World Bank's official says more work to be done for GCC economies to break away from oil

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Updated 02 June 2022

World Bank's official says more work to be done for GCC economies to break away from oil

World Bank's official says more work to be done for GCC economies to break away from oil

RIYADH: Despite persistent efforts in the Gulf Cooperation Council to pursue reforms in the times of economic expansion, more work needs to be done to achieve a sustainable growth model with low hydrocarbon dependence, said a senior World Bank official.

“The GCC has been very successful in the past couple of years in enduring a twin shock of COVID-19 pandemic and dropping oil prices. The reforms, together with a competent health system, helped contain the number of COVID-19 cases and expedited the opening of these economies compared to other parts of the world,” Issam Abou Sleiman, regional director of the GCC for the World Bank, told Arab News.

According to Abou Sleiman, more work needs to be done to make the GCC resilient to the price fluctuations in the hydrocarbon industry, even though it is the primary source of revenue in this region. This can be achieved by balancing revenue and expenditure.

In 2021, the GCC nations picked up from a GDP contraction of 4.9 percent and rebounded to an expansion of 3 percent, and the World Bank expects the expansion to go up to 5.9 percent this year.

There is also a better way to reach the lower-income population than subsidizing or redistributing the income of the wealth in the GCC.

Issam Abou Sleiman, regional director of the GCC for the World Bank

What they are up against

“Four of the six GCC countries have taken some measures by introducing the value-added tax. Saudi Arabia has even increased the VAT during the pandemic, but more needs to be done on the revenue side,” he said.

As for the expenditure side, Abou Sleiman said that the wage bill and the subsidy scheme are both areas for improvement.

“The wage bill in the GCC is very high compared to similar countries around the world, and it is coming from the public sector that the region is looking to right-size,” he added.

The wage bill came from a social contract that existed for decades, but with a growing population, this formula no longer serves the purpose and has increased the fiscal deficit.

“There is also a better way to reach the lower-income population than subsidizing or redistributing the income of the wealth in the GCC,” said Abou Sleiman.

The subsidy schemes must be substituted with a more effective social safety net targeted toward the lower 40 percent of the income pyramid.

For example, Saudi Arabia in January introduced a modern social safety net that will have a much more significant impact on the low-income population than the traditional subsidy schemes.

“A balance between the revenue and expenditure sides, together with the governments’ vision of economic diversification, will allow these economies to become less and less dependent on the fluctuations of oil prices,” Abou Sleiman said.

HIGHLIGHTS

  • GCC growth in 2022 will be mainly driven by the hydrocarbon market
  • Hydrocarbon sector is likely to expand by 12 percent
  • In 2021, the GCC nations picked up from a GDP contraction of 4.9 percent and rebounded to 3 percent
  • The World Bank expects the expansion to go up to 5.9 percent this year.

2022 growth

The growth in 2022 will be mainly driven by the hydrocarbon market, which is likely to expand by 12 percent.

“The GCC benefited from the supply chain shocks and rising oil prices. However, despite the reigning fuel prices, the countries broke historical trends by carrying on its economic reform,” said Abou Sleiman.

Four countries in the GCC — Saudi Arabia, Bahrain, Qatar, and Oman — have witnessed noticeable transformations in the past couple of years to change the fabric of the economy and make it less driven by the government.

“The move toward an economy reliant on the private sector is focused on diversifying into non-oil sectors, and it is expected to continue in the coming years and cause a spillover within the GCC and the MENA region,” he said.

Preparing for the future

Abou Sleiman also tackles a vital topic focused on job creation among the young generation, especially women. “In an economy like Saudi Arabia, where the focus is on growing the tourism, entertainment and digital sectors, the focus should be on those young people who are much more educated today than years ago,” Abou Sleiman said.

The country only started incentivizing women to go into the labor market in 2019; however, seeing women flood into the labor job market in a short period brings a huge wave of optimism, according to Abou Sleiman.

“Statistically speaking, women are more educated than men, and when proper laws are put into place to drive them to the job market, this will bring a higher level of income for the Saudi and the GCC families,” he added.

Abou Sleiman also addressed the need to move the GCC infrastructure from state-owned enterprises to the private sector. “This will bring foreign investment, foster cost efficiencies, and encourage competitiveness in the region.”

Despite showing great optimism, Abou Sleiman only fears the reform needed for this kind of transformation would be halted in periods when oil prices go up. The other risk factor is the dependence of the monetary policy on the US dollar.

“While this could be good to tame inflation from a demand perspective, it will also impact the investments in the region,” added Abou Sleiman.


NEOM awards London-based Keller major piling contract for ‘The Line’

NEOM awards London-based Keller major piling contract for ‘The Line’
Updated 27 June 2022

NEOM awards London-based Keller major piling contract for ‘The Line’

NEOM awards London-based Keller major piling contract for ‘The Line’

RIYADH: Saudi Arabia’s $500-billion project NEOM has awarded UK’s Keller a major piling contract for “The Line,” a 170-km megacity being developed within the Kingdom’s flagship project. 

Starting in the west at the Gulf of Aqaba and terminating at the NEOM International Airport within the upper valley region, The Line is subdivided into around 135 modules, according to a statement. 

Each module contains eight buildings founded on large diameter bored piles. 

Keller had signed an umbrella framework agreement with respect to the project, and is mobilizing for an anticipated first works order on a portion of Module 40 which has an expected value to Keller of around £50 million ($61.5 million), with the work anticipated to be completed within the next 12 months.

