PARIS: French Finance Minister Bruno Le Maire called Thursday for EU leaders to heed a “wake-up call” on a plan to tax US technology giants, amid signs of growing resistance to the French-led initiative.
“I urge my European counterparts to hear the wake-up call; that they listen to what European citizens want,” Le Maire told France 2 television.
The tax, which Paris hopes to implement early next year, targets multinationals which declare their revenues from across the 28-member European Union in a single low-tax jurisdiction, depriving other countries of billions of euros in fiscal revenue.
It would mainly affect US companies with worldwide annual turnover above €750 million ($870 million), such as Facebook, Google, Twitter, Airbnb and Uber.
“European citizens want justice, they want fiscal justice,” Le Maire said.
“They don’t understand why we allow companies like Google, Amazon and Facebook pay 14 percentage points less in tax than small and midsize businesses, or a European company,” he said.
The tax is expected to be high on the agenda as EU and eurozone finance ministers meet in Vienna this weekend.
But France’s proposal, which would require backing by all EU members, appears to be running into resistance.
Germany’s Bild newspaper reported Wednesday that Finance Minister Olaf Scholz, who had given his backing to the plan, now believes that “demonization” of tech giants was “not efficient.”
Bild cited an internal ministry note which said that “publicly declaring that companies like Google, Apple, Facebook and Amazon should pay taxes on their revenues is not defendable.”
Yet in a press interview Thursday, Scholz denied reversing his stance, while indicating he was considering alternatives.
“There are several proposals, which all have their advantages and disadvantages,” he told the Augsburger Allgemeine.
“But it isn’t the kind of solution that just comes to you while in the shower one morning,” he said.
Asked about Berlin’s stance, Le Maire played down the reported divergences.
“The Germans have been at our side since the beginning to start taxing digital giants. I’m convinced they will support us all the way,” he said.
France urges ‘wake-up call’ on tax for US web giants Google, Amazon and Facebook
France urges ‘wake-up call’ on tax for US web giants Google, Amazon and Facebook
- The tax, which Paris hopes to implement early next year, targets multinationals which declare their revenues from across the 28-member EU in a single low-tax jurisdiction
Saudi Arabia’s fintech sector driving digital transformation
- More than $1 billion has been invested in local fintech firms, says report
CAIRO: Saudi Arabia’s fintech sector has made significant strides as it nears its goal to become a regional financial hub, according to a report by Arthur D. Little.
In its latest study titled “Realizing Potential of Fintech in Kingdom of Saudi Arabia,” the international management consulting firm highlighted the rapid growth and innovation within the sector, spearheaded by initiatives such as Fintech Saudi.
Launched in April 2018 by the Saudi Central Bank, also known as SAMA, and the Saudi Capital Markets Authority, Fintech Saudi has been a pivotal force in promoting the Kingdom as the leading fintech hub in the Middle East and North Africa.
The initiative includes programs such as an accelerator, career fair, fintech tour, and summer sessions, contributing to a 20-fold increase in the number of fintech companies in the Kingdom since the program’s establishment.
To date, more than SR4 billion ($1 billion) has been invested in local fintech companies, with over 100,000 individuals participating in related events and training programs, the report said.
The adoption of a national strategy in May 2022 marked a significant advancement in the country’s fintech sector.
The strategy is built on six pillars, which include establishing the Kingdom as a regional fintech hub, fostering a regulatory environment conducive to growth, providing funding for startups, enhancing skills training, accelerating support infrastructure, and promoting local and international collaboration.
Ambitious goals
The Vision 2030 goals include the establishment of at least 525 fintech companies by 2030, up from 200 in 2023, the creation of 18,000 fintech job opportunities, up from approximately 5,400 in 2023, contribute SR13.3 billion to the gross domestic product, a substantial increase from around SR3.75 billion in 2023, and achieve SR12.2 billion in direct venture capital contributions, compared to SR5.2 billion in 2023.
Fintech Saudi has catalyzed this growth through various initiatives, including the Fintech Accelerator Program, the Fintech Saudi Innovation Hub, and an online Fintech directory.
Additionally, the establishment of a fintech regulatory sandbox by SAMA has allowed for controlled live testing of fintech innovations, easing their transition to the open market. Further boosting the sector, the Saudi Venture Capital Co., backed by CMA and the Financial Sector Development Program, has launched a SR300 million fund focused on fintech startups, with plans to invest an additional SR6 billion in startups and small and medium enterprises across various sectors.
So far, SVC investment in 35 VC funds has facilitated over 900 deals and SR1.9 billion in investments. Additionally, the Saudi National Technology Development Program has introduced the Technology Development Financing Initiative, providing debt funding to support startups.
