Obama Makes War Gains
Maliki's Embrace of Withdrawal Timeline Confounds McCain
By Dan Balz
Washington Post Staff Writer
Tuesday, July 22, 2008; A06

AMMAN, Jordan, July 21 -- When Sen. Barack Obama left Washington last week, he was under pressure to defend what Republican critics called an arbitrary deadline for withdrawing U.S. combat forces from Iraq. By Monday, the White House and rival Sen. John McCain's presidential campaign were at pains to explain why the Iraqi prime minister had seemingly all but endorsed Obama's relatively rapid timeline for getting out.

Obama has certainly not won the argument over Iraq policy. Far from it. His proposal to withdraw U.S. combat forces over a 16-month period still faces serious questions, including from some of the commanders who might be asked to implement it if he is elected.

But the curious turn of events made for an unexpected opening act for the Democrat's week-long tour of seven countries, demonstrating anew the combination of agility and good fortune that has marked his campaign.

Whether Obama can count on Iraqi Prime Minister Nouri al-Maliki in the days ahead is another matter. The Iraqi government does not speak with one voice on this matter, and it is not yet clear how current negotiations with the administration will conclude and how much emphasis will be placed on making a withdrawal timetable or "time horizon" conditions-based.

Beyond that, Obama's opposition to the troop "surge" that has helped quell violence and U.S. casualties -- and that McCain vociferously supported -- leaves plenty of room for further questions about his judgment at that moment. McCain's advisers were quick to suggest Monday that it was only because of the success of the increase that Obama can project the drawdown of troops over a 16-month period.

But as political theater, the events of the past few days have played unfailingly in the Democrat's favor. On Friday, a day after Obama left for Afghanistan and Iraq, Bush administration officials announced that the United States and Iraq had agreed on a time horizon for removing troops. Then, twice in three days, Maliki embraced a withdrawal timeline similar to Obama's. Beyond that, McCain shifted ground to declare that he, too, favors sending more U.S. troops to Afghanistan.

McCain, campaigning in Maine, was blistering in his criticism of Obama on Monday. He said his rival has been "completely wrong" on Iraq and "has no military experience whatsoever," and argued again that any withdrawal from Iraq must be based on conditions on the ground.

The Republican's campaign advisers noted that he has also embraced a withdrawal timetable for Iraq. In a recent speech, he said his goal would be to remove all U.S. combat forces by the end of his first term as president. But McCain said that could happen only if Iraq is secure and stable. Obama, he said, has gotten it backward -- calling for a timetable first and foremost, with no real regard for conditions on the ground.

"You've got a situation where Senator Obama has been incessantly criticizing the Iraqi government for 18 months," said Randy Scheunemann, McCain's senior foreign policy adviser. "Now here's something he thinks can work to his political advantage and so he's embracing it, while at the same time rejecting the considered military judgment of those who made the successes of the surge possible, like Gen. [David H.] Petraeus and Gen. [Raymond T.] Odierno."

The Iraqi prime minister's commentary about timetables was rolled out first through an interview in the German magazine Der Spiegel in which he explicitly mentioned Obama's 16-month timetable and gave it a favorable review. Later, after urgent inquiries from officials at the U.S. Embassy in Baghdad seeking clarification, a spokesman said that Maliki had been misinterpreted. But he did not specifically explain what was misstated.

Then on Monday, after Maliki met with Obama, his spokesman, Ali al-Dabbagh, said the Iraqis were working toward a deadline that would call for U.S. combat forces to be out of Iraq by the end of 2010, at most eight months after Obama's timetable. He also said the timetable was not discussed when Maliki met with Obama and Sens. Chuck Hagel (R-Neb.) and Jack Reed (D-R.I.), who are accompanying the senator from Illinois.

White House press secretary Dana Perino was peppered with questions at her daily briefing on Monday about the apparent similarity between Obama's plan and Maliki's latest pronouncements.

