Electric vehicles emerge as key driver of Saudi-China climate-change fight

Tesla cars charge at a charging station outside a shopping mall in Beijing. (AFP)
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Updated 08 December 2022

Electric vehicles emerge as key driver of Saudi-China climate-change fight

  • China is the world’s largest market for EVs, accounting for 53 percent of the global share 
  • Saudi Arabia has launched its own EV brand, Ceer, and owns a stake in US maker Lucid

RIYADH: China and Saudi Arabia are two of the energy powerhouses of the world and, as such, the world’s gaze turns to them in discussions around climate change.

While much of the focus is on the Kingdom’s oil production, or Beijing’s coal-mining activities, the two nations are only just starting to get recognition for their shared vision for decarbonization via electric vehicles.

This is an area of shared enthusiasm, and one where Saudi Arabia and China can further work together to lead innovation and implementation.

For its part, Saudi Arabia has handed the EV industry a prominent role in its economic diversification plan known as Vision 2030.




Tesla cars at a charging station in Beijing, main, and, below, a Lucid luxury electric vehicle on display. (AFP)

The world’s largest oil exporter has identified the sector as one on the cusp of a boom as the globe moves away from fossil fuels, and is investing not just in overseas firms, but also in homegrown products.

The overseas backing takes the form of the US-firm Lucid. In 2018, the Public Investment Fund poured $1billion into the company and now has a 60 percent stake. The investment prompted Lucid to announce in February 2022, that it would build its first international vehicle assembly plant in King Abdullah Economic City, north of Jeddah. 
To further underline its commitment to the sector, the Saudi government struck a deal with Lucid to buy up to 100,000 EVs over a 10-year period.

It is not just Lucid that will be producing EVs in the Kingdom. In October, Crown Prince Mohammed bin Salman unveiled Saudi Arabia’s own EV brand: Ceer.




Lithium batteries for electric vehicles on the inspection line at a factory in Nanjing in China’s eastern Jiangsu province. (AFP)

Like Lucid, this company will produce vehicles from a plant in KAEC, with construction on the $69 million facility due to begin in early 2023.

Ceer is a joint venture with FoxConn — the Taiwan-based firm that is the largest private sector employer in China — and will further cement the ties between Saudi Arabia and the economies of the Far East.

Ceer will license component technology from BMW to design and build vehicles, including sedans and sport utility vehicles, in the Kingdom while Foxconn will develop the electrical architecture of the vehicles, resulting in a portfolio of products that will lead in infotainment, connectivity and autonomous driving technologies.

Of course, the Kingdom is not turning itself into one of the leading EV producers in the world just to appease its domestic market. Exporting these vehicles is a key part of not just Saudi Arabia’s economic diversification strategy but in reducing global emissions.

Penetrating the Chinese market could prove a challenge. Beijing has been encouraging its citizens to switch to EVs by offering subsidies for purchases. This has helped China become the largest market for EVs, accounting for 53 percent of the global share.




US-based Lucid is planning to build its first overseas vehicle assembly plant north of Jeddah. (AFP)

The Chinese government forecasts that EVs will account for 50 percent of all new car sales in the country by 2035, suggesting the appetite for such vehicles will continue to be high.

Yet while firms such as Tesla are doing well in the market — selling 83,135 cars in September in what was its best month for sales in the country — China has a thriving production sector, meaning the reliance on imports is low.

However, as is the case in many countries, one of the main barriers for mass take-up of EVs is higher purchase price than for petrol vehicles.

Saudi Arabia could find itself in a position to use its growing EV production hub being built just north of Jeddah to make affordable vehicles for what is the largest market in the world.

Should it crack that nut, the Kingdom’s Vision 2030 goal of raising non-oil exports to 50 percent of GDP looks eminently reachable.


Pakistani rupee plummets to all-time low against US dollar at 271

Updated 52 min 21 sec ago

Pakistani rupee plummets to all-time low against US dollar at 271

  • Pakistan's rupee declines by Rs2.53 or 0.93% against US dollar, according to central bank data
  • Pakistani rupee continues free fall after currency dealers removed cap on exchange rate last week

KARACHI: Pakistan's rupee continued its free fall against the US dollar on Thursday, with the greenback reaching an all-time high of Rs271.36, a week after Islamabad removed artificial controls from its exchange market to secure an International Monetary Fund (IMF) bailout package. 

After Pakistan's currency dealers announced removing the exchange rate cap last week, the rupee declined by a massive Rs25 or 9.6% in a single day. With a staggering $3.6 billion in reserves barely enough to cover import payments for a month, Islamabad has agreed to the IMF's tough conditionalities to revive a stalled $7 billion loan program it hopes would lead to more inflows from multilateral organizations and "friendly countries."

The IMF has been pushing Pakistan to remove artificial controls from its exchange market. Experts have warned the rapid weakening of the rupee would usher in an inflationary storm in the country. 

