LONDON: Arab News has established how sanctions will affect Bahrain, the UAE and Tunisia as part of an EU crackdown on tax avoidance.
The main weapon will be funding restrictions to be imposed by the European Fund for Sustainable Development (EFSD), the European Fund for Strategic Investment (EFSI) and the External Lending Mandate (ELM).
Direct funding for projects on the ground in those countries — already subject to checks before loans are released – will not be affected.
The real targets are entities through which funds are channeled to other projects overseas, in places such as Africa and India, a Brussels source told Arab News.
These entities would include banks, private equity funds, asset managers and even government-linked bodies.
The three countries are among 17 jurisdictions to be punished following an EU probe.
A statement said: “The EU list should have a real impact on the countries concerned, thanks to new legislative measures.”
Brussels said new EU proposals would also, in time, impose stricter reporting requirements for multinationals with activities in “listed” states. Additionally, a tax scheme routed through an EU listed country would automatically be reported to the tax authorities, the statement said.
The European Commission is examining legislation in other policy areas, “to see where further consequences for listed countries can be introduced.”
Individual EU states have agreed they could also opt to trigger a number of other measures such as increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions.
According to Brussels: “The Commission will support member states’ work to develop a more binding and definitive approach to sanctions for the EU list in 2018.”
As well as the UAE, Bahrain and Tunisia, other countries on the so-called tax haven blacklist are: American Samoa, Barbados, Grenada, Guam, South Korea, Macau, the Marshall Islands, Mongolia, Namibia, Palau, Panama, St. Lucia, Samoa, and Trinidad & Tobago.
A “watchlist” of 47 countries promising to change their tax rules to meet EU standards has also been issued.
This “grey list” includes several with UK links, including Hong Kong, Jersey, Bermuda and the Cayman Islands, as well as Switzerland and Turkey.
The lists follow the leaking of the Panama Papers and the Paradise Papers, revealing how companies and individuals hid their wealth from tax authorities around the world in offshore accounts.
To determine whether a country is a “non-cooperative jurisdiction,” the EU index measures the transparency of its tax regime, tax rates and whether the tax system encourages multinationals to unfairly shift profits to low tax regimes to avoid higher duties in other states. In particular, these include tax systems that offer incentives such as percent corporate tax to foreign companies.
UK-based tax campaigners have said EU countries will be encouraged to disallow payments made to blacklisted countries for tax purposes, or to charge withholding taxes on interest payments to them.
The EU campaign is designed to force countries to take measures to reform their tax systems as it seeks to clampdown on corporate tax avoidance around the world.
Current EU plans are to reconsider the lists annually. Developed grey-list countries have one year to deliver on their reform promises, while developing nations have two years, said the EU.
How EU tax crackdown will affect UAE, Bahrain and Tunisia
How EU tax crackdown will affect UAE, Bahrain and Tunisia
AI key to crossing Vision 2030 finish line in Saudi Arabia: PwC executive
RIYADH: In a rapidly evolving digital landscape, the push for transformative strategies has become a cornerstone for businesses across Saudi Arabia, according to a top PwC Middle East executive.
Following the launch of the firm’s latest report – “Digital acceleration: Fueling the ambition for transformation success in Saudi Arabia” – Marwan Khamis, a partner at PwC Middle East, emphasized to Arab News the pivotal role of emerging digital technologies in achieving sustainable growth and strategic objectives for organizations within the Kingdom.
Khamis highlighted that organizations are actively pursuing transformation initiatives at the halfway mark to Saudi Vision 2030, with a keen focus on leveraging emerging technologies like generative artificial intelligence, referred to as GenAI, to enhance decision-making, efficiency, resource utilization, and compliance.
Speaking on the sidelines of the Global Project Management Forum in Riyadh, he said: “AI is coming into play. According to a recent survey that we have done, 73 percent of CEOs in the Middle East that were surveyed believe that they need to adopt AI within the next three years in order to make sure that they are delivering outcomes to their beneficiaries.”
GenAI offers significant promise in automating routine tasks and streamlining project management processes, the report added.
This automation liberates organizations to concentrate more on strategic growth initiatives and cultivating robust client relationships.
By integrating real-time data and advanced training programs, GenAI empowers businesses to analyze extensive datasets, identify operational efficiencies, and redefine industry best practices.
According to the report, resource availability and timely decision-making emerged as the primary challenges for C-suite executives, cited by 90 percent of respondents, a fact that can be supplemented through the use of emerging technologies.
This was closely followed by resistance to change, at 80 percent, and data availability, which was cited by 7 percent of respondents.
Therefore, overcoming these hurdles requires a strategic approach, one that embraces technological advancements while addressing cultural and economic factors that influence the pace and scale of transformation.
Khamis highlighted the critical importance of project management in the transformation journey of entities, saying: “As organizations are moving into their transformation journey, project management is becoming more and more important as a key driver for them to move into that transformation.”
The executive also addressed the growing recognition of the need for advancement among Middle East CEOs, stating, “According to the recent CEO report that we’ve published in PwC, 48 percent of all Middle East CEOs believe that their businesses need to transform within the next few years.”
