Saudi Arabia most improved economy for business

IMD’s chief economist noted the efficiency of public-sector finance and the stability of Saudi Arabia’s tax regime as factors in the improved ranking. (Reuters)
Updated 29 May 2019

Saudi Arabia most improved economy for business

  • The Kingdom rose 13 places in the latest edition of IMD’s annual survey, jumping to 26th in the world
  • IMD’s Christos Cabolis: Saudi Arabia spends 8.8 percent of its gross domestic product on education, against a global average of 4.6 percent

DUBAI: Business competitiveness in Saudi Arabia has improved more than any other country in the world, according to a new survey by Switzerland-based business school and think tank the International Institute for Management Development (IMD).
The Kingdom rose 13 places in the latest edition of the annual survey, jumping to 26th in the world. IMD highlighted Saudi investment in education, where the country achieved the highest ranking in the world, as well as the quality of public and business finance, as factors behind the improvement.
Christos Cabolis, chief economist and head of operations at IMD’s World Competitiveness Center, said the Kingdom invested nearly double the global average on education. “Saudi Arabia spends 8.8 percent of its gross domestic product on education, against a global average of 4.6 percent.”
He also noted the efficiency of public-sector finance and the stability of Saudi Arabia’s tax regime as factors in the improved ranking. “The message is to keep up the good reforms and attempt to be more transparent.”
The UAE was the highest-ranked regional performer in the survey, becoming the first Middle East country to break into the top five, with particular praise for its business efficiency.
Cabolis said that the improvement for both Saudi Arabia and the UAE came despite challenges in the economic performance of their oil-dominated economies. But non-oil exporters in the Middle East, such as Turkey and Jordan, suffered because of inflationary and other fiscal challenges.
Singapore emerged as the most competitive economy in the world, replacing the third-placed US, last year’s top economy. Hong Kong was ranked second.
“Singapore’s rise to the top was driven by its advanced technological infrastructure, the availability of skilled labor, favorable immigration laws, and efficient ways to set up new businesses. Hong Kong SAR held on to second place, helped by a benign tax and business environment and access to business finance,” IMD said.
“The initial boost to confidence from President Donald Trump’s first wave of tax policies appears to have faded in the US, according to the ranking. While still setting the pace globally for levels of infrastructure and economic performance, the competitiveness of the world’s biggest economy was hit by higher fuel prices, weaker hi-tech exports and fluctuations in the value of the dollar,” it added.
Ireland rose five places to rank 7th, while the UK — partly as a result of Brexit uncertainty — slipped to 23rd. In Saudi Arabia, Cabolis said that the strategy of economic diversification under the Vision 2030 plan was “slow but noticeable” and had contributed to the Kingdom’s rise.
However, the Kingdom performed comparatively poorly in some categories, notably international trade, technology and infrastructure, health and environment.
Challenges remain for Saudi competitiveness, IMD said. Policymakers have to continue government efforts to boost the non-oil economy, as well as to increase employment opportunities for young Saudi men and women under the human capability development program.
They should also continue reforms to restructure and streamline procedures and fees for licensing activities, and increase efforts to attract foreign direct investment.
“Economists regard competitiveness as vital for the long-term health of a country’s economy as it empowers businesses to achieve sustainable growth, generate jobs and, ultimately, enhance the welfare of citizens,” IMD said.


Microsoft shares fall 4% after warning of coronavirus hit to supply chain

Updated 28 February 2020

Microsoft shares fall 4% after warning of coronavirus hit to supply chain

  • Drop in share price wiped off nearly $50 billion from the Microsoft’s market value
  • Apple was the first big technology firm to come out and say the virus was affecting its production and demand in China

NEW YORK: Shares of Microsoft Corp. fell more than 4 percent on Thursday after the company warned of weakness in PC business due to a hit to its supply chain from the coronavirus outbreak, echoing similar statements from Apple Inc. and HP.

The drop in share price wiped off nearly $50 billion from the Microsoft’s market value on a day when broader markets were down more than 2 percent.

The virus has so far infected about 80,000 people, killed nearly 2,800 and spread to 44 countries, after originating in the central Chinese city of Wuhan late last year.

Apple was the first big technology firm to come out and say the virus was affecting its production and demand in China. PayPal Holdings Inc. and Mastercard Inc. have also warned about a possible hit.

Microsoft said on Wednesday its supply chain was returning to normal operations at a slower pace than anticipated and its Windows and Surface computers had been more negatively impacted than expected.

“Finished good inventory levels matter. If Microsoft had not fully assembled and packaged Surface units in the channel, then the impact would be felt faster and more severely,” Morningstar analyst Dan Romanoff said in a mail.

The global stock markets have also taken a hit as investors grew cautious of the impact of the virus on global supply chains. The Dow Jones Industrials index dropped more than 400 points at the open on Thursday.

Several Wall Street analysts expect other technology companies with heavy presence in China to soon come out with their own statements.

“Given there seems to be weakness in the PC supply chain, it would seem highly likely to me that we hear something from Intel,” Atlantic Equities analyst James Cordwell said in a mail.

Andrew MacMillen, an analyst with Nucleus Research, said that PC makers such as Dell Technologies Inc. and Lenovo Group could be seeing some difficulties.

Dell, the world’s third-biggest PC maker after Lenovo Group and HP, will report quarterly earnings after market close on Thursday. It has a sizeable exposure to China.

Microsoft said on Wednesday it would miss its own third quarter revenue forecast for the PC unit, which houses Windows, of $10.75 billion and $11.15 billion. 

J.P.Morgan analysts said that Microsoft’s guidance is a supply chain issue, not a demand issue, but it was possible that broad supply chain issues plus investors becoming increasingly averse to risk could metastasize into demand issues over time.