Talat Zaki Hafiz



COVID-19: Pandemic fears open digital gateway to financial fraudsters

Submitted by romulo on Thu, 2020-04-09 06:19

The Saudi Arabian Monetary Authority (SAMA) defines financial fraud as, “any act involving deceit to obtain a direct or indirect financial benefit by the perpetrator or by others with his help, causing a loss to the deceived party.” 

Financial fraud has become a major global issue, especially with the proliferation of modern communication tools, such as the internet and electronic sites, smartphones and other devices. 

SAMA has indicated that fraudsters are becoming more skilled in using the latest technologies to strengthen their capabilities and they have been helped by the cheap prices of PCs, scanners, laser printers, and copying machines. 

Among the most common methods of financial and banking fraud, especially at the level of individuals, are contacting potential victims to say they have won a cash prize and promising them big profits from currency trading. 

Unfortunately, fraudsters have taken advantage of public panic over the coronavirus disease (COVID-19) pandemic, pretending to represent the World Health Organization (WHO) to steal money or sensitive information from individuals. 

WHO has advised anyone contacted by a person or body purporting to be from the organization, to verify authenticity before responding. Furthermore, WHO has stressed that it never asks for usernames or passwords to access safety information or conduct lotteries, offer prizes, grants, certificates or funding through emails. 

INTERPOL has also warned the public about the potential dangers of buying medical supplies online, advising people to double-check website addresses and ensure that payment is secured. 

Talat Zaki Hafiz is an economist and financial analyst.

 

 

Publication Date: 
Thursday, April 9, 2020 - 06:15
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TheSpace: Saudi shift toward cashless society paying e-dividends

Submitted by romulo on Thu, 2020-03-12 02:43

One of the main objectives of the Financial Sector Development Program is to reduce the amount of cash being used in the Kingdom by developing the national finance infrastructure to allow a transition to an electronic payment environment.

The rationale behind cutting back on cash usage is to achieve multiple benefits for the Saudi economy, including cost reductions, greater transparency in government monitoring of cash flows for taxation purposes, and ease of tackling commercial concealment.

It has been estimated that moving toward a cashless society will increase the share of noncash transactions as a percentage of total transactions by 28 percent in 2020 and up to 70 percent by 2030.

The Saudi Arabian Monetary Authority (SAMA) has been focusing its attention on enhancing MADA (an electronic payment network) infrastructure capabilities and encouraging banks and nonbanking institutions to develop electronic payment channels such as point of sale (PoS), the use of bank cards, smartphone payment apps and electronic wallets. Additionally, SAMA has introduced SADAD e-invoicing and has announced the launch of licenses for non-bank financial institutions (financial technology organizations).

The authority has also introduced initiatives such as the Elevation program, to incentivize merchants and cardholders to increase cashless payments, and putting a cap on the value of customer cash transactions with corporate merchants.

Other measures are being considered too, including possible fees for cash withdrawals and deposits.

The efforts have so far achieved excellent PoS results. In 2019, the number of transactions reached 1.6 billion, a rise of 57 percent on the previous year, with the monetary value amounting to SR287 billion, up 24 percent on 2018 figures.

Contactless PoS transactions hit 918.5 billion in 2019, an increase of 442 percent on 2018, with bank cards and smart phones representing 56.6 percent of all PoS transactions last year. The monetary value was SR94.8 billion in the same year, soaring 1,431 percent from 2018.

 

Talat Zaki Hafiz is an economist and financial analyst.

Publication Date: 
Thursday, March 12, 2020 - 02:41
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Saudi shift toward cashless society paying e-dividends

Submitted by Mahad on Thu, 2020-03-12 00:27

One of the main objectives of the Financial Sector Development Program (FSDP) is to reduce the amount of cash being used in the Kingdom by developing the national finance infrastructure to allow a transition to an electronic payment environment.

The rationale behind cutting back on cash usage is to achieve multiple benefits for the Saudi economy, including cost reductions, greater transparency in government monitoring of cash flows for taxation purposes, and ease of tackling commercial concealment.

