Interview: Ahmed S Al Rajhi
How will Vision 2030’s fiscal reform agenda affect the private sector in the short term?
AHMED S AL RAJHI: Although postponing the fuel subsidy reform to 2023 is positive for the business sector, the Fiscal Balance Programme 2020 – which includes value-added tax, expatriate labour fees, energy subsidy removal and municipal fees – is expected affect economy adversely. Domestic production costs will increase relative to imported products, the domestic private sector’s competitiveness will dampen and, as a result, the balance of trade will be adversely affected. Moreover, private companies’ turnover and profit margins will weaken, which may force many businesses to exit the market.
Therefore, we advocate for the government to absorb fiscal adjustment costs by introducing a parallel policy plan with several strategic objectives. These include better development of a qualified vocational labour force, fairer labour regulations that determine businesses’ and workers’ responsibilities, technical assistance to start-ups and improved provision of soft loans for business development. At the RC we developed a list of five strategic recommendations to roll out the Fiscal Balance Programme.
Which sectors are best equipped to take on a greater role to help boost the non-oil economy?
AL RAJHI: Vision 2030 aims to increase the private sector’s share of non-oil GDP from 40% to 65%. First, this will require local investors to enhance production capabilities and investment in sectors with a competitive advantage over their regional and global counterparts. ICT, including artificial intelligence and robotics, is a key example of this, as it will be driven by mega-projects and will be given the opportunity to compete globally. Second, the automobile, shipbuilding and military spare parts industries offer major opportunities. Third, transport is expected to grow on the back of major domestic and regional rail projects. Fourth, both religious and local tourism is still less developed, and is projected to benefit from the infrastructure projects being rolled out. Fifth, heavy industries, such as iron and steel businesses, have been targeted as downstream opportunities for national companies. Sixth, the aforementioned sectors will inevitably act as a catalyst to boost non-oil economic development.
How might Saudi companies respond to the rising level of international competition?
AL RAJHI: The government’s decision to allow fully foreign-owned businesses to operate and compete in the economy could negatively affect local business, which has been granted subsidised fuel and energy prices for decades. However, international competition will drive the private sector to develop more efficient methods of production – and leverage e-commerce platforms and other technologies – to scale up while minimising costs. Greater attention to optimisation is necessary to support and encourage small and medium-sized enterprise (SME) development. The new General Authority for SMEs was established to underpin this new direction, and we hope it will have a tangible effect. Lastly, mergers and acquisitions will be one of the critical solutions for coping with international competition.
What sectors present the greatest female employment opportunities going forward?
AL RAJHI: Women’s employment has long been constrained by socio-economic challenges, such as adverse social customs and labour mismatches. In the past few years, however, employment has been rising steadily, driven by two major trends: the need for development in additional strategic sectors and compliance with increasingly stringent nationalisation requirements. Segments related to trade activities, especially retail enterprises, SMEs, pharmaceutical companies, physio-therapeutic and medical firms, educational institutions, and tourist and logistics enterprises are set to benefit most from the greater female labour participation.
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