No plans for income tax, VAT increase is temporary: Saudi Crown Prince Mohammed bin Salman

The crown prince revealed that the Kingdom is in discussions to sell 1 percent of state oil firm Saudi Aramco to a leading global energy company
The crown prince revealed that the Kingdom is in discussions to sell 1 percent of state oil firm Saudi Aramco to a leading global energy company. (Reuters)
Short Url
Updated 28 April 2021

No plans for income tax, VAT increase is temporary: Saudi Crown Prince Mohammed bin Salman

No plans for income tax, VAT increase is temporary: Saudi Crown Prince Mohammed bin Salman
  • Crown Prince touched on a wide range of topics during appearance on Liwan Al Mudaifer Show on Rotana Khalijiya TV
  • He tallied the achievements of Vision 2030 to date and outlined what would come in the next phase of implementation

RIYADH: In a wide-ranging TV interview to mark the fifth anniversary of the Saudi Vision 2030 strategy, Crown Prince Mohammed bin Salman has identified increasing home ownership and falling unemployment as two signal achievements, ruled out introduction of income tax and described the current 15 percent value-added tax (VAT) as a temporary measure.

He also revealed that the Kingdom is in discussions to sell 1 percent of state oil firm Saudi Aramco to a leading global energy company. Aramco previously sold a sliver of its shares on the Saudi bourse in December 2019, generating $29.4 billion in the world's biggest initial public offering.

Appearing as a guest on the Liwan Al-Mudaifer Show late on Tuesday, presented by Saudi host Abdullah Al-Mudaifer and broadcast on Rotana Khalijiya TV and state media, the crown prince tallied the achievements of Vision 2030 to date and outlined what would come next.

It was on April 25, 2016, that Prince Mohammed bin Salman, then Saudi Arabia’s deputy crown prince, unveiled a strategic plan designed to transform the Kingdom’s economy, reduce its dependence on oil, and nurture a “vibrant society ... characterized by strong roots and strong foundations that emphasize moderate Islam, national pride, Saudi heritage, and Islamic culture.”

On the same day, in an interview with Al Arabiya news channel, he talked about the Saudi government having targets, key performance indicators and project management offices.

Exactly five years on, Crown Prince Mohammed bin Salman appeared on the Liwan Al Mudaifer Show to say: “We had a housing problem for 20 years that we could not resolve. A citizen would be waiting to receive a loan or a housing subsidy for like15 years.

“The level of housing did not increase beyond 40 and 50 percent. Before Vision 2030 it was 47 percent. And during the reign of (the late) King Abdullah, about SR11 billion was allocated in 2011. From these SR20 to SR50 billion, only SR2 billion was disbursed but not used. The Ministry of Housing could not transfer them to existing projects because the condition of the states was quite weak.

“The ministries were scattered. There wasn’t a public policy, so the Ministry of Housing could not succeed without having a general policy for the state in coordination with the municipalities, the Central Bank and the Ministry of Finance for enacting legislation, private sector, etc.

“So, this SR 250 billion was returned to the treasury and an annual budget was disbursed. But the outcome was that the percentage of housing increased from 47 to 60 percent within four years alone, and this is quite an indicator of where we are heading.”

Moving on to the issue of jobs, the crown prince pointed out that unemployment in Saudi Arabia at the beginning of Vision 2030 was about 14 percent. “In the first quarter of 2020 we reached 11 percent. Because of the pandemic unemployment increased. We were the sixth best country in the G20 in terms of performance and unemployment, but in the last part of the fourth quarter of 2021 we were back to 12 percent. We shall break the 11 percent (barrier) and reach 10 percent and a fraction until we reach a better rate,” he said.

“In the non-oil (sector), we raised revenues from SR66 billion to SR350 billion. The commercial register used to take days to produce a commercial registration, going through six entries. Now (it happens) in a period of half an hour. Foreign investment tripled. The Saudi market was stuck between 4,000 points to 7,000 points. Now we have exceeded the 10,000 (mark), which means that the private sector has started to grow.”

The crown prince explained that these were huge numbers in comparison with past figures. “It would take a lot of time to explain this. Economic growth in the non-oil sector was within an average that was not quite as we were aspiring to. In the fourth quarter in 2019, when the non-oil economy grew about 4.5 percent, and then, if it weren’t for the pandemic in 2020, would have exceeded 5 percent in the non-oil sector. We shall recover these levels hopefully this year and the coming years, and even more in the future.”

