Anti graft legislation

Saudi ArabiaGroup Members:Arun Anantha Raman 86Aruttam Biswas92Supriya Gunthey102

Transparency International Rating & Amnesty International listingTransparency International Rating CORRUPTION MEASUREMENT TOOLS

CORRUPTION PERCEPTIONS INDEX (2013)RANK: 63/177SCORE: 46/100BRIBE PAYERS INDEX (2011)RANK: 22/28SCORE: 7.4/10CONTROL OF CORRUPTION (2010)PERCENTILE RANK: 62%SCORE: 0.145667079Transparency International Rating MEASURING TRANSPARENCY

OPEN BUDGET INDEX (2010)BUDGET OPENNESS:SCANT OR NONESCORE:1Transparency International Rating OTHER GOVERNANCE AND DEVELOPMENT INDICATORS

GLOBAL COMPETITIVENESS INDEX (2012-2013)RANK:18/142SCORE:5.19/7HUMAN DEVELOPMENT INDEX (2011)RANK:56/187SCORE:0.770HUMAN DEVELOPMENT:HIGHPRESS FREEDOM INDEX (2011-2012)RANK:158/179SCORE:83.25

Transparency International Rating OTHER GOVERNANCE AND DEVELOPMENT INDICATORS (Continued)

JUDICIAL INDEPENDENCE (2011-2012)RANK:21/142SCORE:5.6/7RULE OF LAW (2010)PERCENTILE RANK:60%SCORE:0.161964746VOICE & ACCOUNTABILITY (2010)PERCENTILE RANK:4 %SCORE:-1.76825581

SWOT AnalysisSWOTStrengths

Largest oil reserves and the biggest oil exporter Ranked 26th in World Banks Doing Business ReportRanked 20th in World Economic Forum's Global Competitiveness Index 201314Worlds 19th largest economyIt's the largest free market in the MENAHas the 7th freest labour market in the world

Weakness

Weak and poor administration of education systemBurden on the government in times of low oil pricesStructure of production is too petroleum centered Restriction on civil libertiesDiscrimination Issues

SWOTSWOTOpportunities

Potential Oil SupplyEconomic CitiesDiversify into other sectorsSWOTThreats

TerrorismSuccession InstabilityDepletion of Oil ReservesEconomic ScenarioStatisticsCurrency: Saudi RiyalCentral Bank: Saudi Arabian Monetary AgencyGDP: $906.8 billion (PPP) $727.3 billion (Nominal)GDP growth: 5.13% (2013)GDP per capita: $31,275 (PPP) $25,085 (Nominal)GDP by sector: Agriculture: 3.2%; Industry: 60.4%; Services: 36.4% Inflation(CPI): 2.90% (2013)Labour force: 7.63 million (2012) (Note: about 80% of the labor force is foreign)Labour force by occupation: Agriculture: 6.7%; Industry: 21.4%; Services: 71.9% (2012)Unemployment: Estimated 10%Ease of doing business rank: 26

Public FinancesPublic debt: 9.4% of GDP Revenues: $293.1 billion Expenses: $210.6 billion Credit rating Standard & Poor's:AA- Outlook: Stable

Moody's:Aa3Outlook: Stable

Fitch:AA-Outlook: StableEconomic OverviewThepetroleumsector accounts for roughly 92.5% of budget revenues,55% of GDP, and 90% of export earningsSaudi oil reservesare the largest in the world, and Saudi Arabia is the world's leading oil producer and exporterProven reserves, according to figures provided by the Saudi government, are estimated to be 260 billion barrels, about one-quarter of world oil reservesMore than 95% of all Saudi oil is produced on behalf of the Saudi Government by the state owned giantSaudi Aramco, and the remaining 5% by similar state owned companiesAbout 40% of GDP comes from the private sector

Roughly five and a half millionforeign workersplay an important role in the Saudi economyThe government is encouraging private sector growth to lessen the kingdom's dependence on oil and increase employment opportunities for the swelling Saudi populationThe government has begun to permit private sector and foreign investor participation in the power generation and telecom sectorsAs part of its effort to attract foreign investment and diversify the economy, Saudi Arabia acceded to the WTO in 2005The government has begun to permit private sector and foreign investor participation in the power generation and telecom sectors

