Brighter Saudi economic outlook boosted by reforms, says IMF

A number of big infrastructure projects such as Jeddah’s new $7.2 billion King Abdulaziz International Airport are expected to bolster economic expansion. (Instagram)
Updated 23 May 2018

Brighter Saudi economic outlook boosted by reforms, says IMF

  • An IMF team reported that growth was expected to pick up this year and over the medium-term “as reforms take hold.” 
  • Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan: The statement “confirms the progress made by the Kingdom’s government in implementing economic and structural reforms.”

LONDON: Saudi Arabia’s “ambitious” reform program is set to accelerate the Kingdom’s economic growth this year, according to the International Monetary Fund (IMF).
Following discussions with Saudi officials, an IMF team led by Tim Callen reported that growth was expected to pick up this year and over the medium-term “as reforms take hold.” 

It added: “The primary challenges for the government are to sustain the implementation of reforms, achieve the fiscal targets it has set, and resist the temptation to re-expand government spending in line with higher oil prices.”

The report said considerable progress was being made to improve the business climate. Recent efforts had focused on the legal system and business licensing and regulation. The public procurement law that is being updated had a key role to play in strengthening anti-corruption policies, said the IMF.
Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan said that the statement “confirms the progress made by the Kingdom’s government in implementing economic and structural reforms.”
Jean Michel Saliba, Middle East economist at Bank of America Merrill Lynch, expressed some concern that higher oil prices could encourage the government to take its foot off the fiscal prudence accelerator.

 

He said: “The IMF report is in line with our views that, while oil prices allow the Saudi government to support a pick-up in economic activity while minimizing the impact on fiscal balances, the key risk that higher oil prices bring is that medium-term (spending targets) are not adhered to.”
However, the IMF identified several encouraging KSA initiatives. The introduction of value-added tax was said to be a “milestone achievement” in strengthening the tax culture and tax administration of the country. Energy price reforms and the introduction of citizens’ accounts to compensate the less well-off for higher energy/VAT costs were also welcomed.
The IMF said that the Kingdom’s privatization and public and private partnership program, recently approved, should be accelerated.
It said: “A balance is needed between pursuing financial development and inclusion and financial stability. Increased finance for smaller businesses, more developed debt markets and improved financial access especially for women as envisaged under the Financial Sector Development Program will support growth and equality.”
Targeting a balanced budget in 2023 was lauded as being “appropriate,” and the Saudi government was advised to focus on delivering on this objective. “Limiting the growth of government spending would be necessary to achieve fiscal targets,” said the IMF.
Reforms to strengthen the budget process and the fiscal framework, increase fiscal transparency, and develop macro-fiscal analysis were said to be making good progress.
But broadening the coverage of fiscal data beyond the central government would ensure a more complete assessment of the government’s impact on the economy.
“While the public sector can be a catalyst for the development of some new sectors, it is important that it does not crowd out private sector involvement, nor remain a long-term player in markets where private enterprises can thrive on their own,” the IMF said.

More needs to be done to ensure that an accurate and timely assessment of economic developments is possible.

IMF

The IMF recommended that government policies should focus on sending clear signals about the limited prospects for public employment, easing restrictions on expatriate worker mobility, further strengthening education/training, and continuing to support increased female participation. While progress had been made in increasing data availability, “more needs to be done to ensure that an accurate and timely assessment of economic developments is possible.” 

Earlier this month, the ministry of finance published first quarter fiscal indicators that showed the Kingdom — which is making concerted efforts to diversify its oil-reliant economy — has projected a deficit of SR195 billion ($52 billion), or 7.3 percent of gross domestic product (GDP), this year, down from SR230 billion last year. It plans to balance the budget by 2023.
First-quarter revenues reached SR166.3 billion, up 15 percent from the same period last year, the ministry said in a statement.
Non-oil revenues jumped 63 percent to SR52.3 billion, partly due to a 5 percent value-added tax (VAT) that the government introduced in January.
Oil revenues rose 2 percent but the low figure was a result of a change in the way dividends are distributed and a stronger number is expected in the second quarter.
The IMF expects Saudi economic growth to hit 1.7 percent in 2018 after falling into negative territory last year.
A number of big-ticket infrastructure projects such as Jeddah’s new $7.2 billion King Abdulaziz International Airport are expected to bolster economic expansion.
In global energy markets, with crude trading at close to $80 per barrel, leading investment banks have forecast prices could go higher.
Supplies are being squeezed by the collapse of production from OPEC member Venezuela as well as worries about Iranian supplies following President Donald Trump’s decision to reimpose sanctions on Iran.

