The New Saudi Arabia

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US, UK investors flock to Saudi-focused funds

Time: March 19, 2019  

US, UK investors flock to Saudi-focused funds
The net flow as a percentage of assets for Saudi Arabia funds increased about 48 percent this year, more than any other country in a ranking compiled by Bloomberg, after Croatia.

Exchange-traded funds in the US and the UK focused on Saudi Arabian equities are piling up new money this year, placing the Middle Eastern kingdom high in a global ranking.

A London-based ETF and another that trades in New York together attracted around $327 million in new money since the beginning of January.

The net flow as a percentage of assets for Saudi Arabia funds increased about 48 percent this year, more than any other country in a ranking compiled by Bloomberg, after Croatia.

The appetite for ETFs offered by BlackRock Inc and Invesco jumped as the $539 billion stock market becomes included in major benchmarks tracking developing countries.

FTSE Russell began adding Saudi stocks this week, in the first of five stages to be fully implemented by March 2020. MSCI Inc will follow suit in two tranches later this year.

Bets on the Saudi market through funds based abroad have been profitable. They’ve delivered a return of about 12 percent each since the start of the year, compared with a gain of 10 percent for the Tadawul All Share Index. Total assets under management for both ETFs are at the highest since their inception.

This article was first published in Arabian Business

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Saudi Arabia leaps up World Bank index on resolving commercial disputes

Time: February 12, 2019  

The Kingdom jumped 24 places on the World Bank Contract Enforcement Index, reaching 59 from 83 in the previous year’s list. (File photo: AFP)
  • The Kingdom jumped 24 places on the World Bank Contract Enforcement Index, reaching 59 from 83 in the previous year’s list

JEDDAH: Saudi Arabia has soared up a World Bank index that ranks countries on how easy it is to resolve a commercial dispute.

The Kingdom jumped 24 places on the World Bank Contract Enforcement Index, reaching 59 from 83 in the previous year’s list.

The index measures the time and cost for resolving a commercial dispute through a local first-instance court.

The Ease of Doing Business 2019 report said steps taken by the Kingdom’s Ministry of Justice during the past two years have contributed to the improved standing.

This article was first published in Arab News

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Getting rid of red tape seen as key to Saudi reform push

Time: February 06, 2019  

  • Legal expert sees ‘real efforts and measures’ underway in the Kingdom, led by the government
  • Saad A. Alrashed: There’s a push to ‘buy Saudi Arabia’ from international funds

Saad A. Alrashed, the founding partner of law firm ZS&R in association with Hogan Lovells, speaks to Arab News about the investment climate in Saudi Arabia and why 2019 is set to be the year of deal-making.

Q: We are seeing the return of merger-and-acquisition activity in the Gulf, at its highest in a decade. How is this likely to play out in Saudi Arabia, and in which particular sectors — beyond Saudi Aramco’s proposed acquisition of a controlling stake in SABIC — are we likely to see deals being done?
A: Apart from SABIC/Aramco, there are two large ones taking place: NCB and Riyad Bank, and before that SABB and Hollandi, and negotiations are still ongoing.
Banks in Saudi Arabia have among the highest profitability in the world, and local boutique banks are usually good for the economy and end-consumer, therefore it’s difficult to foresee more logical mergers in this sector.

