Roubini backs VAT plans and urges quicker reforms
Roubini backs VAT plans and urges quicker reforms
In an exclusive interview with Arab News, the economist urged the swift implementation of economic reforms under Saudi Vision 2030 and backed the introduction of VAT and the planned opening of Saudi Aramco to outside investment.
“There are signs that maybe the government is aware that they have to accelerate the process of economic reform,” the economist told Arab News on the sidelines of the Global Citizen Forum in Sveti Stefan, Montenegro.
Roubini, whose warnings on housing prices ahead of the financial crisis earned him the moniker “Dr. Doom,” said: “Traditional groups in Saudi Arabia are against reforms but those reforms are necessary. I hope they have the political courage to do it sooner and faster because that’s important. Time is running out.”
The economist said he believed the Kingdom’s move to introduce VAT from Jan. 1, 2018 was the right decision.
Despite analyst concerns that the new tax may put pressure on already squeezed GCC economies, Roubini said VAT was a more “effective form” of taxation.
He said: “In the GCC, the revenues have traditionally been oil-based, but these revenues are both volatile and falling over the long-term.
“Therefore, introducing other forms of taxation is the right way of reforming the tax system in many parts of the Gulf.”
The introduction of taxation in Gulf economies has also raised fears that it will hit consumers in the pocket.
However Roubini said that did not have to happen if the policy was managed strategically.
“VAT is a tax and therefore somebody has to pay it, but the policy of subsidies across the GCC — electricity, health care, gasoline, education and so on — some of them are not efficient because if you want to help the poor, you need to have targeted social policies only for those who need it.
“VAT can be a progressive move as long as you make sure the poor are getting other benefits and not going to be hurt by the tax.”
The planned opening of national oil company Saudi Aramco to outside investors was also endorsed by the economist.
He said: “It’s a way to raise capital and diversify the economy so it’s a good move. Right now, there is a debate on whether to do an IPO or a private placement to save some of the underwriting costs.
“But either way, I would say bringing in transparency and openness is going to be important.”
“Bringing international capital into Aramco is going to be good for foreign investors and it’s going to be good for Saudi Arabia as a way of diversifying its financial opportunities.”
Asked if he would personally invest in Aramco stock, Roubini replied that it would depend on the price.
“The oil price is very volatile but certainly Saudi Arabia is one of the low-cost producers of oil, so even if oil prices fall lower, Saudi will remain profitable. Saudi is not going to be a displaced producer.
“But of course if oil prices are lower, their profit margins will be lower as well. As we know, one of the most unpredictable things in the global economy is the oil price. Whether I would invest in it depends whether the price is right. I don’t know what that price is going to be.”
Saudi Arabia has lion’s share of regional philanthropy
- Kingdom is home to three quarters of region's foundations
- Combined asets of global foundations is $1.5 trillion
Nearly three quarters of philanthropic foundations in the Middle East are concentrated in Saudi Arabia, according to a new report.
The study, conducted by researchers at Harvard Kennedy School’s Hauser Institute with funding from Swiss bank UBS, also found that resources were highly concentrated in certain areas with education the most popular area for investment globally.
That trend was best illustrated in the Kingdom, where education ranked first among the target areas of local foundations.
While the combined assets of the world’s foundations are estimated at close to $1.5 trillion, half have no paid staff and small budgets of under $1 million. In fact, 90 percent of identified foundations have assets of less than $10 million, according to the Global Philanthropy Report.
Developed over three years with inputs from twenty research teams across nineteen countries and Hong Kong, the report highlights the magnitude of global philanthropic investment.
A rapidly growing number of philanthropists are establishing foundations and institutions to focus, practice, and amplify these investments, said the report.
In recent years, philanthropy has witnessed a major shift. Wealthy individuals, families, and corporations are looking to give more, to give more strategically, and to increase the impact of their social investments.
Organizations such as the Bill and Melinda Gates Foundation have become increasingly high profile — but at the same time, some governments, including India and China, have sought to limit the spread of cross-border philanthropy in certain sectors.
As the world is falling well short of raising the $ 5-7 trillion of annual investment needed to achieve the UN’s Sustainable Development Goals, UBS sees the report findings as a call for philanthropists to work together to scale their impact.
Understanding this need for collaboration, UBS has established a global community where philanthropists can work together to drive sustainable impact.
Established in 2015 and with over 400 members, the Global Philanthropists Community hosted by UBS is the world’s largest private network exclusively for philanthropists and social investors, facilitating collaboration and sharing of best practices.
Josef Stadler, head of ultra high net worth wealth, UBS Global Management, said: “This report takes a much-needed step toward understanding global philanthropy so that, collectively, we might shape a more strategic and collaborative future, with philanthropists leading the way toward solving the great challenges of our time.”
This week Saudi Arabia said it would provide an additional $100 million of humanitarian aid in Syria, through the King Salman Humanitarian Aid and Relief Center.
The UAE also this week said it had contributed $192 million to a housing project in Afghanistan through the Abu Dhabi Fund for Development.