Strategy & highlights Saudi Vision 2030 goals to reform economy

Updated 18 July 2016

Strategy & highlights Saudi Vision 2030 goals to reform economy

DUBAI: GCC countries are facing budgetary problems, which could result in long-term deficits if not addressed.

While every GCC government has announced spending cuts to conserve budgets, conventional cost-cutting is only a short-term fix and could potentially slow a country’s growth over time, according to a recent study by management consultancy Strategy&, formerly Booz & Company.
For GCC governments to cut costs and grow simultaneously, Strategy& recommends adopting a Fit for Service framework. This approach would allow GCC government entities to achieve sustainable reductions in their budgets while also reinforcing investment in the services that are essential to long-term security and robust growth.
Fadi Adra, partner with Strategy& and a member of the public sector practice in the Middle East, said: “The GCC’s budgetary problems are not a cyclical condition that will resolve themselves with time. The price of oil for example, which contributes to three-quarters of GCC government revenues, has fallen to its lowest levels in over a decade, while the cost and demand for core public services continues to rise.”
Adra added: “Oil-based budgets however are also not viable over the long-term, whether or not the price of oil rebounds. To put this into perspective, even if GCC governments can grow non-oil revenues by 10 percent annually over the rest of this decade and the average price per barrel of oil returns to $50, their budgets would still need to be reduced by approximately $100 billion on an annual basis— this is 7 percent of the GCC’s total GDP — in order to eliminate fiscal deficits. This is why adopting a Fit for Service approach is critical for GCC nations.”
According to Strategy&, adopting a Fit for Service approach is driven by four actions — articulating a strategy, transforming the existing cost structure, building critical capabilities needed to execute the strategy funded by cost savings and reorganizing the operating model for optimal performance.
“For example, every GCC government should be able to articulate clearly a coherent way to service its constituents, quickly find savings to reduce deficit spending and release funds needed, maintain a multitude of capabilities to execute its strategy and develop the appropriate operating models aligned with the strategy,” said Ashish Labroo, principal with Strategy& and a member of the firm’s energy, chemicals and utilities practice in the Middle East.
Rawia Abdel Samad, director of the Ideation Center, a major think tank for Strategy& in the Middle East, said: “By adopting a Fit for Service approach, GCC governments for example can achieve 20 to 40 percent reductions in their cost structures.”
Some GCC governments have already taken steps to adopt initiatives aligned with a Fit for Service approach. In Saudi Arabia, for example, the government’s national transformation plan — Saudi Vision 2030 — has ambitious goals to reform various aspects of government.
Sevag Papazian, principal with Strategy& and a member of the digital business and technology practice in the Middle East, said: “It is easy to see why conventional cost-cutting has become the default solution to budgetary shortfalls in the public and private sectors.”


A sham Qatar deal could have cost ex Barclays exec $64 mln, court hears

Updated 16 min 38 sec ago

A sham Qatar deal could have cost ex Barclays exec $64 mln, court hears

  • Roger Jenkins stood to get 50 mln stg “good leaver” package -lawyer
  • Defense lawyers tell jury SFO case is misconceived, perverse

LONDON: A former top Barclays executive, on trial in London on fraud charges, would have risked a 50 million pound ($64 million) “good leaver” package if he had sought a criminal deal with Qatar during the credit crisis, a court heard on Thursday.
It would have been “lunacy” for Roger Jenkins, one of three men charged with fraud over undisclosed payments to Qatar during emergency fundraisings in 2008, to risk such accrued benefits and a job that had paid him 38 million pounds in 2007 alone, his lawyer told a jury at the Old Bailey criminal court.
The high-profile Serious Fraud Office (SFO) case revolves around how Barclays — one of the few major British banks to survive the credit crisis without direct government aid — raised more than 11 billion pounds ($14 billion) from Qatar and other investors to avert a state bailout as markets roiled.
Prosecutors allege that former top executives lied to the market and other investors by not properly disclosing 322 million pounds paid to Qatar, disguised as “bogus” advisory services agreements (ASAs), in return for around four billion pounds in two fundraisings over 2008.
Jenkins, the former head of the bank’s Middle East business, Tom Kalaris, who ran the wealth division and Richard Boath, a former head of European financial institutions, deny charges of conspiracy to commit fraud by false representation and fraud by false representation.
Lawyers for Jenkins and Kalaris told the jury the case against their clients was misconceived, perverse and illogical and that there was no evidence the ASAs were a sham or fake.
In brief opening speeches before the prosecution continues laying out its case, they alleged the defendants believed the ASAs were genuine agreements to secure lucrative business for Barclays in the Middle East — a region it was keen to exploit.
They said the agreements were side deals during emergency fundraising that June and October that had been approved by internal and external lawyers and cleared by the board.
“The unequivocal, repeated advice was that this was legitimate — providing the ASA was a genuine contract for the provision of benefits to Barclays,” said John Kelsey-Fry, a senior lawyer representing Jenkins.
Jenkins, who will give evidence later, had pursued and won the trust of Sheikh Hamad bin Jassim bin Jabr Al-Thani, the former prime minister of Qatar, and wanted to unseat Credit Suisse as the wealthy, gas-rich Gulf state’s preferred bankers, the jury heard.
Had Jenkins considered a fraudulent deal with Sheikh Hamad, the sheikh might have rung up Barclays bosses and said: “Neither I nor QIA (the sovereign wealth fund) are putting a penny in a bank like yours. I will never do business with you again,” Kelsey-Fry said.
Qatar Holding, part of QIA, invested in Barclays alongside Challenger, Sheikh Hamad’s investment vehicle.
The case against Kalaris, meanwhile, hung on three conversations he had had with Boath on the afternoon of June 11, 2008, that the prosecution had “fundamentally misunderstood,” his lawyer Ian Winter said.
When Kalaris told Boath: “Noone wants to go to jail here” and that lawyers would provide “air cover,” he was trying to ensure that a genuine ASA would be approved by legal experts as a legitimate means of paying Qatar for real value, Winter said.
All three men, aged between 60 and 64, are charged over the June fundraising. Jenkins, alone, also faces charges over the October fundraising.
The trial is scheduled to last around five months. ($1 = 0.7819 pounds)