Kingdom scores high on prices and tax efficiency, IMD survey finds

The Kingdom was ranked highly for its consumer price inflation policy and exchange rate management. (AFP)
Updated 23 May 2018
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Kingdom scores high on prices and tax efficiency, IMD survey finds

  • Kingdom ranks second in the world for pricing of goods and services, according to IMD survey.
  • Kingdom slips three places to 39th position out of 63 countries assessed.

DUBAI: Competitive pricing and an efficient tax regime are two big highlights of the Saudi Arabian economy according to the annual ranking of global competitiveness by the Swiss business school IMD.
The Kingdom ranks second in the world for pricing of goods and services, and seventh for the efficiency of the government’s tax regime, according to the IMD’s World Competitiveness Ranking 2018.
But despite improvements in some areas of the economy, Saudi Arabia slipped three places in the global rankings, to 39th position out of 63 countries assessed.
IMD said that most countries in the Middle East overcame political tensions in the region to experience improvements in their competitiveness. The UAE was the top ranked, in 7th position, mainly due to strengthening of its international trade.
In a survey of executive opinion which accompanied the rankings, large proportions of respondents identified Saudi Arabia’s cost of competitiveness (53.7 percent), the dynamism of its economy (52.4 percent) and its competitive tax regime (45.1 percent) as key reasons for the attractiveness of the economy.
The Kingdom was ranked highly for its consumer price inflation policy and exchange rate management, and for its efficiency in assessing and collecting consumer and other taxes. Expenditure on education was also highly rated.
However, IMD also identified five key challenges in the current year to enhance overall competitiveness: Balancing the budget deficit and mitigating exposure to oil price fluctuations; developing legal and regulatory frameworks to support privatization and the development of strategic sectors in the Vision 2030 strategy.
It also stressed the need to develop human capital and increase workforce participation for men and women; continue the changes to the fees structure for business startups; and the need to adopt international best practice for licensing activities.
The US was the highest ranked country in the survey, now in its 30th year, overtaking Hong Kong in the top slot. Singapore, the Netherlands and Switzerland made up the rest of the top five countries.
The return of the US to the top slot was driven by its strength in economic performance and infrastructure, which were both ranked No. 1 in the world. Nordic countries and Canada comprised the rest of the top ten, along with the UAE.
Two big risers in the 2018 rankings are Austria (18th, up seven places) and China (13th, up five places).
Professor Arturo Bris, director of the Geneva-based World Competitiveness Center, said: “This year’s results reinforce a crucial trait of the competitiveness landscape. Countries undertake different paths toward competitiveness transformation. Countries at the top of the rankings share an above average performance across all competitiveness factors, but their competitiveness mix varies. One economy, for example, may build its competitiveness strategy around a particular aspect such as its tangible and intangible infrastructure; another may approach competitiveness through their governmental efficiency.”
The bottom five economies show a slight change in their performance, especially those countries that have experienced economic and political distress in the past few years. While Mongolia (62) and Venezuela (63) remained in the last positions, Ukraine (59) and Brazil (60) improved.
Brazil’s improvement is the first since 2010 due to a positive shift in real GDP and employment. Ukraine increased because of its business efficiency. Their rise pushed Croatia down two places to 61, IMD said.


Oil up on OPEC uncertainty regarding production levels

Updated 22 June 2018
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Oil up on OPEC uncertainty regarding production levels

  • Saudi Arabia and Russia are in favor of raising output. Other OPEC-members including Iran have opposed this, resulting in a flurry of backdoor diplomacy ahead of the meeting
  • Phillip Futures said in a note that it expected “an approximate 300,000–600,000 barrels per day (bpd) hike by Saudi Arabia and Russia collectively”

SINGAPORE: Oil prices rose by around 1 percent on Friday, lifted by uncertainty over whether OPEC would manage to agree a production increase at a meeting in Vienna later in the day.
Brent crude oil futures were at $73.78 per barrel at 0502 GMT, up 73 cents, or 1 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $66.26 a barrel, up 72 cents, or 1.1 percent.
The Organization of the Petroleum Exporting Countries (OPEC), a producer group with top exporter Saudi Arabia as the de facto head, is meeting together with non-OPEC members including No.1 producer Russia at its headquarters in the Austrian capital to discuss output policy.
The group started withholding supply in 2017 to prop up prices. This year, amid strong demand, the market has tightened significantly, pushing up crude prices and triggering calls by consumers to increase supplies.
Saudi Arabia and Russia are in favor of raising output. Other OPEC-members including Iran have opposed this, resulting in a flurry of backdoor diplomacy ahead of the meeting.
“The actual decision by OPEC and its partners — which may not actually become apparent until Saturday — is the big one traders are watching,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Phillip Futures, another brokerage, said in a note that it expected “an approximate 300,000–600,000 barrels per day (bpd) hike by Saudi Arabia and Russia collectively.”
US investment bank Jefferies said an increase in “the range of 450-750,000 bpd seems the most likely outcome” of the meeting, driven largely by Russia and Gulf OPEC members Saudi Arabia, the United Arab Emirates and Kuwait.
Jefferies said these increases “would essentially offset Venezuelan declines and falling Iranian exports,” but the bank warned that global “spare capacity could fall globally to around 2 percent of demand – its lowest level since at least 1984.”
That would leave markets prone to supply shortages and price spikes in case of large, unforeseen disruptions.
The other big uncertainty is potential Chinese tariffs on US crude imports that Beijing may impose in an escalating trade dispute between the United States on one side and China, the European Union and India on the other.
Asian shares hit a six-month low on Friday as tariffs and the US-China trade battle start taking their economic toll.
Should the 25 percent duty on US crude imports be implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere.
Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.
“If China’s import demand dries up, more than 300,000 bpd of US crude will have to find a new destination,” energy consultancy FGE said.
“This will certainly depress US Gulf Coast prices,” it said.