Trade threatens to emerge soon in the wake of intense economic tensions between Riyadh and Abu Dhabi and the escalation of the Gulf Co-operation Council’s six-nation conflict after Saudi Arabia set new import prices for its neighbors.
Taxes, which came into effect this month, range from 3 to 15% and apply to sales made by any company in the Gulf region whose employees do not include 10-25% of the country’s citizens. Riyadh said this made it impossible for its factories to be used by cheap foreigners.
But it is moving steadily towards the GCC’s traditional alliance, where most items from non-GCC countries have a 5% tax rate on GCC members – Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman – and in particular for free.
Traffic lines have been aided at the Saudi-UAE border as users are scrambling for new documents, including a form requiring state heirs to provide proof of where they are with their co-workers.
“This has blinded us; What you need to do is impossible, “said a senior official at the Dubai Family Cooperation Council.” This is the end of the GCC – what is it? “
Taxes form a recent boost in competition between Saudi Arabia and the UAE. Riyadh and Abu Dhabi have for many years shared regional goals, working together in an effort to convert to Islam, intervening in the Yemeni conflict in 2015 and imposing Qatari sanctions in 2017 after claiming to support Islamic repression.
But tensions have escalated since the UAE withdrew troops from Yemen in 2019 and Abu Dhabi’s refusal on Opec Conference this month approving the oil increase that Riyadh and Moscow approved and endorsed by other cartel members.
The economic crisis intensified as Saudi Arabia, led by Crown Prince Mohammed bin Salman, devised ways to boost its economy and diversify its oil supply, making its manufacturing sector more competitive with its neighbors.
The new tax government was “just” a record of practices used to promote “local issues”, a spokesman for the finance ministry told the Financial Times.
“This also applies to Saudi Arabian property and we hope that other GCC assets will be equally verified in order to receive the opportunity to sell GCC products and be pardoned,” the spokesman said.
“The UAE would not benefit from a single market like this,” said Mohammed al-Suwayed, chief executive of Razeen Capital, a technology company in Riyadh. “We are no longer benefiting from the destruction of other members.”
Indian workers are planning to board a bus after work in Dubai. Saudi Arabia says tariffs seek to prevent its industries from being controlled by cheap foreign trade in neighboring countries © REUTERS
In the UAE, where only about 10% of the 9m-10m population are citizens, companies say they are facing a serious problem. The Dubai leader said less than 1 percent of those used in his manufacturing business were Emirati. “No. [conditions] it’s impossible to follow: no designer has ordinary people, “he said.
The Saudi market made about 40% of its sales to its manufacturing company last year, he said. Already wrestling with Saudi manufacturers, who benefit from cheaper prices, the agency operates at a profit margin of at least 10%. “This is not the same – we need to go to another market,” he said.
The 15% price tag that his company, which provides construction services, offers to competitors in countries such as China and India to compete with regional manufacturers, he added.
“Such an issue is a tragedy,” one consultant said to a food producer who relies on the state for 75% of his business. “It has caused a great deal of confusion and fear.”
Like Saudi Arabia, the UAE has turned to manufacturing to help diversify its economy. The kingdom, with 35m, is its largest export market, with sales of about $ 20bn in the first three installments by 2020.
In Dubai, an economically diverse emirate, the attraction of some 30 free real estate agents has been available in nearby major markets such as Saudi Arabia.
Jebel Ali Free Zone, a major manufacturing and export center, is home to about a quarter of Dubai’s economy. In 2019, it operated at a cost of $ 95bn, equivalent to all intra-GCC sales.
Economists say that a coalition led by the GCC, rather than a rivalry between members, could be a better way to move economically and socially.
“This is a time for the opportunity to rewrite the law and forge a new international agreement and look forward to the future,” said Nasser Saidi, an economist at Dubai.
Creating a comprehensive alliance between jobs and goods could make the Gulf Arabs a global sector that can better communicate with other energy sources, he said.
“It’s important for everyone to go to the same market, let alone politics,” he said. “It took EU years for this to happen, and there were conflicts along the way – because it could take time.”
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