Saudi Arabia, in its post-WTO era, will have to dismantle its agricultural subsidies by 13.3 per cent over a 10-year period, according to a report.

Saudi Arabia has committed to reduce its aggregate measures of support for agriculture under a long-term plan to minimise any adverse impact on the agricultural sector, said Samba Financial Group chief economist Brad Bourland.
The Sixth WTO Ministerial Conference to be held in Hong Kong from tomorrow (December 13 to 18) is deemed vital for enabling the four-year-old Doha Development Agenda negotiations to move forward sufficiently to conclude next year, said the report.
The Kingdom has already concluded bilateral market-access negotiations with all interested WTO members. The general council formally concluded negotiations with Saudi Arabia on November 11 on the terms of the country’s membership to the WTO.
The tariff protection for local industry, according to Bourland, will be reduced from 20 to 15 percent, effective Sunday. He said the phased tariff reduction for the agricultural sector should not create much of a problem for the industry.
Industry sources point out that the Kingdom has a list of 938 locally manufactured products that enjoy tariff protection. The government committed two years ago to shorten the list by almost half by the end of 2005. However, with 2006 approaching, this has not yet happened and the protective barrier continues across a broad spectrum of industrial and consumer products, said the Arab News report.
In this context, financial consultant Motasher Al-Murshed said that the government should set up an experts panel from various sectors to steer the national economy through the challenges looming ahead. “We have to rethink the national strategy and make sure that the government’s privatisation programme does not create a situation whereby it loses its competitive advantage.”
Al-Murshed said that while the privatisation programme is good for the national economy, the Kingdom’s strategy should be to open up the sectors rather than pull out of them altogether. He identified the telecom, petrochemicals and the oil and gas sectors as areas where the government should maintain its presence while allowing private-sector participation at the same time. However, air transportation, railroad and seaports could be privatized under a phased plan, he added.
Such an approach would allow the government to hold on to its competitive advantage and promote diversification of the economy away from oil. “Oil is not a dependable source of national income, since oil prices keep fluctuating. If the government withdraws from highly lucrative sectors like telecommunications, oil and gas, it could create serious problems,” Al-Murshed said, adding that various western governments have adopted a similar policy of maintaining their economic presence in key sectors, added the report.