Delay of project awards particularly in the regions non-oil sector will worsen the boom-bust cycle, Dr. Nasser Saidi, founder of Nasser Saidi & Associates and former chief economist at the Dubai International Financial Centre (DIFC), told a MEED conference on 17 February.
It is a mistake to delay project awards. A down cycle in the oil sector must drive the [regional] governments to focus and strengthen the non-oil sector, says Saidi. He said investing particularly in science, technology and innovation could pay major dividends during a bust cycle.
Saidi also said the current environment has created a positive environment for implementing fiscal reforms such as the phasing out of fuel subsidies and introducing a taxation regime focusing on value added as well as excise taxes. We began discussing value added tax with the regional governments]in 2008 but the plans were put on hold when the global crisis hit, he said.
Saidi cited that introducing a minimum excise tax on energy use in Saudi Arabia alone could help the government raise an additional $53bn in its annual revenues even while it will help eliminate wasteful energy utilisation practices.
While it is generally feared that a taxation regime could potentially erode the GCC states competitiveness particularly in attracting foreign expat workers due to increased cost of living, Saidi said VAT and excise taxes on very select products will not impact the regions competitiveness at all especially if these countries will start investing aggressively in science, technology and innovation.