Q: How would you describe international investor sentiment toward the Kingdom currently, and to what extent will Saudi Arabia benefit from improving investment interest in emerging markets?
A: The Saudi economy in 2017 was in slight negative growth (real gross domestic product at -0.7 percent), yet it grew (in 2018 by almost) 2.5 percent and is upgraded to reach about 2.7 percent this year. The G20 can be split into two sections: Advanced and emerging. Both have been downgraded by the IMF as per growth (as seen in 2018 and as estimated for 2019). For example, the US economy grew last year around 2.9 percent (real GDP growth), and is expected to slow down this year. Saudi Arabia is one of the few countries in the G20 that have an upgraded growth forecast for this year and next year (along with Italy, Canada and Russia).
Japan got a downgraded growth forecast along with Australia and South Korea, and even China and India got downgraded forecasts (China’s GDP growth, which was 6.9 percent in 2018, was downgraded from a forecast of 6.6 percent to 6.0 percent for 2019). India’s economy is expected to slow down slightly to 7.3 percent.
As for how the Saudi economy is viewed internationally juxtaposed to all this, there’s a push to ‘buy Saudi Arabia’ from international funds (such as Passive Funds, with little or no active management, which usually seek to emulate their international exposure for emerging markets), also reflected in light of the Kingdom’s inclusion in the MSCI and the FTSE’s Emerging Markets Index.
This was clearly reflected as well in the national Saudi market (Tadawul) from the beginning of last year until today, with leading company stocks soaring, which indicates a general positive view of the whole economy. Of course, this is all in retrospection against 2017.
In terms of investor sentiment, there’s some hesitation that I believe is totally unjustified, since the real local feel and mood of the Saudi populace is a positive one in light of all the changes and new adaptations taken by the leadership.
And generally it’s difficult to ignore Saudi Arabia and its economy, which is the largest in the Middle East and North Africa, with a stable and deep system, a large local population, and massive growth potential and oil reserves.

Q: Which areas of the economy would benefit from further reforms?
A: It’s difficult to say, but a lot of the SMEs (small and medium enterprises) have been impacted by hikes in import labor fees, utility fees and different tax measures. And consumer spending is seen to have slowed down last year. This is of course as a result of Saudization measures and localizing labor.
Reforms benefit the whole economy. There are many sectors that need reform and can benefit from it, and now there are many courageous government initiatives in all directions really. Just last month, we saw around 34 excellent openings in all fields, from infrastructure to mining to logistics. Thankfully, there’s a huge push now by the Ministry of Commerce and Investment to cut down business establishment costs in order to encourage entrepreneurship and help initiate SMEs across the country (right now, according to unofficial figures from the ministry, setting up a new business in Saudi Arabia is more expensive than in Turkey and Dubai, for example).
This will definitely help alleviate the hikes mentioned earlier that affect SMEs and consumer spending. There seem to be real efforts and measures to cut red tape and start-up costs, led by the Saudi government.

Q: Given the prevailing sentiment in markets, are we likely to see many initial public offerings (IPOs) this year, and in what sectors?
A: I believe there are around six offerings this year in the stock market, which is a healthy number. This can be addressed further by financial experts.

This article was first published in Arab News

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Saudi Arabia to spend $3.8bn to enhance mineral exploration

Time: February 06, 2019  

Saudi Arabia is one of the world’s top phosphate suppliers and its mining sector employs around 250,000 people. (File/AFP)
  • The government has identified 51 potential exploration projects, including 14 gold and 14 copper
  • Investments will be made through the National Industrial Development and Logistics Program

CAPE TOWN: Saudi Arabia will invest around $3.8 billion to enhance access to geoscience data and reduce regulatory red tape as it looks to boost mineral exploration, senior government officials said on Wednesday.
Government plans to jump-start the Saudi mining sector form part of a broader industrial strategy aimed at diversifying the economy and attracting private-sector investments worth 1.6 trillion riyals ($426 billion) over the next decade.
Investments will be made through the National Industrial Development and Logistics Program (NIDLP), part of Vision 2030, a reform strategy led by Crown Prince Mohammed bin Salman and intended to wean the economy off oil while creating jobs.
“For some time Saudi mining has been characterised by a lack of publicly available geoscience data, longer processing times on licenses and a lack of transparency,” Khalid Al-Mudaifer, vice minister of mining, told an African mining conference.
He said the $3.8 billion would be spent on making it easier to do business and improving data quality to reduce the risks associated with investing in new mining opportunities for gold, zinc, rare earth metals and other minerals.
Saudi Arabia is one of the world’s top phosphate suppliers and its mining sector employs around 250,000 people.
The vice minister also said the government was working on a digital platform to help finalize exploration licenses within 60 days, compared to six months at present.
“Also the law allows 100 percent ownership … and you can apply for exploration or mining licenses,” he said.
Earlier, Abdulrahman Al-Belushi, who heads mining strategy at the NIDLP, said there were vast opportunities in Saudi Arabia should investors look to exploit mineral resources valued at an estimated $1.3 trillion.
“Aside from the oil and gas in the eastern part of the kingdom, we have been blessed with tremendous geological potential that remains vastly unexplored,” he said.
The government has identified 51 potential exploration projects, including 14 gold and 14 copper, covering around 1,351 square kilometers that could be among the first targeted, another official said.

