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Vision 2030 and the Transformation of Saudi–Japanese Economic Relations

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Vision 2030 and the Transformation of Saudi–Japanese Economic Relations Vision 2030 and the Transformation of Saudi–Japanese Economic Relations Makio Yamada Research Fellow January, 2017 King Faisal Center for Research and Islamic Studies Vision 2030 and the Transformation of Saudi–Japanese Economic Relations Abstract The visit of Deputy Crown Prince Mohammed bin Salman to Tokyo in August and September 2016 resulted in the beginning of the reconfiguration of Saudi–Japanese economic cooperation into one that responds to the goals of Vision 2030 and the National Transformation Program 2020. In recent years, the two states have been keen on transforming their energy- based bilateral relationship into what they have referred to as a ‘strategic’ and ‘multi-layered’ relationship. Today, as Saudi Arabia accelerates its efforts to achieve a transition to a post-oil economy, they have begun to cooperate on the creation of more diverse economic ties between them, through the newly formed Saudi– Japanese Vision 2030 Joint Group. Riyadh is aiming to develop new economic sectors such as renewable energy, tourism and entertainment, and the digital economy, as well as promoting localization of the energy and defense industries. Consequently, it expects investment in these sectors from the world’s third largest economy. Tokyo also desires to strengthen its cooperation with the largest oil supplier to its economy for the sake of energy security. Policy-makers from both states agree that human capital development is one of the key factors that will determine the outcomes of the efforts made by the two governments. 3 Introduction Since the visit of Deputy Crown Prince (DCP) Mohammed bin Salman to Japan in August and September 2016, Saudi Arabia and Japan have been working on the transformation of their bilateral relationship into one responding to the goals and targets of Vision 2030 and the National Transformation Program (NTP) 2020, which were announced earlier this year. This paper will shed light on the dynamics of that transformation; it consists of five parts: (i) Overview; (ii) Background; (iii) What Saudi Arabia aims to gain from Japan; (iv) What Japan aims to gain from Saudi Arabia; and (v) Prospects. 1. Overview DCP Mohammed bin Salman, who is also a defense minister of Saudi Arabia, visited Japan for four days between 31 August and 3 September following his three-day visit to China.1 Following his arrival in Japan on the evening of 31 August, DCP Mohammed visited Japan’s Imperial Palace on the morning of 1 September to greet Japan’s Emperor Akihito, and had a meeting with Japan’s PM Shinzō Abe (安倍晋三) at the latter’s office in the afternoon of the same day. At the end of their meeting, seven memorandums of understanding (MoUs) were exchanged between Saudi Arabia and Japan (Table 1).2 The following day, DCP Mohammed also met Japan’s Crown Prince Naruhito at his residence, and held talks with Japan’s defense minister Tomomi Inada 稲田朋美( ) too. Prior to his meeting with Inada, an MoU for promoting exchange between the defense ministries of the two states were signed.3 Table 1: 7 MoUs exchanged between Saudi Arabia and Japan during the DCP–PM meeting No. Name of MoU 1 Promotion of cultural exchange 2 Cooperation against counterfeit products 3 Cooperation in the field of small and medium-sized enterprises (SMEs) 4 Cooperation in the field of energy 5 Industrial cooperation 6 Cooperation between the Japan International Cooperation Agency (JICA) and the Saudi Development Fund (SDF) 7 Cooperation between Kyodo News and Saudi Press Agency Source: The Ministry of Foreign Affairs Japan 1- After his visit to Japan, DCP flew back to China to attend the G20 summit in Hangzhou as head of the Saudi delegation (“Saudi Prince to Discuss Reform Drive in Visits to China, Japan”, Al Arabiya, 25 August 2016). DCP, known as being fond of Japanese culture, in particular anime, privately visited Japan for his honeymoon before (“サウジ副皇太子、来日ヘ 日本アニメに詳しい親日家”, 朝 日新聞, 24 August 2016). 2- Ministry of Foreign Affairs Japan, “安部総理大臣とムハンマド・ビン・サルマン・サウジアラビア副皇太子との会談”, 1 September 2016, http://www.mofa.go.jp/mofaj/me_a/me2/sa/page4_002309.html [accessed 30 September 2016]. 3- Ministry of Defense Japan, 日サウジアラビア防衛相会談（概要）“ ”, 2 September 2016, http://www.mod.go.jp/j/press/youjin/201602/09/_gaiyo.html [accessed 30 September 2016]. 