Saudis ease for­eign­ers' own­er­ship in econ­omy as oil slumps

The Pak Banker - - MARKETS/SPORTS -

Saudi Ara­bia may fur­ther ease re­stric­tions on for­eign own­er­ship in the econ­omy and over­haul one of the world's most re­stric­tive visa sys­tems as the king­dom seeks to draw in­vestors to help re­duce its re­liance on oil ex­ports.

The world's big­gest oil ex­porter is con­sid­er­ing al­low­ing for­eign­ers to own 100 per­cent of a com­pany in at least four in­dus­tries in ad­di­tion to retail, the only one that's cur­rently per­mit­ted, Mo­hanud Helal, sec­re­tary gen­eral of the Eco­nomic Cities Au­thor­ity, said in an in­ter­view in Riyadh.

The role of for­eign in­vestors in the econ­omy has al­ways been a con­tro­ver­sial is­sue in Saudi Ara­bia, which fol­lows an aus­tere ver­sion of Sunni Is­lam. Yet as oil prices plum­met to around $30 a bar­rel, au­thor­i­ties are rac­ing to find al­ter­na­tives to rev­enue from crude ex­ports to fi­nance a bud­get deficit about 15 per­cent of eco- nomic out­put.

For­eign in­vest­ments in non-oil in­dus­tries are also cru­cial to to cre­ate jobs for Saudi na­tion­als in the pri­vate sec­tor in a coun­try where youth un­em­ploy­ment stands at about 30 per­cent. Al­most 90 per­cent of pri­vate-sec­tor jobs cre­ated in five out of the six-na­tion Gulf Co­op­er­a­tion Coun­tries be­tween 2000 and 2010 went to ex­pa­tri­ates, ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund. Na­tion­als filled over 70 per­cent of pub­lic-sec­tor jobs.

"The de­ci­sion had al­ready been made on some of the in­dus­tries," Helal said. The Saudi Ara­bian Gen­eral In­vest­ment Au­thor­ity, known as SAGIA, has iden­ti­fied about four sec­tors in which full for­eign own­er­ship may be per­mit­ted, he added with­out elab­o­rat­ing. Calls made to SAGIA af­ter of­fice hours weren't im­me­di­ately re­turned.

The slump in oil prices has al­ready pushed Saudi au­thor­i­ties to cut spend­ing, is­sue more debt and draw down the king- dom's for­eign-cur­rency re­serves. Of­fi­cials are also weigh­ing plans to sell stakes in state-owned en­ti­ties from hospi­tals to air­ports and even Saudi Ara­bian Oil Co., the king­dom's big­gest oil com­pany, known as Aramco.

The coun­try is also re­view­ing its re­stric­tive visa sys­tem by look­ing for ways to ac­cel­er­ate the process of is­su­ing work and visit per­mits, ac­cord­ing to Helal, who heads the reg­u­la­tory body gov­ern­ing four eco­nomic cities, in­clud­ing King Ab­dul­lah Eco­nomic City.

"It is a very im­por­tant and much needed step," said Mo­hammed Al­suwayed, the Riyadh-based head of cap­i­tal and money mar­kets at Adeem Cap­i­tal. "We need for­eign in­vestors to con­trib­ute to the ex­pan­sion of the Saudi econ­omy, specif­i­cally the pri­vate sec­tor and for them to bet­ter un­der­stand what or where they are putting their money in, they need to be al­lowed bet­ter ac­cess into the king­dom."

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