American Chamber of Commerce: Why Biden will be business as usual for US-KSA economic ties

American Chamber of Commerce: Why Biden will be business as usual for US-KSA economic ties
U.S. flags fly with the U.S. Capitol in the distance on January 10, 2021. (Reuters)
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Updated 19 January 2021

American Chamber of Commerce: Why Biden will be business as usual for US-KSA economic ties

American Chamber of Commerce: Why Biden will be business as usual for US-KSA economic ties
  • New US leader may adopt more pragmatic approach, but trade relations will remain strong

JEDDAH: While some analysts are predicting a change in Saudi-US relations following Joe Biden’s inauguration on Wednesday, the new chairman of the American Chamber of Commerce (AmCham) in the Kingdom of Saudi Arabia said he believes the change in the White House will not have any significant impact on relations between the two allies.

“The US has been a partner of Saudi Arabia since the 1940s and I think that goes very deep. We think that the Biden administration and presidential election victory will usher in new foreign policy changes. That’s a given when there’s any change in administration and especially in party,” Tarik Solomon, chairman of AmChamKSA, told Arab News.

AmCham recently launched its first chamber in Saudi Arabia. It is part of the United States Chamber of Commerce umbrella that has hundreds of branches around the world. In the region, there are already branches in Dubai and Abu Dhabi, as well as in Egypt and Lebanon.

The US and Saudi Arabia enjoy a robust economic relationship. According to the US Department of State, the US is Saudi Arabia’s second-largest trading partner, while Saudi Arabia is one of the US’ largest trading partners in the Middle East and its third-leading source of imported oil.

Solomon said he expects a different communication style when it comes to the US-Saudi relationship going forward. “We will likely see a return to standard official communication procedures under Biden, rather than the decree by tweet policy of Trump,” he said.

However, the US-Saudi relationship is longstanding and is characterized by its pragmatism, Solomon said.

“Biden may request some concessions and will probably put stronger conditions on support. However, when you look at trade and investment, we’re committed to working tirelessly to elevate this relationship,” he added.

According to Solomon, AmCham’s aim is to strive for increased cooperation between the two countries in terms of trade and investment, to diversify the Saudi economy away from a dependence on hydrocarbons and to help raise the Kingdom’s profile in the US.

In 2019, Saudi Arabia was the US’ 27th-largest goods and service market, with a total value of $39 billion, focusing on military, energy, aluminum, fertilizers and petrochemicals.

“Those are extremely high figures when you look at, for example, military vehicles — that’s $2 billion on its own,” said Solomon. “There’s a lot of trade going on between the KSA and US and there’s a lot of room for growth.”

However, the chairman hopes to push more US companies into new sectors that have high potential and are pillars of the Saudi government’s Visions 2030 goals. Of the promising investment sectors in the Kingdom, Solomon highlighted manufacturing, tourism, entertainment, sports and technology.

“What we are looking at right now is the manufacturing sector. This is where work towards localizing renewable energy and industrial equipment is growing. We’re looking at sports, tourism and leisure,” said Solomon.

In addition to manufacturing, the technology sector is another promising industry with high potential, but Solomon said that there is a slight lag in US investment in technology and the digital economy, which he wants to push forward while it remains a greenfield space in the country, especially as the government increases investment in the sector.

Solomon highlighted the significance of Saudi Crown Prince Mohammed bin Salman’s visit to the US under the Trump Administration. “Crown Prince Mohammed bin Salman signed a significant amount of memorandums of understanding between the Saudi Arabian government and US entities, and some of those included Aramco and SABIC. We see this as an opening to new opportunities for US investment in a market that was traditionally heavily protected.”

Solomon believes that strategic dialogue in the trade and investment field will be the key to success and enhancing investment opportunities between the two countries.

“We need to remember what kind of a friend Saudi Arabia is and that they’ve always been there for us. We’ve always had a strong relationship,” he said. “Saudi Arabia has choices. Our goal is to be its first choice as a trusted partner.”


Weekly energy recap: March 5, 2021

Weekly energy recap: March 5, 2021
Updated 2 min 52 sec ago

Weekly energy recap: March 5, 2021

Weekly energy recap: March 5, 2021
  • Many market participants were expecting that OPEC+ would restore as much as 1.5 million barrels a day of output in April
  • Many analysts had not taken into account the fact that global oil inventories remain well above the five-year average

Oil prices have escalated to the highest levels since October 2018. The Brent crude price is shyly approaching the vital $70 per barrel mark and closed the week at $69.36 per barrel. WTI closed the week at $66.09 per barrel.