4 DCP Mohammed and PM Abe agreed on the formation of the ministerial-level Saudi– Japanese “Vision 2030 Joint Group” (ビジョン 2030共同グループ) as a platform to discuss, plan, and implement bilateral cooperation projects aimed at achieving the goals of Vision 2030 through the participation of Japanese firms and institutions. The first meeting of the Joint Group took place in Riyadh on 9 October. The meeting was attended by Japan’s economy, trade, and industry minister Hiroshige Sekō (世耕弘成) and three Saudi ministers: the economy and planning minister Adel Fakeih, the commerce and investment minister Majid Al-Qasabi, and the energy, industry, and mineral resources minister Khalid Al-Falih.4 The meeting saw the creation five working groups to continue discussions on detailed plans of cooperation in the following fields: (1) trade and investment; (2) finance; (3) energy and industry; (4) SMEs and human capital development (HCD); and (5) culture and sports. The second meeting of the Joint Group is expected to take place in Tokyo in the spring or summer of 2017.5 2. Background: Saudi–Japanese Relations in Recent Years Saudi Arabia and Japan celebrated the 60th anniversary of their diplomatic relationship in 2015. Since 1955, the two countries have maintained a reciprocal relationship based on energy trade: Saudi Arabia has been an irreplaceable source of Japan’s oil imports while Japan has been a major destination of Saudi oil exports. In addition, Arabian Oil Company (アラビア石油), a Japanese private oil company, produced oil in Al-Khafji in the former Saudi– Kuwaiti neutral zone between 1961 and 2000.6 Since the beginning of the current century, the two countries have been accelerating their endeavors to develop the bilateral relationship beyond the energy nexus. In January 2001, Tokyo revealed its new policy toward Saudi Arabia and other Gulf Cooperation Council 7 (GCC) countries aimed at building ‘multi-layered relationships’ (重層的関係) with them. Subsequently, Riyadh and Tokyo began referring to their bilateral relationship as a ‘strategic partnership’ (戦略的パートナーシップ) in April 2006, around the time of Crown Prince Sultan’s 8 visit to Tokyo and meeting with PM Junichirō Koizumi (小泉純一郎). 4- Ministry of Foreign Affairs Japan,薗浦外務副大臣の「日・サウジ・ビジョン “ 2030共同グループ閣僚級会合／第12回日・サウジ合同委員会」への出 席及びサウジアラビア訪問（結果）”, 9 October 2016, http://www.mofa.go.jp/mofaj/press/release/press4_003791.html [accessed 10 October 2016]. 5- Ministry of Economy, Trade, and Industry Japan, “世耕経済産業大臣がサウジアラビア王国に出張しました”, 9 October 2016, http://www.meti.go.jp/press/201620161011006/20161011006/10/.html [accessed 20 October 2016]. 6- 庄司太郎『アラビア太郎と日の丸原油』エネルギーフォーラム, 2007. 7- Ministry of Foreign Affairs Japan, “湾岸諸国との重層的な関係に向けた新構想”, 9 January 2001, http://www.mofa.go.jp/mofaj/press/enzetsu/13/ekn_0109.html [accessed 12 October 2016]. 8- Ministry of Foreign Affairs Japan, “共同声明 日本・サウジアラビア王国間の戦略的・重層的パートナーシップ構築に向けて”, 6 April 2006, http://www.mofa.go.jp/mofaj/kaidan/yojin/arc_06/jsaudi_sengen.html [accessed 12 October 2016] 5 In truth, however, Saudi–Japanese economic relations were already beginning to be diversified following the period of the first oil boom (1973–83). Responding to Saudi Arabia’s first industrial expansion then, two petrochemical joint ventures were formed in the Al-Jubail Industrial City between Saudi Arabian Basic Industries Corporation (SABIC) and Japanese consortiums led by companies from Mitsubishi Group (三菱グループ). As Saudi Arabia embarked on its second industrial expansion during the new oil boom in the mid- 2000s, aiming at the consolidation of its global leadership in the production of basic petrochemical products and extending production-chains further downstream to labor- intensive manufacturing sectors, Japan came to be counted as a key industrial partner once again.9 The bilateral industrial cooperation was boosted with the creation of the Japan–Saudi Arabia Industrial Cooperation Taskforce (日本サウジアラビア産業協力タスクフォース) in Tokyo following PM Abe’s visit to Saudi Arabia in May 2007, during his first premiership (September 2006–September 2007). The Taskforce cooperated with Saudi Arabia’s National Industrial Clusters Development Program (NICDP), a program then jointly supervised by the Ministry of Petroleum and Mineral Resources and the Ministry of Commerce and Industry with the objective of nurturing targeted manufacturing sectors, to promote investment by Japanese firms in the Saudi economy.10 The two organizations have so far succeeded in launching eight industrial projects in the Kingdom, including the truck-assembly plant of Isuzu Motors 11 (い すゞ自 動 車 ) in Dammam, which opened in December 2012. Another major bilateral industrial project is Rabigh PlusTech Park, an industrial park currently under development in Rabigh, the town close to the King Abdullah Economic City in the north of Jeddah. The project began with the creation of Petro Rabigh, an equally owned petrochemical joint venture between Saudi Aramco and Japan’s Sumitomo Chemical (住友化 学). It was the first petrochemical project of Saudi Aramco, and Petro Rabigh launched one of the world’s largest refinery-integrated petrochemical complexes, producing 1.3 million tons per annum of ethylene in April 2009.12 Rabigh PlusTech Park, which is adjacent to the complex, has been attracting both Saudi and foreign producers in the conversion industries that will process petrochemical products produced by Petro Rabigh into manufacturing products.13 Following Japan’s political experiment during the three years of the administration of the now-defunct Democratic Party of Japan (民主党) between 2009 and 2012 – during which the earthquake, followed by the Fukushima nuclear disaster, hit Japan in March 9- Makio Yamada, “Gulf-Asia Relations as ‹Post-Rentier› Diversification?: The Case of the Petrochemical Industry in Saudi Arabia”, Journal of Arabian Studies, 1(1), 2011: 99–116.
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