It has been estimated that moving toward a cashless society will increase the share of non-cash transactions as a percentage of total transactions by 28 percent in 2020 and up to 70 percent by 2030.

The Saudi Arabian Monetary Authority (SAMA) has been focusing its attention on enhancing MADA (an electronic payment network) infrastructure capabilities and encouraging banks and non-banking institutions to develop electronic payment channels such as point of sale (PoS), the use of bank cards, smart phone payment apps and electronic wallets.

Additionally, SAMA has introduced SADAD e-invoicing and has announced the launch of licenses for non-bank financial institutions (financial technology organizations).

The authority has also introduced initiatives such as the Elevation program, to incentivize merchants and cardholders to increase cashless payments, and putting a cap on the value of customer cash transactions with corporate merchants.

Other measures are being considered too, including possible fees for cash withdrawals and deposits.

The efforts have so far achieved excellent PoS results. In 2019, the number of transactions reached 1.6 billion, a rise of 57 percent on the previous year, with the monetary value amounting to SR287 billion, up 24 percent on 2018 figures.

Contactless PoS transactions hit 918.5 billion in 2019, an increase of 442 percent on 2018, with bank cards and smart phones representing 56.6 percent of all PoS transactions last year. The monetary value was SR94.8 billion in the same year, soaring 1,431 percent from 2018.
 

Publication Date: 
Thursday, March 12, 2020 - 00:26
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Talat Zaki Hafiz

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Saudi housing sector flourishes thanks to Vision 2030

Submitted by romulo on Fri, 2020-02-28 02:34

For more than 25 years, the housing sector in Saudi Arabia has faced challenges such as inadequacy and enormous gaps between supply and demand.

That has begun to change following recent developments, including the introduction of a new scheme as part of the Kingdom’s Vision 2030 reform plan. 

The new housing program offers solutions to enable Saudis to own or benefit from new housing. The program also aims to improve the living conditions for current and future generations, increase the supply of affordable housing units in record time, and enhance access to subsidized and appropriate funding. 

A recent report published by the Ministry of Housing showed significant improvement in the housing sector in the Kingdom, reflected in a huge increase in the number of homeowners. The active partnership and successful collaborations between the ministry and financing companies including Saudi banks and real estate developers, have resulted in seismic shifts, as the number of owned and occupied houses by Saudi households increased by 8.84 percent to 2.285 million homes in 2019 compared to 2.1 million homes in 2017.

These results also reflected positively on the Kingdom’s economy, as the housing sector grew by 0.04 percent of gross domestic product (GDP) in the third quarter of 2019, and 5.99 percent of non-oil GDP compared to the same quarter in 2018.

Finally, housing financing provided by Saudi banks and finance companies amounted to $21 billion in 2019, a growth rate of about 168 percent over 2018, and the number of loans offered by the same entities reached 179,217 in 2019 compared to 50,496 loans in 2018 — a growth rate of 255 percent.

Such impressive results will help in the Kingdom’s goal to raise household ownership in the country to 70 percent of the population by 2030.

 

• Talat Zaki Hafiz is an economist and financial analyst.

Publication Date: 
Friday, February 28, 2020 - 02:32
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Saudi Aramco lives up to its reputation as the best performing company

Submitted by Mahad on Thu, 2020-01-02 00:34

The initial public offering (IPO) of Saudi Aramco undoubtedly qualifies to be called the biggest business event of 2019.

The company raised $25.6 billion through the IPO, which has made it the largest (IPO) in history, knocking the Chinese e-commerce giant Alibaba off the top spot for the biggest ever public offering.

Saudi Aramco’s shares value jumped on the second day of trading (Dec.12) in the Saudi Stock Exchange (Tadawul) pushing the oil giant to a more than $2-trillion valuation.

Reaching such value made Saudi Aramco the world’s largest-ever market value listed company in a stock market on earth and in the history of the stock markets’ IPO & listings, superseding Apple’s market value of about $1.2 trillion.

