Here’s a look at Saudi reforms planned for 2018

Saudi Arabia began transforming its economic and fiscal policies in 2017 to shake away the pressures of the past two years as cheaper oil prices and a widening budget deficit weighed on the country’s finances. With Crown Prince Mohammed bin Salman announcing reforms in quick succession, the Kingdom is now preparing to implement new policies and measures. 

Argaam lists some of the key changes that are coming in 2018.

Value-Added Tax

Starting January 1, Saudi Arabia will implement a 5-percent value-added tax on all transactions, with a few exceptions. Certain medicines and medical equipment are exempt, along with financial services such as loans and ATM usage. The Capital Market Authority (CMA) has said the levy will not apply to value of trading transactions.

Analysts expect the tax to add another revenue source for the government, and help boost its non-oil earnings. An estimate from Saudi Arabian Monetary Authority (SAMA) last year said that the country is expected to generate SAR 35 billion in new revenue.

World’s biggest IPO

Saudi Arabia is seeking to list up to 5 percent of its national oil firm Saudi Aramco’s shares on the Saudi Stock Exchange (Tadawul), along with on one or more international markets, in an initial public offering (IPO) that could raise $100 billion —the world’s largest ever.

After multiple reports claimed that the country was reconsidering the IPO plans, the Kingdom in September this year said that it will proceed with the share sale as scheduled in 2018. Stock exchanges from New York to London, Hong Kong and Japan are vying to be the venue, while the world’s biggest oil importers —China and India—have expressed interest in participating.

Women drivers

For the first time ever, women in Saudi Arabia will be allowed to start driving in June 2018. King Salman issued the decree last September, paving the way for driver’s license to be granted to women. The social reform is also expected to boost the country’s revenue as it saves on thousands of riyals in remittance by expat drivers every month. The move will also support the insurance sector, where the auto insurance segment remains the fastest-growing.

Movie theaters

Commercial cinemas are also coming to the Kingdom in early 2018 as the 35-year ban is lifted. Earlier this month, Ministry of Culture and Information announced that it expects 300 cinemas, with 2,000 screens, to open by 2030. The move is expected to contribute more than SAR 90 billion ($24 billion) to GDP. While the country’s mall operators are working on plans to include movie theaters, the Public Investment Fund (PIF) has signed a deal with US-based AMC Entertainment Holdings Inc. to explore opportunities in the entertainment sector.

Developing tourism

Saudi Arabia has reintroduced tourist visas, with the country allowing travel agencies in the category D to issue visas to tourists and for educational or medical treatment purposes. The move comes as the Kingdom pushes ahead with it plans to develop the industry as an alternative source of revenue. Among some of the biggest tourism projects planned in the country are: SAR 8 billion Souq Okaz project in Taif, the Red Sea Tourism Project and the Jeddah Downtown project, which has an estimated cost of SAR 18 billion.

Updates on NEOM

In 2018 more details are likely to be announced about the $500 billion NEOM project unveiled by Crown Prince Mohammad bin in October at a conference in Riyadh. Already the investor interest is high in the project, which will be located on an area of 26,500 square meters in northwest Saudi Arabia. Japan’s SoftBank Group Corp. is eying $15 billion investments in NEOM. Russia, too, is exploring investment opportunities.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com