Grand Mosque project structure collapses

May 11: Saudi Arabia will triple its value-added tax rate and suspend a cost of living allowance for state workers, it said on Monday, seeking to shield finances hit by low oil prices and a slump in demand for its lifeline export worsened by the new coronavirus.

Historic oil output cuts agreed by Riyadh and other major producers have given only limited support to prices after they sank on oversupply caused by a war for petroleum market share between the kingdom and its fellow oil titan Russia.

Saudi Arabia, the world's largest oil exporter, is also being hit hard by measures to fight the new coronavirus, which are likely to curb the pace and scale of economic reforms launched by Crown Prince Mohammed bin Salman.

"The cost of living allowance will be suspended as of June 1, and the value added tax will be increased to 15% from 5% as of July 1," Finance Minister Mohammed al-Jadaan said in a statement reported by the state news agency. "These measures are painful but necessary to maintain financial and economic stability over the medium to long term...and to overcome the unprecedented coronavirus crisis with the least damage possible."

The austerity measures come after the kingdom posted a $9 billion budget deficit in the first quarter.

The minister said non-oil revenues were affected by the suspension and decline in economic activity, while spending had risen due to unplanned strains on the healthcare sector and the initiatives taken to support the economy.

"All these challenges have cut state revenues, pressured public finances to a level that is hard to deal with going forward without affecting the overall economy in the medium to long term, which requires more spending cuts and measures to support non-oil revenues stability," he added.

The government has cancelled and put on hold some operating and capital expenditures for some government agencies, and cut allocations for some reform initiatives and projects worth a total 100 billion riyals ($26.6 billion), the statement said.

Central bank foreign reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011, while oil revenues in the first three months of the year fell 24% from a year earlier to $34 billion, pulling total revenues down 22%.

"The reforms are positive from a fiscal side as greater adjustment is essential. However, the tripling of VAT is unlikely to help that much in 2020 revenue wise with the expected fall in consumption," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

She said she kept unchanged her deficit forecast of 16.3% of GDP for this year, which already factors in a greater than previously announced spending cut.

About 1.5 million Saudis are employed in the government sector, according to official figures released in December.

In 2018, Saudi Arabia's King Salman ordered a monthly payment of 1,000 riyals ($267) to every state employee to compensate them for the rising living costs after the government hiked domestic gas prices and introduced value-added tax.

DIFFICULT TIMES

A committee has been formed to study all financial benefits paid to public sector employees and contractors, and will submit recommendations within 30 days, the statement said.

In late 2015, when oil prices fell from record highs, the kingdom slashed lavish bonuses, overtime payments and other benefits once considered routine perks in the public sector.

In a country without elections and with political legitimacy resting partly on distribution of oil revenue, the ability of citizens to adapt to such reforms is crucial for stability.

"Tripling the VAT will test the limits of the balance between revenues and consumption as the economy dives into a deep recession. The move will impact consumption and could also lower the expected revenues," said John Sfakianakis, a Gulf expert at the University of Cambridge.

"These are pro-austerity and pro-revenue moves rather than pro-growth ones," he said.

Hasnain Malik, head of equity strategy at Tellimer, said the VAT rise could bring about $24-$26.5 billion in additional non-oil fiscal revenue. The rise would hit consumer spending further but was a needed step towards fiscal sustainability, he said.

Dubai, Mar 9: The eyes of the world will be on the oil markets when the big trading hubs in Europe and North America open following the end of the deal between Saudi Arabia and Russia that has helped to sustain crude at relatively high levels for the past three years.

There were big falls on Friday when ministers from the Organization of the Petroleum Exporting Countries (OPEC) failed to get a deal with non-OPEC members — the so-called OPEC+ — to extend output agreements. Brent oil was down nearly 10 percent at $45.27 going into the western weekend.

Saudi Aramco took immediate action to cut prices after the OPEC+ collapse, offering big discounts for crude deliveries from next month, when the current output restrictions end.

According to a notification sent to customers by Saudi Aramco, seen by Arab News, the Kingdom’s oil giant will cut between $4 and $8 per barrel, with the biggest discounts being offered to buyers in northwest Europe and the US.

Roger Diwan, an oil analyst at consultancy IHS Market, said: “We are likely to see the lowest oil prices of the past 20 years in the next quarter.”

West Texas Intermediate, the US oil benchmark, fell to $28.27 in November 2001.

The move raises the possibility of a “crude war” between the three biggest oil blocs — the US, Russia and the Arabian Gulf. Some analysts believe the American shale industry is more vulnerable to low prices than either the Russians or the Saudis.

Robin Mills, head of the Qamar consultancy, told Arab News: “I don’t think this was premeditated but Saudi Arabia has clearly swung quickly into action to put the Russians under pressure. But the Russians, with low debt and a flexible exchange rate, can cope with a few months of low prices.”

The boom in US shale has made the country the biggest oil producer in the world, but with high financing costs. Lower global prices would put a lot of shale companies out of business.

On the other hand, American motorists, and President Donald Trump, would be pleased to see lower fuel prices in an election year.

In Moscow, one prominent financier with ties to the Kingdom played down the long-term significance of the Vienna fallout.

Kirill Dmitriev, chief executive of the Russian Direct Investment Fund, told Arab News: “Saudi Arabia is our strategic partner, and cooperation between our two countries will continue in all areas. We will also continue to work within the framework of the Russia-Saudi Economic Council.”

