Saudi decision on Gulf imports

  Reuters said that Saudi Arabia has amended its rules on imports from other Gulf Cooperation Council countries, excluding goods made in free zones or that include Israeli inputs, which may affect the UAE economy in particular.

On Monday, the agency stated, quoting the official newspaper of the Kingdom, Umm Al-Qura, that the Saudi decision aims to attract more investments to serve the Kingdom's goals, including diversifying the sources of the economy and not relying on oil alone, as well as employing Saudi citizens and relying on local labor.

The agency indicated that from now on, Saudi Arabia will exclude from the GCC tariff agreement goods manufactured by companies that comprise less than 25% of the local population, and industrial products whose value is less than 40% of the added value after the conversion process.

The agency added that all goods made in the free zones in the zone will not be considered locally made.

The main driver of the UAE economy, free zones are areas where foreign companies can operate under light regulation, and where foreign investors are allowed to take 100% ownership of the companies.

According to the Saudi decree, goods that contain an ingredient manufactured or produced in “Israel” or manufactured by companies wholly or partly owned by Israeli investors or companies included in the Arab boycott agreement relating to “Israel” will be excluded.

For his part, Amir Khan, chief economist at the Saudi National Bank, told Reuters: "The idea was to create a Gulf market, but now there is a realization that the priorities of Saudi Arabia and the UAE are very different."

The ministerial decision stated that companies whose local employment volume ranges between 10% and 25% of the total can compensate for the difference by increasing the industrial added value in their products and vice versa.

He added that the added value should not be less than 15% in any case to benefit from the preferential tariff agreement.

It is noteworthy that in February 2021, Saudi Arabia warned international companies that implement projects to move their regional centers to Riyadh by 2024 or leave, most of which are concentrated in the Gulf and the free zone in Dubai in particular.