JEDDAH, 12 December 2005 — Saudi Arabia formally joined the World Trade Organization (WTO) yesterday, becoming the trade body’s 149th member and setting the stage for the Kingdom to play a significant role in global commerce.
The Kingdom’s formal WTO accession came a month after it was admitted by its member governments on Nov. 11, following 12 years of intense negotiations, and just two days before a key summit in Hong Kong.
WTO Director General Pascal Lamy hailed the membership of Saudi Arabia, which is the world’s 13th largest merchandise exporter and 23rd largest importer.
“This is a historic event for the WTO,” said Lamy, adding that Riyadh’s membership would pave the way for a stronger multilateral trading system.
A high-level Saudi delegation led by Commerce and Industry Minister Hashem Yamani has arrived in Hong Kong to attend the WTO ministerial meeting as a full member. The team includes Transport Minister Jabara Al-Seraisry; State Minister Abdullah Alireza, who is deputy chairman of the Saudi negotiating team; Abdul Wahab Attar, the Kingdom’s permanent representative to WTO in Geneva; and Prince Abdul Aziz ibn Salman, assistant minister of petroleum and minerals, who played a leading role in accession talks.
The General Council Chair, Ambassador Amina Mohamed of Kenya, congratulated members for approving the accession of Saudi Arabia. “It is a great honor for me to witness the constructive spirit in which these negotiations have been completed. Members have taken not only a major step toward better international economic cooperation but have also allowed the WTO to become more universal,” she said.
Saudi Arabia has been negotiating its membership since July 1993. As a result of the negotiations, the Kingdom has agreed to undertake a series of important commitments to further liberalize its trade regime and accelerate its integration in the world economy, while offering a transparent and predictable environment for trade and foreign investment in accordance with WTO rules.
Saudi Arabia will eliminate any non-tariff measures that cannot be justified under WTO rules while maintaining the right to restrict the import and export of a certain number of goods and services for reasons that include protecting public morals, the life and health of the population and national security interests. It has also agreed to review the list of banned imports on an annual basis.
In accordance with the agreement, the Kingdom will allow foreign insurance companies to open and operate direct branches in the country. A three-year transition period will be given to existing foreign insurance providers to convert to either a Saudi cooperative insurance company or to a direct branch of a foreign insurance company.
Commercial presence of banks will be permitted in the form of locally incorporated joint-stock companies or as international bank branches. The foreign equity cap for joint ventures in banking will be increased to 60 percent. Within three years from accession, Saudi Arabia will allow up to 70 percent foreign equity ownership in the telecommunications sector.
Faisal Alsayrafi, president & CEO of Financial Transaction House, said the WTO membership was a reward for the economic reforms and structural adjustments carried out by the Kingdom in the past years.
“Becoming a member of the global community will present various benefits and challenges to all sectors of the Kingdom,” he added, saying that WTO membership will help bring more domestic products to the global marketplace. It will also result in less dependence on the oil industry, increased inflow of foreign direct investments and preparing the Saudi riyal for free float, thus decreasing the pegging subsidy, he said.
“WTO accession is perceived to be a strong driving force to enhance the efficiency and development of private and government sectors. Achieving such international standards will lay the foundation for Kingdom’s future development and prosperity of its upcoming generations,” Alsayrafi said.
Riyadh-based international business consultant Salim Ghalayini said international competition would encourage national firms and local expertise to become more qualified and competitive. “Business disputes resulting from operations in Saudi Arabia are still a concern to multinational firms,” Ghalayini said. “This move will dilute such concerns. The bottom-line is an excellent move that Saudi Arabia cannot afford to lose, but we have to be patient during the initial teething stage,” said Ghalayini.
