December 31, 2008

GCC Set To Impose Income Tax Soon

The Gulf States have agreed to implement corporate and individual income tax by 2012, and are now planning to bring the deadline closer, reports Emirates Business. "The prospect of drastic reductions in oil revenues and the resultant fiscal deficits has forced the six countries to examine whether implementation can be done earlier than 2012," sources told the paper.

Saudi Construction Down

Financial Times
Dec 30, 2008

For the past few years, much of the talk coming out of Saudi Arabia has been about opportunity – a chance to use the oil boom to develop the economy and go some way to heading off pressing social and economic pressures that have been building up in the kingdom.

During the late 1980s and 1990s, the economy stagnated while the population ballooned. By the turn of the century, unemployment had reached double digits and, with some 60 per cent of the 17m national population estimated to be under 25, the need to expand the private sector and create jobs was deemed vital to the nation’s stability and its future prosperity.

The oil boom and the massive accumulation of petrodollars provided a chance to tackle those issues and rehabilitate decaying infrastructure. But just as the process is beginning to inch forward, the Arab world’s largest economy faces a slowdown and is grappling with the prospect of a dramatic fall in revenue following the collapse in oil prices and reductions in crude output.

Now the onus is on the kingdom’s traditionally cautious leaders to ensure that the process of diversification – a huge task even in the boom years – continues in a downturn, analysts say. If not, they warn, the small gains made over the last few years will be lost, the private sector will contract and the pool of unemployed Saudis will grow.

All the Arab Gulf countries are braced for a slowdown after a period of incredible growth. But given Saudi Arabia’s demographics and size, its needs are considered more urgent than those of its smaller and wealthier neighbours.

One analyst says: “It’s taken [Saudi Arabia] five years just to warm up and begin running, and they need to keep the momentum for at least five years for that pace to be set in motion. The most dangerous thing now is for them to say ‘we are not going to invest’. If they don’t do it, they will reset the development process for at least the next five years.”

Last week, the government projected it would post a budget deficit in 2009, the first for seven years, with revenue expected to tumble to 410bn riyals ($109bn) in the next fiscal year, from a record 1,100bn riyals this year. But, to the relief of economists and businessmen, the finance ministry announced an expansionary budget, putting expenditure at 475bn riyals for 2009, about 16 per cent higher than budgeted spending for 2008, although 35bn riyals less than expected actual spending.

The oil-dependent economy relies heavily on government spending to stimulate private sector growth, and although projects estimated at $600bn have been announced, many have yet to begin and those that have are predominantly in hydrocarbons, real estate and infrastructure – sectors that provide few jobs for Saudis.

The analyst estimates that some 1m jobs have been created since 2002, but three-quarters of those were low-salary positions that were predominantly occupied by cheap foreign labour.

Official unemployment has dropped gradually to about 9 per cent, but there are concerns that the middle class is shrinking while the sizeable lower-income segment of society is becoming larger. Analysts estimate that some 3m Saudis are expected to enter the labour market up to 2020.

Worryingly, growth in the private sector – which is critical to job creation – slowed in 2008 in spite of the massive inflow of petrodollars, falling from 5.8 per cent in 2007 to 4.3 per cent.

That is expected to slow further next year, and estimates of 2009 real economic growth range from about 2 per cent to a 1.5 per cent contraction. The business community’s confidence has been dented by falling oil prices and the private sector also faces the problem of liquidity drying up in local and international banks.

Some $26bn worth of industrial infrastructure projects have either been cancelled or put on hold, according to Samba bank. This month, Rio Tinto said it would not be able to finance its 49 per cent stake in a $10bn aluminium project with state mining companyMaaden, seen as an important pillar of diversification.

On the positive side, the government is praised for acting prudently during the boom years and has significantly reduced its debt while also building up foreign assets estimated to be in excess of $500bn, making it far better placed to weather a downturn than in the 1990s. But the government will have to tap into its savings to fill the role expected to be vacated by a cautious and credit-starved private sector, analysts say.

“The $60m question is whether the government is going to step in to finance a lot of these projects, or guarantee them, or deposit enough money in the banking system so they can finance these projects,” says John Sfakianakis, chief economist at SABB Bank. “They don’t have the luxury to stop doing the reform because they are fighting time. They have to keep going at all costs.”

December 19, 2008

Saudi News Weekly Dec 13-19, 2008

Water Water Everywhere...

There’s no place like home…

According to a recent publication, Saudi Arabia’s foreign assets could increase more than twofold to nearly $878 billion (SR3.22 trillion) at the end of 2010 because of massive fiscal surpluses spawned by a surge in its petrodollar income.
I hope that we would spend some of these “massive fiscal surpluses” to improve many areas in Jeddah still suffering huge water shortages (see picture below).