Saudi Aramco’s performance on the stock market was expected as it is the world’s largest integrated oil and gas company. In the first six months of 2019, it produced 13.2 million barrels per day of oil equivalent including 10 million barrels per day of crude oil (including blended condensate).

Moreover, the company’s crude oil production accounted for approximately one in every eight barrels of crude oil produced globally between the period 2016 -2018 and the company’s proven liquids reserves are approximately five times larger than the combined proven liquids reserves of the five major international oil companies: ExxonMobil, Shell, Chevron, Total and BP. The company’s heritage dates back to 1933 as an upstream venture founded predecessors to Chevron and ExxonMobil.

Aramco’s net refining capacity is considered, according to data provided by a third-party consultant in the industry, the fourth largest integrated refiner in the world based on a comparison with the most recently available data with a gross and net refining capacity of 4.9 million & 3.1 million barrels per day respectively as of December 2018.

Last but not the least, Aramco is a very solid, company financially generating SR453.7 billion ($121.0 billion) in net cash from operating activities and SR321.9 billion ($85.8 billion) of free cash flow as of the year ended on Dec. 31, 2018.

Also, one of the most competitive strengths and advantages of Aramco in addition to its excellent operating cash flow and free cash flow, are the strong earnings. For example, Aramco’s last year net income was $111.1 billion.

Additionally, one of the major advantages of Aramco compared to the major international oil producers, is its unique position as the lowest upstream lifting cost producer globally as of Dec. 31, 2018 averaging $2.8 per barrel of oil.

In my opinion, these strengths which Aramco possesses indeed makes its IPO and listing the world’s most historical and successful one, despite some doubts raised by international financial analysts and media, which have been proven wrong.

• Talat Zaki Hafiz is an economist and financial analyst.

Publication Date: 
Thursday, January 2, 2020 - 00:33
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SAMA: Moving fast on the road to a cashless society

Submitted by Sajjadkk on Mon, 2019-12-16 02:34

The Saudi Arabian Monetary Authority (SAMA) says that electronic payments for the retail sector amounted to more than 36 percent of all payments available, including cash, in the Kingdom by the end of July 2019.

This has exceeded the target set by the financial sector development program (FSDP), one of the Kingdom’s Vision 2030 executive programs.

A key objective of the FSDP was to promote electronic payments and convert Saudi society to a cashless society by increasing the share of non-cash transactions from 16 percent in 2016 to 28 percent by 2020 and a further 70 percent by 2030.

A number of benefits are achieved by moving society to electronic payments, especially for bank customers by providing them with an excellent experience in facilitating payment processes with less cost and also by enhancing quality and transparency in transactions.

SAMA, as one of the FSDP stakeholders, has always believed that the reduction of cash transactions is one of its most important strategic objectives, and to achieve this it has been working hard over the past few years on several initiatives, projects and investments in the digital payments sector in line with the objectives of FSDP.

SAMA’s efforts have succeeded in enhancing the level of electronic payment in the Kingdom, as evidenced by the results of a recent study that showed the percentage of electronic payments in the retail sector. Retail payments exceeded 36 percent of the total available payments by the end of July 2019.

The results of the study show that card payments made up the largest share of electronic payments at about 31.3 percent. SAMA has said that its electronic payments strategy has helped “Mada” (Saudi Payment Network) to register an unprecedented rise in the number and value of purchasing transactions. For example, point-of-sales (POS) — an electronic payment channel connected to Mada — operations have grown by 50 percent for the nine months of this year, while the growth rates were 33 percent, 35 percent and 46 percent in 2016, 2017 and 2018 respectively.

The growth indicators in the POS service were accompanied by an expansion in the number of POS devices, which included various commercial sectors (such as gas stations); the total number of devices exceeded more than 407,000 devices by the end of September 2019 compared to 107,000 devices by the end of 2013. In addition, launching the Mada Atheer (NFC) service has had a major impact in activating and enhancing e-payment, especially after the introduction of mobile payment services.

