Turkish President Erdogan's visit to Saudi Arabia seeks to restore strained relations


Ahmed Maher
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Turkey's President Recep Tayyip Erdogan travels to Saudi Arabia on Thursday as the countries seek to re-establish relations after a period of tension and stagnation.

Mr Erdogan has confirmed that he would meet Saudi Crown Prince Mohammed Bin Salman and said his visit is aimed at opening a new chapter with the kingdom on a basis of mutual respect and trust.

His visit is seen as the most tangible step by Turkey to seek better relations with several countries in the region, including the UAE, Israel and Egypt.

The Turkish president's last visit to Saudi Arabia was in 2017 during which he met King Salman and performed Umrah.

Officials in both countries have been working on a rapprochement for months, with Turkish Foreign Minister Mevlut Cavusoglu visiting Saudi Arabia in May last year.

Turkey’s ties with Riyadh and a host of Arab countries were strained by Ankara’s support of the Muslim Brotherhood in Egypt during the unrest and protests witnessed across the Middle East after 2011.

Riyadh and Ankara also took different positions on dealing with Syrian President Bashar Al Assad.

Turkey and Egypt held talks last September with a view to normalising relations that were strained after the Egyptian military removed Muslim Brotherhood member Mohammed Morsi from the presidency in 2013. According to a joint statement, the talks addressed "several regional questions like the situation in Libya, Syria, Iraq, Palestine" as well as the East Mediterranean, where massive natural gas reserves have been discovered.

Earlier this month, Ankara backed the transfer to Riyadh of the trial of Saudi suspects in the 2018 killing of Saudi journalist Jamal Khashoggi at the consulate in Istanbul — a move analysts believe is another sign that relations are thawing.

Saudi Arabia has already tried and convicted several senior intelligence and political officials over what it says was a rogue operation.

While Crown Prince Mohammed bin Salman has said he was ultimately responsible for the failures that led to the killing, authorities have categorically denied he ordered it.

Escaping the prism of zero-sum games

Mr Erdogan is seeking to boost his country’s economy, which is struggling with inflation above 50 per cent and the sharp devaluation of the lira, which has lost more than 40 per cent of its value against the US dollar.

The global economic impact of Russia’s war on Ukraine is likely to add to Ankara’s financial woes. The economic crisis has already been deepened by the coronavirus pandemic.

The diplomatic efforts by Turkey will help it face its perilous financial crisis, analysts say.

“Both Turkey and Saudi have much potential to benefit from a rapprochement. As Turkey’s economy suffers from a serious crisis, Saudi investment and more trade between Turkey and wealthy Gulf Co-operation Council members such as Saudi Arabia can help the Turks amid this difficult period," Giorgio Cafiero, chief executive of the Washington-based consultancy Gulf State Analytics, told The National.

In February, the Turkish leader visited the UAE, reciprocating a visit in November last year by Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces. The UAE formed then a $10bn fund to support investments in Turkey.

  • Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, welcomes Recep Tayyip Erdogan, the Turkish President, to Expo 2020 Dubai. Photo: Dubai Media Office
    Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, welcomes Recep Tayyip Erdogan, the Turkish President, to Expo 2020 Dubai. Photo: Dubai Media Office
  • The Turkish leader’s visit to the world’s fair concluded his first official trip to the Emirates in almost a decade. Photo: Dubai Media Office
    The Turkish leader’s visit to the world’s fair concluded his first official trip to the Emirates in almost a decade. Photo: Dubai Media Office
  • Sheikh Mohammed, Mr Erdogan and an official tour Expo 2020 Dubai. Photo: Dubai Media Office
    Sheikh Mohammed, Mr Erdogan and an official tour Expo 2020 Dubai. Photo: Dubai Media Office
  • Mr Erdogan said the two countries should ‘act together to achieve a brighter future’. Photo: Dubai Media Office
    Mr Erdogan said the two countries should ‘act together to achieve a brighter future’. Photo: Dubai Media Office
  • Sheikh Nahyan bin Mubarak, Minister of Tolerance and Coexistence, with President Erdogan at Expo 2020 Dubai. All photos hereafter: Chris Whiteoak / The National
    Sheikh Nahyan bin Mubarak, Minister of Tolerance and Coexistence, with President Erdogan at Expo 2020 Dubai. All photos hereafter: Chris Whiteoak / The National
  • Tuesday was the second and last day of the Turkish president's trip to the UAE.
    Tuesday was the second and last day of the Turkish president's trip to the UAE.
  • Turkey marked its National Day on Tuesday, which included a flag-raising ceremony at the Expo site.
    Turkey marked its National Day on Tuesday, which included a flag-raising ceremony at the Expo site.
  • ‘I am truly happy to be with you on the occasion of the Expo 2020 Dubai Turkish National Day. I congratulate the friendly and sisterly UAE for the large scale event despite the pandemic conditions,’ Mr Erdogan said in a public address.
    ‘I am truly happy to be with you on the occasion of the Expo 2020 Dubai Turkish National Day. I congratulate the friendly and sisterly UAE for the large scale event despite the pandemic conditions,’ Mr Erdogan said in a public address.
  • People gather outside Al Wasl Plaza for the occasion.
    People gather outside Al Wasl Plaza for the occasion.
  • A musical performance during the visit of President Erdogan to Expo 2020 Dubai.
    A musical performance during the visit of President Erdogan to Expo 2020 Dubai.
  • Music for Turkey's National Day.
    Music for Turkey's National Day.