On Thursday, Pakistan's central bank shared data on Twitter according to which the rupee declined by Rs2.53 or 0.93%, with the greenback selling at Rs271.36 in the interbank market. 

 

 

 

"The Pakistani rupee witnessed pressure and closed at a record low against the U.S. dollar mainly due to less inflows of export proceeds," Zafar Sultan Paracha, general secretary of the Exchange Companies Association of Pakistan, said. 

"The country’s political and economic situation also continued to exert pressure on the rupee," he added. 

Earlier this week, international credit ratings agency, Finch Ratings, said Pakistan's rupee would further weaken and exacerbate inflation in the country.

Official data showed on Wednesday that Pakistan’s inflation rate surged to 27.6 percent, the highest in over four decades, on a year-on-year basis in January 2023. 

“In the near term, it [weakening rupee] could exacerbate imported inflationary pressure, and may eventually result in steeper policy rate hikes from the SOP,” Finch said. 


Amid economic crisis, Pakistan finance minister asks charity network to raise $2 billion from expats

Updated 5 min 26 sec ago

Amid economic crisis, Pakistan finance minister asks charity network to raise $2 billion from expats

  • Saylani Welfare International Trust sought Ishaq Dar’s approval to get interest-free debt for the country from Pakistani diaspora
  • The country is facing severe dollar liquidity crunch amid depleting foreign exchange reserves, growing import payment demand

KARACHI: Pakistan’s finance minister Ishaq Dar on Thursday allowed a charity organization operating in the country to voluntarily raise about $2 billion in debt to support the national exchequer amid ongoing economic turmoil.

Addressing a gathering on the Islamization of economy, Dar told the chairman of Saylani Welfare International Trust, Bashir Farooqui, he was free to generate money from overseas Pakistanis by utilizing his network. However, he said all the transactions must be kept transparent.

“The transactions must be transparent and well documented and the money must be raised under the defined procedures,” the minister said while participating in the gathering through a video link from Islamabad.

Farooqui had sought permission from Dar to generate the required amount during the course of the program.

“The debt will be raised for five years and will be interest-free,” he said. “The collected amount will be handed over to the government.”

Pakistan's finance minister Ishaq Dar addresses an event focusing on the Islamization of the country's economy through a video link from Islamabad, Pakistan, on February 2, 2023. (Photo courtesy: Finance Ministry)

Pakistan is currently facing an acute dollar liquidity crunch with official foreign exchange reserve down to $3.6 billion against the average import cover of $5 billion.

Responding to the Saylani Welfare Trust chairman, the finance minister asked him to coordinate with the central bank to determine the contours and mechanism of the proposed scheme while directing State Bank of Pakistan (SBP) officials to facilitate and record any inflows through meticulous documentation.

Dar also said the subject of Islamic economic system came very close to his heart, adding that he prayed for the elimination of interest-based financial environment.

“One of the actions taken in this regard has been the formation of a high-level steering committee consisting of all key stakeholders, including the finance ministry and central bank officials, Securities and Exchange Commission of Pakistan and Shariah experts,” he said.

Pakistan’s Federal Shariat Court (FSC) directed the government last April to eliminate riba – or interest – within five years.

Dar maintained it was possible to Islamize Pakistan’s economy even before the given deadline.

“There is no reason why we can’t achieve the Islamization of economy before five years,” he said.


Iraqi PM says banking reforms reveal fraudulent dollar transactions

Updated 01 February 2023

Iraqi PM says banking reforms reveal fraudulent dollar transactions

  • Iraq has in recent months been making efforts to ensure its banking system is compliant with the international electronic transfer system known as SWIFT

BAGHDAD: Iraq’s premier said Tuesday that new banking regulations had revealed fraudulent dollar transactions made from his country, as the fresh controls coincide with a drop in the local currency’s value.
Iraq has in recent months been making efforts to ensure its banking system is compliant with the international electronic transfer system known as SWIFT.
Referring to the new controls, Prime Minister Mohammed Shia Al-Sudani hailed “a real reform of the banking system,” but denounced “falsified invoices, money going out fraudulently,” in particular as foreign currency payments for imports.
“That is a reality,” he said in an interview on state television.
The adoption of the SWIFT system was supposed to allow for greater transparency, tackle money laundering and help to enforce international sanctions, such as those against Iran and Russia.
An adviser to Sudani had said that since mid-November, Iraqi banks wanting to access dollar reserves stored in the United States must make transfers using the electronic system.
The US Federal Reserve will then examine the requests and block them if it finds them suspicious.
According to the adviser, the Fed had so far rejected 80 percent of the transfer requests over concerns of the funds’ final recipients.
Before the introduction of the new regulations, “we were selling $200 million or $300 million a day,” Sudani said.
“Now, the central bank provides $30 million, $40 million, $50 million,” he said, questioning: “What were we importing in a single day for $300 million?“
“There are products that were entering (Iraq) for prices that make no sense. Clearly, the objective was to take foreign currency out of Iraq,” he said. “This must stop.”
Money may have been transported to Iraq’s autonomous Kurdistan province “and from there to neighboring countries,” Sudani said, without specifying whether he was referring to Turkiye, Iran or war-torn Syria.
He said the new controls had been planned for two years, in accordance with an agreement between Iraq’s central bank and US financial authorities, and deplored previous failures to put them in place.
Iraq, which is trying to move past four decades of war and unrest, is plagued by endemic corruption.
The official exchange rate is fixed by the government at 1,470 dinars to the dollar, but the currency was trading at around 1,680 on Tuesday on unofficial markets amid dollar scarcity.
The drop has sparked sporadic protests by Iraqis worried about their purchasing power.
Foreign Minister Fuad Hussein and the new central bank chief will be among a delegation traveling to Washington on February 7 to discuss the new mechanism and the fluctuating exchange rate, Sudani said.