Though global oil markets had anticipated an output increase from OPEC+, claiming the market can absorb one to two million additional barrels per day (bpd), OPEC+ took the market by surprise when it decided to roll over its quota, given the still-fragile global oil demand recovery.

The move is not about OPEC+ protecting the current price levels that have exceeded the pre-pandemic levels, it is not about refusing to bring more oil production online, it is not about dismissing any concerns about inflation and market overheating. The current oil price levels are not at astronomical high levels to add inflationary pressure to the global economy as it emerges from the pandemic.

Many market participants were expecting that OPEC+ would restore as much as 1.5 million barrels a day of output in April. However, they were only looking at the tip of the iceberg, focusing on high fuel demand in India, depleting global inventories, the rollout of vaccine programs and the financial stimulus packages that helped to improve market sentiment.

Many analysts had not taken into account the fact that global oil inventories remain well above the five-year average. Or, most importantly, the upcoming spring refineries maintenance season in Asia during the second quarter will further dampen crude oil supply.

On top of that, there has been a massive drop in the US refinery utilization rate, which has seen oil inventories jump by 21.6 million barrels, the biggest weekly rise since records began in 1982.

All these bearish developments make oil demand recovery uncertain in the short-term. Despite the fact that oil prices have rallied by about 30 percent since the start of 2021, OPEC+ producers are working tirelessly to drain the glut that built up during the pandemic last year, one of the worst periods in the history of the industry.


Saudi entertainment shares jump on easing of restrictions

Saudi entertainment shares jump on easing of restrictions
Updated 29 min 46 sec ago

Saudi entertainment shares jump on easing of restrictions

Saudi entertainment shares jump on easing of restrictions
  • The stock gained 5 percent in early trade

DUBAI: Saudi entertainment and retail shares gained on Sunday after the government said it would end most coronavirus-related restrictions, including resuming indoor dining and reopening cinemas, entertainment activities and events.

The sector has been one of the worst affected by a year of restrictions which has forced restaurants, cinemas and other venues to close their doors.
Entertainment giant Abdul Mohsen Al Hokair Group for Tourism and Development said all of its entertainment venues and cinema joint ventures would re-open on Sunday.
However, it said that the suspension of party and meeting halls as well as some other hotel facilities would continue until notified otherwise by the government.
The stock gained 5 percent in early trade.
Saudis will also be allowed to exercise in gyms following the relaxation of restrictions. Leejam Sports Company said it would re-open all of its facilities from Sunday.
Its stock rose 3.5 percent.


Saudi Ground Services slashes costs after year of worldwide flight disruption

Saudi Ground Services slashes costs after year of worldwide flight disruption
Updated 20 min 36 sec ago

Saudi Ground Services slashes costs after year of worldwide flight disruption

Saudi Ground Services slashes costs after year of worldwide flight disruption
  • The company services 28 airports across the Kingdom and processed more than 690,000 flights a year before the pandemic

DUBAI: Saudi Ground Services said it had slashed operating costs as it posted a loss caused by the collapse in global air travel.

The company which services 28 airports across the Kingdom and processed more than 690,000 flights a year before the pandemic, reported a total comprehensive loss of SR446.7 million ($118.9 million) for last year, it said in a Tadawul stock exchange filing.

“Despite the challenges faced by the company in light of the pandemic, Saudi Ground Services has executed several initiatives aimed at increasing the efficiency of operation and thus reducing the impact of the pandemic on the company’s profitability,” it said in the statement.

Companies that specialize in baggage handling, cargo and other airport services have been among the hardest hit over the last year as global air travel collapsed. Swissport, the world’s largest provider of ground and cargo handling services in the aviation industry, has axed thousands of jobs in response to the crisis in aviation. Smaller operators such as Hong Kong-based Jardine Aviation have also cut jobs.

Despite the challenges faced by Saudi Ground Services over the last year, it said that it had executed several strategies aimed at boosting efficiency which limited what would otherwise have been a much bigger hit to its business.