Asked whether the administration would prefer that the Iraqis not talk about specific dates, she replied, "We don't think that talking about specific negotiating tactics or your negotiating position in the press is the best way to negotiate a deal. However, we understand that they're a sovereign country and they'll be able to do that. We're just not going to do it on our end."

If there was a strategic goal for Obama's trip to Afghanistan and Iraq, it was to broaden the debate from focusing largely on his proposal to withdraw combat forces from Iraq over a 16-month period to the question of whether the conflict in Iraq has sapped the United States' ability to combat the Taliban and al-Qaeda in Afghanistan.

As Obama prepared for his trip, almost all the focus was on his troop withdrawal plan for Iraq -- and there was considerable criticism that his firm deadline ignored any consideration of conditions on the ground.

McCain led the criticism, saying Obama was wrong about the troop increase and was naive to establish such a short and seemingly rigid timeline for leaving Iraq. From Iraq, some military commanders weighed in as well, raising doubts as to the wisdom of Obama's proposal.

Over the weekend, Adm. Michael Mullen, chairman of the Joint Chiefs of Staff, also raised questions about setting such a timetable, calling it "very dangerous" to establish a deadline of about two years from now for withdrawing troops.

Against this criticism, Obama appeared determined not just to defend his timetable, but also to shift the focus of the debate. He used his speech to link the wars in Iraq and Afghanistan, and to argue that the conflict in Iraq continues to deplete the U.S. military's capacity to wage what he called the more important war, in Afghanistan.

McCain and Obama agree that more troops are needed in Afghanistan, but they remain far apart on how the war in Iraq fits into this equation, just as they remain at odds over the terms of ending U.S. involvement in Iraq. That debate will continue to play out between now and November with more turbulence ahead, resulting from the twists and turns of the past three days

India, Pak, Iran to meet in Tehran to push IPI project
16 Jul 2008, 1207 hrs IST,PTI
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ISLAMABAD: Iran, Pakistan and India are expected to hold a meeting in Tehran later this month to push the USD 7.4-billion IPI gas pipeline project that has been delayed after being caught in wrangling over transit fee.

India will be attending tripartite talks on the Iran-Pakistan-India pipeline project that has been opposed by the US due to Tehran's involvement, after a long time as it had stayed away from discussions while a caretaker government was in power in Pakistan.

After the Pakistan People's Party-led government assumed office in March, Indian Petroleum Minister Murli Deora had travelled to Islamabad for talks on the IPI and Turkmenistan-Afghanistan-Pakistan-India pipeline projects.

Ahead of the meeting in Tehran, Pakistan's Steering Committee on the pipeline project will meet here on July 17 to review the status of the gas transit fee to be paid by India for transporting Iranian gas across Pakistani territory.

Finance Secretary Farrukh Qayyum, Federal Board of Revenue Chiarman Abdullah Yousuf, Planning Commission Deputy Chairman Salman Farooqui and Foreign Secretary Salman Bashir will attend the meeting, a senior petroleum ministry official told the Daily Times newspaper.

The Steering Committee earlier met on January two and approved the draft Gas Sales Purchase Agreement (GSPA) with Iran for the IPI project.

The Steering Committee is expected to review the draft GSPA and the financial impact of the IPI project on Pakistan's economy. The pipeline is expected to bring benefits worth two billion dollars for Pakistan's economy.

The official said Iran had invited Pakistan to attend the tripartite meeting in Tehran though the date for the meet had not yet been finalised. The date will be finalised after the meeting of the Steering Committee on July 17.
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Let’s Shoot the Speculators!
The candidates say financial slimeballs are piling into commodities markets and pushing prices to artificial and unconscionable levels. If only it were that simple.

