JEDDAH, 25 April 2005 — With Saudi Arabia getting closer to joining the World Trade Organization following the latest report on the near finalization of a bilateral agreement on tariffs with the United States, economists are weighing in on the short and long-term effects on the various sectors. Although there are still other points that need to be worked out especially in services, Saudi Arabia has made progress in reforming its financial sector, opening the insurance market for foreign investment, reviewing its copyright laws and pushing for privatization thus paving the way for its accession to the organization.
Saudi economists despite being optimistic about the positive effects of joining the WTO on expanding the investment market and opportunities, improving the quality of services and products due to increased competition and on developing the infrastructure and technology in the country, they remain apprehensive about some expected negative outcomes. For example, some worry that joining the WTO will increase public debt, increase unemployment and lead to inflation and product saturation.
“These are our main challenges because of developed countries’ expertise and capacity compared to developing countries,” said Dr. Fahd Al-Etani in a lecture he gave recently at the Council of Saudi Chambers. He cautioned against local sectors and industries not being prepared for the competition in terms of having a competitive advantage. “Multinational companies and international companies will affect small and medium businesses that still work in a traditional way,” he said. He expects that food products’ prices will increase by 20 percent annually due to the gradual elimination of the European governments’ support and an increase in the prices of industrial products because of the WTO law of no preferential terms between countries. What the government needs to do until Saudi Arabia joins the WTO is to restructure administrative procedures and educate the workers in each sector to improve the quality of service as well as activate regional coalitions to add to their competitive strength and negotiation leverage, recommended Al-Etani.
As for the chambers of commerce, he said they should create information centers on WTO for the businessmen, conduct research studies on the market and organize more lectures and workshops for the businessmen on how to cope and compete.
As for Dr. Mohammed Al-Qahtani, he cautioned against inflation caused by an increase in investors and the lack of enough development projects, according to Al-Hayat newspaper. He also warned against the effect of joining WTO on family businesses which he said should try to become public. Another sector he expects to be affected is the agricultural because it is supported by the government and he recommends that this sector try to be more self-sufficient and to improve using our natural resources.
During last week’s Capital Market Forum in Riyadh there was a discussion on the effect of joining the WTO on the Saudi stock market. Dr. Fahd Al-Mubarak, president of Malaz Investment and Financing Consultation Center, said that joining the WTO will not force us to implement new laws for the stock market but it will contribute to pushing Saudi Arabian Monetary Agency (SAMA) to create tools that will improve the market’s performance and raise its standards.
Abdulhadi A. Shayif, general manager of National Commercial Bank (NCB), on the other hand said that during the next few years there would be substantial changes in the financial sector especially concerning employees and bank products.