With spending boost, budget gives Saudi reforms new impetus

King Salman during a cabinet meeting to announce the 2019 budget. (SPA)
Updated 20 December 2018
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With spending boost, budget gives Saudi reforms new impetus

  • King Salman says budget is the largest in the Kingdom’s history, aiming to support economic growth
  • The government aims to boost spending by about 7 percent in 2019

RIYADH: Saudi Arabia hopes a bumper budget unveiled on Tuesday will revive the economy, with record levels of government spending intended to spur growth.

The government aims to boost spending by about 7 percent in 2019, despite a continuing budget deficit — the shortfall in revenues compared to expenditure. 

King Salman said the budget was the largest in the Kingdom’s history, and one designed to achieve financial stability.

“We are determined to go ahead with economic reform, achieving fiscal discipline, improving transparency and empowering the private sector,” he said.

Crown Prince Mohammed bin Salman, who is behind the Vision 2030 program to reform the economy, said the government would continue to “diversify the sources of income and consolidate fiscal sustainability through boosting non-oil revenues.” 

Non-oil revenues increased to $77 billion this year and are estimated to reach $83.5 billion — or around one third of total revenues. 

Minister of Finance Mohammed Al-Jadaan said the budget announcement, along with a speech by King Salman pledging to continue paying allowances to citizens, marked a “historic day” for the Kingdom.




Finance Minister Mohammed Al-Jadaan said the budget marked a historic day for the Kingdom. (Ziyad Alarfaj/Arab News)

Government spending is projected to rise to 1.106 trillion riyals ($295 billion) next year, up from an actual 1.030 trillion riyals this year, Al-Jadaan said at a briefing in Riyadh. 

The budget estimates a 9 percent annual increase in revenues to 975 billion riyals, mostly from oil. The deficit is forecast at 131 billion riyals for next year, a decline on 2018.

Saudi Arabia has been working to diversify its economy away from oil, by promoting the private sector, as well as increasing the prices of fuel and energy and imposing a value-added tax. 

Government coffers have also been given a boost by Saudi Arabia’s clampdown on corruption late last year, in which scores of top officials and business executives were detained at the Ritz-Carlton hotel in Riyadh. 

Al-Jadaan said the government had collected about 50 billion riyals this year in settlements, and he expected collections to continue next year. 

Investigators said this year they aimed to seize about $100 billion overall.

The minister said Saudi Arabia was working to fulfil payments owed by the government to private contractors. “The government is seeking to settle any dispute with the private sector with regard to the due payments,” he said.

Saudi Arabia, long reliant on oil revenues, has suffered a budget deficit every year since 2014, when a slump in energy prices lowered state income. 

Its 2019 budget announcement came as world oil prices tumbled to new one-year lows, amid concerns over demand.


South Korea downgrades Japan trade status as dispute deepens

Updated 18 September 2019

South Korea downgrades Japan trade status as dispute deepens

  • The change comes a week after South Korea initiated a complaint to the World Trade Organization
  • The new measures in effect mean it might take up to 15 days for South Korean companies to gain approvals to export sensitive materials to Japan

SEOUL, South Korea: South Korea on Wednesday dropped Japan from a list of countries receiving fast-track approvals in trade, a reaction to Tokyo’s decision to downgrade Seoul’s trade status amid a tense diplomatic dispute.
South Korea’ trade ministry said Japan’s removal from a 29-member “white list” of nations enjoying minimum trade restrictions went into effect as Seoul rearranged its export control system covering hundreds of sensitive materials that can be used for both civilian and military purposes.
The change comes a week after South Korea initiated a complaint to the World Trade Organization over a separate Japanese move to tighten export controls on key chemicals South Korean companies use to manufacture semiconductors and displays.
Seoul has accused Tokyo of weaponizing trade to retaliate against South Korean court rulings ordering Japanese companies to offer reparations to South Koreans forced into labor during World War II. Tokyo’s measures struck a nerve in South Korea, where many still resent Japan’s brutal colonial rule from 1910 to 1945.
According to South Korean trade ministry, the new measures in effect mean it might take up to 15 days for South Korean companies to gain approvals to export sensitive materials to Japan, compared to the five days or less it took under a simpler inspection process provided for favored trade partners.
Lee Ho-hyeon, a South Korean trade ministry official, said the change would affect about 100 local firms that export items such as telecommunications security equipment, semiconductor materials and chemical products to Japan. He said Seoul will work to minimize disruption to South Korean companies.
Japan for decades has enjoyed a huge trade surplus with South Korea, an economy that’s much more dependent on exports. Many major manufacturers heavily rely on parts and materials imported from Japan.
But the dispute is taking a toll. Exports to South Korea from Japan fell 9.4% last month, Japan’s Finance Ministry reported Wednesday.
The trade dispute between the neighbors erupted in July, when Japan imposed tighter export controls on three chemicals South Korean companies use to produce semiconductors and displays for smartphones and TVs, major export items for South Korea. It cited unspecified security concerns over Seoul’s export controls.
A few weeks later, Japan dropped South Korea from its own trade “white list,” triggered a full-blown diplomatic dispute that took relations between the US allies to their worst in decades.
The dispute has spilled over to security issues, with Seoul declaring it plans to terminate a bilateral military intelligence-sharing pact with Japan that symbolized the countries’ three-way security cooperation with the United States in the face of North Korea’s nuclear threat and China’s growing influence.
Following an angry reaction from Washington, Seoul later said it could reconsider its decision to end the military agreement, which remains in effect until November, if Japan relists South Korea as a favored trade partner.
Seoul announced its plans to downgrade Tokyo’s trade status in August before holding a 20-day period to gather opinions on the decision, during which the Japanese government voiced opposition to the move it described as “arbitrary and retaliatory,” Lee said.
He said Seoul needs to strengthen controls on shipments to a country that’s “hard to cooperate with” and fails to uphold “basic international principles” while managing export controls on sensitive materials.
South Korea previously divided its trade partners into two groups in managing export controls on sensitive materials. Following Wednesday’s change, South Korea now has an in-between bracket where it placed only Japan, which would mostly receive the same treatment in trade as the non-favored nations in what had been the second group.