Robert J. Samuelson
NEWSWEEK
Updated: 2:28 PM ET Jun 28, 2008
Tired of high gasoline prices and rising food costs? Well, here's a solution. Let's shoot the "speculators." A chorus of politicians, including John McCain, Barack Obama and Sen. Joe Lieberman, blames these financial slimeballs for piling into commodities markets and pushing prices to artificial and unconscionable levels. Gosh, if only it were that simple. Speculator-bashing is another exercise in scapegoating and grandstanding. Leading politicians either don't understand what's happening or don't want to acknowledge their complicity.

Granted, raw-material prices have exploded across the board. Look at the table below. It shows price increases for eight major commodities from 2002 to 2007. Oil rose 177 percent, corn 70 percent and copper 360 percent. But that's just the point. Did "speculators" really cause all these increases? If so, why did some prices go up more than others? And what about steel? It rose 117 percent—and continued increasing in 2008—even though it's not traded on commodities futures markets.

A better explanation is basic supply and demand. Despite the U.S. slowdown, the world economy has boomed. Since 2002, annual growth has averaged 4.6 percent, the highest sustained rate since the 1960s, says economist Michael Mussa of the Peterson Institute. By their nature, raw materials (food, energy, minerals) sustain the broader economy. They're not just frills. When unexpectedly high demand strains existing production capacity, prices rise sharply as buyers scramble for scarce supplies. That's what happened.

"We've had a demand shock," says analyst Joel Crane of Deutsche Bank. "No one foresaw that China would grow at a 10 percent annual rate for over a decade. Commodity producers just didn't invest enough." In industry after industry, global buying has bumped up against production limits. In 1999, surplus world oil capacity totaled 5 million barrels a day (mbd) on global consumption of 76mbd, reckons the U.S. Energy Information Administration. Now the surplus is about 2mbd—and much of that in high-sulfur oil not wanted by refiners—on consumption of 86mbd.

Or take nonferrous metals, such as copper and aluminum. "You had a long period of underinvestment in these industries," says economist John Mothersole of Global Insight. For some metals, the collapse of the Soviet Union threw added production—previously destined for tanks, planes and ships—onto world markets. Prices plunged as surpluses grew. But "the accelerating growth in India and China eliminated the overhang," Mothersole says. By some estimates, China now accounts for 60 percent to 80 percent of the annual increases in world demand for many metals.

Commodity-price increases vary, because markets vary. Rice isn't zinc. No surprise. But "speculators" played little role in the price run-ups. Who are these offensive souls? Well, they often don't fit the stereotype of sleazy high rollers: many manage pension funds or university and foundation endowments. Their modest investments in commodities aim to improve returns.

These extra funds might drive up prices if they were invested in stocks or real estate. But commodity investing is different. Investors generally don't buy the physical goods, whether oil or corn. Instead, they trade "futures contracts," which are bets on future prices in, say, six months. For every trader betting on higher prices, another is betting on lower. These trades are matched. In the stock market, all investors (buyers and sellers) can profit in a rising market and all can lose in a falling market. In futures markets, one trader's gain is another's loss.

Futures contracts enable commercial consumers and producers of commodities to hedge. Airlines can lock in fuel prices by buying oil futures; farmers can lock in a selling price for their grain by selling grain futures. What makes the futures markets work is the large number of purely financial players—"speculators" just in it for the money—who often take the other side of hedgers' trades. But all the frantic trading doesn't directly affect the physical supplies of raw materials. In theory, high futures prices might reduce physical supplies if they inspired hoarding. Commercial inventories would rise. The evidence today contradicts that; inventories are generally low. World wheat stocks, compared with consumption, are near historic lows.

Recently the giant mining company Rio Tinto disclosed an average 85 percent price increase in iron ore for its Chinese customers. That was stunning proof that physical supply and demand—not financial shenanigans—are setting prices: iron ore isn't traded on futures markets. The crucial question is whether these price increases are a semi permanent feature of the global economy or just a passing phase as demand abates and new investments increase supply. Prices for a few commodities (lead, nickel, zinc) have receded. Could oil be next? Barron's, the financial newspaper, thinks so.

