RIYADH // Hassan Khamis has sold carpets from Riyadh’s retail heart of Olaya Street for almost a quarter of a century. But for him and his fellow shopkeepers there has been little to cheer about this year with fewer shoppers and a drop in spending. Business is down by more than half over the past two years.
“We are all saying the same,” he says, pointing to the empty street outside and the equally empty shops across the road.
Piled around him are hundreds of rugs from Iran to Pakistan selling for as much as Dh100,000. The Egyptian remembers much better times soon after arriving in the city from the Mediterranean port city of Alexandria in 1992.
Things may get worse as a wave of mall construction creates more distractions to turn the heads of Olaya’s dwindling shoppers. Saudi Arabia is about to get some Dubai-style retail therapy.
The Saudi government wants to find a million new jobs in the retail sector under its new Vision 2030 – an economic diversification plan of unprecedented scale that aims to wean the kingdom from its dependence on oil.
The plan was announced by Saudi deputy crown prince Mohammed bin Salman last month and includes sweeping reforms touching many different areas of business and society.
Saudi Arabia is about to offer full foreign ownership rights for the first time in the retail sector, to draw in investment from mega mall developers such as the UAE’s Majid Al Futtaim Group – a conglomerate that was instrumental in fashioning Dubai’s global reputation as a shopper’s paradise.
The retail sector already employs 1.5 million people in the kingdom, but only 300,000 of them are Saudis.
Running south from the bottle opener-shaped Kingdom Tower that looms over the city centre, Olaya Street is a retail incongruity in a region where luxury brands are usually found in luxurious malls.
The street feels anything but high-end. There are lots of empty units and building materials spill out on to the pathway at intervals. Litter accumulates in corners where the pavement has been cut off by construction hoardings erected along the route of the Riyadh Metro, which is being dug deep in the sand below.
Despite a wave of new mall construction, Saudi Arabia still has a higher proportion of traditional street-based retail than neighbouring countries, where summertime temperatures average 45° C. Such shops still account for about half of the total compared with 20 per cent in other Gulf countries.
At the Arabian Oud outlet, 26-year-old sales manager Ali Gamal squirts a strong smelling scent on to my wrist from a Dh1,200 bottle of Blue Oud. He hopes that Ramadan, traditionally a good month for retail in general and oud sales in particular, will bring more customers into his shop. But the latest spending data suggests it may not.
According to broker JLL, retail transactions in the first quarter of this year have fallen by about 9 per cent compared with the corresponding period last year.
The consumer spending slowdown coincides with a rise in mall construction. Several new shopping centres are due to open in Riyadh this year and the city’s total retail stock could jump by as much as 15 per cent this year to more than 1.6 million square metres if projects finish on time.
Despite the depressed trading conditions and a glut of new supply, property consultants see strong long-term demand for new malls across the kingdom because of its unique characteristics.
In the absence of cinemas and other entertainment venues, malls in Saudi Arabia are not just about shopping. They serve a much bigger recreation function than anywhere else, which is one reason why the market still appears to be under served.
Another is the kingdom’s youth bubble, with 65 per cent of the population made up of high-spending generations Y and Z.
The opening up of the retail sector in Saudi Arabia to foreign investment will lead to more Dubai-style mega malls with unique selling points said Imad Damrah, managing director of Colliers International in Saudi Arabia.
“The mall operators will also have more choice in terms of brand,” he says.
Majid Al Futtaim, the company that built an indoor ski slope in its Mall of the Emirates property in Dubai, is set to repeat the feat in Saudi Arabia.
The conglomerate is expected to be at the forefront of the kingdom’s changing retail landscape, tapping into opportunities created by the government’s new economic vision. It plans to develop the Mall of Saudi in the north of the city, which will be the largest shopping centre in the kingdom and will have one of the world’s biggest snow parks. It will also develop the City Centre Ishbiliyah mall in the east of the city.
The new malls are also expected to benefit from the government’s drive to create a thriving tourism sector, encouraging religious pilgrims to stay longer and spend more.
Already tourist spending accounts for as much as 20 per cent of the total in shopping centres in cities like Jeddah, Dammam and Al Khobar, says Colliers. That could balloon if the kingdom meets its ambitious targets, which include increasing its capacity to welcome 30 million umrah visitors each year from eight million.
Since the first details of Saudi Arabia’s new economic vision emerged last month, the headlines have been dominated by the planned IPO of Aramco and the creation of the world’s biggest sovereign wealth fund.
But the plan is about changing Saudi society as well as economy.
The first signs of that change will be as visible in the malls as on the financial markets.
scronin@thenational.ae
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Empty Words
By Mario Levrero
(Coffee House Press)
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
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Smalling (28'), Lukaku (70')
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Quarter-finals
Saturday (all times UAE)
England v Australia, 11.15am
New Zealand v Ireland, 2.15pm
Sunday
Wales v France, 11.15am
Japan v South Africa, 2.15pm
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
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- On sale: 2026
- Price: Not announced yet
Four reasons global stock markets are falling right now
There are many factors worrying investors right now and triggering a rush out of stock markets. Here are four of the biggest:
1. Rising US interest rates
The US Federal Reserve has increased interest rates three times this year in a bid to prevent its buoyant economy from overheating. They now stand at between 2 and 2.25 per cent and markets are pencilling in three more rises next year.
Kim Catechis, manager of the Legg Mason Martin Currie Global Emerging Markets Fund, says US inflation is rising and the Fed will continue to raise rates in 2019. “With inflationary pressures growing, an increasing number of corporates are guiding profitability expectations downwards for 2018 and 2019, citing the negative impact of rising costs.”
At the same time as rates are rising, central bankers in the US and Europe have been ending quantitative easing, bringing the era of cheap money to an end.
2. Stronger dollar
High US rates have driven up the value of the dollar and bond yields, and this is putting pressure on emerging market countries that took advantage of low interest rates to run up trillions in dollar-denominated debt. They have also suffered capital outflows as international investors have switched to the US, driving markets lower. Omar Negyal, portfolio manager of the JP Morgan Global Emerging Markets Income Trust, says this looks like a buying opportunity. “Despite short-term volatility we remain positive about long-term prospects and profitability for emerging markets.”
3. Global trade war
Ritu Vohora, investment director at fund manager M&G, says markets fear that US President Donald Trump’s spat with China will escalate into a full-blown global trade war, with both sides suffering. “The US economy is robust enough to absorb higher input costs now, but this may not be the case as tariffs escalate. However, with a host of factors hitting investor sentiment, this is becoming a stock picker’s market.”
4. Eurozone uncertainty
Europe faces two challenges right now in the shape of Brexit and the new populist government in eurozone member Italy.
Chris Beauchamp, chief market analyst at IG, which has offices in Dubai, says the stand-off between between Rome and Brussels threatens to become much more serious. "As with Brexit, neither side appears willing to step back from the edge, threatening more trouble down the line.”
The European economy may also be slowing, Mr Beauchamp warns. “A four-year low in eurozone manufacturing confidence highlights the fact that producers see a bumpy road ahead, with US-EU trade talks remaining a major question-mark for exporters.”
