Local partner condition may be scrapped to bolster FDI

Updated 07 February 2016
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Local partner condition may be scrapped to bolster FDI

JEDDAH: New steps being taken to increase the flow of foreign investments into Saudi Arabia this year have raised the expectations of the business community.
A triple sectorial committee, including Saudi Arabian General Investment Authority (SAGIA), Ministry of Commerce and Industry, and Ministry of Labor, is seriously reviewing factors that hinder investment in the Saudi market, Asharq Al-Awsat reported Saturday.
Quoting sources, the report said that the study is aimed to facilitate global companies’ investment in the Saudi market and to present them with incentives.
The daily also stated that the committee’s review would shift the current situation to a new standpoint, which eliminates all obstacles slowing down global investment.
The condition to have a local partner in a foreign investment project for it to be granted access to the Kingdom’s direct market has reduced the scale of foreign investment in Saudi Arabia.
The condition for the need for a local partner is likely to be removed when the committee concludes its studies, the report indicated.
James Reeve, deputy chief economist and assistant general manager, Samba Financial Group, said: “Saudi Arabia needs to attract FDI to help stem losses of international reserves.”
He told Arab News: “The main obstacle for foreign investors is the lack of clarity on bankruptcy laws. That, and the hiring and firing of nationals.”
Reeve said: “Retail is the main growth sector of the next few years. It is already in pretty good shape. One might expect some consolidation (i.e. fewer smaller independent outlets) and some bigger players.”
Said Al-Shaikh, group chief economist of the National Commercial Bank, commented: “Probably one of the things making it difficult for foreign investors is the issue of legal enforcement.”
The lengthy process of resolving commercial disputes is a major concern, he said. “Within the legal system there are until now no special courts for commercial disputes. They go to general courts.”
Al-Shaikh said: “The lengthy process in obtaining licenses is another hindrance.”
Fawaz Alfawaz, a Riyadh-based economic consultant, told Arab News: “It really depends on the type of investments we the Kingdom aspires to. The existing state of the economy makes energy intensive and distribution more attractive because of the cost structure in the Saudi economy. But as the Kingdom strives to modernize its economy the types of foreign investment we need becomes radically different.”
Alfawaz added: “SAGIA can help with streamlining the bureaucracy, the information, the rules and regulations but the heavy lifting is really on the total eco-system starting with public sector, private sector to find the right partners and the productivity of the Saudi labor market.”


IMF warns G20 economic leaders that tariffs hurting global economy

Updated 34 min 26 sec ago
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IMF warns G20 economic leaders that tariffs hurting global economy

BUENOS AIRES: The International Monetary Fund (IMF) warned world economic leaders on Saturday that a recent wave of trade tariffs would significantly harm global growth, a day after US President Donald Trump threatened a major escalation in a dispute with China.
IMF Managing Director Christine Lagarde said she would present the G20 finance ministers and central bank governors meeting in Buenos Aires with a report detailing the impacts of the restrictions already announced on global trade.
“It certainly indicates the impact that it could have on GDP (gross domestic product), which in the worst case scenario under current measures...is in the range of 0.5 pct of GDP on a global basis,” Lagarde said at a joint news conference with Argentine Treasury Minister Nicolas Dujovne.
Her warning came shortly after the top US economic official, Treasury Minister Steven Mnuchin, told reporters in the Argentine capital there was no “macroeconomic” effect yet on the world’s largest economy.
Long-simmering trade tensions have burst into the open in recent months, with the United States and China — the world’s No. 2 economy — slapping tariffs on $34 billion worth of each other’s goods so far.
The weekend meeting in Buenos Aires comes amid a dramatic escalation in rhetoric on both sides. Trump on Friday threatened tariffs on all $500 billion of Chinese exports to the United States.
US Treasury Secretary Steven Mnuchin will try to rally G7 allies over the weekend to join it in more aggressive action against China, but they may be reluctant to cooperate because of US tariffs on steel and aluminum imports from the European Union and Canada, which prompted retaliatory measures. .
The last G20 finance meeting in Buenos Aires in late March ended with no firm agreement by ministers on trade policy except for a commitment to “further dialogue.”
German Finance Minister Olaf Scholz said he would use the meeting to advocate for a rules-based trading system, but that expectations were low.
“I don’t expect tangible progress to be made at this meeting,” Scholz told reporters on the plane to Buenos Aires.
Mnuchin told reporters on Saturday that he has not seen a macroeconomic impact from the US tariffs on steel, aluminum and Chinese goods, along with retaliation from trading partners.
But he said there have been microeconomic effects on individual businesses, he said, adding that the administration was closely monitoring these and looking at ways to help US farmers hurt by retaliatory tariffs.
The US dollar fell the most in three weeks on Friday against a basket of six major currencies after Trump complained again about the greenback’s strength and about Federal Reserve interest rate rises, halting a rally that had driven the dollar to its highest level in a year.