New labor drive targets cover-up businesses

Riyadh, Jun 18: Minister of Tourism Ahmed Al-Khateeb said that Saudi Arabia will resume tourist activities at the end of Shawwal (June 21) after a hiatus of more than three months due to lockdown measures imposed following the outbreak of coronavirus pandemic.

The minister made the remarks during a television interview after chairing the emergency meeting of the Arab Ministerial Council for Tourism on Wednesday. He said that the current indications are positive and that the Kingdom is ready to launch the summer program, which will be a boost for domestic tourism.

“It was revealed in a research study carried out by the Tourism Authority that 80 percent of Saudi citizens want to take advantage of domestic tourism. We will launch the domestic tourism program for the public after having made necessary coordination with the Ministry of Health and the concerned higher authorities,” he said.

Several Arab tourism ministers and officials of the relevant organizations attended the meeting, which discussed the challenges that the region’s tourism sector is facing due to the pandemic. Al-Khateeb pointed out that the Arab Ministerial Council for Tourism, headed by Saudi Arabia, held the virtual session in exceptional circumstances to discuss ways to get out of this pandemic and revitalize the tourism sector.

“Saudi Arabia has initiated a package of financial stimulus activities with a total value of more than $61 billion to protect jobs and businesses and reduce the economic burden of the crisis. The domestic tourism sector has benefited from it as one of the important economic sectors, as it covered 60 percent of salaries of Saudi employees in the private sector for a period of three months,” he added.

Riyadh, Jul 1: Saudis braced Wednesday for a tripling in value added tax, another unpopular austerity measure after the twin shocks of coronavirus and an oil price slump triggered the kingdom's worst economic decline in decades.

Retailers in the country reported a sharp uptick in sales this week of everything from gold and electronics to cars and building materials, as shoppers sought to stock up before VAT is raised to 15 percent.

The hike could stir public resentment as it weighs on household incomes, pushing up inflation and depressing consumer spending as the kingdom emerges from a three-month coronavirus lockdown.

"Cuts, cuts, cuts everywhere," a Saudi teacher in Riyadh told AFP, bemoaning vanishing subsidies as salaries remain stagnant.

"Air conditioner, television, electronic items," he said, rattling off a list of items he bought last week ahead of the VAT hike.

"I can't afford these things from Wednesday."

With its vast oil wealth funding the Arab world's biggest economy, the kingdom had for decades been able to fund massive spending with no taxes at all.

It only introduced VAT in 2018, as part of a push to reduce its dependence on crude revenues.

Then, seeking to shore up state finances battered by sliding oil prices and the coronavirus crisis, it announced in May that it would triple VAT and halt a cost-of-living monthly allowance to citizens.

The austerity push underscores how Saudi Arabia's once-lavish spending is becoming a thing of the past, with the erosion of the welfare system leaving a mostly young population to cope with reduced incomes and a lifestyle downgrade.

That could pile strain on a decades-old social contract whereby citizens were given generous subsidies and handouts in exchange for loyalty to the absolute monarchy.

The rising cost of living may prompt many to ask why state funds are being lavished on multi-billion-dollar projects and overseas assets, including the proposed purchase of English football club Newcastle United.

Shopping malls in the kingdom have drawn large crowds in recent days as retailers offered "pre-VAT sales" and discounts before the hike kicks in.

A gold shop in Riyadh told AFP it saw a 70 percent jump in sales in recent weeks, while a car dealership saw them tick up by 15 percent.

Once the new rate is in place, businesses are predicting depressed sales of everything from cars to cosmetics and home appliances.

Capital Economics forecast inflation will jump up to six percent year-on-year in July, from 1.1 percent in May, as a result.

"The government ended the country's lockdown (in June) and there are signs that economic activity has started to recover," Capital Economics said in a report.

"Nonetheless, we expect the recovery to be slow-going as fiscal austerity measures bite."

The kingdom also risks losing its edge against other Gulf states, including its principal ally the United Arab Emirates, which introduced VAT at the same time but has so far refrained from raising it beyond five percent.

"Saudi Arabia is taking massive risks with contractionary fiscal policies," said Tarek Fadlallah, chief executive officer of the Middle East unit of Nomura Asset Management.

But the kingdom has few choices as oil revenue declines.

Its finances have taken another blow as authorities massively scaled back this year's hajj pilgrimage, from 2.5 million pilgrims last year to around a thousand already inside the country, and suspended the lesser umrah because of coronavirus.

Together the rites rake in some $12 billion annually.

The International Monetary Fund warned the kingdom's GDP will shrink by 6.8 percent this year -- its worst performance since the 1980s oil glut.

The austerity drive would boost state coffers by 100 billion riyals ($26.6 billion), according to state media.

But the measures are unlikely to plug the kingdom's huge budget deficit.

The Saudi Jadwa Investment group forecasts the shortfall will rise to a record $112 billion this year.

Saudi Arabia has initiated refund of work visa fee to foreigners unable to travel to the Kingdom due to the suspension of international flights in the aftermath of Covid-19 pandemic.

Several work visas were cancelled, following which the Ministry of Human Resources and Social Development, in cooperation and coordination with the Ministry of Foreign Affairs, announced the refund. The cancellation and refunding of the stamped visas will be considered effective from the date of issuance of the royal decree on March 18, reported Saudi Gazette.

As a precautionary measure to curb the spread of coronavirus, the Kingdom suspended all international flight. The ministry of health in Saudi Arabia on Wednesday announced 1,325 new Covid-19 coronavirus cases and 169 recoveries. With this, the total number of cases in the Kingdom now stands at 21,402, while recoveries stand at 2,953, as on Wednesday reported KT.