A cashless society
“Saudi Arabia has embarked on a journey to transform society to be less dependent on cash transactions,” the report noted, highlighting the FSDP as instrumental in this shift by fostering a regulatory environment conducive to the growth of payment companies.
The ambition of Vision 2030 is notably high, aiming to increase the proportion of non-cash transactions to 80 percent by 2030, up from just 18 percent in 2016.
Remarkably, by 2021, cashless payments constituted 62 percent of all transactions, significantly surpassing the interim targets, the report stated.
Saudi Arabia has embarked on a journey to transform society to be less dependent on cash transactions.
Mohammad Nikkar, principal at Arthur D. Little
This rapid adoption has been supported by the integration of innovative payment solutions, including digital wallets, local transfers, QR code payments, and the SADAD system for bill payments.
“According to data released by SAMA, digital wallet usage has seen an exponential rise from 315,000 in 2018 to 17 million by 2022, representing over half of Saudi Arabia’s population,” the report stated.
Initially, bank transfers dominated as the primary method for topping up these wallets, but by 2022, around 80 percent of top-ups were being made via debit or credit cards, indicating a shift in consumer behavior.
The report also sheds light on the increasing reliance on digital wallets among expatriates for international transfers, with non-Saudi users of digital wallets increasing from 17 percent in 2018 to 45 percent in 2022.
Among the leaders in this burgeoning market are stc pay and urpay. stc pay, in particular, has distinguished itself as the first fintech unicorn in the Kingdom, with a notable 25 percent year-on-year increase in profits in 2022, as stated in the report.
Alternative financing
The report, co-authored by Mohammad Nikkar, principal at Arthur D. Little, and Arjun Vir Singh, partner at the firm, delved into Saudi Arabia’s alternative financing sector, notably buy now, pay later and debt crowdfunding, which has become the second-largest fintech subsector after Saudi Payments.
BNPL usage has surged from 76,000 customers in 2020 to over 10 million in 2022, with market leaders like Saudi-based Tabby
and Tamara expanding across the Gulf Cooperation Council, the report explained.
Debt crowdfunding is also growing as a vital funding source for SMEs. Since 2019, investors have issued over 1,800 loans worth more than SR1.1 billion, with SR770 million disbursed in 2022 alone.
However, challenges persist with rising interest rates and fluctuating approval rates.
Challenges
“While the future for fintech in Saudi Arabia looks bright, there are still some important challenges to overcome,” the report stated.
Increasing Saudi Arabia’s visibility on the international stage is crucial. The report emphasizes the need to enhance the Kingdom’s global profile by articulating its unique fintech ecosystem offerings to attract more global entrepreneurs and investors.
“Streamlining regulatory frameworks. Efforts to simplify the setup and licensing processes are underway to create a more navigable regulatory environment for fintech entities. Continued enhancements in this area will support both local and international ventures,” the report added.
Furthermore, expanding funding avenues is also essential. The development of more accessible financial mechanisms such as accelerators and grants is expected to invigorate the investment climate, allowing a diverse range of fintech initiatives to flourish, the report explained.
Addressing the talent gap is also a priority as strategies should be implemented to cultivate local expertise and address challenges like high turnover and competitive salary demands.
Moreover, optimizing investment in infrastructure to reduce the cost of essential technology, while ensuring compliance with local data regulations, is also a vital aspect.
Lastly, fostering international partnerships is key to the long-term success of Saudi fintechs, helping them adapt and thrive in the global market, the report explained.
“By addressing these areas thoughtfully, Saudi Arabia can enhance its fintech ecosystem, ensuring robust growth and sustainable development in the years to come,” it added.
Transformational drivers
The consultancy identified six transformational drivers essential to overcoming existing challenges and ensuring robust growth within the Kingdom’s fintech landscape.
The report emphasized the need for elevating Saudi Arabia’s global positioning in the fintech domain. The Kingdom aspires to enhance its international presence by illustrating its unique value propositions and inviting participation from global fintech innovators.
This could be achieved through forging international alliances and showcasing Saudi advancements at global fintech symposiums, potentially increasing its influence not just in the MENA region but globally.
On the regulatory front, the report suggests that Saudi Arabia refine its regulatory processes and align them more closely with international best practices, particularly in burgeoning sectors like open banking.
Strengthening the angel investor network and fortifying public-private partnerships are also seen as vital steps to provide foundational support for early-stage initiatives and reinforce growth for mature firms.
Additionally, the report advocates for significant investment in educational programs tailored to fintech and associated industries.
Lastly, the report highlights the importance of managing infrastructure costs by encouraging a competitive tech provider market and local data-hosting solutions, supported by government incentives for technological advancements.