As a result, it reduced operating costs by some SR581 million in the current year, it said.
“In addition to cost reduction initiatives, the company has taken certain initiatives such as the opportunity to increase sales by providing disinfection services for aircraft in addition to other services which also contributed to reducing the impact of the pandemic on the company’s profitability.” it said.


UAE’s first independent digital banking platform launches

UAE’s first independent digital banking platform launches
Updated 07 March 2021

UAE’s first independent digital banking platform launches

UAE’s first independent digital banking platform launches
  • Global leaders in digital banking, such as Revolut, one of the world’s fastest-growing apps, do not have a UAE presence

DUBAI: The first independent digital banking platform in the United Arab Emirates launched on Sunday, a neobank hoping to become a leader in the Middle East, Africa and South Asia.

Dubai-based YAP does not have a banking licence itself but has partnered with RAK Bank which provides international bank account numbers for YAP users and secures their funds under its own banking licence.

YAP, like other neobanks which do not have physical branches, does not offer traditional banking services like loans and mortgages, but offers spending and budgeting analytics, peer-to-peer payments and remittances services and bill payments.

YAP is in the process of partnering with banks in other countries, head of product Katral-Nada Hassan said, including a bank in Saudi, in Pakistan and in Ghana.

Global leaders in digital banking, such as Revolut, one of the world’s fastest-growing apps, do not have a UAE presence.

Some UAE banks have in recent years launched their own digital banking offerings targeted at digitally-savvy and younger users, such as LIV by Emirates NBD and Mashreq Neo by Mashreq Bank.

Abu Dhabi state-owned holding company ADQ last year said it plans to set up an as-yet unnamed neobank using a banking licence of the country’s biggest lender, First Abu Dhabi Bank (FAB).

“The fintech revolution has become very popular in other parts of the world and we saw a gap and unique need for this service in the Middle East,” said YAP CEO and founder Marwan Hachem

Hassan said there are challenges for fintechs looking to expand to the UAE.

“There are a lot of fintechs right now looking at partnering with banks, but that requires a lot of discussion, relationship building ... It is not an easy thing to do,” she said, adding YAP’s founders had an existing relationship with RAK Bank.

YAP is at seed funding stage, funded by founders, a private equity firm and private investors, Hassan said, adding that more than 20,000 customers have pre-registered and accounts will gradually go live in coming weeks.