The local Human Right Commission recently commemorated the 60th anniversary of the Universal Declaration of Human Rights.
If this is the case, why is it that nine Indian nurses who received a favorable ruling from the Labor Court against their employer, Dr. Siddiqa Hospital in Jeddah, have not yet received their unpaid salaries and their final-exit visas?
Happy human rights everybody…

Last week was not a very happy week for many people.
· In Jeddah, police arrested a 47-year-old Saudi man shortly after he killed his 19-year-old daughter by slashing her neck with a knife. Another abuse story.
· Also in Jeddah, the Investigation and General Prosecution has moved the General Court to award capital punishment for a Yemeni accused of raping young children. How many children? 13.
· The Saudi Charitable Society Caring for Saudi Families Abroad (Awassir) announced it is studying the condition of 1,000 abandoned Saudi children abroad in 15 Asian and African countries. We don’t waste any time when we go abroad, do we!
· A group of monkeys has been wreaking havoc on Al-Ajer Intermediate School for Girls in Khamis Mushayt. I understand the monkey scare has forced panicky students and teachers to stay away from the school altogether. I don’t blame the monkeys.

Finally, and as Linda Heard said: Size 10 will never be the same again.

Life goes on….
Abdullah Al Alami

This is not a little village in Africa...
This is Al kandara, Jeddah
where volunteers fill water cans
(Pic from Arab News)

December 16, 2008

Unprecedented public ferment among once-silent Saudis

Islamic extremism, education, and women's rights are under scrutiny, as Saudi Arabia discusses democratic reform.

By Faye Bowers Staff writer of The Christian Science Monitor

RIYADH, SAUDI ARABIA – The capital is abuzz. Everywhere, it seems, from sidewalk cafes to women's salons behind closed doors, Saudis are talking about societal changes.
Religious extremism and democratic and educational reforms, as well as women's issues, are paraded for public discussion in what has long been one of the most tight-lipped and tightly controlled lands in the Middle East. While actual political reform may be moving at a snail's pace by Western standards, the new degree of openness is earthshaking here.
"There is a dialogue in society," says Khaled al-Maeena, editor in chief of Arab News, an English-language daily in Saudi Arabia. "Newspapers are flourishing. Papers are talking about accountability, corruption, leaders not being up to the mark, women, children, and empowerment."
A leading indicator, says Mr. Maeena, was a Nov. 28 commentary by Mansour al-Nogaidan, a reformed militant Muslim and Saudi columnist, published in The New York Times. The article bluntly questioned the Saudi government-sanctioned extremist religious culture - and was widely reproduced here. "I think the whole of Saudi Arabia read it and is talking about it," Maeena says.
The kingdom has been steadily - albeit slowly - evolving for the past 60 years, Saudi and Western officials say. But the Sept. 11, 2001, attacks on the US, along with the May and November suicide bombings this year in Riyadh, have galvanized Saudis and enabled the press to discuss reforms and societal problems more than ever before. Prior to the May bombing, says a Western diplomat, the government denied that Islamic extremism was a problem. The attack was a major turning point.
"The ironic thing is that at 11 p.m. on the evening of the May 12 bombing, television featured a scholar - a professor of Islam at Imam Muhammed Bin Saud Islamic University here. He spoke about extremism within society. That opened a lively debate here," the diplomat says. "To my surprise and astonishment, there is [now] a very lively debate within a fairly free press here."
The biggest changes since Sept. 11, says Norah al-Sowayan, a counselor at a private clinic here in Riyadh, are that "people in government see that [extremists] are not just religious people, but people who have a political agenda, and that newspapers have started to talk about these things."
Although Ms. Sowayan thinks that the pace of reforms - especially those that deal with women's issues - is much too slow, she's encouraged that they are at least being discussed publicly.
She runs a private clinic that has offered marriage and child-abuse counseling for seven years. It was one of the first of its kind, set up and secretly run by a member of the royal family. The services offered are free, and most of the clients are young women - between 25 to 30 years of age - who are experiencing marital problems and have no idea about women's rights. The clinic has recently begun to flourish, Sowayan says, in large part because "newspapers and radio talk about the organization and other social centers."
For example, Sunday's Arab News reported that the Saudi government is now considering opening up free marriage-counseling offices "to combat the high rates of divorce in the country."
Moreover, Saudi newspapers are publishing almost daily installments with the names, photos, and background information on four or five of the 26 men listed as Saudi Arabia's most wanted terror suspects. It's still not clear how much information the public is providing to the government about suspected terrorists. But it appears that the public is increasingly questioning the religious establishment they believe has incited the extremists.
Members of the Majlis ash Shura, the 120-member royal advisory council, which was recently given increased power to propose and enact laws, are speaking out, as well. In an interview in his elegantly appointed office, Maglis member Abdulmuhsin al-Akkas says the government is intent on increasing political participation, but initially only at the local level. Saudis must learn the art of participatory politics, he says, before national elections are held - in part to avoid electing religious extremists, popular clan leaders, and others who may not have the skills to run the government. "You must have the institutions and the culture ... and people don't learn this overnight," Mr. al-Akkas says.
Maeena, the Arab News editor, agrees. "There has to be civil society, institutions," he says. "Our national pastime is complaining. Now we need to roll up our sleeves and do something about it."