Main IndustriesCrude oil productionPetroleum refiningBasic petrochemicalsChemicals (Ammonia, Industrial gases, Sodium hydroxide)CementFertilizerPlasticsMetalsCommercial ship repairCommercial aircraft repairConstruction & real estateDiversificationAs of 2007, non-oil manufacturing contributed 10% to Saudi Arabian GDP and less than 6% of total employmentThrough five-year development plans, the government has sought to allocate its petroleum income to transform the economy into a modern industrial state Although economic planners have not achieved all their goals, the economy has progressed rapidlyOil wealth has increased the standard of living of most SaudisHowever, significant population growth has strained the government's ability to finance further improvements in the country's standard of living Heavy dependence on petroleum revenue continues, but industry and agriculture now account for a larger share of economic activityThe mismatch between the job skills of Saudi graduates and the needs of the private job market at all levels remains the principal obstacle to economic diversification and development; about 4.6 million non-Saudis are employed in the economy

Political ScenarioPolitical Scenario in Saudi ArabiaObjectives of the Islamic Governance system:Ensuring JusticeGuiding to good and warning against evilPreserving the religion through statement and advocatingExecution of verdictsGiving due care to others rightsArranging the affairs of lifePreservation of public order

Three Pillars of Islamic system of GovernanceIdeological FoundationsConstitutional FoundationsMoral Fountains1. Ideological FoundationsIstikhlaf (Vicegerency)Mans responsibilityLegislation is for GodHonoring the HumanUnity of the Muslim Ummah (Nation)

2. Constitutional FoundationsFairness and equityShoura (Consultation)Bayah (Pledge of allegiance)Listening and obeying in all that are goodState responsibility3. Ethical FoundationsAdviceForbearanceMutual respect between the ruler and the ruled

Key Functions of GovernmentThe Legislative Authority is the lawmaking body, having the power to make new lawsThe Executive Authority is authority that enforces orders and ensures that they are carried out as proposedThe Judicial Authority is the authority that is assigned the task of interpreting and implementing lawsThe Judicial AuthorityIndependence of the JudiciaryLitigation is a common right for allJudges are to abide by the Law of Islamic shariah

2. The Executive AuthorityImamah (leadership) KingThe MinistryRegion or provinceThe official governmental agencies and departments, as well as those independent from the ministries

3. The Regulatory AuthorityA technical, legislative-form channelA regulatory, procedural-form channelPublic Anti-Corruption InitiativesAnti graft LegislationBriberyis taken extremely seriously in Islam and is referred to as a sinHowever, Saudi Arabian corruption laws are not uniformly enforced and punishments are selectiveSaudi Arabia'sLaw for Combating Briberywas issued in 1992 by Royal Decree No. M/36Law for Combating Briberycovers public-to-public and public-to-private bribery, but not private-to-private briberyViolation of the law can result in prison sentences up to 10 years and fines up to Saudi Riyal 1 millionIn May 2002, the Saudi Arabian Monetary Agency issued new guidelines for detectingmoney launderingactivitiesALaw on Combating Money Launderingwas enacted in August 2003Basic Law of Governance 1992(Art. 79 & 80) stipulates that all state assets and agencies are subject to audits