Saudi banks’ funding profile changing on rising mortgage demand: S&P Global
RIYADH: Saudi banks are expected to pursue alternative funding strategies to deal with the rapid expansion in lending, fueled by the demand for new mortgages, according to S&P Global.
In its latest report, the credit-rating agency stated that the funding profiles of financial institutions in the Kingdom are set to undergo changes, primarily driven by a state-backed initiative to boost home ownership.
According to the analysis, mortgage financing represented 23.5 percent of Saudi banks’ total credit allocation at the end of 2023, compared to 12.8 percent in 2019.
“The ongoing financing needs of the Vision 2030 economic initiative and relatively sluggish deposits growth, is likely to incentivize banks to seek alternative sources of funding, including external funding,” said S&P Global.
The report also predicted that this pursuit of external funding could potentially impact the credit quality of Saudi Arabia’s banking sector.
According to the US-based rating agency, lending growth among Saudi banks has outpaced deposits, with the loan-to-deposit ratio exceeding 100 percent in 2022, up from 86 percent at the end of 2019.
S&P Global expects this trend to persist, particularly with corporate lending playing a more significant role in growth over the next few years. “We consider Saudi banks are likely to turn to alternative funding strategies to fund that expansion,” the report said.
HIGHLIGHTS
100%
According to the US-based rating agency, lending growth among Saudi banks has outpaced deposits, with the loan-to-deposit ratio exceeding 100 percent in 2022, up from 86 percent at the end of 2019.
It added: “We consider, however, that the risk created by the maturity mismatch is mitigated by the relative stability of Saudi deposits.” The agency also predicted that Saudi banks’ foreign liabilities will continue to increase, rising from about $19.2 billion at the end of 2023 to meet the funding requirements of strong lending growth, particularly amidst lower deposit expansion.
The report highlighted that Saudi banks have already tapped international capital markets, and the credit rating agency expects this trend to continue for the next three to five years.
According to S&P Global, the Saudi banking system could transition from a net external asset position of SR42.9 billion, or 1.6 percent of lending, at the end of 2023 to a net external debt position within a few years.
In April, S&P Global, in another report, stated that banks in the Kingdom are anticipated to experience robust credit growth ranging between 8 to 9 percent in 2024.
The agency noted that this credit expansion will be propelled by corporate lending, fueled by increased economic activities driven by the Vision 2030 program.
Moreover, the report added that the Saudi government and its related entities are expected to inject deposits into the banking system, thereby supporting the credit growth of financial institutions in the Kingdom.
NEOM, Saudi Red Sea Authority sign MoU to develop marine tourism regulations
- The MoU’s goal is to enhance research, deliver innovation, and improve the visitor experience for tourists
- The agreement reflects SRSA’s commitment to attracting investment in coastal tourism activities
NEOM: The Saudi Red Sea Authority and NEOM signed a memorandum of understanding on Friday to cooperate on developing legislation, regulations, and technology in marine tourism, reported the Saudi Press Agency.
The MoU’s goal is to enhance research, deliver innovation, and improve the visitor experience for tourists in Saudi Arabia’s existing, emerging, and future Red Sea coastal destinations.
SRSA Acting CEO Mohammed Al-Nasser and NEOM’s CEO Nadhmi Al-Nasr signed the partnership, which they hope will promote an exchange of expertise and enable the implementation of joint initiatives.
The agreement also reflects SRSA’s commitment to attracting investment in coastal tourism activities.
The partnership will further assist small and medium enterprises in the sector through administrative, technical, and advisory support.
Via this agreement, SRSA aims to integrate with relevant public, private, and third-sector entities to achieve one of the goals of Saudi Vision 2030, which is to develop coastal tourism as a valuable sector of the Kingdom’s economy.
World food prices up in April for second month: UN agency
PARIS: The UN food agency’s world price index rose for a second consecutive month in April as higher meat prices and small increases in vegetable oils and cereals outweighed declines in sugar and dairy products.
The Food and Agriculture Organization’s price index, which tracks the most globally traded food commodities, averaged 119.1 points in April, up from a revised 118.8 points for March, the agency said on Friday.
The FAO’s April reading was nonetheless 7.4 percent below the level a year earlier.
The indicator hit a three-year low in February as food prices continued to move back from a record peak in March 2022 at the start of Russia’s invasion of Ukraine.
In April, meat showed the strongest gain in prices, rising 1.6 percent from the prior month.
The FAO’s cereal index inched up to end a three-month decline, supported by stronger export prices for maize. Vegetable oil prices also ticked higher, extending previous gains to reach a 13-month high due to strength in sunflower and rapeseed oil.
The sugar index dropped sharply, shedding 4.4 percent from March to stand 14.7 percent below its year-earlier level amid improving global supply prospects.
