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Saudi Arabia approves ambitious plan to move economy beyond oil

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  • As Japan budgets $1.45m for women, girls, Others affected by Boko Haram

Saudi Arabia has approved an ambitious strategy to restructure the kingdom’s oil-dependent economy, involving diversification, privatisation of massive state assets including the energy giant Aramco, tax increases and spending and subsidy cuts.

King Salman bin Abdulaziz announced cabinet backing for the Saudi Vision 2030 plan in a brief televised announcement on Monday in which he called on his subjects to work together to ensure success. Shares on the Riyadh stock market rose sharply.

Under Salman, who came to the throne in early 2015, economic strains have been the backdrop to rising tensions with regional rival Iran, the threat from Islamic State, the wars in Syria and Yemen, and a sense that the kingdom’s decades-long relationship with the US is fraying.

Mohammed bin Salman, the king’s son and deputy crown prince, gave details of the economic reforms in a pre-recorded TV interview – part of a proactive media strategy designed to advertise a sense of dynamism and change in response to oil prices, which have fallen from more than $100 a barrel in early 2014 to about $40 this month.

Elements of the long-heralded 15-year blueprint include the creation of a $2tn Saudi sovereign wealth fund, as well as strategic economic reforms called the National Transformation Programme.

Bin Salman confirmed that the kingdom would sell off about 5% of Aramco, which will become a holding company with subsidiaries listed via an initial public offering. Oil was a “dangerous” addiction, he told al-Arabiya TV. “The vision doesn’t need high oil prices,” he added. “We can live without oil in 2020.”

Aramco is estimated to be the world’s most valuable company, while the wealth fund would be the largest of its kind. Overall the plans aim to make the Arab world’s largest economy depend on investments rather than energy to fill government coffers in the years to come.

“The vision is a road map of our development and economic goals,” the prince said. “Without a doubt Aramco is one of the main keys of this vision and the kingdom’s economic renaissance.”

The fund will include current assets of around $600bn, as well as returns from the sales of Aramco shares and state-owned real estate and industrial areas estimated to be worth $1 tn.

Bin Salman, 30, is not only young in a country long ruled by old men but famously energetic and assertive. He seems genuinely popular but is also resented for his unprecedented concentration of power – as defence minister and chairman of the Council of Economic and Development Affairs. Critics call him reckless – especially over the war in Yemen.

Economic reform has often been discussed before but the sense of urgency has grown since the government ran a record budget deficit of nearly $100bn last year. Plans to boost non-oil revenues with taxes will take years to have an impact, leaving spending cuts and foreign investment as the main way to bring state finances under control.

In recent years Saudi Arabia has relied on oil revenues for about 90% of its budget. Earlier this month it took out a $10bn five-year loan from a consortium of global banks – its first sovereign loan since 1991. The new strategy builds on the work of several prominent international consulting firms, who have been paid $1.25bn in fees this year.

Subsidy cuts, already under way, look set to be challenging, with Saudis used to cheap petrol, water and energy – while polls show they still expect them to continue. Bin Salman said the reforms are intended to eliminate housing and unemployment problems and ensure help reaches those most in need.

Last Saturday, the king sacked the water and electricity minister, who had drawn criticism for his handling of price increases, including a suggestion that citizens upset over high water bills dig their own wells.

Social factors are a key driver for the new policy. With half the Saudi population under 25, job creation is vital if the kingdom – which has no national representative institutions – wants to avoid the social unrest that has fuelled Arab spring protests across the region. But the introduction of even indirect taxes may lead to demands for change that could undermine the autocratic system.

A “green card” system is to be launched within five years to allow expatriate Arabs and Muslims to live and work long-term in the country, Bin Salman said. Tourism – apart from the annual hajj pilgrimage – and mining would be used to generate new revenues. A holding company for military industries would also be set up.

Bin Salman had suggested earlier that what Saudi Arabia was planning was similar to the Thatcher-era privatisation of state industries in Britain in the 1980s.

Experts and analysts have called this the biggest economic shakeup since the founding of Saudi Arabia. “The vision and ambition is out there and the proof now will be on the execution and the ability to continue to amass support from society in general and the business community specifically,” John Sfakianakis, director of economics at the Gulf Research Centre in Riyadh told the Guardian.

“Due to Mohammed bin Salman’s age, pace and sense of accountability, society is embracing these plans. Now is the time for big economic changes that the country hasn’t embarked on since 1932. The dynamism and determination to deliver has not been seen before and Bin Salman and his team know they have to deliver. Economic necessity dictates that Saudi Arabia reforms now.”

It is unclear whether the economic shake-up will lead to the kind of social changes many believe are needed to truly modernise the country: allowing women to drive, for instance, opening up the legal system, or ending the kind of human rights abuses that attract far more attention abroad than in the kingdom itself.

In the meantime, the Government of Japan in partnership with the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women) has announced a $1.45 million initiative for women and girls in Internally Displaced Persons and other survivors of Boko Haram in the North East of Nigeria.

The initiative according to a statement issued by the Japanese embassy in Abuja, is strategically designed to Strengthen emergency assistance initiatives to Internally Displaced Persons (IDPs), especially women/girls and survivors of Sexual and Gender-Based Violence in target areas amongst other things.

The project, which is targeted at selected areas in Adamawa, Bauchi and Gombe states is a one-year initiative (2016-2017), wholly funded by the Government of Japan to the tune of 1,450,000 USD and it will be implemented by UN Women, in partnership with relevant Government Ministries, Departments and Agencies (MDAs), CSOs and other Development Agencies amongst other stakeholders.

The Humanitarian Response project, the statement stated “will complement an on-going Women Peace and Security Programme in Northern Nigeria, being implemented by UN Women and other partners, while also enhancing collaborative interventions between the Government of Japan and Nigeria.”

Gender mainstreaming it in humanitarian response, it argued is undoubtedly central to an inclusive, effective, efficient and sustainable support and recovery programme for IDPs in Nigeria

Guardian with additional report from Upshot

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners

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…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live

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The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: www.maritimefirstnewspaper.com and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured

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…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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