Saudi Arabia’s non-oil sector set for boost as economic reforms take off

Saudi Arabia is looking to reduce its reliance on the energy industry and boost private sector business. (Shutterstock)
Updated 14 May 2019
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Saudi Arabia’s non-oil sector set for boost as economic reforms take off

  • Under the ambitious Vision 2030 plan, the country is looking to reduce its reliance on oil
  • Such reforms are paying off, with growth in the Kingdom’s non-oil sector set for an additional “pick up”

LONDON: Saudi Arabia’s non-oil sector is set for a further boost as the Kingdom’s economic reforms pay dividends and work begins on a raft of mega-projects, a report published Sunday found.
Under the ambitious Vision 2030 plan, the country is looking to reduce its reliance on the energy industry and boost private sector business.
Such reforms are paying off, with growth in the Kingdom’s non-oil sector set for an additional “pick up” going forward, according to a report by Bank of America Merrill Lynch.
“Authorities’ ongoing fiscal reforms and possible one-off revenues are keeping non-oil revenues on track,” wrote the bank’s regional economist Jean-Michel Saliba.
Saliba said the $69 billion deal in which oil giant Saudi Aramco plans to acquire petrochemicals firm SABIC from the Public Investment Fund (PIF), could further boost the non-oil sector.
“The likely ramp-up in budget expenditures and, in particular, off-budget capital spending after the completion of the SABIC-Aramco-PIF deal, suggest non-oil activity is likely to pick up going forward,” he wrote.

FASTFACT

2.1%

Growth in Saudi Arabia’s average non-oil GDP last year, compared with 1.3 percent in 2017.

The completion of the SABIC deal and the subsequent financial boost for PIF, Saudi Arabia’s sovereign wealth fund, could help kickstart many of the Kingdom’s planned mega-projects, the report added.
That could boost growth in non-oil GDP by 2 percentage points “in the medium term” — which would be almost double the 2.1 percent rate at which non-oil GDP grew in 2018.
“The possible finalization of the Saudi Aramco-SABIC-PIF deal could unlock $69.1 billion of financing to the PIF. This could support a first phase of mega-projects. Authorities suggest the transaction would close in 2020, implying the growth impact of PIF’s off-budget capital spending could start to be felt next year,” Saliba wrote.
Saudi Arabia achieved its first budget surplus since 2014 in the first quarter of 2019, at about $7.41 billion, the country’s minister of finance said in late April.
The Bank of America Merrill Lynch said non-oil revenues stood at SR76 billion ($20.3 billion) in the first quarter of 2019, a 46 percent rise on the year-ago period.
But it cautioned that Saudi Arabia’s fiscal surplus is “unlikely to last” later in the year.
“We expect the budgetary outcomes to deteriorate going forward, following the surprising (first quarter) fiscal surplus,” Saliba wrote.
That surplus was attributed by Saliba to an increase in special dividends paid by Saudi Aramco to the government, along with seasonality and control of spending.
Government spending during the first quarter was also “unsustainably low,” the bank added, another factor in the surplus.
“Spending is likely to increase in coming quarters, particularly given the seasonally low spending figures in the first quarters of the year,” Saliba wrote.

FASTFACTS

2.1%

Growth in Saudi Arabia’s average non-oil GDP last year, compared with 1.3 percent in 2017.


Amazon workers strike as ‘Prime’ shopping frenzy hits

Updated 16 July 2019
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Amazon workers strike as ‘Prime’ shopping frenzy hits

  • The protesters waves signs with messages along the lines of “We’re human, not robots”
  • The strike was part of an ongoing effort to pressure the company on issues including job safety, equal opportunity in the workplace, and concrete action on issues including climate change

SAN FRANCISCO: Amazon workers walked out of a main distribution center in Minnesota on Monday, protesting for improved working conditions during the e-commerce titan’s major “Prime” shopping event.
Amazon workers picketed outside the facility, briefly delaying a few trucks and waving signs with messages along the lines of “We’re human, not robots.”
“We know Prime Day is a big day for Amazon, so we hope this strike will help executives understand how serious we are about wanting real change that will uplift the workers in Amazon’s warehouses,” striker Safiyo Mohamed said in a release.
“We create a lot of wealth for Amazon, but they aren’t treating us with the respect and dignity that we deserve.”
Organizers did not disclose the number of strikers, who said employees picketed for about an hour in intense heat before cutting the protest short due to the onset of heavy rain.
The strike was part of an ongoing effort to pressure the company on issues including job safety, equal opportunity in the workplace, and concrete action on issues including climate change, according to community organization Awood Center.
US Democratic presidential contenders Kamila Harris and Bernie Sanders were among those who expressed support for the strikers on Twitter.
“I stand in solidarity with the courageous Amazon workers engaging in a work stoppage against unconscionable working conditions in their warehouses,” Sanders said in a tweet.
“It is not too much to ask that a company owned by the wealthiest person in the world treat its workers with dignity and respect.”
Amazon employees also went on strike at seven locations in Germany, demanding better wages as the US online retail giant launched its two-day global shopping discount extravaganza called Prime Day.
Amazon had said in advance that the strike would not affect deliveries to customers.
Amazon has consistently defended work conditions, contending it is a leader when it comes to paying workers at least $15 hourly and providing benefits.
The company last week announced plans to offer job training to around one-third of its US workforce to help them gain skills to adapt to new technologies.
Amazon has been hustling to offer one-day deliver on a wider array of products as a perk for paying $119 annually to be a member of its “Prime” service, which includes streaming films and television shows.
The work action came on the opening day of a major “Prime” shopping event started in 2015.
Now in 17 countries, the event will span Monday and Tuesday, highlighted by a pre-recorded Taylor Swift video concert and promotions across a range of products and services from the e-commerce leader.
Prime Day sales for Amazon are expected to hit $5 billion this year, up from $3.2 billion in 2018, which at the time represented its biggest ever global shopping event, JP Morgan analyst Doug Anmuth says in a research note.