This article was first published in Arab News

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Is the war on corruption over?

Time: February 05, 2019  

After the conclusion of the work of the Supreme Committee to Fight Corruption, headed by Crown Prince Muhammad Bin Salman, many in the media have raised valid questions. Here is a summary of my answers to them.

Why now?

— Why not? We have had to live with corruption issues for ages. Tons of cases were opened and closed, with years of investigation and few indictments. The government agencies charged with the task of fighting corruption have failed so far to give us solid results. Many of those responsible for the disasters that resulted from Jeddah floods in 2011 are still free to enjoy the millions/billions they stole in cash and real estate. Not to mention all the mega projects that were inflated in cost and deflated in quality. Or the shady deals, power abuse, money laundering and misuse of public funds and property.

It was high time someone did something about it. The King and his Crown Prince did exactly what we were waiting for – only faster and better than our best expectations and wildest dreams.

So, instead of asking why now, we should be asking why not before. And the answer to that is: We have had enough of the incompetency of the process and the processors. The system was ineffective and incompetent to deal with the issues at hand. A higher authority had to be created with the mandate and required power to do the job, quickly, efficiently and comprehensively.

Why start at the very top?

— Because that is exactly where we should start. Leaders are supposed to lead, inspire and set a model to be followed. If the example they set is low, what do we expect from their followers? Worse still, such a model creates societal culture that tolerates corruption and regards stealing from public treasure as fair game. You cannot heal a body if the head is sick.

So what is the message here?

— Actually there are two messages here. One for the Saudi people, which basically says: “We will not tolerate corruption any longer. Starting today, the cleaning process is on full speed. If you are clean you will benefit from the new environment. If you are dirty, then clean up or else!”

The second message is for the world. It declares: “Saudi Arabia is entering the race for the world’s best business and investment environment. Justice, honesty, and the rule of law are top concerns. Corruption in all its forms is at the bottom. Investors, inventors, workers and businessmen will enjoy an even playing field, where only the best may win. No one is above the law, and no VIP is privileged enough to have an easier run or a corner cut in any competition.

What has this to do with Saudi Vision 2030?

— Everything! In the new world we dream, plan and sweat for, we cannot and will not tolerate dirty tricks and money, low quality projects, overpriced services or under-the-table deals. Our new world will shine under the bright sun, and those who can only live and work in the dark have no space or place reserved.

Any unintended consequences? Bad reactions? Strong backlash?

— Maybe! For every action there is a reaction. However, these are well-studied moves. Safeguards must have been taken. Counter moves were readied.

As for the economy, I believe it will benefit from the cleanup. While foreign investors and businessmen will benefit from the new order, Saudis will also find it up to their best expectations and standards. The youth and women have been complaining for ages about an uneven playing field. A healthier environment and culture will certainly give them more space to operate. No more glass ceilings; the sky is the limit.

Is there any link between the war on corruption, local politics and regional conflicts?

— We do not live on an isolated island. We live in a dangerous neighborhood and a competitive political and business world. If we do not wake up quickly, the slippery road we have been walking on for ages will take us down – way down! With our oil getting cheaper and more irrelevant, we many soon not have sufficient income to sustain our development and lifestyle.

Time is running out. Regional conflicts are eating up our treasury. Facing Iran’s destructive intervention and sponsorship of terrorism is distracting us. The war on terror is depleting our resources. We cannot afford on top of all of that to let the corrupted steal our wealth, slow our development and damage our economy.

Is the campaign on corruption over?

— Not at all! It has just started. The Supreme Committee to Fight Corruption had achieved its goals. Other watchdog agencies and newly established regulations will continue to safeguard our institutions against the danger of corruption.

Your comments, dear readers, are welcome.

