JEDDAH, 16 March 2008 — The Finance Ministry will hold an important meeting with at least 70 prominent traders this week to discuss measures to curb the rising prices of essential commodities, including those subsidized by the government. The meeting comes in the wake of complaints by Saudis and expatriates about increasing prices of rice, barley and baby milk despite the subsidies announced by Custodian of the Two Holy Mosques King Abdullah.

An informed source at the ministry said the total subsidies approved by the government would reach 15 to 25 percent of the national budget. The annual subsidy for barley alone would reach SR8.4 billion, he added. According to the source, most traders and importers were not submitting the original bills of imports when they applied for the payment of subsidies. "Submission of original bills is essential to prove the accuracy of prices and prevent foul play," he added.

The importers should submit the bill of purchase attested by the chamber in the country of origin and a payment voucher from one of the local banks to receive subsidy. They should also present a certificate attested by the port authority; bill of lading attested by an intermediary bank and original copies of import statements attested by the customs department.

Businessmen intending to import rice should inform the Ministry of Finance and the Ministry of Commerce and Industry and submit copies of the bill of payment from a local bank within 15 days, an official at the ministry said.

Saudi Arabia is the largest importer of rice in the Middle East. It imported a little under half of India's total rice exports of 1.01 million tons in 2006-2007, while the rest of West Asia imported 291,000 tons, according to data from India's Directorate General of Commercial Intelligence and Statistics.

According to the UN Food & Agriculture Organization (FAO), rice prices have risen 8.7 percent in the international market since the beginning of last year. Last week, rice prices rose to more than $500 per ton in world markets for the first time in 20 years, the FAO said. Major exporting countries such as India, Vietnam and Egypt restricted export of the crop in order to meet growing local demand.

Meanwhile, the unprecedented increase in barley prices reaching SR55 per bag resulted in rising prices of dairy and meat products across the country. It also created a flour crisis in the Kingdom for the first time in recent history as many farmers used flour to feed their cattle.

Faisal Balubaid, deputy general manager of Balubaid Trading Company, one of the major suppliers of rice in the Kingdom, denied suggestions that there was conflict between traders and the ministry. He highlighted the problems and challenges being faced by traders and importers. He said some exporters had increased prices of rice after hearing news of subsidies. "This has resulted in increasing prices even after subsidies," Asharq Al-Awsat quoted him as saying. He said prices of medium quality rice have increased from SR120 for a 45-kg bag to SR140, citing hikes in storage, packing, shipping and insurance charges.

Another trader said some of the ministry's conditions were harmful to the interests of traders and importers. He urged the ministry to release subsidies soon after the arrival of the consignment in order to distribute products at subsidized rates.

Ahmed Al-Sanie, general manager of United Fodder Company, also urged the ministry to expedite the payment of subsidies, adding that at present companies had to wait for three to six months to receive their payments. "This delay is eating our profits," he added.

In a recent statement, Finance Minister Dr. Ibrahim Al-Assaf said the government was spending about SR12 billion annually on direct subsidies. He estimated the additional annual spending at SR10 billion as a result of the payment of five percent inflation allowance and 10 percent additional allocation for social insurance. "Naturally this amount will increase further in the next two years as a result of the growth in the number of employees and their salaries," the Saudi Press Agency quoted the minister as saying.