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Old 01-23-2006, 11:21 PM
DW Simpson DW Simpson is offline
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Default Saudi Arabia enters the WTO

I must have missed this memo.

Saudi Arabia's WTO Commitments to Help Liberalize Its Economy

Arab News - 02/01/2006

JEDDAH, 2 January 2006 — Following 12 years of negotiations, Saudi Arabia finally made its way into the World Trade Organization (WTO) on Nov. 11. As a result of the accession, the stock market surged to unprecedented levels. It is believed that more benefits are on the way as soon as trade barriers to Saudi petrochemicals fall.

However, the Kingdom is bound to make further legal and institutional commitments in order to improve its business landscape and to cope with the challenges that WTO rules would impose. Saudi Arabia's commitments are a response to the WTO's three major agreements: GATT (General Agreement on Tariffs and Trade), GATS (General Agreement on Trade in Services) and TRIPS (Trade-Related Aspects of Intellectual Property Rights).

Commitment to WTO

The acceptance of Saudi Arabia as a member in the WTO came as a result of the Kingdom's economic reforms and trade liberalization efforts in recent years. But as a result of its WTO-accession negotiations, Saudi Arabia agreed to undertake further commitments to broaden the liberalization of its economy. According to a WTO statement issued regarding Saudi Arabia, the Kingdom agreed, in general, to eliminate any non-tariff measures that "cannot be justified under WTO rules while maintaining the right to restrict the importation and exportation of a certain number of goods and services in order to protect public morals, the life and health of population, and national security interests."

Saudi negotiators ensured that alcohol, pork products, pornographic materials and 65 other religiously forbidden goods will not find their ways into the Saudi market.

Saudi Arabia is also committed to give equal national treatments to local and foreign investors. However, the Saudi negotiators ensured that the taxation system will differ between them. Zakah (Islamic tax) will be applied to the local investors whereas state tax will be applied to the foreign," says Minister of Trade and Industry Dr. Hashem Yamani.

The minister adds, "the Kingdom gave priority to certain issues through the negotiations since there are several sectors that employ large number of Saudis and the Kingdom wants to protect them unless we are required to open those sectors." Land transportation is among the sectors that got the government protection.

Tariff Levels

In the area of goods, Saudi Arabia committed its self to the following:

• Gradually lowering trade barriers and increasing market access for foreign goods. Saudi Arabia has been given a period of ten years to implement this provision, and it is expected at the end of the period to see that the average bound tariff level for agricultural goods will have fallen to 12.4 percent and 10.5 for non-agricultural goods. Yamani mentions that there are 7,177 goods that the Kingdom trades within WTO member states, and it agreed to lower tariffs for 11.25 percent of these goods in the next five years. The tariff levels for the rest will remain unchanged for now.

• Saudi Arabia agreed that it would not maintain any export subsidies on agricultural products. The press release shows that the highest rates for agricultural goods in the Kingdom are to be applied to tobacco and dates. For non-agricultural goods, the highest rates are to be applied to woods, iron and steel.

GATS Commitments Affect

Three Major Sectors

Under trade in services, Saudi Arabia agreed on several issues covering its largest service sectors: The financial and telecommunication sectors. The financial sector, the country largest service sector, got the lion's share in the negotiations.


The Kingdom gave the green lights for foreign insurance companies to have full presence in the Saudi market and operate its branches directly. Additionally, the government will permit foreign insurance companies to establish locally incorporated cooperative insurance joint-venture companies. The government has limited the ownership of foreign partners in joint-venture insurance companies to 60 percent. Furthermore, the government agreed on giving all existing operational foreign insurance companies in the Kingdom a transition period of three years to transform their business entities into one of the following two forms. The first form is a Saudi cooperative insurance company, and the second form is a local branch operated directly by the foreign company. The government allowed the existing firms to continue their operations during the transitional period and that includes providing new services and attracting new clients.

• Banking

The Saudi government agreed on opening its banking sector for foreign competition. Foreign banks are permitted to either form local joint-venture companies with an increased foreign equity cap of 60 percent, or to open direct branches in the Kingdom. The government, in addition, allowed for asset management, financial advisory by non-commercial banking financial institutions, and it allowed foreign financial institutions to engage in financial brokerage. The Saudi government had issued licenses for ten foreign banks to open direct branches and operate fully in the Kingdom.

The list of banks includes BNP Paribas, J.P. Morgan, Deutsche Bank, the National Bank of Kuwait, the National Bank of Bahrain, Emirates Bank, Gulf International Bank, State Bank of India and National Bank of Pakistan. In 2005, only French BNP Paribas and Emirates Bank opened branches in the Kingdom. British giant HSBC and the Swiss Credit Suisse were the only two foreign banks to obtain licenses for financial brokerage services in the Kingdom in 2005.

• Telecommunication

Turning to the second service sector, the government is allowing up to 70 percent foreign equity ownership in the country's telecommunication sector within three years from its accession, according to the WTO press release. The government will apply this commitment to the basic telecommunication and to the value-added telecom services, according to the press release. But the government required that public communication services must be provided through a join-stock company.

• Intellectual Property Rights

The protection of intellectual property rights is a major commitment for the Kingdom under WTO rules. Saudi Arabia agreed to the application of technical regulations and standards that will restore investors' confidence in the Kingdom and protect their technological investments. As a direct result to the Kingdom agreement on TRIPS agreement, Intel Capital, the investment arm of Intel Corporation, the world's largest computer chipmakers, announced that it is teaming up with the Saudi Arabian General Investment Authority (SAGIA) in establishing a $100 million venture capital fund to invest in technology companies that are operating in or connected to the Gulf and Saudi market.
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Old 01-24-2006, 09:49 AM
Maxprime Maxprime is offline
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Not to be insensitive to the miners lost in the most recent accident, but it speaks to America's mental simplicity that the story of them is still a headline over this.
"Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty or Safety."

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Old 01-24-2006, 01:32 PM
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Aaron Brachowitz Aaron Brachowitz is offline
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Um, does this mean that SA's participation in the world's largest price-fixing cartel will be ending?
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Old 01-30-2006, 08:43 PM
DW Simpson DW Simpson is offline
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When I first saw this, I thought it was an Onion story. I'm surprised at the lack of interest.
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Old 01-31-2006, 02:47 AM
Utopial Utopial is offline
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EU Trade Commissioner Peter Mandelson warned Saudi Arabia that the bloc would take action at the World Trade Organization if the government supported the boycott of Danish goods, the European Commission said.

Mandelson told a Saudi official that any Danish boycott would be a boycott of the European Union. “He made it clear that if the Saudi government had encouraged the boycott, Commissioner Mandelson would regret having to take the issue to the WTO,” said EU spokesman Peter Power.

The Saudi official told Mandelson that the government had not encouraged the boycott.
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