Dr. Khaled M. Batarfi is a Saudi writer based in Jeddah. He can be reached at kbatarfi@gmail.com. Follow him on Twitter: @kbatarfi

This article was first published in the Saudi Gazette

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Saudi Arabia launches office to keep up corruption fight after crackdown

Time: February 05, 2019  

Saudi Arabia has launched a new office to monitor state spending, saying it would help keep up the fight against corruption.

Saudi Arabia has launched a new office to monitor state spending, saying it would help keep up the fight against corruption after the closing of a 15-month crackdown, state media reported.

The financial reporting office would be part of the state’s General Auditing Bureau, which watches out for financial discrepancies, public prosecutor Saud al-Mojeb was quoted saying on Monday by state news agency, SPA.

“Corruption is not restricted to a specific company or government sector. The concerned authorities will be monitoring,” he said, adding that public prosecutors would handle any investigations.

Crown Prince Mohammed bin Salman said last week that the crackdown launched in November 2017 – which netted scores of the kingdom’s economic and political elite – had achieved its objectives.

The royal court said the operation had recovered more than $106 billion through settlements with scores of senior princes, ministers and top businessmen.

King Salman said at the time that the government would continue its efforts to combat corruption and protect public funds.

Fifty-six people who were summoned under the anti-corruption campaign still face criminal charges, and eight others had declined settlement offers, the royal court has said.

This article was first published in Al Arabiya English  

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Saudi Arabia determined to ‘combat corruption’

Time: February 05, 2019  

King Salman chairs the Cabinet session in Riyadh on Tuesday. (SPA)
  • Law enforcement, auditing bodies should strengthen their roles to protect public funds, says King Salman

RIYADH: Saudi Arabia will continue to preserve integrity and combat corruption, King Salman said at the weekly Cabinet session in Riyadh on Tuesday.
Law enforcement and auditing bodies should strengthen their roles so that they can protect and preserve public funds, he added.
The king thanked Crown Prince Mohammed bin Salman, who is chairman of the Anti-Corruption Committee, for his efforts and keenness.
King Salman also thanked the committee’s staff and working teams for completing the tasks assigned to them. The Cabinet vowed to continue to fight corruption and punish those responsible.
It lauded the consultative meeting of the foreign ministers of Saudi Arabia, Kuwait, the UAE, Bahrain, Egypt and Jordan.
The meeting discussed regional developments, and enhancing cooperation and coordination to serve Arab interests.
The Cabinet reviewed the latest Arab, regional and international developments. It commended the holding of the first round of Saudi-German political consultations, which reviewed bilateral relations, cooperation in combating extremism and terrorism, and regional and international issues.
Media Minister Turki bin Abdullah Al-Shabanah said the Cabinet discussed cultural and heritage activities held during the past few days, which witnessed large turnouts and international participation.
The Cabinet authorized the interior minister or his deputy to discuss with Chinese officials a memorandum of understanding (MoU) between the Saudi Interior Ministry and China’s Public Security Ministry to combat electronic crime.
The Cabinet also approved an MoU for political consultations between the Saudi and Dutch foreign ministries.
Furthermore, it approved an agreement between Saudi Arabia and the UAE to avoid double taxation and tax evasion.

This article was first published in Arab News

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Saudi Arabian government spending $27 billion on industry development in next two years

Time: January 28, 2019

Saudi Arabia’s Minster of Transportation Nabeel Al-Amudi gave the opening remarks at the Saudi Industrial Development program. (AN Photo/Ziyad Alarfaj)
  • Saudi Arabia’s 2019 budget allocated $8.7 billion for the energy, industry, mining and logistics sectors
  • Saudi Arabian government will spend $27 billion in 2019 and 2020

RIYADH: The Saudi Arabian government will spend $27 billion in 2019 and 2020 as part of its industrial development programme, Aabed Abdullah Al-Saadoun, Deputy Minister of Energy, Industry and Mineral Resources said on Monday.
The programme is offering investment opportunities in mining, industry, logistics and energy sectors inside the kingdom, according to a document distributed to participants at an investment conference the deputy minister was addressing in Riyadh.
The programme is offering investors the opportunity to invest in projects such as plants that manufacture rubber, catalysts and vehicles, it said.
Saudi Arabia’s 2019 budget allocated $8.7 billion for the energy, industry, mining and logistics sectors, Energy Minister Khalid Al-Falih said in a tweet in December.
That is more than three times the amount allocated in the previous budget, he said, in a sign the kingdom is keep to boost diversification in these key sectors to create jobs for Saudis and wean economy off oil.