According to an assessment byFreedom House in 2012 enforcement of anti-corruption laws is limited in Saudi Arabia and occurs mostly behind closed doorsPunishments against individuals involved in corruption are selective and usually includes lower-level figures indicted for relatively minor offencesPublic officials are not subject to financial disclosure laws and no laws provide public access to government information, including ministerial budgetThe country has signed but still not ratified theUnited Nations Convention against Corruption(UNCAC)Government StrategiesIn 2007, the Council of Ministers approved aNational Strategy for Maintaining Integrity and Combating CorruptionHowever, no recent government corruption strategies were identified at the time of reviewA set of other state agencies also participate in the fight against corruption in Saudi ArabiaAnti-Corruption AgencyThe National Anti-Corruption Commission (Nazaha) was created by way of RoyalOrder No. (A/65)The decision to create the Commission was taken by the King to "promote transparency and fight against financial and administrative corruptionThe Commission reports directly to the king and is formally given full financial and administrative independence from the KingThe Commission's duties include the implementation of orders relating to the public interest to ensure compliance, investigating aspects of financial and administrative corruption in public officesFreedom House in 2013reports that administrative obstacles are hinders for the successful operation of the Commission in 2012Prosecution and Investigation Commission(PIC)The PIC investigates cases of corruption against public service officials and reports to the Council of MinisterItmonitors the performance of all government employees and investigates those accused ofbribery, forgery and abuse of public fundsThe PIC identifies instances of forgery, bribery and public mistreatment, among othersAuditor GeneralTheGeneral Auditing Bureau(GAB, in Arabic), under the Council of Ministers, is tasked with public auditing in Saudi ArabiaThe GAB is responsible for the execution of post-auditing of state revenues, expenditures, current and fixed assetsMoreover, it carries out performance and financial audits

To act on the findings of the GAB, theAuditing and Investigation Commission(AIC) has been establishedThe AIC's jurisdiction covers the audit and investigation of all matters concerning public officials abuse of officeThe objective is to ensure an effective and efficient level of administrative performance, both within public agencies and public corporationsThe objective is to ensure an effective and efficient level of administrative performance, both within public agencies and public corporationsThe AIC's jurisdiction also covers crimes of forgery,bribery andembezzlementof government fundsThe GAB reports its findings and results directly to the kingThe head of the GAB can only be discharged by the king

Public ProcurementThere is a heightened risk of corruption within Saudi Arabian public procurement, especially large-scale government contractsThe Government Tendering and Procurement Regulations of 2006has improved transparency within the government procurement regime through publication of tendersTenders can now be found on several ministerial websites, although most of them are only published in ArabicCompanies should note that normal tender requirements to not apply to all sectors, including defense Companies that have committed acts ofbriberyin order to win a public contract risk having the contract withdrawn or of being temporarily or indefinitely barred from participating in future procurement with the governmentWhistle BlowingTheBoard of Grievances, under the Ministry of Justice, is the only formalized mechanism available to act on claims of publicabuse of powerThe Law for Combating Bribery incentivizes people to act as whistleblowers and report acts ofbriberyby rewarding them monetarilyReports of administrative corruption can be given to theMinistry of Interiorby phone, fax or e-mail

Ease of doing business in the country( World Bank 10 parameters)Ease of doing business in the country (World Bank 10 parameters)Doing Business 2014 Rank : 26Doing Business 2013 Rank : 22Change in Rank: -4

Doing Business 2014 DTF (% points): 72.85Doing Business 2013 DTF (% points): 72.90 Improvement in DTF (% points) : -0.05

Ease of doing business in the country (World Bank 10 parameters)TopicsDB 2014 Rank DB 2013 Rank Change in RankStarting a Business8481-3Dealing with Construction Permits1717No ChangeGetting Electricity1515No ChangeRegistering Property1412-2Getting Credit5552-3Protecting Investors2221-1Paying Taxes33No ChangeTrading Across Borders6961-8Enforcing Contracts127124-3Resolving Insolvency1061093Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Ease of doing business in the country (World Bank 10 parameters)

Investment and Trade regimeInvestment Regime in Saudi ArabiaRegulatory Framework:New Foreign Investment Law introduced which is more conducive to privatization and globalization of the EconomySaudi Arabian General Investment Authority (SAGIA) was inducted as the implementing authorityGovernment to privatize public undertakings and to allow more foreign investment

Why Saudi Arabia?Political & Economic stabilityA well established infrastructureWell-defined open market trade policiesA strong banking sectorFriendly Tax regimeEasy access to primary & secondary raw materialsMarket entry simplified through assistance from SAGIA

Sectors to be PrivatizedWater and Sewerage FacilitiesDesalination of sea waterTelecommunication servicesAviation and allied servicesRailwaysRoads Maintenance & ConstructionAirport ServicesPostal ServicesFlour mills and grain silos Sea port services

