The World Trade Organization’s Trade Policy Review Body will meet today to conduct its third review of Saudi Arabia’s trade policies.
Today’s review comes as the kingdom continues to revamp its economy to reduce its reliance on oil revenues—the petroleum sector accounted for 87% of budget revenues and 42% of GDP in 2018. Global demand for oil, depressed in 2020 due to the COVID-19 pandemic, is likely to face further headwinds from permanent changes in international travel and renewed pledges from governments to accelerate the transition to renewable energy sources. Riyadh expects oil revenues this year to drop by 30%.
The kingdom is taking steps to liberalise its social and business environments to attract multinational corporations and foreign direct investment, a central component of economic diversification. Riyadh recently announced a requirement for multinationals to base their regional headquarters in the country starting in 2024 in order to be considered for government contracts. Other measures including extended tax holidays and the elimination of a local employee quota are meant to boost the kingdom’s regional appeal. However, the changes needed to unseat rivals in the emirates of Dubai and Abu Dhabi are likely to create pushback in the medium-term as it is pressured to change far beyond its conservative social structure.