Politicians now promise tighter regulation of futures markets, but futures markets are not the main problem. Physical scarcities are. Government subsidies and preferences for corn-based ethanol have increased food prices by diverting more grain into biofuels. A third of the U.S. corn crop could go to ethanol this year. Restrictions on offshore oil exploration and in Alaska have reduced global oil production and put upward pressures on prices. If politicians wish to point fingers of blame for today's situation, they should start with themselves.

URL: http://www.newsweek.com/id/143786

http://www.latimes.com/news/nationworld/world/la-fg-university13-2008jul13,0,886691.story
From the Los Angeles Times
ISLAM IN A NEW WORLD

New Saudi Arabia university will have a Western feel
King Abdullah University of Science and Technology will feature coed classes, a curriculum in English and other touches seen as dangerous liberalism by Islamic fundamentalists.
By Jeffrey Fleishman
Los Angeles Times Staff Writer

July 13, 2008

THUWAL, SAUDI ARABIA — Up the corniche, along a coast where boats carrying pilgrims bound for Mecca sailed for centuries, a thicket of cranes rises over whitewashed mosques along the Red Sea.

Steel flashes and blowtorches glow as 20,000 workers build a $10-billion university ordered up by a king who hopes Western ingenuity will revive the economy of this ultraconservative Muslim nation. When finished next year, King Abdullah University of Science and Technology will offer coed classes, Western professors, a curriculum in English and other touches loathed as dangerous liberalism by Islamic fundamentalists.

The West may be dependent on Saudi crude, now as high as $145 a barrel, but this campus outside an ancient fishing village is recognition that the country that is home to Islam's holiest shrines needs the likes of USC, Oxford University and the Massachusetts Institute of Technology to survive globalization.

An architect's rendering shows a campus of canals and reflecting pools running along sleek silver and glass libraries and laboratories. A marina with slips for 140 boats stands in a cove lighted by a tapered beacon. Students and professors will live in villas and apartments looking out on date palms and furnished with eggshell and white Swedish-style sofas and chairs.

Saudis have studied in the U.S. and Europe for decades, bringing back expertise without directly exposing the kingdom to Western classrooms and professors. But the new university is inviting the secular West a step closer in another ideological battle between Saudi reformers led by King Abdullah and the Wahhabi sect of puritanical Islam that has resisted outside influences since the days of desert caravans.

"Saudis are beginning to realize they are not the center of the universe," said Tariq Maeena, a writer and aviation expert. "The king hopes that a young Saudi will be in a class with an American professor. The king is jabbing the conservatives from all sides. He's not doing it with a massive decree, but incrementally, and all the radicals can do is roll their eyes and say, 'Uh-oh, we're losing more power.' "

Amira Kashgary, a literature professor at a women's college, said, "We are part of the global world now. Whether we like it or not, and regardless of our political and religious systems, there are changes seeping through our lives.

"The radicals ran a wicked Internet campaign against the university. They said it is another sign liberals are invading us."

The kingdom's huge oil reserves cannot mask Saudi Arabia's problems: 40% of its population is younger than 18, its schools are backward and its economy is not diverse enough to compete in a high-tech future balanced between the West and the rising powers of China and India.

King Abdullah is building the university, along with six multibillion-dollar Economic Cities, to provide jobs and open the country to global markets. Conservatives fear that these international voices, from South Asian construction workers to Western scientists, will change the religious fabric.

"Men and women learning together should remain forbidden," said Mohammed Ben Yehia Nogeemy, a member of the Saudi Juristic Academy, a religious organization that issues fatwas. He said that such an atmosphere could be regarded as sedition and "if any Saudi official has the intention to allow the establishment of a coeducational university, that will be a big mistake that will need to be corrected."

But the king, for now, is a step ahead of the conservatives. Nogeemy was not in attendance on a recent afternoon when oil money seduced brainpower at a hotel along the Red Sea in Jidda.