Referring to the decision on July 1 last year to triple value-added tax to 15 percent was temporary, Crown Prince Mohammed bin Salman said: “This step was painful for me personally as I do not want to harm the Saudi citizen in any way shape or form. But my main job is to guarantee and build the citizens’ future in the long term, for the next 20-30 years.”

READ MORE:

What Saudi Vision 2030 reform plan has achieved at the five-year mark

Saudi Crown Prince says differences with US minimal, suggests peace with Houthi still possible

He added: “One of the measures to avoid cancelling allowances or reducing salaries was to increase VAT to 15 percent. Of course, it’s a painful measure. The last thing I want to do is to hurt any Saudi citizens. I have no interest in hurting anyone. But what I want is for our homeland to grow and our citizens to be happy and to prosper. It’s my duty to build for them a long-term future that will continue to grow — not just to satisfy them for three or four years, then exhaust all the saving opportunities of the country towards a better future.

“So, there were a number of decisions including the VAT. It’s a temporary decision. It will continue for a year, maximum five years, and then things will go back to what they were. We are targeting it to be between 5 to 10 percent, only till we reinstate our balance after the pandemic. Depending on the economic situation or what may transpire, but maximum five, minimum one year.”

Last month, Crown Prince Mohammed bin Salman announced that the Kingdom would spend more in the next 10 years than it had done in the past 300 years as he unveiled a new program to strengthen public-private sector partnerships. At the announcement of the program, named Shareek, he said Saudi Aramco would lead investments in the private sector to the tune of 5 trillion riyals ($1.3 trillion) by 2030.

On Tuesday, he confirmed that “there is a discussion on the acquisition of 1 percent (of Aramco) by one of the world's leading energy companies, and this will be a very important deal to boost Aramco's sales in that country,” but he did not name the company or the country. He said further Aramco stake sale to international investors could happen in the next one year or two.

Talking about the sovereign wealth fund, the Public Investment Fund (PIF), Crown Prince Mohammed bin Salman said: “Our goal is to ensure that the fund achieves growth. We aim to increase the fund’s assets to SR10 trillion in 2030.”

Under the Vision 2030 strategic plan, Saudi Arabia has launched several multi-billion-dollar projects that aim to put it on the map as a major actor in the world of innovation, tech and youth-driven initiatives. The Kingdom’s non-oil revenues have increased by over 200 per cent since the start of the Vision 2030 plan. “If we look back, oil has helped develop our country for centuries, so we’ve always had that impression to depend on oil. But the increase in population will not be able to depend on oil production at the rate we are going,” Crown Prince Mohammed bin Salman said.

He said Saudi Arabia’s oil revenues were becoming insufficient to cover the needs of the growing population, a fact that was the driving force behind the announcement of the Vision 2030 reform plan to diversify the economy. “We went from a population of 2 to 3 million, to nearly 20 million Saudis since the discovery of oil. So, oil revenues now barely cover the needs and the way of life that we have grown accustomed to since the 1960s, ‘70s, ‘80s and ‘90s. So, had we continued on the same old path, there is no doubt that with the population growth, it would have affected us in the next 20 or 10 years in the quality of life that we have grown used to for the past 50 years,” he said.

The crown prince said the second need for the reform plan was the numerous opportunities in the Kingdom of Saudi Arabia in different sectors other than just the oil sector.

“In mining in tourism, in services, in logistics, in investment, etc. (Because of the) huge opportunities, even if we didn’t have any problem in terms of oil, there would still be enthusiasm and a big drive towards achieving these enablers that we aspire to benefit from as Saudis for our beloved country,” he said.

“So, I believe that was the main emphasis for the Vision 2030, in order to eliminate the challenges that we face and to exploit the untapped opportunities that may constitute 90 percent of our situation today, and we can continue to grow and prosper and compete at the world level.”

He added: “Oil is still the main source of income for the state. My intention is to make sure that the country is secure, safe and has a better future to look forward to.”

Crown Prince Mohammed bin Salman also lauded the progress made in environmental protection, pointing out that vegetation cover across the Kingdom has increased over the past four years by 40 percent, which will likely have a direct impact on tourism and foreign investment. This is no small matter given that, as the crown prince said, the tourism sector alone is expected to create 3 million jobs by 2030.