Escalating violence ups pressure for Myanmar sanctions

Escalating violence ups pressure for Myanmar sanctions
Updated 07 March 2021

Escalating violence ups pressure for Myanmar sanctions

Escalating violence ups pressure for Myanmar sanctions
  • The UN special envoy urged the Security Council to act to quell junta violence that this week killed about 50 demonstrators
BANGKOK: The escalation of violence in Myanmar as authorities crack down on protests against the Feb. 1 coup is raising pressure for more sanctions against the junta, even as countries struggle over how to best sway military leaders inured to global condemnation.
The challenge is made doubly difficult by fears of harming ordinary citizens who were already suffering from an economic slump worsened by the pandemic but are braving risks of arrest and injury to voice outrage over the military takeover. Still, activists and experts say there are ways to ramp up pressure on the regime, especially by cutting off sources of funding and access to the tools of repression.
The UN special envoy on Friday urged the Security Council to act to quell junta violence that this week killed about 50 demonstrators and injured scores more.
“There is an urgency for collective action,” Christine Schraner Burgener told the meeting. “How much more can we allow the Myanmar military to get away with?“
Coordinated UN action is difficult, however, since permanent Security Council members China and Russia would almost certainly veto it. Myanmar’s neighbors, its biggest trading partners and sources of investment, are likewise reluctant to resort to sanctions.
Some piecemeal actions have already been taken. The US, Britain and Canada have tightened various restrictions on Myanmar’s army, their family members and other top leaders of the junta. The US blocked an attempt by the military to access more than $1 billion in Myanmar central bank funds being held in the US, the State Department confirmed Friday.
But most economic interests of the military remain “largely unchallenged,” Thomas Andrews, the UN special rapporteur on the rights situation in Myanmar, said in a report issued last week. Some governments have halted aid and the World Bank said it suspended funding and was reviewing its programs.
Its unclear whether the sanctions imposed so far, although symbolically important, will have much ímpact. Schraner Burgener told UN correspondents that the army shrugged off a warning of possible “huge strong measures” against the coup with the reply that, “‘We are used to sanctions and we survived those sanctions in the past.’”
Andrews and other experts and human rights activists are calling for a ban on dealings with the many Myanmar companies associated with the military and an embargo on arms and technology, products and services that can be used by the authorities for surveillance and violence.
The activist group Justice for Myanmar issued a list of dozens of foreign companies that it says have supplied such potential tools of repression to the government, which is now entirely under military control.
It cited budget documents for the Ministry of Home Affairs and Ministry of Transport and Communications that show purchases of forensic data, tracking, password recovery, drones and other equipment from the US, Israel, EU, Japan and other countries. Such technologies can have benign or even beneficial uses, such as fighting human trafficking. But they also are being used to track down protesters, both online and offline.
Restricting dealings with military-dominated conglomerates including Myanmar Economic Corp., Myanmar Economic Holdings Ltd. and Myanmar Oil and Gas Enterprise might also pack more punch, with a minimal impact on small, private companies and individuals.
One idea gaining support is to prevent the junta from accessing vital oil and gas revenues paid into and held in banks outside the country, Chris Sidoti, a former member of the UN Independent International Fact-Finding Mission on Myanmar, said in a news conference on Thursday.
Oil and gas are Myanmar’s biggest exports and a crucial source of foreign exchange needed to pay for imports. The country’s $1.4 billion oil and gas and mining industries account for more than a third of exports and a large share of tax revenue.
“The money supply has to be cut off. That’s the most urgent priority and the most direct step that can be taken,” said Sidoti, one of the founding members of a newly established international group called the Special Advisory Council for Myanmar.
Unfortunately, such measures can take commitment and time, and “time is not on the side of the people of Myanmar at a time when these atrocities are being committed,” he said.
Myanmar’s economy languished in isolation after a coup in 1962. Many of the sanctions imposed by Western governments in the decades that followed were lifted after the country began its troubled transition toward democracy in 2011. Some of those restrictions were restored after the army’s brutal operations in 2017 against the Rohingya Muslim minority in Myanmar’s northwest Rakhine state.
The European Union has said it is reviewing its policies and stands ready to adopt restrictive measures against those directly responsible for the coup. Japan, likewise, has said it is considering what to do.
The Association of Southeast Asian Nations, or ASEAN, convened a virtual meeting on March 2 to discuss Myanmar. Its chairman later issued a statement calling for an end to violence and for talks to try to reach a peaceful settlement.
But ASEAN admitted Myanmar as a member in 1997, long before the military, known as the Tatmadaw, initiated reforms that helped elect a quasi-civilian government led by Aung San Suu Kyi. Most ASEAN governments have authoritarian leaders or one-party rule. By tradition, they are committed to consensus and non interference in each others’ internal affairs.
While they lack an appetite for sanctions, some ASEAN governments have vehemently condemned the coup and the ensuing arrests and killings.
Marzuki Darusman, an Indonesian lawyer and former chair of the Fact-Finding Mission that Sidoti joined, said he believes the spiraling, brutal violence against protesters has shaken ASEAN’s stance that the crisis is purely an internal matter.
“ASEAN considers it imperative that it play a role in resolving the crisis in Myanmar,” Darusman said.
Thailand, with a 2,400 kilometer (1,500-mile)-long border with Myanmar and more than 2 million Myanmar migrant workers, does not want more to flee into its territory, especially at a time when it is still battling the pandemic.
Kavi Chongkittavorn, a senior fellow at Chulalongkorn University’s Institute of Security and International Studies, also believes ASEAN wants to see a return to a civilian government in Myanmar and would be best off adopting a “carrot and stick” approach.
But the greatest hope, he said, is with the protesters.
On Saturday, some protesters expressed their disdain by pouring Myanmar Beer, a local brand made by a military-linked company whose Japanese partner Kirin Holdings is withdrawing from, on people’s feet — considered a grave insult in some parts of Asia.
“The Myanmar people are very brave. This is the No. 1 pressure on the country,” Chongkittavorn said in a seminar held by the East-West Center in Hawaii. “It’s very clear the junta also knows what they need to do to move ahead, otherwise sanctions will be much more severe.”