Dairy prices edged down, ending a run of six consecutive monthly gains.
In separate cereal supply and demand data, the FAO nudged up its estimate of world cereal production in 2023/24 to 2.846 billion metric tonnes from 2.841 billion projected last month, up 1.2 percent from the previous year, notably due to updated figures for Myanmar and Pakistan.
For upcoming crops, the agency lowered its forecast for 2024 global wheat output to 791 million tonnes from 796 million last month, reflecting a larger drop in wheat planting in the EU than previously expected.
The revised 2024 wheat output outlook was nonetheless about 0.5 percent above the previous year’s level.
Material sector dominates TASI trading in first quarter of 2024
RIYADH: The materials sector led trading on Saudi Arabia’s Tadawul All Share Index, accounting for approximately SR87 billion ($23.2 billion) or 15.11 percent of the market, according to TASI’s 2024 first-quarter report.
SABIC, the largest component of this sector, boasted a market capitalization of SR234.9 billion, with trading value reaching nearly SR7 billion.
The banking sector trailed with transactions valued at SR71.22 billion, comprising 12.37 percent of the market. Al-Rajhi Bank took the lead in market capitalization within the sector and secured the second spot in trade value totaling SR23.62 billion.
In a February report by Bloomberg, Al-Rajhi Bank, seen as an indicator of Saudi Arabia’s growth strategies, exceeded the performance of JPMorgan Chase & Co., exhibiting nearly a 270 percent surge in shares since the initiation of Vision 2030. It has outpaced both local and global competitors, including state-supported banks, emerging as the largest bank in the Middle East and Africa, boasting a market cap of around $95 billion.
According to Morgan Stanley analysts led by Nida Iqbal, as reported by Bloomberg, “We see it as a long-term winner in the Saudi bank sector… While Al-Rajhi is best placed for a rate-cutting cycle, we believe current valuation levels reflect this.”
Gulf central banks, including Saudi Arabia’s, frequently align their policies with those of the Federal Reserve to maintain their currency pegs to the dollar. According to Bloomberg Intelligence senior analyst Edmond Christou, a reduction in Fed rates could potentially bolster Al-Rajhi Bank’s profitability and expansion, as it will encourage gathering cheap deposits while enabling it to issue debt at more attractive levels.
In this period, the energy sector secured the third position in terms of value traded, reaching SR55.4 billion. Saudi Aramco topped the list with a market capitalization of SR7.47 trillion and registered the highest value among companies traded on the index, totaling SR28.82 billion.
In March of this year, Aramco announced a net income of $121.3 billion for its full-year 2023 financial results, marking the second-highest in its history. Aramco credited these results to its operational flexibility, reliability, and cost-effective production base, underscoring its dedication to delivering value to shareholders.
Tadawul’s quarterly report also indicated that the transportation sector recorded the fourth-highest value traded at SR39.25 billion, equivalent to 6.82 percent of the market. Among the top performers in this sector was cargo firm SAL Saudi Logistics Services, ranking third in value traded on the TASI during this period, following Aramco and Al-Rajhi Bank, with a total value of SR22.74 billion.
SAL debuted on the main market of the Saudi Exchange in November last year. With aspirations to manage 4.5 million tonnes of air cargo by 2030, Saudi Arabia is empowering its logistics sector from a supportive role to a pivotal driver of economic growth.
SAL, in which the Saudi government holds a 49 percent stake through the Saudi Arabian Airlines Corp., experienced a 30 percent surge in its share price during its initial public offering, raising $678 million and becoming Saudi Arabia’s second-largest IPO of the year.
In a January report by Forbes, SAL’s CEO and Managing Director Faisal Al-Beddah emphasized the company’s potential to shape the future of logistics in Saudi Arabia and beyond. He stated: “Logistics is the backbone of any economy. Now we are ready. We have the rotation, we have the infrastructure, we have the regulations, and most importantly, we have the mindset and the technology for Saudi Arabia to be the leading connecting logistics hub in the region.”
The top gainer during this period in terms of price appreciation was MBC Group, with a quarter-to-date percentage change of 127.6 percent, according to Tadawul.
Saudi Arabia’s MBC Group, a media conglomerate, debuted as the first new listing on TASI in 2024. Its trading began on Jan. 8. The company raised SR831 million through its initial public offering.
Saudi Steel Pipes Co. in the materials sector was the second highest gainer, with price appreciating by 88.15 percent.
Etihad Atheeb Telecommunication Co. had a QTD price percentage change of 81.91 percent making it the third-highest gainer on the exchange during this period.
TASI concluded the first quarter of 2024 with a 3.6 percent increase, climbing by 435 points to reach 12,402 points.