Silver trays of hors d'oeuvres and alcohol-free champagne glided through a crowd of Western academics gathered for a conference on the university's goals. Soldiers with Humvees and .50-caliber machine guns stood guard outside to scare away would-be terrorists, while inside mathematicians and molecular biologists tried on blue university ball caps and pocketed Lamborghini pens left on seats as gifts.

The university, known as KAUST, is promising academic freedom, the mixing of cultures and religions, and subjects as varied as nanotechnology and crop development. The country's ubiquitous and often abusive morality police will not patrol the campus, depicted on the university's interactive website with unveiled women. Going unveiled is a crime in Saudi society that could lead to lashings and imprisonment.

KAUST will be "a new house of wisdom," Ali Ibrahim Naimi, the Saudi minister of petroleum and mineral resources, told the guests. He said world research projects and the Saudi economy, with a 12% unemployment rate, would benefit from the "easy flow of ideas and people into and out of the region."

To ensure that, KAUST is not under the jurisdiction of the Education Ministry, which is controlled by fundamentalists and often forbids the teaching of music, art and philosophy.

The project is overseen by Aramco, the Saudi oil company founded by U.S. firms in the 1930s. Aramco has experience in creating a parallel world: In its gated communities in the eastern part of the country, alcohol is available but hidden, there's a pee-wee baseball winter carnival, and Western women drive cars, a practice forbidden to Saudi women.

With a chocolate-scented cigar in one hand and a honey-flavored coffee in the other, Maeena sat in his favorite Jidda cafe, nodding hellos to young men with laptops and waiters who know his preferences. This is the world he likes, a place to write, a den of intellectual freedom in Saudi Arabia's most liberal city.

He said KAUST, which is being built 50 miles north of the cafe, is another sign that the country's religious and ideological barriers are weakening.

"It's an act of opening us up to a better side of education," said Maeena, who, like many of his generation, attended college in the U.S. "The West has planted those seeds of liberalism in me and thousands like me. We were young Saudis educated in the West in the '60s, '70s and '80s, but this slowed as the seeds of fundamentalism took hold here in the 1990s."

The Saud family's alliance with the Wahhabis dates to the 1700s, but the most recent wave of fundamentalism intensified in the 1980s and was fueled by anger over U.S. troops stationed in Saudi Arabia after the 1991 Persian Gulf War, leading to terrorist attacks.

When militants struck in the kingdom after the Sept. 11 attacks, the government began cracking down on Wahhabi religious schools and radical preachers. Abdullah has not moved as swiftly as many reformers would like -- Wahhabis control the courts, and ultraconservative members of the royal family hold key government posts, including the Interior Ministry.

"The king is older and doesn't have a lot of time," said Maeena, a columnist for the Arab News. "Every good Saudi says, 'I pray for the king's long life.' He is our hope. We were a pariah nation after Sept. 11, and he's slowly taking us out of this."

Samar Fatany, a radio commentator, said of the fundamentalists, "They are the ones who want to make us live in the dark ages of camels and caravans and tents."

But conservatives remain powerful. They desire Western scientific and technological advances, but want nothing to do with democracy, women's rights, religious rights and other cultural freedoms that cloud the Wahhabi goal of evoking the centuries-old golden era of Islam.

That vision was less threatened when the students of Maeena's generation went abroad to study. Now, with the new university rising, Nogeemy wants the professors to find separate lives, like the Aramco oil engineers before them.

"I do not fear any creeping Western influence," he said, "because Westerners who come to Saudi Arabia are experts of very high caliber who live in isolated communities where they can maintain their own culture."

Of the university, Nogeemy said, "We can tolerate that a male professor teaches female students. . . . There would not be sedition there. But male and female students should not be together."

After the alcohol-less cocktail party at the hotel in Jidda, the Western academics and their Saudi hosts retired. The slide shows that whirled with DNA-like designs were put away, and Sami M. Angawi, an architect, drove through the streets wondering whether the university would melt into the community or become another gated pocket of Western ideals.

