Houthi Militias Attack Makkah, Lagarde’s Visit and A Peaceful Nuclear Deal
On Friday, Houthi militias targeted the city of Makkah with a Scud ballistic missile, an act that caused fury among citizens. In another update, Saudi Arabian troops may join international troops fighting in Al Raqqa outside Mosul, in the international war against Daesh in Iraq and Syria.
The Kazakh president’s visit this week resulted in signed a number of deals (feedstock and agriculture) between the countries, and an MOU for peaceful use nuclear agreement. Of course, he met with everyone he should meet, princes, ministers, etc.
Another visitor in Riyadh was the IMF managing director Christine Lagarde. Her visit coincided with GCC finance ministers’ meeting. So far, no outcome of the deal between GCC finance ministers was announced. The deal is to finalise the introduction of value added tax, and has been approved on excise levies – an important step for the implementation process. Lagarde, who hailed the reforms taken so far, said that countries have begun to control their public-sector wage bills, and most have reduced capital spending to adjust the GCC economies to lower crude oil prices.
Lagarde met with King Salman and Prince Muhammed bin Salman to enhance cooperation between the IMF and Saudi Arabia, and to discuss the Transformational Plan 2020, Vision 2030 and its implementation phases. As Bloomberg announced this week, OPEC members must reduce oil production by 1.3 million barrels to stabilise their economies.
At the Stability Seminar organised by SAMA and the CMA, Saudi Finance Minister Ibrahim Al Assaf said that the successful issuing of bonds last week will be followed by other effective steps to reduce debts. Saudi Arabia has yet to decide on the size of future debt issuances, but will not be limited to bonds only. Part of it will be sukuk.
According to IMF forecasts, Saudi Arabia is expected to run a 13% GDP fiscal deficit in 2016, and 9.5% in 2017. So far, Saudi Arabia has financed its deficits by drawing down its foreign reserves by more than $170 billion over the past two years, and issuing billions of riyals of domestic debt. It tapped the international loan market earlier this year with a $10 billion syndicated facility. Gross government debt will rise from 5% of GDP in 2015 to 19.9% in 2017. Al Assaf sees the Saudi GDP growth forecast as “reasonable”.
The banking sector has been the backbone of the stock market’s recovery since Saudi Arabia successfully conducted the bond sale last week. An independent investment advisor said that the bond sale coupled with more stable oil prices is giving investor confidence to return to the market.
Saudi Arabia, which has relied heavily on sale of oil for revenues, plans to diversify its hydrocarbon-dependent economy and add new sources of revenue here comes the importance for implementing VAT.
Al Assaf said that Saudi Arabia enjoys strong balance sheets and indications of solid financial safety, banks enjoy relatively high level of capital adequacy and liquidity ratios. Also, politics related to financial stability need to be reviewed and modernised. Only actions will enable Saudi Arabia to adapt to current challenges, which some government agencies have already started to do as their part in Vision 2030, succeeding in reducing the pressures on the economy.
The updated Nitaqat program will be issued on 11th December. The system gets updated regularly and is getting more complicated each time by developing new sub-categories. A lawyer in Riyadh said that the programme is running at full speed but gets stuck because many job applicants lack the necessary skills for their jobs. Unless more training is provided, Nitaqat might not to achieve its goal under Vision 2030.
In the same vein, the Technical and Vocational Training Institute (TVTC) and Human Resources Development Fund (HRDF) are cooperating with each other. The TVTC signed an agreement with Maaden to train 550 youth in the northern border region. Currently, the unemployment in Saudi Arabia stands at 11.7%, and the government aims to reduce this to 9.3% by 2020.
Singapore’s SATS, the biggest ground handler at Changi Airport, announced that it will invest SAR 108 million at Dammam Airport. The company aims to build an air cargo facility at King Fahd International Airport Cargo under a concession that is valid for 22.5 years. It will also build a new 20,000 m2 cargo terminal near the airport.
Enhancing facilities for consumers, the Saudi Electric Company SEC requests proposals from prequalified companies for its first major standalone renewable energy projects and photovoltaic projects located in Al Jouf and Rafhina in the north of Saudi Arabia.
