Rule of law essential to attract foreign investment, says top US management consultant

Management consultancy AT Kearney has welcomed ongoing reforms in Saudi Arabia and urged regional economies to pursue the transparent enforcement of the rule of law. (Reuters)
Updated 21 February 2018
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Rule of law essential to attract foreign investment, says top US management consultant

DUBAI: Countries in the Middle East and North Africa must pursue the “transparent enforcement of the rule of law” if they are to attract vital foreign direct investment, according to a leading consulting firm advising several governments in the region, including that of Saudi Arabia.
AT Kearney, the American consultant, said that corruption is one of the big factors deterring foreign investment in the Middle East, and praised Saudi Arabian government plans for economic reform, which it described as a “genuine committed effort” to transform the Kingdom’s economy and society.
“The Saudi reform efforts are incredibly impressive, and the commitment to achieving them is sincere,” said Rudolph Lohmeyer, vice president of Kearney’s global business policy council.
He said that foreign direct investors were attracted to countries with “addressable” market size, such as Saudi Arabia, Egypt and Turkey, but had been deterred by the historically high levels of political risk in the region, resulting in limited investment compared with other parts of the world.
Further reform is required in regional economic and political sectors in MENA if it is to successfully complete the transformations underway in many countries by 2030, he said.
Lohmeyer said that countries in the region, including the six Gulf Cooperation Council countries, had to establish a “regional security architecture” to head off possible inter-state conflicts, and increase the comparatively low pace of economic and trading integration between them.
He advocated “arrangements between adversaries,” such as informal channels of communications between leaders of regional governments, to defuse tensions and head off potential conflicts. “A number of leaders have expressed interest in this idea,” he said, without identifying them.
Lohmeyer was speaking in Dubai at an event to announce the establishment of Kearney’s National Transformations Institute, a unit based in the UAE to analyze and monitor the progress of governments trying to modernize their economies.
He said that policymakers in the region faced several challenges in achieving the planned transformations, including economic integration, improving trade flows, optimizing foreign direct investment and implementing fiscal policy transitions.
On trade, Lohmeyer said that “geography was not enough” to counter falling global trade levels, but pointed out that volumes of trade in the region were increasing and were crucial elements of regional economies, for example accounting for 40 percent of Dubai’s economy.
On the implications for government finances of comparatively low oil prices, he said it was vital for governments to lower public sector wage bills and reduce the gap between public and private sector pay.
Erik Peterson, AT Kearney managing director, said that global economic growth was “synchronous, rather than synchronized”, with a positive short-term outlook, but with increasing challenges after that.
The risks to the global economy came from from low productivity, high levels of debt, political instability, and populism leading to “islandization” rather than globalization, he said.


EU to respond to any US auto tariff move: report

Updated 23 June 2018
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EU to respond to any US auto tariff move: report

  • Trump threatened to impose 20 percent tariff
  • Shares in carmakers slip on trade war fears

PARIS: The European Union will respond to any US move to raise tariffs on cars made in the bloc, a senior European Commission official said, the latest comments in an escalating trade row.
US President Donald Trump on Friday threatened to impose a 20 percent tariff on all imports of EU-assembled cars, a month after his administration launched an investigation into whether auto imports posed a national security threat.
“If they decide to raise their import tariffs, we’ll have no choice, again, but to react,” EU Commission Vice President Jyrki Katainen told French newspaper Le Monde.
“We don’t want to fight (over trade) in public via Twitter. We should end the escalation,” he said in the comments published on Saturday.
The European Autos Stocks Index fell on Friday after Trump’s tariff threat. Shares US carmakers Ford Motor Co. and General Motors Co. also dropped.
“If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the US Build them here!” Trump tweeted.
The US Commerce Department has a deadline of February 2019 to investigate whether imports of automobiles and auto parts pose a risk to US national security.
US Commerce Secretary Wilbur Ross said on Thursday the department aimed to wrap up the probe by late July or August. The Commerce Department plans to hold two days of public comments in July on its investigation of auto imports.
Trump has repeatedly singled out German auto imports to the United States for criticism.
Trump told carmakers at a meeting in the White House on May 11 that he was planning to impose tariffs of 20 or 25 percent on some imported vehicles and sharply criticized Germany’s automotive trade surplus with the United States.
The United States currently imposes a 2.5 percent tariff on imported passenger cars from the EU and a 25 percent tariff on imported pickup trucks. The EU imposes a 10 percent tariff on imported US cars.
The tariff proposal has drawn sharp condemnation from Republican lawmakers and business groups. A group representing major US and foreign automakers has said it is “confident that vehicle imports do not pose a national security risk.”
The US Chamber of Commerce said US auto production had doubled over the past decade, and said tariffs “would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.”
German automakers Volkswagen AG, Daimler AG and BMW AG build vehicles at plants in the United States. BMW is one of South Carolina’s largest employers, with more than 9,000 workers in the state.
The United States in 2017 accounted for about 15 percent of worldwide Mercedes-Benz and BMW brand sales. It accounts for 5 percent of Volkswagen’s VW brand sales and 12 percent of its Audi brand sales.