Activities Excluded from Foreign InvestmentIndustrial Sector:Oil Exploration, drilling and productionManufacture of military equipment, devices and uniformsManufacture of civilian explosivesServices Sector:Military Catering servicesSecurity and detective servicesReal estate investment in Makkah & MadinahHaj & Umrah tour guide servicesReal estate brokerageRecruitment & employment servicesPrinting & publishingAudio-visual servicesLand & air servicesSatellite transmissionSpace projectsBlood banksFisheries

Priority Areas of Investment All sectors are open for foreign investment with specific exclusion of those stated above Government is more keen on foreign investments in the sectors given below:MiningWater DesalinationPower GenerationHigh Technology projects

Role of SAGIATo oversee investment affairs in Saudi ArabiaPropose and Implement policies that encourage investmentIssue of Investment LicensesFraming recommendations for improvement of investment environmentEvaluation and Follow up of potential investment opportunitiesAct as an interface between global investors and Government agenciesIncentives offered to foreign investorsPre-Investment assistanceDuty free import of goods & equipmentDuty free export and preferential treatment for products in Government procurementAvailability of land in industrial cities at nominal chargesOwnership of real estate directly connected to a projectBenefits of all bilateral & multilateral agreements related to taxation and investmentRepatriation of capital & profitsFreedom of movement of shares between partnersSponsorship of licensed project to the foreign investorAvailability of loans at nominal chargeCarry-forward of losses into later years for tax purposesSaudi Industrial Development Fund (SIDF)To provide medium & long term loans to industrial projects for upto 50% of total project costs along with marketing and financial consultancy.Maximum loan term is 15 yearsMinimum promoters equity of 25% requiredMaximum loan that can be granted is US$ 106.7 million for a joint stock companyThe financing of used equipment and machinery is proscribedTrade policies In Saudi ArabiaSaudi Arabia became a full WTO Member on 11December2005Saudi Arabia has improved its business environment since its WTO accession, although this sometimes is not as apparent to the outside world as it should beTrade policies framed to encourage more private sector (local and foreign) participation in the economy and create more employment opportunities for all Saudi nationalsSaudi Arabia has been taking steps to improve the protection of intellectual property rightsTrade StatisticsRanked 12th among world merchandise exporters Ranked 21st among world merchandise importersIt is the 8th biggest recipient of FDI in the worldRanked 11th in ease of doing business (up from 67th in 2005)Exports in 2013: US$ 388 billionImports in 2013: US$ 156 billion

Exports in Saudi ArabiaSaudi Arabia's economy is highly dependent on oil exports (87 percent of total exports) and the state-owned firm Aramco is the world's largest oil producing and exporting company.Main export partners are: United States (14 percent of total exports), Japan (13 percent), China (12 percent), South Korea (10 percent) and India (8 percent). Others include: United Arab Emirates, Bahrain, Singapore and Twain

Imports in Saudi ArabiaSaudi Arabia main imports are: machinery, mechanical appliances and electrical equipment (27 percent of total imports), transport equipment (16 percent), base metals (13 percent), chemicals and related products (9 percent) and vegetables (6 percent).Import partners are China (13 percent of total imports), United States (12.6 percent), Germany (7 percent) and Japan (6 percent), South Korea, United Arab Emirates, France and Italy.

Saudi Arabia CompetitivenessCompetitiveness??Competitiveness depends on the productivity with which a nation uses its human, capital, and natural resources.Productivity sets the standard of living (wages, returns on capital, returns on natural resources) that a country can sustainIt is not what industries a nation competes in that matters for prosperity, but how productively it competes in those industriesProductivity in a national economy depends on a combination of domestic and foreign firms The productivity of local or domestic industries is fundamental to competitiveness, not just that of export industriesMacroeconomic Competitiveness1. Social Infrastructure and Political Institutionsa. Basic Human capacityEducation, Health careb. Political InstitutionsPolitical Freedom, stability, accountabilityc. Rule of lawJudicial Independence, legal framework, civil rights

2. Macroeconomic Policiesa. Fiscal PoliciesSurplus/Deficit, Debtb. Monetary PolicyInflation, Interest rateMicroeconomic CompetitivenessAccess to high quality business inputsAvailability of suppliers and supporting industriesSophistication of local customers and needsLocal competitionLocal rules and incentives that encourage investment and productivity

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