Angawi stopped his car at a hospital he had designed. It was after midnight. The building didn't look like a hospital; one hallway resembled the nave of a cathedral, another opened to a mosque, and another to a courtyard bright with moonlight.

His intent, he said, was to mix different styles into one voice, to allow architectural nuances from one culture to seep into another.

"To just implant a foreign university here will not work," he said. "What do we do with it? Put fences around it? We don't allow it to interact with the rest of Saudi society?

"Do we just want science without culture? Does science grow without culture? You have to have a unity. Without interaction you create polarization, and with that the extreme will grow more extreme."

The sliding doors opened and Angawi stepped from the stone floor back into the night.

jeffrey.fleishman @latimes.com

Noha El-Hennawy of The Times' Cairo Bureau contributed to this report.

Saudis Look Beyond Oil to New Economy in Desert
By Faiza Saleh Ambah
Washington Post Foreign Service
Thursday, July 17, 2008; A01

MEDINA, Saudi Arabia -- Clouds of yellow dust swirled in the air as tractors moved back and forth, leveling a huge, barren piece of land dotted with billboards announcing the city that will rise from the sand here.

Over the next few years, Saudi officials say this stretch of desert will be transformed into a buzzing hub of scientific research and development, with cutting-edge universities, hospitals and housing for more than 130,000 people attracted by the idea of living in the city where Islam's prophet Muhammad is buried.

The project, called Knowledge Economic City, represents a first serious step by Saudi Arabia toward building a post-petroleum economy. It is one of six major industrial centers planned to rise over the next 15 years. At a cost of more than $100 billion, the sites are expected to provide housing and jobs for the country's fast-growing population, half of which is younger than 21.

These cities-from-scratch are the most ambitious projects to date launched by a kingdom enriched almost entirely by oil since its disparate regions were unified into a state more than seven decades ago. In beginning to construct an economy to survive the end of its natural resources, the Saudi government is drawing on lessons learned during a previous oil boom when profits were squandered in part by spendthrift princes and short-term planning that emphasized infrastructure over education.

"The ruling dynasty is under pressure to show its population that the oil money is being reinvested for the good of the people. The al-Sauds have suffered from the image of the ruling family as corrupt and spending lavishly," said Rochdi Younsi, an analyst with the Eurasia Group, a consulting firm that provides political risk analysis of countries around the world.

With oil prices peaking above $145 a barrel in recent weeks, the kingdom is reaping an unprecedented windfall from its vast reservoirs of oil, which represent a quarter of the world's proven reserves. Saudi Arabia reported oil income of $200 billion last year and projects $700 billion in revenue over the next two years. The kingdom earned an average of $43 billion annually throughout the 1990s.

But Saudi officials have long feared that too-high oil prices would push the world toward alternative fuels, a concern captured by one former oil minister's tart reminder that "the Stone Age did not end for lack of stone."

To meet rising demand, as well as to slow the world's rush to develop alternative energy sources, Saudi officials have raised oil production by 500,000 barrels a day since May.

Though increased production means the Saudi reserves will be depleted faster, the government is using a burst of additional capital to develop an economy it hopes will eventually be untethered from the price of oil.

The new cities "are part of a broader effort to diversify the economy away from oil and away from its reliance on the public sector. The cities are intended to develop more of a non-oil economy, well before the oil runs out," said Jane Kinninmont, an analyst at the Economist Intelligence Unit, a research and advisory company that provides industry and management analysis of countries around the world.

Based on economic zones around the world, the cities aim to trade Saudi assets -- plentiful and cheap oil and vast open spaces -- for foreign expertise and training. But the cities also have social aims, analysts said, including creating jobs to stave off political unrest.