This article was first published in Arab News

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Saudi Arabia seeks to attract $427bn with industrial program

Time: January 26, 2019

(Khalid Al-Falih, pictured earlier this month, said the Kingdom would announce projects worth SR70 billion. (File photo/Reuters)
  • The move is aimed at diversifying the economy away from oil and creating jobs
  • There are plans to announce projects in the military, chemicals and small businesses industries worth $50 billion

RIYADH: Saudi Arabia aims to attract private sector investments worth SR1.6 trillion ($427 billion) over the next decade through an industrial development program aimed at diversifying the economy, Energy Minister Khalid Al-Falih said on Saturday.
Investments will be made through the National Industrial Development and Logistics Program (NIDLP), one of the programs set out under Vision 2030, a wider reform strategy led by Crown Prince Mohammed bin Salman and intended to wean the economy off hydrocarbons and create jobs for Saudis.
Falih said the kingdom would on Monday announce projects worth 70 billion riyals that are “ready for negotiations” under the NIDLP to boost industry, mining, energy and logistics.
At a later stage, it plans to announce projects in the military, chemicals and small businesses industries worth $50 billion, he added without giving a timeframe.
“The (NIDLP) program targets 1.6 trillion Saudi riyals … it is quite ambitious but it is over a 10-year period so we have got the time to do it,” Falih told a press conference.
The program will seek to raise money from both domestic and foreign investors.
“We will have a huge contribution from the private sector outside the kingdom, but we will leave the bigger share for the Saudi private sector,” Falih said.
The program will integrate the mining, industry and energy sectors, which Falih said were each vital to the kingdom’s plan to empower the private sector and make it the main driver for economic growth.
After decades of spending on development projects, the government has made attracting greater foreign investment a cornerstone of its Vision 2030 plan.
But foreign investors have been rattled in recent months by Saudi Arabia’s deteriorating relations with Western governments after the murder of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October.
Transport Minister Nabeel Al-Amudi told the press conference that NIDLP would launch 60 initiatives in the logistics sector, including five new airports and 2,000 km of railways, and aims to attract more than 135 billion riyals of investments.
“We aim by 2020 that the logistics sector contributes 221 billion riyals to GDP,” he said.
Under Vision 2030 the kingdom aims to have the private sector operate much of its transport infrastructure, including airports and sea ports, with the government keeping a role as regulator. ($1 = 3.7503 riyals) (Writing by Hesham Hajjali, Ghaida Ghantous and Marwa Rashad; Editing by Edmund Blair and Clelia Oziel)

This article was first published in Arab News

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Saudi Arabia unveils seven principles to raise investment

Time: January 23, 2019

Ibrahim Al-Omar, governor of the Saudi Arabian General Investment Authority. (SPA)
  • The rapid pace of economic transformation in the coming years is opening exciting investment opportunities

 

JEDDAH: Saudi Arabia has unveiled seven investment principles, issued by royal decree and based on international best practice, that will support the development of a competitive investment environment in the Kingdom.
“The rapid pace of economic transformation in the coming years is opening exciting investment opportunities, both in Saudi — a G20 economy opening up to international businesses — and in the broader Middle East,” said Ibrahim Al-Omar, governor of the Saudi Arabian General Investment Authority (SAGIA).
The investment principles are: Ensure equality between Saudi and foreign investors; ensure protection of investments; enable sustainability of investment; provide access to equal investment incentives; implement social and environmental standards and ensure investor compliance with Saudi health, safety and environmental regulations; facilitate access procedures for foreign workers and their families; and ensure a solid transfer of knowledge, technology and enhancement of local human capital.

This article was first published in Arab News

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