One Russian official, who asked not to be named, added: “There is a good relationship between Alexander Novak, Russian energy minister, and his Saudi counterpart Prince Abdul Aziz bin Salman, and I am sure they will continue talking to each other less formally.”

Riyadh, Jun 20:  Speaking at an exclusive webinar organized by the London Business School’s (LBS) Riyadh Chapter, Saudi Arabia’s first sports minister Prince Abdulaziz Bin Turki Al Faisal proudly reflected back on his nation’s sports achievements over the last few years.

Attended by over 170 people, the highest record set at an LBS webinar, various topics were discussed including the Kingdom’s sports strategy, investment opportunities, role of the media and advantages of hosting international sporting events, among other things.

Saudi Arabia has recently presented itself as one of the major players in the global sports industry thanks to its transformative Vision 2030, which aims to diversify the economy and create a more vibrant society.

Recognizing the importance of the vision, Prince Abdulaziz said: “Vision 2030 is something we all believe in. Everywhere you go within the Kingdom, you feel that people are passionate about the vision and its targets. Sport is part of it, and it has a big role in it.”

At the heart of the newly created Ministry of Sport’s strategy is increasing mass participation across all types of sports and preparing the next generation of elite athletes capable of competing on the international stage.

The ambitious prince asserted, “We want to make sure that we create an ecosystem that is sustainable, creates jobs, income and provides a lot of opportunities for everyone. We are creating academies around the Kingdom for kids to get into sports to make sure we have a base for them to start off from.”

Over 50 questions were addressed during the open and transparent webinar, a reflection of the attitude and culture the prince is creating at the Ministry. He admitted that while Saudi Arabia is a nation bound by a love and passion for sport, until recently sports has been looked at as a tool for entertainment rather than an important industry.

One of his key goals is to shift this mentality. Hosting major sports events has greatly contributed in doing so, he is a strong believer of their long-lasting impact and legacy.

“These events will shed light on enlightening people about certain sports and making sure they get attracted by it and enjoy it. From these events that we hosted, we found out there’s interest for tennis, golf, and boxing.”

“We will continue to host these events to make sure that people enjoy them as entertainment but to also make sure that people are passionate about these sports get to watch them live in the Kingdom and hopefully from that get someone passionate enough to participate,” he explained.

A former professional motorsports racer, Prince Abdulaziz was appointed chairman of the then-General Sports Authority at the start of 2019 after holding the position of vice chairman for the previous two years. Under his leadership, the Ministry of Sport doubled the number of its ever-growing sports federations and invested heavily at the grassroots level.

When asked about the significance of such investments, he said: “We give them [athletes] an opportunity to compete under the name of the Kingdom, to shine and make sure there’s a future for them. Today we look at a holistic view of sports. We use it to change certain mindsets and restrictions within the Kingdom to make sure we can evolve within the industry and complete against leading countries.”

The Riyadh Chapter of the London Business School aims to increase engagement and opportunities for LBS alumni in the Kingdom and to develop stronger ties that help build a better future for the business community.

Co-presidents Majed Al Hugail and Faris Al Shareef expressed their delight in hosting Prince Abdulaziz for the first time by saying: “The webinar was very insightful to the elite group of LBS alumni both locally and internationally. It helped them further understand how the Ministry is reshaping the sports sector as part of Vision 2030.

“The session left many of the attendees with a great sense of appreciation of the Ministry’s support to the community, an area where stronger partnerships can potentially be explored for the country and region’s benefits.”

In line with new progressive government policies, a lot of attention and investment has geared towards the inclusion of women in sports on both the elite and amateur levels.

When asked by an audience member about this matter, the sports leader proudly replied by saying: “We’ve seen an increase of active women participation in sports by about 149% from 2015 till today. Only five years ago, women were not allowed to participate in the street but it’s a completely different ball game today.”

A testament to this great progress is the participation of 22 women’s national teams in competitive regional games across a wide range of sports in recent years, in addition to newly incepted Women’s Football League.

Among the topics discussed during the 1-hour long webinar was the Ministry’s journey towards the privatization of some of its assets.

Highlighting the significant role that the private sector contributes towards future growth and development, the Minister said: “The private sector is a fundamental aspect for the evolution of sports within the Kingdom and anywhere else in the world. We have to make sure that the platform is open for the private sector to come in and play its role in increasing the number of participants and to add the number of clubs within the Kingdom.”

He continued: “It is our role to provide the right regulatory process. Today we are ready with a platform to make sure that we can deliver on this for the private sector and for the public. This will add towards the evolvement and the development of sports within the Kingdom.”

Saudi Arabia’s successful hosting of high-profile sports events attracted thousands of locals and visitors; it now has bigger plans to cement its strong position in the global sports industry. Among these plans include bids for two of the continent’s most sought after competitions, the 2027 AFC Asian Cup and 2030 Asian Games.

When asked about the reason behind them, he was confident in his response highlighting that Saudi Arabia has celebrated multiples trophies and medals in the past, but this is the first time that they’re aiming to host the events.

“It is time to do so. It’s unheard of that you win a competition but don’t host it. Saudi should host these events and we are capable of hosting them as a nation. It is something that our people are very passionate about, they love it and follow it. It will showcase what Saudi can do on the Asian front.”

Prince Abdulaziz recognizes Saudi Arabia’s recent sporting achievements, but he remains humble on his mission to use sports as a tool to tell his country’s story to the world and build a healthier, more vibrant society capable of nurturing athletes who can compete on the elite level for many years to come.