Bangladesh secures $4.7 billion from IMF as Pakistan, Sri Lanka see delays

Updated 31 January 2023

Bangladesh secures $4.7 billion from IMF as Pakistan, Sri Lanka see delays

  • Bangladesh has seen a sharp widening of its current account deficit, depreciation of its currency
  • Pakistan, IMF negotiations expected to begin from today as Islamabad seeks to shore up its foreign reserves

The International Monetary Fund (IMF) has approved loans of $4.7 billion to Bangladesh for disbursal starting immediately, making it the first to secure such funds out of three South Asian countries that applied last year amid economic trouble.

The loans are a win for Prime Minister Sheikh Hasina ahead of a general election early next year and will help the country, which has seen a sharp widening of its current account deficit, depreciation of the taka currency and a decline in its foreign exchange reserves.

Bangladesh will get about $3.3 billion under the IMF's extended credit facility and related arrangements, with an immediate disbursement of about $476 million. The IMF executive board also approved about $1.4 billion under its newly created Resilience and Sustainability Facility for climate investments for Bangladesh, the first Asian country to access it.

The IMF said the loans will "protect macroeconomic stability and rebuild buffers, while helping to advance the authorities’ reform agenda". The agenda includes creating fiscal space to enable greater social and developmental spending, strengthening Bangladesh's financial sector, boosting fiscal and governance reforms and building climate resilience.

"Since independence, Bangladesh has made steady progress in reducing poverty and significant improvements in living standards," Antoinette M. Sayeh, the IMF's deputy managing director, said in a statement.

"However, the COVID-19 pandemic and subsequent Russia’s war in Ukraine interrupted this long period of robust economic performance," Sayeh added. "Multiple shocks have made macroeconomic management challenging in Bangladesh."

The country last year also sought $2 billion from the World Bank and the Asian Development Bank amid efforts to bolster its foreign exchange reserves.

Bangladesh's regional counterparts, Sri Lanka and Pakistan, are doing much worse economically but have not been able to get final approval for IMF loans.

Bangladesh's current account deficit hit a record $18.7 billion in the last financial year, which ended on June 30, as exports of garments failed to offset a surge in energy costs. The Bangladesh central bank expects the deficit to fall to about $6.8 billion at the end of the current fiscal year.

The government has also raised fuel and energy prices in recent months as it approached the IMF. It announced a 5% increase in retail power prices from Wednesday, the second such rise this month.


IMF mission due in Pakistan tonight to discuss resumption of stalled loan program

Updated 30 January 2023

IMF mission due in Pakistan tonight to discuss resumption of stalled loan program

  • A successful IMF visit is critical for Pakistan, which is facing an increasingly acute balance of payments crisis
  • Pakistan is desperate for external financing, with only enough forex reserves to cover three weeks of impotts

ISLAMABAD: An International Monetary Fund (IMF) mission will land in Pakistan tonight, Monday, to discuss a stalled ninth review of the country's current funding program, Pakistani media widely reported.

A successful IMF visit is critical for Pakistan, which is facing an increasingly acute balance of payments crisis and is desperate to secure external financing, with less than three weeks' worth of import cover in its foreign exchange reserves.

“The [IMF] delegation will stay in Pakistan for 10 days,” Samaa Digital, a leading Pakistani news portal, reported. “During the visit, the delegation will be briefed about the country’s economic performance during the second half of 2022 … The situation arising from $30 billion losses incurred by the recent floods will also be conveyed to IMF.”

The government will also brief the IMF delegation on actions it has taken to improve tax revenue and exchange rate conditions, as well as reforms in the energy sector and steps taken to squeeze the current account deficit.

Last week, Pakistan's ministry of finance announced petrol and diesel prices would rise by 35 rupees ($0.1400) a litre. Last week, the Pakistani rupee lost close to 12% of its value after the removal of price caps that were imposed by the government but which were opposed by the IMF.