Economy

Saudi Arabia pledges $500m to global coronavirus relief efforts

The current chair of the G20 called on other countries and organisations to help bridge $8bn financing gap

Nada El Sawy
Nada El Sawy

April 17, 2020

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Saudi Arabia, the current chair of the G20, has pledged $500 million (Dh1.83bn) to support global efforts to combat the Covid-19 pandemic. 
The contributions include $150m to the Coalition for Epidemic Preparedness and Innovation (CEPI), $150m to the Global Alliance for Vaccines and Immunisations (Gavi), and $200m to other international and regional health organisations and programmes, the Kingdom said in a statement on Thursday.
It also urged all countries, non-governmental organisations, philanthropies and the private sector to help close the financing gap to fight the virus, estimated to be over $8bn according to the Global Preparedness Monitoring Board (GPMB). The independent body, launched in 2018, assesses response capacity for international health crises. 
The $500m pledge from Saudi Arabia comes in response to the commitment made during the Extraordinary G20 Leaders' Summit last month, when leaders of the world's 20 largest economies agreed to mobilise needed funds for virus relief.

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    A worker fills the shelves at a supermarket before the curfew in Misrata, Libya. Reuters
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    A Palestinian boy gestures as he wears a costume, sewed by his mother, representing the microscopic view of the coronavirus in the central Gaza Strip. Reuters
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    Egyptian clown Ahmed Naser, helps children to put on face masks in Darb Al Ban district at Islamic Cairo, Egypt. Reuters
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    A woman looks at traditional Ramadan lanterns on display at a stall at Al Khayamia street in old Cairo, Egypt. Reuters
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    Expatriate workers have their temperatures checked while carrying out road project development in Aali village south of the Bahraini capital Manama. AFP
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    Palestinian children pose with makeshifts masks made of cabbage while cooking at home with their family in Beit Lahia in the northern Gaza Strip. AFP

Following a virtual meeting of the G20’s finance ministers and central bank governors on Wednesday, the group said it must “act collectively and decisively to protect and support our citizens and businesses, prevent long-term damage and lift restrictions as soon as our health conditions permit”.

There were more than 2.1 million confirmed Covid-19 cases and a toll of 145,000 deaths as of Friday, according to Johns Hopkins University. As worldwide lockdowns, business closures and travel restrictions continue, the International Monetary Fund warned this week the global economy faces its worst recession since the Great Depression of the 1930s. 
The G20 has so far poured $7 trillion into the global economy to support businesses and stem job losses.
Last month the group agreed to suspend debt repayments from the world's poorest countries, allowing them to dedicate funds to fight the coronavirus instead. Both principal repayments and interest payments will be suspended from May 1 until the end of the year.
During a separate virtual meeting of the International Monetary and Financial Committee that represents the members of the IMF on Thursday, Saudi Arabia's finance minister said the country is facing the coronavirus crisis from "a position of strength".

Mohammed Al Jadaan said the Saudi government has a strong balance sheet, ample reserve buffers and relatively low debt, the Saudi Press Agency reported. He said the government's priorities are necessary resources for the healthcare system and support to those affected by the coronavirus financially and economically. 
The government has so far announced 170bn riyals (Dh166bn) to support the economy, including 50bn riyals dedicated to small and medium-sized enterprises and 50bn riyals to speed up payments to the private sector.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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  • By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

Business Insights
  • As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses. 
  • SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income. 
  • Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
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