Listed on the London Stock Exchange, Keller is an independent geotechnical solutions specialist.


NEOM, McLaren Racing partner to drive innovation in electric motorsport

NEOM, McLaren Racing partner to drive innovation in electric motorsport
Updated 27 June 2022

NEOM, McLaren Racing partner to drive innovation in electric motorsport

NEOM, McLaren Racing partner to drive innovation in electric motorsport

RIYADH: NEOM, one of Saudi Arabia’s flagship projects, has partnered with McLaren Racing to drive innovation and talent development in electric motorsport, according to a statement. 

With the partnership, NEOM becomes the title partner of the McLaren Formula E and Extreme E racing teams, which brings the two electric race series together under the banner of NEOM McLaren Electric Racing.

“Our partnership with McLaren Racing complements NEOM’s commitment to driving sustainable solutions and tackling some of society's most pressing challenges,” CEO Nadhmi Al-Nasr said. 

“The partnership will allow us to share our collective resources and experience to yield exciting results, not only for our own organizations, but also for the broader automotive and sports industries,” he added. 

McLaren will be located within OXAGON’s Research and Innovation Campus, which will provide cutting edge facilities and collaboration spaces. 

During 2023, McLaren and NEOM will create a bespoke program to nurture engineers and students, in line with the mega project’s commitment to develop Saudi talent. 


Thailand to seek fertilizer supply from Saudi producers

Thailand to seek fertilizer supply from Saudi producers
Updated 27 June 2022

Thailand to seek fertilizer supply from Saudi producers

Thailand to seek fertilizer supply from Saudi producers

RIYADH: Thailand is planning to negotiate with Saudi Arabia for the supply of fertilizers as the country is currently facing a shortage, especially due to the high cost of imports.

The Thai Chamber of Commerce will coordinate with Saudi suppliers and a business event is to be held between three major Saudi-based fertilizer suppliers and Thai importers on June 29, Thai local media reported citing Commerce Minister Jurin Laksanawisit.

Laksanawisit added that two Saudi suppliers were recently provided permission to sell fertilizers to Thailand.

Thailand heavily relies on imports for its fertilizers, with only 8 percent coming from domestic sources and a usage of about 5 million tons of fertilizer a year, according to the minister.

The country’s overall demand for fertilizer from Saudi Arabia is about 808,000 tons, the media report noted citing industry statistics.


US stocks — Wall Street sheds opening gains on losses in high-growth stocks

US stocks — Wall Street sheds opening gains on losses in high-growth stocks
Updated 27 June 2022

US stocks — Wall Street sheds opening gains on losses in high-growth stocks

US stocks — Wall Street sheds opening gains on losses in high-growth stocks
  • S&P 500 energy stocks among few gainers
  • Robinhood rises on Goldman Sachs upgrade
  • Indexes down: Dow 0.24 percent, S&P 0.36 percent, Nasdaq 0.68 percent

REUTERS: Wall Street’s main indexes fell after opening higher on Monday, as a rally last week on easing concerns over inflation lost steam, with high-growth stocks leading declines.

“We had a nice rally last week, so I think we’re seeing a little bit of profit taking this morning,” said Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas.

“The stocks that were up the most last week are the ones getting hit the hardest here today.”

The tech-heavy Nasdaq Composite index, which gained 7.5 percent last week, fell 0.7 percent to lead declines among the three major indexes.

Investors were betting on the retreat in oil prices from the three-month highs hit in June to potentially ease inflationary pressures and likely push the Federal Reserve to moderate its aggressive policy tightening.

However, data on Monday showed new orders for US-made capital goods and shipments increased solidly in May, pointing to sustained strength in business spending on equipment in the second quarter.

Oil prices also moved back into positive territory, pushing up the S&P 500 energy index by 2.2 percent, reining in expectations for inflation falling on the back of lower energy prices.

The US central bank has rapidly raised interest rates to tame 40-year-high inflation, stoking fears its actions could tip the world’s largest economy into a recession.

After the benchmark S&P 500 index earlier this month recorded a 20 percent drop from its January closing peak to confirm a bear market, investors have been trying to gauge when the market might hit its bottom.

At 10:11 a.m. ET the Dow Jones Industrial Average was down 76.62 points, or 0.24 percent, at 31,424.06, the S&P 500 was down 13.94 points, or 0.36 percent, at 3,897.80 and the Nasdaq Composite was down 78.44 points, or 0.68 percent, at 11,529.19.

Shares of Robinhood Markets rose 0.6 percent after media reports said Goldman Sachs upgraded the retail broker’s stock to “neutral” from “sell.”

Goldman Sachs, however, cut rating on Coinbase Global Inc. to “sell” from “buy,” according to media reports, sending shares of the cryptocurrency exchange lower by 9.4 percent.

Declining issues outnumbered advancers for a 1.03-to-1 ratio on the NYSE and a 1.31-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 29 new lows, while the Nasdaq recorded 16 new highs and 41 new lows.


OPEC+ trims 2022 market surplus projection to 1m bpd -report

OPEC+ trims 2022 market surplus projection to 1m bpd -report
Updated 27 June 2022

OPEC+ trims 2022 market surplus projection to 1m bpd -report

OPEC+ trims 2022 market surplus projection to 1m bpd -report

LONDON: The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, trimmed its projected 2022 oil market surplus to 1 million barrels per day, down from 1.4 million bpd previously, a report seen by Reuters showed.

The report was prepared ahead of a meeting of the OPEC+ Joint Technical Committee scheduled to take place on Tuesday.