SAMA’s strategy to convert Saudi Arabia to a cashless society is working well, as evidenced by the excellent achievements made in electronic payments. This will make financial transactions in general and banking transactions in particular, including payments, easier than ever by providing flexibility and speed, but it will also save the national economy the cost of printing money. This is costing some countries’ economies between 2 percent to 3 percent of the gross domestic product.

• Talat Zaki Hafiz is an economist and financial analyst.

Publication Date: 
Monday, December 16, 2019 - 02:33
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Talat Zaki Hafiz

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Saudi budget adds up to efficient spending, private sector empowerment

Submitted by Mahad on Thu, 2019-12-12 00:47

Saudi Arabia’s 2020 budget, announced by King Salman this week, continued to focus on implementing the realization programs of the country’s Vision 2030 reform plan with particular attention on wise spending and private-sector empowerment.

After 2019, next year’s budget is considered to be the second largest in the Kingdom’s history with total expenditure amounting to SR1.02 trillion ($272 billion) which will be spent on supporting public services such health care, education and infrastructure projects.

Such a large budget is also expected to fund social protection programs, private sector development, and the re-evaluation of priorities consistent with better performance of the non-oil economy.

What is very clear from the figures, is that the Saudi government is aiming to achieve steady and sustainable growth by encouraging the non-oil sector and making the private sector more effective in its contribution to a non-oil GDP.

This is evident by the growth of real GDP in the first half of this year by 1.1 percent, driven by the annual rise in the non-oil GDP of about 2.5 percent. 

The government is aiming to improve the private sector contribution to the non-oil GDP, as can be seen by its rise of 2.9 percent during the first half of this year, while oil GDP has declined by about -1 percent.

The new budget is being prepared in the context of a very challenging global economic outlook. 

The International Monetary Fund (IMF) has predicted that growth will remain subdued, with a forecast of 3.2 percent in 2019 and slightly up to 3.5 percent in 2020.

Moreover, the budget has been prepared in an oil-market condition best described as unstable and volatile, in addition to the trade dispute between the US and China, and the UK poised to leave the EU (Brexit).

However, despite these challenges, the budget forecasted total revenues of SR833 billion and a budget deficit of SR187 billion (6.4 percent of the GDP), which is reasonable and quite acceptable in accordance to world standards.

To conclude, I believe that the 2020 budget numbers are very sound and it will serve the objectives of the Saudi government with regard to enhancing the contribution of the non-oil sector to the GDP as well as enhancing the participation of the private sector in the overall economic development of the Kingdom.

A number of world-class and top-notch institutions such as the World Bank, IMD and IMF have complimented the Kingdom’s economic and financial reforms, especially those focused on improving the business climate and doing business in the Kingdom.

• Talat Zaki Hafiz is an economist and financial analyst.

Publication Date: 
Thursday, December 12, 2019 - 00:45
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Talat Zaki Hafiz

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King Salman: Five years of economic achievement

Submitted by Sajjadkk on Mon, 2019-12-09 01:48

Nov. 30 marked five years of King Salman’s ascension to the throne. On this great national occasion, the Kingdom, its citizens and residents celebrated such an important day with joy, excitement and happiness along with great appreciation of the remarkable achievements that have happened in the Kingdom in all aspects of life, especially the achievements that directly affect health, education, public services and many others.

By virtue of specialty, I will address the economic and financial achievements that took place in the fifth year of the king’s reign.

The recent initial public offering (IPO) of 1.5 percent of the shares of Saudi Aramco of the 200 billion ordinary shares without par value was the most prominent financial achievement in the Kingdom’s stock market and attracted world attention. 

The IPO results are remarkable both in terms of the size of the proceeds collected from the offering and the number of subscribers, though limited to qualified investors, Saudi and Gulf Cooperation Council (GCC) citizens and residents in the country.

Financial analysts have described Aramco’s IPO as “the IPO of the century.” Proceeds of the offering make it the biggest IPO in history, raising $25.6 billion, while the proceeds of the offering generated from Alibaba, Agricultural Bank of China and Industrial and Commercial Bank of China were $25 billion, $24 billion and $21.9 billion, respectively.