In order for these sought-after transitions to come to life, Kamis outlined the most result-proven strategies based on PwC research.
“The most effective transformation management offices and project management offices usually focus on two things. One is fostering a positive work culture where all project managers and experts collaborate effectively. The second is the adoption of digital solutions within the transformation journey,” he said.
Khamis further emphasized that as it pertains to the Saudi market, specifically as it nears the 2030 mark, quality execution has become paramount in achieving successful transformation across both public and private sectors.
The success story of the Saudi National Events Centre, known as NEC, serves as a testament to the transformative power of digital technologies.
Leveraging PwC Middle East’s Transform Hub, the NEC has emerged as a frontrunner in delivering world-class events and experiences in Saudi Arabia and the region.
This underscores the potential for digital innovation to drive operational efficiency, innovation, and long-term success in the Kingdom’s dynamic business environment.
Aramco to woo global investors with multi-city roadshows for $12bn share sale: Bloomberg
RIYADH: Saudi energy giant Aramco is launching a series of events in London and the US aiming to generate interest in its $12 billion share sale, according to Bloomberg.
The news agency said that Amin Nasser, Aramco’s CEO, “will be among officials attending at least one of the events in London this week,” citing people familiar with the matter.
It added that Chief Financial Officer Ziad Al-Murshed will also be present in the city over the next few days.
Simultaneously, plans are underway for a separate event in the US, hinting at the company’s keenness to tap into diverse pools of investment.
According to Bloomberg Intelligence, investors could stand to gain from a $124 billion annual payout, offering a dividend yield of 6.6 percent. This enticing proposition, despite the company’s resilient valuation and the absence of buybacks, underscored Aramco’s confidence in attracting global capital.
Post-offering, the Saudi government will retain its ownership stake of approximately 82 percent in Aramco, with the Kingdom’s sovereign wealth fund securing an additional 16 percent share.
Riyadh Municipality and The Helicopter Co. sign MoU to enhance air mobility
RIYADH: Riyadh is on track to enhance its air mobility thanks to a new agreement between the city’s municipality and The Helicopter Co.
The memorandum of understanding between with the Public Investment Fund-owned company aims to develop a future vision for air mobility in Riyadh, according to a statement.
It also seeks to enhance and diversify investment opportunities in the city in accordance with the highest international standards.
This falls in line with Saudi Arabia’s goal of increasing passenger numbers and expanding flight routes.
It also aligns well with the Riyadh Municipality’s mission to elevate the city by promoting sustainable urban development, providing high-quality services, and building effective partnerships toward a vibrant community.
Moreover, the newly signed MoU is set to enhance visitors’ access to tourist destinations, enhancing their experience.
Saudi Arabia issues 127 regional HQ licenses for companies in Q1
RIYADH: More than 120 international firms received licenses to relocate their regional headquarters to Saudi Arabia during the first quarter of 2024, representing a 477 percent year-on-year increase.
In its quarterly report, Saudi Arabia’s Ministry of Investment revealed that the 127 permits issued in the first three months of the year underscores the Kingdom's attractive and favorable business environment.
The drive to attract regional bases to Saudi Arabia plays into the Vision 2030 initiative to diversify the Kingdom’s economy, and includes new tax incentives for multinational companies who secure a relocation license.
These perks include a 30-year exemption on corporate income tax and withholding tax related to headquarters activities, alongside discounts and support services.
According to the recently approved laws in Saudi Arabia, companies with state contracts must have a regional headquarters in the Kingdom with a minimum of 15 employees.
The Ministry of Investment’s report added that the Kingdom processed 445 applications for investor visit visas during the first quarter of this year, allowing overseas businesspeople to visit Saudi Arabia and explore opportunities.
During the first quarter, the ministry also closed 64 investment deals. Additionally, investment licenses issued reached 3,157 in the first quarter, representing a 92.9 percent increase compared to the preceding year.
According to the report, 864 investment licenses were issued in the construction sector during the first three months of this year, followed by 620 permits in the manufacturing industry.
The ministry issued 396 licenses for vocational, educational, and technical activities, while 263 permits were granted in the information and communication technologies sector.
A significant number of investment licenses were also issued in other sectors including accommodation and food, wholesale and retail, and real estate.
“In Q1 2024, real estate recorded the highest growth in investment licenses by 253.3 percent year-on-year, followed by vocational, educational and technical activities, and agriculture, forestry and fishing by 141.5 percent and 129.4 percent respectively,” said the ministry.
Moreover, more than 58,000 services were provided through the department’s electronic platform in the first quarter, marking a rise of 29 percent over the same period in the previous year.
In May, a report released by S&P Global stated that the opening of free economic zones and the regional headquarters program could accelerate foreign direct investment inflows into the Kingdom.
“Future FDI inflows could offer upside on the back of growing investment opportunities and government efforts to improve regulatory and business conditions. These efforts include the opening of free economic zones and a 30-year tax break for multinational companies opening regional headquarters in the country,” said the credit rating agency.