"When there was money, it was easy to absorb young Saudis into public jobs, but the population kept growing and the local education system did not produce enough candidates for the local job market. That caused resentment and allowed militant groups to launch against the local dynasty," said Younsi, referring to a spate of al-Qaeda-related attacks in 2003.

Saudi Arabia's ambitious economic program calls for the kingdom to be among the world's top 10 economies in terms of ease of doing business by 2010, up from its current rank of 23rd. Getting there will probably force social change in several ways.

Saudi officials said they are working on easing the lifestyle and visa restrictions that have kept foreigners from investing and living in the kingdom. One side effect of that will probably be an easing of rules that ban men and women from mingling in public unless they are close relatives.

"We're not anymore an isolated island. We realize the challenge today in order for us to be more competitive means more transparency and more gender equality," said Abdullah Hameedadin, head of the Economic Cities Agency at the Saudi Arabian General Investment Authority, the government body overseeing the projects.

Hameedadin said that 30 percent of his staff is female and that he expects women to be allowed to drive in the new cities -- which is currently banned in the kingdom. Officials also said they were seeking to attract both male and female investors to the cities.

Partly to bypass the bureaucracy and inefficiency of government ministries, and partly to buffer itself against the volatility of oil prices, the government will oversee the projects but leave the financing and management to the private sector, a mix of Saudi companies and investors from the Gulf region, Japan, Malaysia and China, among others.

King Abdullah, who ascended the throne three years ago, has pushed hard to reform the country's economy, speeding the kingdom's entry into the World Trade Organization months after he became king. One of the cities, planned to rise along the Red Sea with canals running between high-rise apartment buildings, is named for him.

"With this second oil boom, we want to build the soft infrastructure to help the business environment prosper. We want to learn from the mistakes of the '70s," Hameedadin said.

An oil bonanza in the 1970s that poured billions of dollars into government coffers turned the kingdom into a rich nation and helped modernize its infrastructure with eight-lane highways, hospitals, malls, universities and desalination plants.

Despite the decades of oil wealth, the Saudi education system is ranked as one of the worst worldwide, tens of thousands of university graduates are unemployed, and the country manufactures and produces very little. Saudi Arabia consumes locally only 2 percent of the oil it produces.

Oil accounts for 90 percent of Saudi Arabia's income. And until oil prices slumped in the 1990s, officials faced little pressure to diversify the economy.

"This is what some people call 'the curse of oil.' You don't need to train people, you don't need to work so hard," said Kinninmont, the economist. Change has come about "partly because of the experience of the '90s," she said. "Lots of political and economic problems still haunt the policymakers."

One-third of last year's budget surplus was earmarked to reduce government debt of $176 billion in 2003, incurred during years of low oil prices.

Enter the economic cities. In colorful slide shows, and on intricately detailed mock-ups that fill entire rooms, avatars of Saudi men and women sip coffee with foreigners in ancient Arabian-style souks as yachts float by in the warm sea and gleaming futuristic skyscrapers rise up from the sky behind them.

When the six cities are complete, about 2020, they will house nearly 5 million people and provide more than 1 million jobs, planners say.

The cities provide regional balance by creating jobs and industries in some of the most underdeveloped regions and cities in the kingdom, said Saudi economist Abdel Aziz Abu Hamad Aluwaisheg. "But the government has to increase investment in building roads and infrastructure in those cities to make those projects more attractive and profitable for private businesses," Aluwaisheg said.

One of the cities is planned for the southern backwater province of Jizan, where the unemployment rate for men is almost double the official 13 percent figure. Some economists believe actual unemployment in the country to be as high as 25 percent. The economic city there is expected to become a center for heavy industry, and several Chinese firms have already signed up to start aluminum smelters there, according to Saudi officials.

"Our carrot to global companies that rely on intensive energy for production is cheaper oil and plenty of land," said Hameedadin, the official in charge of the economic cities. "Instead of them buying the oil and manufacturing in their countries, we entice them here by providing them with tax breaks and cheaper crude, and we get know-how and jobs."

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