JEDDAH, 28 May — Saudi Arabia yesterday slashed customs tariffs on imports from 12 to five percent in a move widely welcomed by businessmen as a major boost to the country’s economy that would strengthen the Kingdom’s competitive edge.
The landmark decision was taken by the Supreme Economic Council (SEC), chaired by Crown Prince Abdullah, deputy premier and commander of the National Guard, at a meeting held in Jeddah. The meeting was also attended by Prince Sultan, second deputy premier and minister of defense and aviation.
The SEC stressed the need to protect national industries by imposing a maximum tariff of 20 percent.
The move comes on the heels of a decision earlier in the month aimed at easing trade regulations to allow imports of goods from fellow Gulf Cooperation Council states under preferential tariffs.
On May 7 the Cabinet agreed to drop a requirement that imports must be made by firms owned by Gulf citizens in order to qualify for preferential treatment in the GCC’s tariff regime. Instead, it decided that products imported into the Kingdom from GCC member states must have at least 40 percent local added value to enjoy preferential tariffs.
The official Saudi Press Agency said yesterday’s decision was taken as per the directive of Custodian of the Two Holy Mosques King Fahd. The move is part of the government’s ongoing economic reforms aimed at attracting foreign investment and creating more jobs for Saudis.
Economists and businessmen contacted by Arab News said the move would reflect positively on the market with direct effect on consumers. They said the decision would boost trade among GCC members with more benefits to the Kingdom as the leading Gulf trading partner.
The move comes at a time when Saudi Arabia is making serious efforts to join the World Trade Organization. “This is an economic move in the right direction and in the interest of the citizens. It is part of the steps that will qualify the Kingdom to join the WTO,” said Muhammad Al-Kheraiji, a prominent businessman.
Al-Kheraiji said it would drive Saudi industries to focus on quality, adding that a restructuring of national businesses and industries was required to be able to compete internationally. “Saudi products already enjoy a strong competitive edge,” he said.
SEC’s Secretary-General, Dr. Abdul Rahman Al-Tuwaijeri said the decision to reduce the tariffs was meant to strengthen the competitive edge of the Saudi economy and reduce the burden on citizens without affecting the industrial sector.
“The move is in line with international trend on more market freedom and reflects the Kingdom’s seriousness in amending its rules in tune with the international standards. It will further consolidate the Kingdom’s position regarding the WTO,” said Hussain Shobokshi, another businessman.
Osama Kurdi, secretary-general of the Council of Saudi Chambers of Commerce and Industry, described the decision as a “significant step” saying such measures would boost the national economy and fulfill WTO’s requirements on lowering tariff barriers.
The decision takes the Kingdom on the path of GCC customs union set for March 2005. While other GCC states aligned the custom duties at a uniform rate ranging from 5.5 percent on essential items and 7.5 percent on the rest of goods either in a phased manner or at one go, the Kingdom opted for a one go move thus going a step further with the new measure.
The lowering of custom tariff coupled with other economic reforms is expected to go a long way in luring back part of the estimated $800 billion in private wealth owned by Saudis and other GCC nationals abroad.
Shobokshi said the decision sought to protect the young industries until the time they become strong enough to compete. He called for stronger economic mergers and consolidated entities in the industrial and commercial sectors to allow Saudi products compete in the open and free world market under the WTO.
He hoped the move would encourage other GCC members to take the initiative and put on new ideas to boost inter-Gulf trade. On the ongoing talks with the European Union, the GCC’s biggest trade partner, Shobokshi said the European Union should take a further step regarding the illogical barriers laid by the EU against GCC products, especially Saudi petrochemicals.
“We shall wait for a positive initiative from the side of the Europeans as a reciprocal gesture toward this latest move by the Kingdom. Such step from the EU is essential to restore confidence and help bring in the free trade agreement that had eluded the two sides for years,” he said.
The SEC meeting endorsed the new telecommunications bill ending state monopoly in the sector and opening it up to foreign capital. On May 14, the Shoura Council adopted the measure which permits the establishment of shareholding telecommunications companies, without ruling out foreign investors from holding capital. A former member of the Council, Abdul Aziz Al-Suwayegh, told Al-Eqtisadiah daily at the time that “the bill aims firstly at breaking the monopoly over the telecom service,” which is controlled by the Saudi Telecom Co. (STC).
The SEC meeting also approved the organization of Saudi Telecom Authority and the principles and arrangements to shift employees of the Ministry of Posts, Telegraphs and Telephones to Saudi Telecom Company.
“The SEC also approved the proposals to accommodate secondary graduates in the country’s higher education institutions as well as the criteria to publish economic and financial statements,” Al-Tuwaijeri said. He said the decisions would be passed to the authorities to complete official procedures.
The SEC, considered a mini-Cabinet with several senior ministers, was established on Aug. 18, 1999, with the aim of developing the country’s economic and administrative systems. It has already taken a number of important decisions including those on the foreign investment law, the General Investment Authority, the Higher Tourism Authority, the new Umrah system, tourism visa rules and the real estate ownership law.