Despite a challenging 2020 because of the coronavirus pandemic, Crown Prince Mohammed bin Salman said he believed Saudi Arabia is firmly back to growth. “We are close to achieving the overall aims and goals of Vision 2030. We are on the right track. We will see a strong rebound in our economic performance and achievements this year,” he said.

Looking back at the pre-Vision 2030 era, he described 2015 as a particularly difficult year. “We made some serious changes to many ministries and government sectors, including security and the economy by changing strategies and imposing the programs of Vision 2030. Lack of a strong state structure was one of the main challenges we faced in 2015,” he said.

“We managed to restructure various ministries by establishing new councils. The most important thing to have is integrity and passion when making these changes.”


Saudi delivery startup raises $2.4m to expand outside KSA

Saudi delivery startup raises $2.4m to expand outside KSA
Updated 29 July 2021

Saudi delivery startup raises $2.4m to expand outside KSA

Saudi delivery startup raises $2.4m to expand outside KSA
  • The startup uses artificial intelligence and a mobile application to partner companies

JEDDAH: WeDeliver, a parcel delivery startup headquartered in Riyadh, has secured SR9 million ($2.4 million) as part of its first pre-seed investment round, it was announced on Wednesday. I coudn’t find a ‘WeDelivery’ in an online search.

The startup uses artificial intelligence and a mobile application to partner companies that have parcels to be delivered with a network of freelance drivers close by.

The company launched its operations in the Kingdom in April last year, just weeks after the pandemic took hold. Starting first in Riyadh, it has since expanded to Jeddah and the Eastern Province.

Ahmad Ramahi, co-founder and CEO of WeDeliver, said in a press statement: “WeDeliver is a MENA startup with a global vision, driven by an experienced team. We have ambitious plans to enrich our growth in the Saudi market and look forward to expanding to new regional markets.

“We believe that our asset-light collaborative model will disrupt intra-city logistics, enabling faster, more efficient, low-cost delivery for businesses and online sellers,” he added. Nasser Al-Maawi, another cofounder of the startup, said that WeDeliver has seen “strong results” and reported “300 percent growth in the second quarter of this year.”

According to a recent industry report, Saudi startups raised more than a quarter of a billion dollars in venture capital (VC) funding during the first half of 2021.

A total of $1.228 billion was raised by startups in the Middle East and North Africa (MENA) in the first six months of the year, a rise of 63 percent year on year and 12 percent more than was raised during the whole of 2020, according to figures from the MENA H1 2021 Venture Investment Report, published by Dubai-based research platform Magnitt.

According to the report, the top three countries in the MENA region for startup funding were the UAE, Egypt and Saudi Arabia, accounting for 71 percent of total investment. The UAE was the dominant market, making up 26 percent of total funding, followed by Egypt with 24 percent and Saudi Arabia with 21 percent, for a total of $257.88 million.

“It’s also important to note that within this top three ranking, Egypt was the only geography to observe a deal count increase year on year, while Saudi Arabia has almost closed the deal count gap with UAE from 44 deals in 2020 to just an 11-deal difference in H1 2021,” the report said. The food and beverage sector was the most popular among VCs in terms of dollars invested, while the fintech sector generated the most deals.

According to this year’s Global Entrepreneurship Monitor report, total entrepreneurial activity in Saudi Arabia increased in 2020 by 24 percent compared to 2019. It also showed that more than 90 percent of adults saw entrepreneurship as a favorable career choice, while a third of Saudis surveyed said that they were keen on launching a business within the next three years.


MasterCard launches support for cryptocurrency startups

MasterCard launches support for cryptocurrency startups
Updated 29 July 2021

MasterCard launches support for cryptocurrency startups

MasterCard launches support for cryptocurrency startups
  • XRP, a cryptocurrency that Ripple uses in its payments network, rose 15.48 percent on Wednesday

RIYADH: Bitcoin traded higher on Wednesday, rising by 3.95 percent to $39,808.10 at 4:21 p.m. Riyadh time. Ether, the world’s second most-traded cryptocurrency, was down 0.29 percent to $2,291.10, according to data from CoinDesk.

XRP, a cryptocurrency that Ripple uses in its payments network, rose 15.48 percent on Wednesday, trading at $0.74, its highest level since June 21. This represents a daily gain of 13 percent, after the company said it is targeting the $1.8 billion Filipino Remittance Corridor. Ripple announced that Japanese money transfer provider SBI Remit and Philippine mobile payment service Coins.ph have teamed up to move remittance payments from Japan to the Philippines, CoinDesk reported.

