said. Saleh Al-Turki, Secretary General of the JCCI Board of Directors, assured that the economic situation in the Kingdom is very stable and good despite the Saudi stock market crisis. Shahid Akram Abbasi, financial and business development consultant, said Saudi Arabia must accommodate moderate foreign investment rules and laws. “This will control the liquidity in the Saudi economy as expatriates are very keen to invest here,” he said. “Soaring prices of consumer goods is a cause of major concern,” said engineer Aijaz Ahmed Khan, who has been working in Saudi Arabia for 29 years. He said that the credit crunch in the US and European markets has not had an impact on Saudi Arabia. “We should watch the failures of others and save ourselves from falling into the pit,” Khan said. The World Bank and the International Monetary Fund (IMF) were established to stabilize the international economy during the financial crises before the Second World War which were confined to particular regions. But the current financial turmoil is rapidly spreading across the continents. “If an appropriate action is taken in the next few months to support the faltering countries and restore the stock markets, the world economy will face a deep and prolonged collapse,” said Edward Henry, an economist and financial expert from Philippines in Jeddah. “Since the current G-7 countries are not doing much, there should be a worldwide call to form a new direction-finding group which should include Brazil, China, India, Mexico, Russia, Saudi Arabia and South Africa and the G-7 countries,” he said. The G-7 was formed in 1976 to bring together finance ministers from a group of seven industrialized nations to meet several times a year to discuss economic policies. Henry said the financial crisis may not end until Japan, which is the world's second largest economy and Asia's biggest market, returns back on its track of economic growth. “The yen has dipped from 80 per dollar a few years ago to 147 and then from 134 to around 102 against the dollar. Such ebb and flow in a major world currency has serious consequences,” he said. Zaffar Iqbal, a Pakistani Production Analyst in Saudi Arabian Lubricant Oil Co., is certain that Saudi Arabia will not be directly affected by the growing levels of financial turmoil. “Timely decisions by the leadership of the country, a strong economic base and well monitored economic policies have provided a protective shield to the country,” he said. Mohammed Muslehuddin, a Network Administrator who plans to shift to the Kingdom believes that it is due to the presence of the two Holy Mosques in the Kingdom that the country is safe from any external crisis. “The economic situation of the people in the Kingdom is far better than that of others and expatriates should realize this fact instead of being insecure,” he said. Abbasi said that the Saudi financial status is relatively stronger and that the expatriates here are lucky to reside in an economically developed country. However, he says expatriates have their own share of problems in the country. “Prices rose by over 50 percent but our salaries in the private sector increased at an average of only 10 percent. So how should we cope with the difference?” he asked. “My house rent has doubled and personal savings have decreased by 90 percent. Air fares have also increased. But the poor economic scenario in my country back home makes living in the Kingdom a better option,” he said. Abbasi said that while the Saudi Riyal was not under any strain, the situation in the neighboring countries has affected the Saudi market. He said the government should take measures to increase exports and decrease imports to ensure a sound economy. “Saudi Arabia must raise its foreign reserves in dollars, pounds and euros. It must increase its deposits of gold and produce food in bulk capacity,” Abbasi said. He said the Saudi government should formulate friendly rules and laws to attract foreign investment. “Measures should be taken to develop cottage industries set up by Saudi businessmen on the lines of Taiwan and China,” he said, adding that the Saudi government should establish micro and macro economic fractions. Meanwhile, Anees Farooqui, a Pakistani businessman in Jeddah, said the financial crisis has a silver lining to it. “Whatever happens, happens for the good. The stock market crash may ultimately result in normalizing of food and commodity prices in the Kingdom in the upcoming months,” he said. __