With all these new projects happening in Saudi Arabia, a project manager said that pre-management at the highest level is the key to improve projects delivery. Saudi Arabia witnessed a gain of almost $7 billion worth of projects that were added to the index. The most significant new scheme was Saudi Aramco’s $1.9 billion Ras al Hair maritime yard. MEED also announced that Saudi Aramco might delay awarding a $300 million pipeline deal or retender the scheme as it mulls changing some of the specification of the project.
It is interesting that Spanish firm Tecnicas Renuidas TR has emerged as by far the most successful contractor in MEED’s latest survey of engineering, procurement and construction EPC awards in the MENA region for the hydrocarbon sector. TR picked up $5.38 billion worth of work between 2015 and 2016 across the region, twice more than UK-based Petrofac, who came second.
This week’s transportation railway sector news came from NSR, the North-South passenger railway line, that will begin commercial operations in 2017. The 1,418 km line runs from Riyadh to Al Qurayyat passing Al Maajme and Hail.
MEED commented on Saad Hariri’s strange decision to endorse presidential candidate Michel Aoun, which sent shockwaves through Riyadh following Saudi Arabia’s years of political and economic alignment with Hariri’s 14 March bloc, not only because of his historic relationship with Saudi Arabia, but also because it goes against his domestic political position. Riyadh’s influence in Lebanon has been seen as a strategic diplomatic position safeguarding Saudi Arabia from Hezbollah’s increasing role in supporting Bashar al-Assad’s Tehran-backed regime.
Saudi Arabia’s financial influence was also recently undermined by the Egyptians when diplomats endorsed a UN vote against the Saudi position on Syria. Saudi Arabia has pumped billions of dollars into Egypt and Lebanon’s economies, with the former becoming increasingly dependent on Saudi aid amid an economic crisis. Political analysts have previously said that the Syrian war is causing a major shift in political alliances in the region.
80% of foreign exchange offices announced this week that they have stopped or will stop dealing in Egyptian pounds (buy SR20 and sell SR30) because of difficulties expecting more backup from the weak Egyptian economy.
The Organisation of Statistics said that living expenditure in Saudi Arabia remained almost stable at 137.9 points in September 2016 from 133.9 points in September 2015. The raise was in clothes (0.7%), F&B (0,3%), telecom (0,2%). while there was a decrease in services, hotels and restaurants, health, and education.
Disappointing news come from the National Council’s female side. Work isn’t successful for representatives. In Jeddah, one representative resigned over seating orders for women in the Council. Within the community, there is little or no interest from women in the Council’s tasks. Critics say that no results can be seen so far, complaints are not followed up.
One female member of Makkah Council said that they are doing their best to deal with complaints and increase interest in the Council’s work, but implementation remains difficult. This leaves a big question mark on the success of the National Council experiment.
On the international level of Saudi females, Sameera Aziz was elected from among 158 as the director of the International Mathematics Association, as new members were also elected. Aziz is also an artist, who produced and scripted a Bollywood movie, and she has written newspapers columns.
The General Authority of Statistic revealed that over half a million Saudi men have more than one wife – for various reasons. Some because religion allows it, while some seek sexual, intellectual and social fulfilment that they do not get from their first marriage, while others lack respect and appreciation, have health problems, infertility, and some come from families were polygamy is common (to boost manhood).
In most cases, the first wife is affected negatively and is not treated as well as the new wife. The statistics showed that the age group 45-49 years is the biggest with 2 wives, followed closely by 35-39 years (who may have 3 wives), and the least men with two wives were the 20-24 years.
But polygamy isn’t only a Saudi issue. In Germany, a Syrian refugee is costing German tax payers 30,000 euros a month, having fled from Syria to Germany with his 4 wives and 22 children. German law does not acknowledge polygamy, so the first wife got the status of wife, while the others were placed with their children in a different city as his girlfriends. From the report is was not clear who will carry his transportation fees for his visits to his ‘’wives’’.