The UAE and Turkey officially began talks in Istanbul on Tuesday for a Comprehensive Economic Partnership Agreement (Cepa) to expand trade and investment ties and support economic recovery and growth across the region.

In 2020, Turkey’s exports to Saudi Arabia reached about $2.62 billion, from $605 million in 1995, while Saudi exports to Turkey – mainly fuel products – stood at about $1.8 billion, according to the Observatory of Economic Complexity.

The end of a rift in the GCC in January 2021, when Saudi Arabia, the UAE, Bahrain and Egypt restored ties with Qatar after more than three years, will give further impetus to better relations between Riyadh and Ankara.

Escaping the prism of "zero-sum games" in the Gulf can lead to win-win outcomes for the GCC states as well as Turkey, says Mr Cafiero.

"Ultimately, it is important to appreciate the extent to which the AlUla summit [hosted by Saudi Arabia] of January 2021 has helped the Middle East move past a period in which Muslim countries outside the GCC came under much pressure to pick between the Qatar/Turkey and Saudi/UAE blocs," he said.

The global and regional dynamics are being transformed in the middle of Russia's war on Ukraine and growing reservations and concerns in the region on how Washington tackles major issues including the Houthi attacks on Gulf states and Iran's controversial nuclear programme, which is being renegotiated by the Joe Biden administration.

If needed, Turkey could play an effective role alongside Iraq in the ongoing talks between Saudi Arabia and Iran, counting on the recent progress in bilateral ties between Tehran and Ankara, says Mohsen Milani, the executive director of the Centre for Strategic and Diplomatic Studies.

"Turkey, like many other countries, can of course play a constructive role by persuading Tehran and Riyadh to accelerate the process of normalising their relations based on mutual respect and reciprocity," Mr Milani, the author The Making of Iran’s Islamic Revolution, told The National.

But, he clarified, it was unlikely that a Saudi-Turkey reset would see a major shift in how talks with Iran are progressing.

"Thanks to the Iraqi government, the bilateral talks between Tehran and Riyadh appear to be proceeding rather well in Baghdad and, therefore, there is no need to include Turkey as a mediator at this juncture," said Mr Milani, who is also professor of politics at the University of South Florida.

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The Melbourne Mercer Global Pension Index

Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.

The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.

“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.

“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”

Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.

Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.

“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.

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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. 

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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. 

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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. 

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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. 

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The main difference between blockchain and other forms of DLT is the way data is stored as ‘blocks’ – new transactions are added to the existing ‘chain’ of past transactions, hence the name ‘blockchain’. It is impossible to delete or modify information on the chain due to the replication of blocks across various locations.

Blockchain is mostly associated with cryptocurrency Bitcoin. Due to the inability to tamper with transactions, advocates say this makes the currency more secure and safer than traditional systems. It is maintained by a network of people referred to as ‘miners’, who receive rewards for solving complex mathematical equations that enable transactions to go through.

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Updated: April 29, 2022, 3:26 AM