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Japan, Saudi Arabia vow to deepen economic ties

  • September 2, 2016
  • , Nikkei Asian Review , 2:53 a.m.
  • English Press

TOKYO — Japanese Prime Minister Shinzo Abe met with Saudi Deputy Crown Prince Mohammed bin Salman here Thursday, with Abe agreeing to lend support to the Middle Eastern nation in its efforts to transform from an oil-dependent state.


During the 40-minute meeting at the prime minister’s official residence, both agreed to form a bilateral cabinet-level cooperative group, which will hold its first meeting in October in Riyadh. Japan plans to present a detailed proposal centered on making it easier for Japanese companies to operate in Saudi Arabia.


The son of King Salman bin Abdulaziz, the 31-year-old bin Salman controls the military and economic levers of Saudi Arabia as the defense minister and chairman of the Council for Economic and Development Affairs. He is next in line to the throne after the current crown prince, Muhammad bin Nayef.


“Japan views Saudi Arabia from the perspective of Middle East peace and significant business opportunities, and not just energy,” Abe said at the meeting. Tokyo has repeatedly sought to deepen relations with Saudi Arabia, and now the two sides see eye-to-eye on the Middle East country’s economic reforms.


Saudi Arabia is looking to lower its dependence on oil through bin Salman’s economic growth strategy, dubbed Vision 2030, which calls on Japan for help. Offering shares in state-owned Saudi Aramco, the world’s biggest oil company, and expanding a public investment fund are part of that initiative. The government aims to boost the private sector’s share of gross domestic product to 65% from 40%.


Japan is a strategic partner, Majid bin Abdullah al-Qasabi, Saudi Arabia’s commerce minister, said at a seminar in Tokyo the same day. He added that his country will establish a favorable investment environment. He appealed for direct investments in health care, alternative energy and logistics. Those are in addition to technology, Japan’s forte.


Appearing along with al-Qasabi at the seminar was the energy minister, the finance minister and other top officials holding economic posts in the cabinet. More than 460 people attended the event, mainly executives from Japanese energy companies, trading houses and banks. The Saudi delegation also invited companies to build recreation facilities and invest in the defense industry.


“We will combine the expertise held in the public and private sector and lend support,” said Hiroshige Seko, Japan’s minister of economy, trade and industry.


Japanese corporations and government agencies exchanged 11 memorandums of understanding with Aramco, Saudi Electricity and other Saudi firms. The agreements cover areas such as solar power generation, waste power generation, energy efficiency, steel pipe manufacturing and investment promotion. The Japanese side includes the three megabanks, engineering firm JGC, oil company Showa Shell Sekiyu and the big trading houses.


Saudi Arabia is looking to shake its dependence on oil as a way to preserve its national strength. Petroleum brings in most of Saudi Arabia’s budget revenue, and the country has been hit hard by the slide in oil prices. It is facing a 326.2 billion riyal ($86.9 billion) deficit for 2016. The country had to sell nearly 5% of its stake in Aramco, its crown jewel. The U.S. is currently exporting shale oil, which will likely weigh on crude prices over the long term.


The Mideast country is also seeking funds from Japanese financial institutions and investors as the government looks to privatize state-owned companies. The nation is looking to create jobs for young people as the population grows at a 2% annual clip. Saudi Arabia is banking on Japan to diversify the economy through direct investment, vocational training and other means.


Meanwhile, Japan looks to deepen ties with the oil-rich nation through the economic partnership. Japan imports a third of its crude oil by volume from Saudi Arabia, and maintaining and developing that relationship has emerged as a major issue.

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