JEDDAH, 7 September 2003 — The Saudi application for World Trade Organization (WTO) membership is nine years old, but after lengthy negotiations with a variety of entities it has finally been reported that the Kingdom is likely to join the international organization in early 2004.
The Kingdom recently signed 14 bilateral agreements with the European Union in Jeddah, seen as a sign of expediting the Kingdom’s accession to the WTO.
With this remarkable progress there is general public interest in the agreements and their provisions. So far relatively uninformed, the public is eager to know the pros and cons of membership, and specifically the influences that membership will have on the Saudi economy.
“Although I am majoring in a subject related to economics, I admit that I know very little about the agreement and its impact on our economy,” Eead Yamani, a 22-year-old student at King Abdul Aziz University in Jeddah, told Arab News.
He blames officials in the Ministry of Industry and Commerce and local economists, who have done nothing to inform the public, for his lack of knowledge.
“They are responsible for this lack of information. Both have the responsibility to provide the public with the needed information and to clear up some misunderstandings that are circulating about the treaty.”
Prominent Saudi businessman Wahib Binzagr told Arab News: “There is a persistent need for sources of relevant information. This information should be available to the largest possible segment of the economy and also among the largest number of citizens. The information should be introduced to the public so that everybody can understand it, be persuaded of its value, and therefore help to make the process flourish.”
When openness is one of the WTO cornerstones, the question becomes: Why have Saudi officials failed to inform the public fully?
Mohammed Al-Khereiji, a local, progressive businessman, attributed the information gap to a lack of professionals in global trade at the ministry level.
“It is happening this way because the ministry does not have enough information about the challenges posed by the WTO, and so they are simply unable to inform the public.”
International economists argue that because WTO agreements are complex, it is difficult to determine how they will affect the countries that adopt them and what impact the agreements will have on different industries and the people who work in them.
“This complication, along with certain other circumstances, has made it clear that the accession will produce both winners and losers with no particular fate assured,” said Binzagr. “Many countries have benefited greatly from membership, though some two billion people have suffered as well.”
Will integration into the WTO result in the Kingdom winning or losing? Will the Kingdom’s entry bring employment opportunities and economic growth to the country?
“That’s the billion-dollar question,” said Ismail Sajini, director of Sajini Research and Consultancy Center.
“Joining the organization will allow us to participate in an international club with 146 other members. Because it is a two-way treaty, we will be able to benefit as much as other members do. But it all depends on a set of factors. If we meet the high standards and criteria — and I think we are qualified to — we will gain a great deal.”
He explained his positive outlook.
“We have the latest advanced systems in many of our domestic companies. Our economy is adaptable because we have been familiar with ‘liberal’ policies for a long time and we somehow have a good financial capability. All these factors will keep us from being a victim.”
Sajini also expected that entry to the WTO would bring growth to the economy in the long-term and would create job opportunities.
At the same time, is it necessarily true that WTO membership will be the dazzling remedy for all the Kingdom’s economic problems?
“Joining the organization is not the ultimate goal,” says Binzagr. “It is only a way to a higher goal. Our process, after full WTO membership, should be guided by only one credo: We need to have a clear and controlled process in order to increase our gains from global trade.”
According to Binzagr, that process is “a comprehensive mechanism that functions on a basis of commitment, transparency and flexibility, and deals logically with internal and external variables and emergences.”
It is said in some quarters that the impact of entry will vary among different sectors of the national economy. Industries which rely on government subsidies will lose severely, while others, such as the gas and petrochemical industries, will get a bigger slice of the cake.
“Only industries with a competitive edge will survive Saudi Arabia’s entry into the WTO. In short, industries which work with efficiency and no government subsidies will benefit the most,” said Mohammed Al-Khereiji. “Industries based on such false economic premises, such as imported labor, imported raw materials and government subsidies, will collapse.”
“In the short term, the biggest impact of WTO will be on the Saudi private sector because the commitment the Saudi government has made to local private firms will apply also to multinational firms,” argues Dr. Bakr Koshaim, a member of the Shoura Council.
How, then, can the Kingdom redress the negative consequences of WTO membership as much as possible while safeguarding the positive aspects?
Binzagr called for an economic transformation. Both the weak private sector and the ailing state sector, he said, should be made more efficient and competitive.
“The approach should be made with a complete and clear vision. Two elements should be present for that ‘clear vision’ — addressing the likely prospects and ambitions and understanding the current challenges. In the light of these two, our approach will have to be how to function locally on global principles.”
Along similar lines, Al-Khereiji called for Saudi businessmen to understand the challenges confronting them in the coming accession phase.
“Saudi businessmen have to change. They have to be business initiators rather than business opportunists, taking into account the competitive edge of the Saudi economy to develop new industries which can compete in the global market,” he said.
Ending the ambiguity and confusion of the present commercial laws will also be important in increasing the expected gains.
“The most important thing now is to produce or revamp new regulations and legislation,” said Sajini, who also called for ending “useless and time-consuming” bureaucracy. “Bureaucracy is irksome; it could possibly shrink our gains from global trade. The different government bodies should all share integrated laws.”
Along with the importance of changing the domestic commercial laws, there are sweeping calls for other crucial changes in the judicial system. Reforming the judicial system is not merely imperative for joining the WTO, it is also instrumental for economic development and the flow of investment into the country. Many argue that reforms which protect capital and investors and facilitate judicial proceedings will have a great positive effect on the economy.
But will calls for reforming the judicial system fail because of possible reluctance from conservatives?
Ismail Sajini once had this concern but he said that he now had a possible solution.
“Officials should develop specialized courts in various areas of disputes. No one is calling for an end to Sharia law; what we want is to add courts to deal with commerce, labor, traffic and so forth.”
Al-Khereiji took a firmer stance on the issue.
“We have no alternative but to change our judicial system if we want to compete in the international market,” he said. “Saudi laws and the way they are implemented is a crucial element for Saudis to become integrated in the global market. The laws must be implemented to be efficient, swift, and assuring equal rights.”
“There is the political will to reform the judiciary system,” said attorney Mustafa Sabry, legal adviser for the Jeddah Chamber of Commerce and Industry.
He told Arab News that officials have established a joint committee with the Ministry of Industry and Commerce and the Saudi Chambers of Commerce and Industry, charged with developing new trade regulations and legislation and making them consistent with WTO requirements.
Minister of Commerce Dr. Hisham Yamani recently announced that special courts for financial and trade disputes will be developed, but he did not give a definite time frame.