In terms of the national economy and the banking sector performance, the economy continued to achieve a number of outstanding results, as the gross domestic product (GDP) has grown by 2.4 percent at constant prices in 2018, against a contraction of 0.7 percent in 2017. The Kingdom continues to maintain a stable monetary system coupled with fixed exchange rate (Saudi riyal to the dollar) while maintaining a comfortable level of foreign exchange reserves.

Moreover, the banking sector continued to achieve high levels of capital adequacy and good credit growth, which contributed significantly to the support of mortgage and small and medium enterprises (SMEs) financing, as the real estate lending has grown by 21 percent in the third quarter of 2019 compared to the same period of the previous year and the contribution of SME financing has increased to 6.2 percent of total financing.

Additionally, in 2019, the Kingdom became a permanent member of the Financial Action Task Force (FATF) after completing the mutual assessment process and by this, the Kingdom became the first Arab country to join the group, which is a recognition of its strong and solid measures in connection with combating money laundering and terrorist financing.

Last but not least, in 2019 the Kingdom was ranked by the World Bank’s Ease of Doing Business Index as the leading country in the world among 190 nations with regard to its fast-track business and economic reforms. It was also positioned as an overall evaluation by the same index in 62nd place ahead of 30th place of 2018.

Additionally, the Kingdom was able to list the Saudi stock market with a number of key financial market indicators such as FTSE Russell, MSCI EM, and others. Such listing has attracted foreign capital funds totaling of SR76 billion ($20.3 billion), and also has helped in expanding the investor base in the financial market and improved market liquidity levels.

In my opinion, since King Salman came to power in 2015, the Kingdom has witnessed remarkable civilized and modern achievements in all spheres of life.

Such achievements have contributed significantly in placing the Kingdom among the top ranks of countries globally and also have attracted the attention of top-class world financial organizations and institutions, including but not limited to the G20. The Kingdom received the G20 presidency file in December 2019 in preparation for the next meeting of the group in Riyadh in November 2020.

These economic and financial achievements could not have taken place without the guidance of King Salman and the supervision and follow-up of Crown Prince Mohammed bin Salman.

• Talat Zaki Hafiz is an economist and financial analyst.

Publication Date: 
Monday, December 9, 2019 - 01:46
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Talat Zaki Hafiz

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Why Fitch is wrong to downgrade Saudi Arabia

Submitted by Mahad on Fri, 2019-11-08 01:53

Fitch Rating Agency has recently downgraded Saudi Arabia in response to the attacks of Sept. 14. Fitch based its downgrading on the Kingdom to A from A+ with a stable outlook following the recent attacks on Saudi Aramco plants in Abqaiq and Khurais (which resulted in production suspension of 5.7 million barrels of crude oil per day) and political tension in the region.

This kind of rating, according to a statement issued by the Ministry of Finance, usually reflects both the country’s economic and fiscal strengths and also it demonstrates the institutional capacity to stage an effective response to an external shock.

The ministry expressed its disappointment and said Fitch took a swift decision to downgrade the Kingdom. The ministry supported its arrangement by highlighting the Kingdom’s outstanding capacity to effectively deal with adversities, as evidenced by Saudi Aramco’s commitment to maintaining stability in the global oil markets and the Kingdom’s status as an important international ally.

As such, the downgrade of the rating comes across as somewhat speculative without direct reference to the swift, decisive and effective response to the event. Furthermore, the Kingdom has illustrated restraint and careful consideration in its response, which should act as a reassurance for the international community.

In its announcement, the ministry said that Saudi Arabia’s oil supply is fully back online after the attacks halved output and the Kingdom has reached 11.3 million barrels per day (bpd) capacity and will reach 12 million bpd by the end of November.

With regard to the financial strength of the Kingdom, the ministry has stated that the budget deficit is within the parameters set for the 2019 Budget and the Kingdom is committed to focus on increasing its investment in key Vision 2030 reform plan areas. 