Earlier this week, US Sen. Elizabeth Warren wrote to Treasury Secretary Janet Yellen outlining several concerns about the risks posed by cryptocurrencies. Warren asked Yellen to act urgently and adopt appropriate policies to address her concerns.

She claimed that the longer the US waits to introduce the appropriate regulatory regime for these assets, the more likely they will become so entangled in the financial system, potentially creating serious consequences if this market comes under pressure. 

The senator from Massachusetts said: “I have become increasingly concerned about the dangers cryptocurrencies pose to investors, consumers, and the environment in the absence of sufficient regulation in the US,” according to Bitcoin News.

MasterCard on Tuesday announced a new global program dedicated to supporting fast-growing digital assets, blockchain and cryptocurrency companies. Seven startups have signed up for the Start Path program. With Mastercard, the startups will expand and accelerate innovation around digital asset technology and make it safer and easier for people and organizations to buy, spend and hold cryptocurrency and digital assets, Bitcoin News reported.


ExxonMobil, Sabic US petrochemical complex to operate end of 2021

ExxonMobil, Sabic US petrochemical complex to operate end of 2021
Updated 28 July 2021

ExxonMobil, Sabic US petrochemical complex to operate end of 2021

ExxonMobil, Sabic US petrochemical complex to operate end of 2021
  • The project, located near Corpus Christi, Texas, is expected to begin ahead of schedule, likely in the fourth quarter of 2021

RIYADH: A petrochemical complex on the US coast being built Saudi Basic Industries Corporation (SABIC) and ExxonMobil is expected to be operational by the end of 2021, the US energy company said.

The complex — which is being developed by Gulf Coast Growth Ventures (GCGV), a joint-owned company by the Saudi and US companies — has reached mechanical completion of a monoethylene glycol unit and two polyethylene units, ExxonMobil said.

“Gulf Coast Growth Ventures is a key development of our plan to serve growing demand for our high value performance products,” said Karen McKee, ExxonMobil President. 

The project, located near Corpus Christi, Texas, is expected to begin ahead of schedule, likely in the fourth quarter of 2021.

“Not only are we ahead of schedule, but we have executed this project with the highest commitment and emphasis on safety with nearly 18 million safe person-hours worked, all while acting on the promises we made to the community when we started this journey four years ago,” said Abdulrahman Al-Fageeh, SABIC’s executive vice president of petrochemicals. 

GCGV will produce 1,100 kilotons of monoethylene glycol and 1,300 kilotons of polyethylene per year upon completion.

“The benefits of this strategic joint venture will not only accrue to SABIC but also to Saudi Aramco, which bought the company from the Public Investment Fund to create a Saudi synergy in local petrochemical production,” independent economist and former professor of finance and economics at King Fahd University of Petroleum and Minerals Dr. Mohamed Ramady told Arab news.

Once in full production, the new venture will add a welcome stream of additional revenue to SABIC’s profitability and its market value. It is expected to reinforce the Kingdom’s diversification into high-value hydrocarbon products through high-performance plastics, adding to SABIC’s portfolio of agri-nutrients and metals, he said.

“This new strategic joint venture cements the ongoing relationship that SABIC has built over the years with international partners as part of its plans to service its key overseas markets with high quality petrochemical downstream products,” he added.

The project created more than 600 permanent jobs with average salaries of $90,000 per year and an additional 6,000 high-paying jobs were created during construction.

The project is expected to be delivered under budget and at approximately 25 percent less than the average cost of similar projects along the US Gulf Coast.


Oil nears $75 on US inventory decline as pandemic concerns recede

Oil nears $75 on US inventory decline as pandemic concerns recede
Updated 28 July 2021

Oil nears $75 on US inventory decline as pandemic concerns recede

Oil nears $75 on US inventory decline as pandemic concerns recede
  • ‘Supply is likely to remain tight even with the production hikes set by OPEC+,’ says broker

LONDON/RIYADH: Brent crude approached $75 a barrel on Wednesday as a report showed US inventories fell more than expected last week, moving the market’s focus away from concerns that rising coronavirus disease (COVID-19) infections will hurt demand.

Crude in storage fell to the lowest since January 2020, while distillate supplies posted the biggest decline since April, according to a report from the US Energy Information Agency. Fuel inventories fell by more than 2 million barrels.

