Saudi private sec­tor to get $53bn boost

King­dom plans to bor­row $10-15bn in­ter­na­tion­ally in 2017

Kuwait Times - - INTERNATIONAL -

RIYADH:

Saudi Ara­bia’s gov­ern­ment plans to pro­vide 200 bil­lion riyals ($53 bil­lion) of in­cen­tives to the private sec­tor over the next four years in its drive to di­ver­sify the econ­omy be­yond oil, ac­cord­ing to an of­fi­cial plan­ning doc­u­ment. A re­form pro­gram launched this year, af­ter a plunge in oil prices slashed state rev­enues in the world’s top oil ex­port­ing coun­try, en­vi­sions the private sec­tor in­vest­ing tens of bil­lions of dol­lars over the next sev­eral years on projects from in­dus­trial zones and power sta­tions to hous­ing, schools and com­mu­ni­ca­tions.

But the will­ing­ness and abil­ity of private sec­tor com­pa­nies to in­vest in projects in an econ­omy which has tra­di­tion­ally re­lied on in­fu­sions of petrodol­lars by the gov­ern­ment has been a ma­jor un­cer­tainty in the pro­gram. “An in­cen­tives pack­age is pro­posed and set at 200 bil­lion riyals be­tween 2017 and 2020 to help boost eco­nomic growth,” said a doc­u­ment re­leased by the gov­ern­ment late on Thurs­day along with its 2017 bud­get plan.

An in­vest­ment fund will be es­tab­lished to pro­vide cap­i­tal that will fa­cil­i­tate in­vest­ments, the doc­u­ment said with­out giv­ing de­tails of the fund’s op­er­a­tions or the na­ture of the in­cen­tives. It said the in­cen­tives would be di­rected to­wards sec­tors that sup­ported eco­nomic growth and cre­ated jobs for Saudi citizens.

The doc­u­ment did not say how the gov­ern­ment would raise money to fund the in­cen­tives, but it out­lined a plan to in­crease the state’s non-oil rev­enues by rais­ing fees on for­eign work­ers and their de­pen­dents. About 10 mil­lion for­eign­ers live in the king­dom, in ad­di­tion to roughly 20 mil­lion lo­cal citizens.

Com­pa­nies now pay 200 riyals a month to em­ploy each for­eign worker above the num­ber of Saudi work­ers they em­ploy; from 2018, the fee will rise to 400 riyals per month, and it will in­crease fur­ther to 600 riyals in 2019 and 800 riyals in 2020.

Com­pa­nies will pay smaller fees for for­eign work­ers who num­ber less than their Saudi work­force. Ex­pats will pay fees on each of their de­pen­dents liv­ing in the king­dom, and the fees will in­crease grad­u­ally through 2020. While the higher fees will boost the gov­ern­ment’s rev­enues, they will also in­crease costs for com­pa­nies, which could hurt their abil­ity to in­vest.

Sep­a­rately, Saudi Ara­bia plans to bor­row be­tween $10 to $15 bil­lion from in­ter­na­tional mar­kets in 2017 and around 70 bil­lion riyals from the do­mes­tic mar­ket, a se­nior Saudi of­fi­cial told Al Ara­biya tele­vi­sion chan­nel. Mo­ham­mad Al-Tuwai­jri, sec­re­tary-gen­eral of the Fi­nance Com­mit­tee at the Royal Court, was speak­ing to Al Ara­biya in an in­ter­view aired yesterday.

The Saudi gov­ern­ment bor­rowed $17.5 bil­lion this year in its first in­ter­na­tional bond is­sue, and also raised a $10 bil­lion in­ter­na­tional loan. It of­fered about 20 bil­lion riyals of do­mes­tic bonds to banks ev­ery month through Septem­ber, be­fore sus­pend­ing those is­sues; fi­nance min­is­ter Mohammed AlJadaan told Reuters on Thurs­day that he ex­pected to re­sume do­mes­tic bond is­sues in the first quar­ter of 2017. — Reuters

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