FASTFACTS

The IMF expects Saudi economic growth to hit 1.7 percent in 2018 after falling into negative territory last year.


Egypt’s creative solutions to the plastic menace

Updated 24 August 2019

Egypt’s creative solutions to the plastic menace

  • Egyptian social startups are taking alternative approaches to fostering awareness and reducing waste
  • While initiatives around the world are taking action to combat this problem, some Egyptian projects are doing it more creatively

CAIRO: Global plastics production reached 348 million tons in 2017, rising from 335 million tons in 2016, according to Plastics Europe. 

Critically, most plastic waste is not properly managed: Around 55 percent of it was landfilled or discarded in 2015. These numbers are extremely concerning because plastic products take anything from 450 to 1,000 years to decompose, and the effects on the environment, especially on marine and human life, are catastrophic.

While initiatives around the world are taking action to combat this problem, some Egyptian projects are doing it more creatively.

“We’re the first website in the Middle East and North Africa that trades waste,” said Alaa Afifi, founder and CEO of Bekia. “People can get rid of any waste at their disposal — plastic, paper and cooking oil — and exchange it for over 65 products on our website.”

Products for trading include rice, tea, pasta, cooking oil, subway tickets and school supplies.

Bekia was launched in Cairo in 2017. Initially, the business model did not prove successful.

“We used to rent a car and go to certain locations every 40 days to collect waste from people,” Afifi, 26, explained. “We then created a website and started encouraging people to use it.”

After the website was launched, people could wait at home for someone to collect the waste. “Instead of 40 days, we now could visit people within a week.”

To use Bekia’s services, people need to log onto the website and specify what they want to discard. They are assigned points based on the waste they are offering, and these points can be used in one of three ways: Donated to people in need, saved for later, or exchanged for products. As for the collected waste, it is given to specialized recycling companies for processing.

“We want to have 50,000 customers over the next two years who regularly use our service to get rid of their waste,” Afifi said.  

Trying to spread environmental awareness has not been easy. “We had a lot of trouble with initial investment at first, and we got through with an investment that was far from enough. The second problem we faced was spreading this culture among people — in the first couple of months, we received no orders,” Afifi said.

The team soldiered on and slowly built a client base, currently serving 7,000 customers. In terms of what lies ahead for Bekia, he said: “We’re expanding from 22 to 30 areas in Cairo this year. We’re launching an app very soon and a new website with better features.”

Go Clean, another Egyptian recycling startup dedicated to raising environmental awareness, works under the patronage of the Ministry of Environment. “We started in 2017 by recycling waste from factories, and then by February 2019 we started expanding,” said founder and CEO Mohammed Hamdy, 30.

The Cairo-based company collects recyclables from virtually all places, including households, schools, universities, restaurants, cafes, companies and embassies. The customers separate the items into categories and then fill out a registration form. Alternatively, they can make contact through WhatsApp or Facebook. A driver is then dispatched to collect the waste, carrying a scale to weigh it. 

“The client can be paid in cash for the weight of their recyclables, or they can make a donation to a special needs school in Cairo,” Hamdy explained. There is also the option of trading the waste for dishwashing soap, with more household products to be added in the future.

Trying to cover a country with 100 million people was never going to be easy, and Go Clean faced some logistical problems. It overcame them by hiring more drivers and getting more trucks. There was another challenge along the way: “We had to figure out a way to train the drivers, from showing them how to use GPS and deal with clients,” said Hamdy.

“We want to spread awareness about the environment everywhere. We go to schools, universities, companies and even factories to give sessions about the importance of recycling and how dangerous plastic is. We’re currently covering 20 locations across Cairo and all of Alexandria. We want to cover all of Egypt in the future,” he added.

With a new app on the way, Hamdy said things are looking positive for the social startup, and people are becoming invested in the initiative. “We started out with seven orders per day, and now we get over 100.”