Free Trade Agreement With Saudi Arabia



Free Trade Agreement With Saudi Arabia

Both objectives are being pursued through intergovernmental efforts to reorganize Saudi Arabia`s business environment. Changes to the legal and regulatory environment governing trade and investment promise a long-term vision of economic growth, even if concrete short-term results are not yet assured. The dominant position of oil in the export portfolio means that there is a direct link between the price of oil and the health of the country`s trade indicators. In 2012, when oil prices were close to their record high, the trade surplus amounted to $247 billion, according to the Saudi Monetary Authority (SAMA). After a significant drop in benchmark oil prices, the trade balance fell to a low of $44 billion in 2015. During this period, the current account balance also fell into the red for the first time since 2009, with a negative value of $57 billion in 2015 and $24 billion respectively in 2015 and 2016. The episode recalled the importance of economic diversification – a long-term goal of hydrocarbon-dependent economies around the Gulf. The kingdom`s recent response to this challenge is contained in the Saudi 2030 Vision, the strategic plan that guides the country`s economic and social development. One of the three key pillars of the strategy is to establish the kingdom as the “epicentre of trade and the gateway to the world” and to take advantage of its strategic position linking the three continents of Europe, Asia and Africa. These efforts require a comprehensive restructuring of the Saudi economy, an increase in non-oil government revenues of SR 163 billion ($43.5 billion) at the time of the drafting of the project in 2016 at SR1trn (US$266.6 billion) by 2030 and an increase in non-oil exports as a percentage of non-oil revenues from 16% to 50%.

In late 2018, the kingdom unveiled plans for a port project in Arar, which has a common border with Iraq. The development of sR259m (US$69 million) will include an area of 1.7 m2 and will include a logistics area that will serve as the kingdom`s northern economic gateway to markets in Europe and Asia. In October 2017, the kingdom officially launched a new commercial justice system with sites in Riyadh, Djiddah and Dammam. Specialized chambers of commerce have also been established in public courts in a number of cities. The Department of Justice has launched a “paperless courts” project that, in early 2018, reduced paper proceedings by about 45% and reduced the time it takes for court orders to be 72 hours from two months to 72 hours. In October 2018, according to the ministry, the new judicial trade system issued between 44 and 190 judgments per day. The Kingdom`s trade efforts are aimed at building on an already well-developed structure of bilateral and multilateral agreements. Saudi Arabia has been a member of the World Trade Organization since 2005 and its position in the Arab Wholesale Area gives it privileged market access in 17 MENA economies. As a member of the GCC, Saudi Arabia benefits from the customs union agreed by the bloc in 2003 and from the free trade agreements signed by the GCC with countries such as Syria and Singapore.

A notable exception to this rule is the production of food. While most foodstuffs are not convenient for importing from the United States, where they are relatively cheap, the removal of trade barriers between Arab states can lead to lower prices for regionally grown foodstuffs and protests among farmers. [Citation required] The Foreign Investment Act, revised in 2000, allows foreign investors access to all sectors of the economy, with the exception of those on a negative list including oil exploration, drilling and production. Investments can be made through a joint venture with a Saudi partner in these sectors or as 100% foreign companies in open sectors. Over the past ten years, the investment conditions set by law have been gradually liberalised, notably by the removal of minimum capital requirements initially linked to undue agricultural projects.