In February, a report by Saudi Arabia’s Small and Medium Enterprises General Authority highlighted that the Kingdom’s Regional Headquarters Program has played a crucial role in accelerating the economic growth of Riyadh.
In November 2023, Minister of Investment Khalid Al-Falih announced that Saudi Arabia has outperformed its target for attracting regional headquarters, with over 180 companies now established in the Kingdom.
IATA forecasts stronger airline profitability in 2024 at Dubai General Assembly
DUBAI: Middle Eastern airlines are maintaining their upward trajectory in passenger and cargo volumes thanks to strong regional economies, according to the International Air Transport Association.
Ahead of its General Assembly in Dubai, the IATA highlighted that Saudi Arabia’s substantial investments in infrastructure and tourism contributed to robust growth, while the UAE remained a key destination for both leisure and business travelers.
On a global scale, the airline industry is set to achieve record revenues of $1 trillion in 2024. All regions worldwide are expected to generate profits for a second year in a row, with the most significant increase being for Asia-Pacific carriers.
In a press release issued to coincide with the gathering in the UAE, the IATA struck an upbeat note, and said: “Although airlines continue to add capacity, yields remain healthy and the demand for travel remains buoyant and looks set to continue apace. Geopolitical risks are the main threat, especially to the Levant carriers.”
“The Gulf carriers are relatively less impacted unless tensions between Iran and Israel escalate.”
Addressing the General Assembly, IATA’s Director General Willie Walsh noted that the sector’s projected net profit in 2024 is a significant achievement, especially considering the severe losses experienced during the pandemic.
“With a record 5 billion air travelers expected in 2024, the human need to fly has never been stronger,” Walsh stated.
The association revealed a revised, upbeat profitability forecast for the global airline industry in 2024, signaling an improvement over previous projections made in June and December 2023.
Net profits for airlines are expected to reach $30.5 billion in 2024, reflecting a net profit margin of 3.1 percent. This is a notable increase from the estimated $27.4 billion in net profits for 2023, which had a margin of 3 percent. It also surpassed the December 2023 forecast, which anticipated $25.7 billion in profits with a 2.7 percent margin.
However, the return on invested capital for 2024 is projected to be 5.7 percent, which remains approximately 3.4 percentage points below the average cost of capital.
Operating profits are expected to climb to $59.9 billion in 2024, up from an estimated $52.2 billion in 2023. The total revenues for the industry are projected to hit a record high of $996 billion in 2024, representing a 9.7 percent increase.
The number of air travelers is anticipated to set a new record at 4.96 billion, while total air cargo volumes are expected to reach 62 million tonnes.
Walsh highlighted that airlines are projected to connect nearly 5 billion people on 22,000 routes through 39 million flights this year, facilitating $8.3 trillion in trade.
He stressed that strengthening airline profitability and financial resilience is crucial for continued investment in customer needs and sustainability initiatives, especially the goal of achieving net-zero carbon emissions by 2050.
Despite the positive outlook, the top official pointed out that the airline industry still has significant ground to cover.
He noted that the modest profit of $6.14 per passenger barely covers the cost of a cup of coffee in many parts of the world.
Improving profitability will require addressing supply chain issues to deploy fleets more efficiently and reducing the burden of onerous regulations and rising taxes.
Walsh called for public policy measures that enhance business competitiveness. These measures would benefit the economy, jobs, and connectivity and support accelerated investments in sustainability.
In 2024, passenger revenues are projected at $744 billion, which is up 15.2 percent from 2023. Passenger demand is expected to grow annually at 3.8 percent from 2023 to 2043.
Passenger yields are forecasted to strengthen by 3.2 percent, with an average return airfare of $252 in 2024. The average passenger load factor is expected to reach 82.5 percent, close to pre-pandemic levels.
Polling data from April 2024 shows strong performance expectations for passenger markets, with 39 percent of respondents planning to travel more in the next 12 months.
Cargo revenues are expected to decline to $120 billion in 2024 but still above 2019 levels, with yields in this area decreasing by 17.5 percent.
For 2024, the IATA expected $1 trillion in revenues. However, total industry expenses are forecasted to grow to $936 billion, with fuel costs accounting for 31 percent of operating costs. Non-fuel expenses, including labor costs, are well-controlled.
The total number of flights is expected to be 38.7 million in 2024, with 1,583 aircraft deliveries, mitigating supply chain issues.
Industry profitability remains fragile and could be influenced by various factors, including global economic developments, geopolitical tensions, supply chain disruptions, regulatory risks, and public policy changes.
Economic developments in China, particularly slowing growth and high youth unemployment, could have significant impacts, according to the IATA press release, which added that the operational impact of the Russia-Ukraine war and the Israel-Hamas conflict has been limited, but any escalation could negatively affect the economic outlook.
Supply chain issues continue to affect airlines, causing unforeseen maintenance problems and delivery delays for aircraft and parts, the release continued.
Walsh emphasized that addressing supply chain issues and reducing regulatory burdens are critical to enhancing profitability.