WTI, the US benchmark, added 0.5 percent to $72.03 a barrel as of 3:48 p.m. in London, while Brent climbed 0.3 percent to $74.72.

Oil is 45 percent higher this year, boosted by a return of demand, as economies have reopened following millions of doses of COVID-19 vaccines, while OPEC+ has kept supply tight.

However, OPEC+ agreed to increase supply by 400,000 barrels a day every month from August, leading to speculation as to whether demand will continue to return.

“Oil supply is likely to remain tight even with the production hikes set by OPEC+,” Naeem Aslam, from online broker Avatrade, told Reuters.

Russia’s flagship Urals crude oil has mostly been used in Europe so far this year due to relatively low output and high prices, while Asian markets have shunned the blend, data showed on Wednesday.

As a result, Russia has lagged behind Saudi Arabia in China’s energy market, one of the world’s largest.

According to Refinitiv Eikon data, the port of Rotterdam, Europe’s biggest oil hub, received 9.7 million tons of Urals in the first half of this year, up from 7.3 million tons in the same period last year.

At the same time, supplies of seaborne Urals cargoes to China plunged to 1.8 million tons from 7.86 million in the first half of 2020.

This year, the spread between Brent — to which Urals is linked — and the Middle Eastern Dubai blend has reached an all-time high of more than $4 per barrel, making Russian oil uncompetitive in Asia.

India has also cut purchases of Urals, while South Korea and Thailand have completely stopped intake of the blend.

Some European countries, notably Finland, have also reduced purchases of seaborne Urals amid the move to greener economies.


Saudi Arabia anticipates 1 trillion riyal injection from 4IR technology

Saudi Arabia anticipates 1 trillion riyal injection from 4IR technology
Updated 28 July 2021

Saudi Arabia anticipates 1 trillion riyal injection from 4IR technology

Saudi Arabia anticipates 1 trillion riyal injection from 4IR technology
  • Artificial intelligence and smart cities will see Saudi Arabia rebrand as a global technology hub

RIYADH: Advanced technology from the Fourth Industrial Revolution (4IR) is expected to generate around 1 trillion riyals for the Saudi economy in new revenue streams, a senior Saudi official told a conference in Riyadh today.

The Kingdom will enjoy economic boosts from robotics, artificial intelligence, and wireless production models as it pushes for more smarter cities and infrastructure.

In his opening remarks of the Saudi 4IR conference, Minister of Communications and Information Technology Abdullah Alsawaha announced the inauguration of the Saudi 4IR center in collaboration with WEF and said that the center will spur more innovation as Saudi cities must keep pace with technological developments.
He told an audience at the two-day conference, being held at King Abdullah City for Science and Technology, that the Kingdom is building the most technologically advanced infrastructure in the new NEOM giga-project, which will be a global technology center.

The impact of the 4IR is expected to be massive, with non-oil gross domestic product anticipated to increase by more than 4 percent from 2017 to 2030, generating 1 trillion riyals in new revenues, Abdullah Alghamdi, the president of Saudi Data and Artificial Intelligence Authority (SDAIA) said in his opening remarks.

He added that SDAIA is working on developing customized platforms for each  city to accommodate their specific needs.

The concept of a Fourth Industrial Revolution was first suggested by Klaus Schwab, chairman of the World Economic Forum, and was the theme of the annual WEF meeting at Davos in 2016. WEF opened its first 4IR Center in San Francisco in 2016, and there are now centers in 13 countries, including Saudi Arabia.

"With this launch you have become part of our growing global network of centers, Schwab said in his remarks to the conference.

Saudi Arabia has invested heavily in digitizing its cities, with 60 percent of the Kingdom’s urban centers covered by 5G networks, said Haytham Alohali, vice minister of communications and information technology.

The government has developed one of the most advanced E-government systems in the world and has established data and AI to support its digital transformation, minister of industry Bandar Alkhorayaf said, adding that the Kingdom has a strong manufacturing base with over 10,000 factories 40 specialized integrated industrial cities that provide the required infrastructure and services needed for the manufacturing facilities and workforce.

The world's leading petrochemical producer, SABIC, strives to keep pace with technical developments and is focused on digital transformation in artificial intelligence, machines, and robotics, CEO Yousef Albenyan told the conference. It also seeks to provide smart solutions to its customers and enhance the competitive process, he added.