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International Bytes: Davos in the desert

India-Saudi Arabia ink 12 agreements – (Davos in the desert)

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In News: (Davos in the desert)

  • Prime Minister Narendra Modi is on a visit to Riyadh to attend an international event. Formally the Future Investment Initiative (FII), it is widely being described as “Davos in the desert”.

Davos in the desert
Davos in the desert

News Summary:

Significance of the visit:
  • The visit is expected to boost the Crown Prince’s global stature which suffered after Saudi journalist Jamal Khashoggi was brutally killed in the Saudi consulate in Istanbul.
  • It will be used to showcase that Saudi-India ties are determined by long-term strategic considerations like India’s energy security and the desire to ensure stability in the Gulf region.
  • The visit highlights the government’s success in deepening ties with Saudi Arabia and intends to ensure that Riyadh does not back Pakistan on issues affecting India.

About: Davos in the Desert

  • The informal name derives from the World Economic Forum’s annual meeting that is held in Davos, Switzerland, where world leaders discuss and shape agendas for pressing international issues.
  • FII, too, brings together policymakers, investors and global experts, who discuss the role of investment in driving global prosperity and development.
  • FII is an initiative that was first undertaken by the Saudi Crown Prince Mohammad bin Salman in 2017 to diversify the kingdom’s economy and reduce its dependence on petroleum products.
  • In 2018, the FII was boycotted by over 40 participants due to allegations about Saudi Arabia’s involvement in the murder of journalist Jamal Khashoggi.

India – an attractive investment destination:

  • In his keynote address at the Future Investment Initiative summit the Indian PM listed the attractiveness of the Indian economy and invited global businessmen to invest in the country.
  • Political predictability, stability of policies and a large diverse market are the key determinants that ensure that investment in India are secure and profitable.
  • The PM also highlighted India’s sharp improvement in the World Bank’s ‘Ease of Doing’ business ranking where it had reached to 63rd position from 142 within five years.

Mutual Partnerships:

  • India Saudi Arabia Strategic Partnership:
    • India and Saudi Arabia have signed an agreement for creating a bilateral strategic partnership council.
    • India is the fourth country with which Saudi Arabia has formed such a strategic partnership, after the UK, France and China.
    • The SPC will have two parallel tracks: Political, security, culture and society, headed by Foreign Ministers; and economy and investment, headed by India’s Commerce Minister and Saudi’s Energy Minister.
    • This will help India and Saudi Arabia to move from a buyer seller relationship towards a closer strategic partnership that will include Saudi investments in downstream oil and gas projects.
  • Security partnership:
    • In a joint statement both sides condemned terrorism in all forms and agreed to step up bilateral security cooperation.
    • The two countries already have a joint committee on defense cooperation that holds regular meetings.
    • Apart from defense, the two sides are also keen to enhance maritime security cooperation and are considering joint naval exercises in 2020.

Mutual Agreements:

  • Both sides signed 12 MoUs on issues such as preventing narcotics trafficking, renewable energy, training of diplomats, defense industry production, security collaboration and use of Rupay cards in Saudi Arabia.
  • India has also cleared an MoU that will help Haj pilgrims to travel comfortably in Saudi Arabia during pilgrimage seasons.
  • On the financial aside, an agreement to launch the RuPay payment gateway in the kingdom will help the Indian diaspora, tourists and Hajj and Umrah pilgrims.
  • The integration of India’s e-Migrate portal with the Saudi e-Thawtheeq system has been completed, and is expected to facilitate the smooth movement of the workforce.

India Saudi bilateral relations:

  1. Background:
    • India and Saudi Arabia enjoy cordial and friendly relations reflecting the centuries old economic and socio-cultural ties.
    • Formal diplomatic relations between contemporary India and Saudi Arabia were established soon after India gained independence in 1947.
    • In a major visit by King Saud of Saudi Arabia to India in November 1955, both nations agreed to shape their relationship based on the Five Principles of Peaceful Co-existence.
    • Saudi Arabia’s close military and strategic ties with Pakistan have been a source of continuing strain on the Indo-Saudi relations.
    • Saudi Arabia supported Pakistan’s stance on the Kashmir conflict and during the Indo-Pakistani War of 1971, at the expense of its relations with India.
    • However, relations between the two countries have strengthened considerably owing to collaboration in regional affairs and trade.
  2. Commercial relations:
    • Reliable source of energy:
      1. India imports around 18% of its crude oil from the kingdom, making it the second-largest source of crude oil for the country.
      2. India imports 83 per cent of its oil needs and stable oil prices are crucial for the growth of the global economy.
      3. It is here that the kingdom plays a vital role as an important and reliable source of energy requirements for India.
    • Bilateral trade:
      1. Saudi Arabia is India’s 4th largest trade partner and in 2018-19 (as per DGFT), the India-Saudi bilateral trade has increased by 23.83 % to US $ 34.03 billion.
      2. During this period, imports from Saudi Arabia reached USD 28.47 billion, registering an increase of 29.04 % over previous year (USD 22.06 billion).
      3. Whereas exports to Saudi Arabia reached USD 5.55 billion registering an increase of 2.61 % over previous year (USD 5.41 billion).
      4. The current bilateral trade (April – August, 2019 provisional figures) is valued USD 14.06 billion.
    • Investments:
      1. According to Saudi Arabian General Investment Authority (SAGIA), there are 322 Indian companies as joint ventures/100% owned entities of worth USD 1.4 billion in the Kingdom till Dec, 2017.
      2. On the other hand, Saudi investment in India has so far been relatively modest at USD 228 million only from April 2000 to March 2019 (Source: DIPP)
      3. One of the major areas of cooperation between India and Saudi Arabia is in investments in infrastructure projects.
      4. During his visit to India in February 2019, the crown prince had indicated an intent to invest in excess of $100 billion in India across various sectors.
      5. Investments from Saudi Arabia can play a big role in India’s smart cities programme and along with shoring up the National Investment and Infrastructure Fund.
  3. Indian Community in Saudi Arabia:
    • The 6 million (as of August 2019) strong Indian community in Saudi Arabia is the largest expatriate community in the Kingdom.
    • It is the most preferred community due to their expertise, sense of discipline, law abiding nature.
    • The Haj pilgrimage is another important component of bilateral relations. The Hajj Quota was increased by 24,975 in 2019, enabling 200,000 Indians performing Hajj in 2019.
    • Around 700,000 Indians also visit the Kingdom to perform Umrah every year.

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