The ministry has stated that Kingdom has one of the strongest reserves in the world and the country’s financial assets substantially exceed its liabilities. 

With all respect to the Fitch rating on the Kingdom’s financial and credit strength, I do believe that it has aggressively jumped to a conclusion by downgrading Saudi Arabia’s rating, especially when considering that Fitch did not pay enough attention to the following points.

First, Aramco’s decision to continue its sales and quick return to production has violated all expectations. The Kingdom is one of the few countries in the world that enjoys huge foreign reserves of about $503 billion as of July, which constitutes about one-third of the government deposits which enable the government to absorb the challenges and finance the deficit if necessary. 

Saudi Arabia has historically dealt with multiple risks and succeeded in containing them and protecting its economy and financial system. 

The pricing of debt instruments issued by the Saudi government or by Saudi companies in the secondary market were not affected by the Fitch’s rating and there will be no impact on the issuance of dollar-dominated bonds. 

Finally, the world is hungry for bonds issuance with a positive yield and the Kingdom is considered to be one of the best three countries in the world to offer a positive financial returns.

• Talat Zaki Hafiz is an economist and financial analyst.

Publication Date: 
Friday, November 8, 2019 - 01:51
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Talat Zaki Hafiz

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New procurement law a remarkable feat of legal re-engineering

Submitted by Sajjadkk on Mon, 2019-09-02 01:55

Earlier this month, the Saudi Council of Ministers issued a resolution approving the new Government Tendering and Procurement Law (GTPL).

The government is counting on the GTPL to solve many of the financial and technical deficiencies which existed under previous legislation.

The law is expected to help in achieving fiscal balance by enhancing the effectiveness of financial planning in the government’s procurement and tendering process, improving resource management, and elevating government procurement procedures.

Drawn up in line with international best practices, the new GTPL will work for the benefit of both local and foreign contractors by providing more transparency in tendering and procurement procedures — such as the submission and opening of proposals — through the unified portal called Etimad.

In addition, the law will bridge the shortcomings of the old legislation and maximize the spending efficiency of new and existing development projects.

The new GTPL will also enhance integrity and competition by preventing the impact of personal interests, thereby protecting public funds and giving fair and equal treatment to all bidders, while in the process fulfilling one of the Ministry of Finance’s (MoF) main objectives.

One of the most important aspects of the revised legislation will see the setting of a clear vision and direction with regard to financial compensation in the event of unforeseen increases in costs to government contracts. These could be due to price changes, a rise in the cost of raw materials, customs duties, taxes or a contractor facing unexpected justified difficulties.

Furthermore, the law provides the right for government entities to pay contractors and sub-contractors for any approved direct payments.

Support for local small- and medium-sized enterprises (SMEs) listed on the stock market is another positive element of the GTPL. SMEs will be given priority over larger competition and exempted from providing an initial guarantee in lieu of being asked to present a letter of commitment. This will not only promote sustainable development of SMEs but also encourage family businesses to participate in the financial market, preserving and protecting their future while increasing their contribution to the gross domestic product (GDP).

The law is expected to improve government procurement methods by using advanced ordering and tendering techniques to save time, reduce purchasing costs and increase market efficiency by reaching a larger global base of suppliers.

Saudi Minister of Finance Mohammed Al-Jadaan said: “The new law (GTPL) will maximize the efficiency of government spending by identifying the actual needs of government agencies, improving quality in works and procurement, and even enable evaluation of contractor performance.”

The GTPL is a remarkable national achievement in the field of re-engineering, touching on a very important government process that had many distortions which hindered the flow of the Kingdom’s procurement system.

The beauty of the matter is that the new law is in line with the development efforts taking place in the Kingdom to realize the goals of the Vision 2030 reform plan.

• Talat Zaki Hafiz is an economist and financial analyst.

Publication Date: 
Monday, September 2, 2019 - 01:54
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Talat Zaki Hafiz

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