India-Saudi Arabia ink 12 agreements – (Davos in the desert)Approx Read Time: 5 minutes
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”.
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.
- 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.
- 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:
- 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.
- Commercial relations:
- Reliable source of energy:
- India imports around 18% of its crude oil from the kingdom, making it the second-largest source of crude oil for the country.
- India imports 83 per cent of its oil needs and stable oil prices are crucial for the growth of the global economy.
- It is here that the kingdom plays a vital role as an important and reliable source of energy requirements for India.
- Bilateral trade:
- 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.
- 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).
- Whereas exports to Saudi Arabia reached USD 5.55 billion registering an increase of 2.61 % over previous year (USD 5.41 billion).
- The current bilateral trade (April – August, 2019 provisional figures) is valued USD 14.06 billion.
- 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.
- 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)
- One of the major areas of cooperation between India and Saudi Arabia is in investments in infrastructure projects.
- 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.
- 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.
- Reliable source of energy:
- 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.