Saudi Arabia scores high on prices and tax efficiency: IMD survey

The Kingdom was ranked highly for its consumer price inflation policy and exchange rate management. (AFP)
Updated 24 May 2018
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Saudi Arabia scores high on prices and tax efficiency: IMD survey

  • The Kingdom ranks second in the world for pricing of goods and service
  • IMD said that most countries in the Middle East overcame political tensions in the region to experience improvements in their competitiveness

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 number one 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 last 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.


Saudi stocks receive landmark emerging markets upgrade from MSCI

Updated 3 min 39 sec ago
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Saudi stocks receive landmark emerging markets upgrade from MSCI

  • Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months
  • MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds

LONDON: Saudi Arabian equites are poised to attract up to $40 billion worth of foreign inflows, following a landmark decision by index provider MSCI’s to include the Kingdom’s stocks in its widely tracked Emerging Markets index.

"MSCI will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index, representing on a pro forma basis a weight of approximately 2.6% of the index with 32 securities, following a two-step inclusion process," the MSCI said in a statement late on Wednesday night Riyadh time.

“Saudi Arabia’s inclusion in MSCI’s EM Index is a milestone achievement and will likely bring with it significant levels of foreign investment,” Salah Shamma, head Of investment for MENA at Franklin Templeton Emerging Markets Equity, told Arab News. 

“It is a recognition of the progress Saudi Arabia has made in implementing its ambitious capital markets transformation agenda. The halo effect of such a move will be felt across the stock exchanges of the entire Gulf Cooperation Council (GCC).”

Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months to bring local capital markets more in line with international norms, including lower restrictions on international investors, and the introduction of short-selling and T+2 settlement cycles.

Such reforms prompted index provider FTSE Russell to upgrade the Kingdom to emerging market status in March, opening the country’s stocks up to billions worth of passive and active inflows from foreign investors.

MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds. The inclusion of Saudi stocks in the index, alongside FTSE Russell’s upgrade, is forecast to attract as much as $45 billion of foreign inflows from passive and active investors, according to estimates from Egyptian investment bank EFG Hermes. 

The upgrade announcement was widely expected by the region’s investment community, following a similar emerging markets upgrade announcement by fellow index provider FTSE Russell in March. 

“MSCI index inclusion will be a historic milestone for the Saudi market as it will allow for sticky institutional money to make an entry in 2019 which will help deepen the market,” said John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh.