Lapas attēli
PDF
ePub

and private Saudis. Total interest payments on the debt were estimated at eight percent of expenditures in 1993.

5. Significant Barriers to U.S. Exports

Although the U.S. is the Kingdom's largest supplier and investor, trade and investment barriers appear in a variety of forms. The foreign capital investment code requires that foreign investment be made in line with the nation's development pri orities and include some technology transfer. While there are no legal fimitations on percentage of foreign ownership, prior to 1994, wholly foreign owned ventures were unlikely to receive government approval. Foreigners may not invest at all in joint ventures engaged solely in advertising, trading, distribution or marketing. Real estate ownership is restricted to wholly-owned Saudi entities or citizens of the Gulf Cooperative Council (GCC).

Saudi labor law requires companies registered in the Kingdom to give preference to Saudi nationals when hiring. The expatriate workforce in the Kingdom is approximately four million. Saudi Arabia announced implementation of a Business Entry fee of Saudi riyals 1,000 (USD 267) in 1995 for working involving Saudi and non-Saudi companies.

On September 30, 1994, the GCC foreign ministers publicly announced that the GCC was no longer enforcing the secondary and tertiary aspects of the Arab League boycott of Israel. Some Saudi commercial documentation continues to contain references to the Arab League boycott. U.S. firms often have to seek revision of these documents before they sign the documentation. The primary boycott against products and services from Israel remains in force.

Import licensing requirements designed to protect domestic industries or restrict importing to nationals are an obstacle to free trade. Saudi Arabia requires a license to import agricultural products. In addition, contractors of civilian projects may not import directly and instead must purchase equipment and machinery from Šaudi agents.

Restrictive shelf-life standards for food products act as de facto discrimination in favor of European and Asian products, which take less time to ship than products made in the United States.

In 1987, Saudi Arabia enacted regulations favoring GCC-made products in gov ernment purchasing. GCC items now receive up to a ten percent price preference over non-GCC products. Under a 1983 decree, foreign contractors must subcontract 30 percent of the value of the contract, including support services, to majority Saudi-owned firms, a restriction which U.S. businessmen consider a serious barrier to exports of U.S. engineering and construction services. Saudi Arabia negotiates offset requirements in connection with certain military purchases and, recently, for some major civilian projects.

In addition, the government reserves certain services for government-owned companies. Insurance services for government agencies and contractors are reserved for the national company for cooperative insurance. A "fly-Saudia” (Saudia Airline) policy applies to government-funded air travel.

Saudi Arabia applies a “fly-Saudia" policy to foreign Muslims traveling to the Kingdom to visit the holy city of Mecca during pilgrimage every year, as well. The government reserves a percentage of foreign pilgrim traffic for Saudia Airline, and enforces this policy by regulating the number of foreign carriers permitted to land during the pilgrimage period. The government also gives a preference to national shipping companies: up to 40 percent of governmental purchases must be shipped in Saudi-owned vessels.

Saudi customs rules require that incoming goods be accompanied by documentation certified by an approved member of the Arab-U.S. Chamber of Commerce and the Saudi Embassy or Consulate in the United States. The latter requirement slows shipping, adds man-hours and fees, and ultimately increases the cost of the product to Saudi customers.

6. Export Subsidies Policies

Saudi Arabia has no export subsidy programs specifically targeted at industrial products, though many of its industrial incentive programs indirectly support exports. Agricultural export subsidies are discussed above.

7. Protection of U.S. Intellectual Property

The United States Trade Representative placed Saudi Arabia on the Special Section 301 Priority Watch List in 1993 mainly because the Kingdom's copyright law does not protect foreign works. On April 13, 1994, Saudi Arabia acceded to the Universal Copyright Convention (UCC). It began enforcing reciprocal protection for UCC signatories July 13, 1994, although pirated products may still be commonly found in shops.

The Kingdom's copyright law went into effect in 1990. The law provides protection for the life of the author plus fifty years in the case of books, and in the case of sound and audio visual works, for the life of the author plus twenty-five years. Computer programs are also covered, although the law does not specify a period of protection. The law does not apply to Western works, however, Saudí authorities have indicated that through the Kingdom's accession to the Universal Copyright Convention, they will be able to extend protection to Western works. As of November 1994, overt computer piracy has decreased, but many pirated videos and sound recordings are still available in the marketplace.

Saudi Arabia enacted a patent law in 1989. The criteria for determining whether an invention is patentable are similar to those applied in the United States. Saudi law prohibits the unlicensed use, sale or importation of a product made by a process subject to patent protection in Saudi Arabia. At the same time, the law allows the government to declare that certain areas of technology are unpatentable. It also permits compulsory licensing of patented products and processes, with or without compensation to the patent holder, for non-use of the patent or for public policy reasons. As of November 1994, the Saudi Patent Office had not yet acted on any of the 3,000 applications it had received.

The Kingdom's trademark laws and regulations conform to international norms, but U.S. businesses have complained of excessive registration and search fees, as well as problems with enforcement. Counterfeiting in spare auto parts, cologne, pharmaceuticals and other consumer products is widespread. Infringement proceedings are spotty. Some proceedings can take years and cost tens of thousands of dollars, while others can be resolved in less than two weeks. Moreover, many Saudi judges are trained only in religious law and are perceived as unsympathetic to trademark claims brought by foreigners.

U.S. industry groups have estimated losses due to lack of copyright protection at over USD 110 million in 1992. When losses from trademark counterfeiting and patent infringement are included, this figure is substantially higher.

8. Worker Rights

a. The Right of Association.—Government decrees prohibit both the formation of labor unions and strike activity.

b. The Right to Organize and Bargain Collectively.-This right is not recognized in Saudi Arabia.

c. Prohibition of Forced or Compulsory Labor.-Forced labor is prohibited in Saudi Arabia. However, since employers have control over the movement of foreigners in their employ, forced labor, while illegal, can occur, particularly in the case of domestic servants and in remote areas where workers are unable to leave their places of employment.

d. Minimum Age for Employment of Children.-The labor law provides for a minimum age of 13, which may be waived by the Ministry of Labor with the consent of the child's guardian. Children under 18 and women may not be employed in hazardous or unhealthy industries such as mining. Wholly-owned family businesses and family-run agricultural enterprises are exempt from the minimum age rules, how

ever.

e. Acceptable Conditions of Work.—Saudi Arabia has no minimum wage. The labor law establishes a 48 hour work week and allows employers to require up to 12 additional hours of overtime, paid at time and one-half. It also requires employers to protect employees from job-related hazards and diseases.

f. Rights in Sectors with U.S. Investment.—Major U.S. companies operating in the oil, chemicals, and financial services sectors are good corporate citizens and adhere strictly to Saudi labor law. Conditions of work at major U.S. firms are generally as good or better than elsewhere in the Saudi economy. U.S. firms normally work a five and one-half day week (44 hours) with paid overtime. Overall compensation tends to be at levels that make employment in U.S. firms very attractive. Safety and health standards in major U.S. firms in Saudi Arabia compare favorably with non-U.S. firms in Saudi Arabia.

Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1993

[blocks in formation]

Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1993-Continued [Millions of U.S. dollars]

[merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small]
[merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small]

1 The Syrian Government has not published its 1993 statistics as of the completion of this report. Further, the government's 1992 economic statistics remain estimates. All figures in the preceding tables are estimates based on the government's 1992 estimates, other sources in the public domain, and the U.S. Embassy's own calculations.

2 Millions of U.S. dollars converted at the official rate of 11.2 Syrian pounds/ 1 U.S. dollar. Millions of U.S. dollars converted at the "Neighboring Country" rate of 42 Syrian pounds /1 U.S. dollar. *All banks in Syria are nationalized and interest rates are set by law, ranging from two percent for fi nancing of the export and storage of barley to nine percent for certain private sector loans. Savings rates range from two percent on public sector "current accounts and sight deposits" to nine percent on "other investment bonds." Most rates have not changed in 10 years.

1. General Policy Framework

In the past year, the Syrian government, except for tightening exchange rate controls, has acted to reduce administrative barriers to U.S. exports. The private sector, responding to these and other reforms, has increased its imports beyond those of the public sector; however, increases of U.S. exports to Syria have lagged behind those of other countries, probably due to continued U.S. Government foreign policy sanctions and remaining Syria administrative and legal barriers to trade. As a reward for participation in the Gulf War, Arab Gulf states have contributed large, but declining amounts of aid, to Syria over the past three years. These allocations, over USD 1.7 billion in 1992, and ÚSD 1.3 billion in 1993, have gone to rehabilitate Syria's telecommunications and electrical power generation sectors.

Prospects for Syrian private sector investment and imports continue to improve, spurred by economic reforms, including an investment encouragement law. Recent liberalization actions of the Syrian government permit private exporters to retain some foreign exchange export earnings to finance permitted imports for manufacturing inputs, as well as other listed products. The rate of retention depends on the type of products exported: 75 percent of industrial export earnings, 100 percent of agricultural sales. Although retaining a monopoly on "strategic" imports, such as wheat and flour, the Government continued to expand the list of permitted imports during 1994, including items, such as sugar and rice, formerly reserved for public sector importing agencies. During 1993 the government attempted to interdict many of the goods imported for the "unofficial market" and succeeded briefly in reducing supplies. Ultimately it discontinued the activity because of inadequate resources to

enforce the interdict and the strong public demand for such goods. Responding to the demand, the government began expanding the list of importable goods.

The United States imposed trade controls in 1979 as a response to Syria's involvement with terrorism. The U.S. Government expanded sanctions against Syria in 1986, following Syria's implication in the attempted bombing of an Israeli airliner at London Heathrow Airport. Among the affected items are aircraft, aircraft parts, and computers of U.S. origin or containing U.S. origin components and technologies. The Syrians have sought alternate suppliers of these products. Under the 1986 sanctions, Syria is ineligible for the Export Enhancement Program (EEP) and the Commodity Credit Corporation (CCC) Program in all agricultural products, rendering U.S. wheat uncompetitive in the Syrian market. The Syrian-U.S. Bilateral Aviation Agreement expired in 1987 and has not been renewed. Finally, the EXIM Bank and OPIC suspended their programs in Syria, further disadvantaging U.S. exporters in meeting competition from other suppliers.

The Syrian government uses its annual budget as its principle tool for managing the economy. Through 1992, the Syrian government's ability to raise official prices on many consumer items (effectively reducing subsidies), improve tax collections, and increase transfers from state enterprises, while reducing commitments of Syrian resources to capital expenditures, enabled it to reduce budget deficits, leading to a balanced budget in 1992. However, the last two annual budgets have been in deficit, due the cost of maintaining Syria's large military establishment (both domestically and in Lebanon) and its recently reduced, but still heavy, subsidization of basic commodities and social services.

Given Syria's anachronistic and nationalized financial system and its inability to access international capital markets, monetary policy remains a passive tool used almost exclusively to cover fiscal deficits. All four of the country's commercial banks are nationalized. Interest rates are fixed by law. Most rates have not changed in the last several years, even though current real interest rates are negative, which exerts additional inflationary pressures in the economy.

2. Exchange Rate Policies

The Syrian government continues to maintain a multiple exchange rate system. The official exchange rate remains fixed at Syrian pounds 11.20 to USD 1 for the government, certain public sector transactions and valuations for some customs tariff rates. A second exchange rate, called the "Blended Rate," SP 26.6 to USD 1, can be used by the U.N. and diplomatic missions. A third rate, the "Neighboring Country" rate, SP 42 to USD 1, applies to most state enterprise imports except certain basic commodities and military/security items. Recently, a foreign oil company signed an exploration contract allowing it to transact contract-related business at the "Neighboring Country" rate, a first for the oil sector. Outside Syria, a thriving offshore market for Syrian pounds operates in Lebanon, Jordan, and the Arab Gulf countries. During 1994, the value of the Syrian pound fluctuated between SP 49 and 51 to the dollar in these locations.

Exchange controls are strict. Syrian currency may not be exported, although it may be imported physically. Almost all exchange transfers must be by letter of credit opened at the Commercial Bank of Syria. Outward private capital transfers are prohibited, unless approved by the Prime Minister or transacted under the new investment law noted below. Prior to 1987, Syrian law required private exporters to surrender 100 percent of foreign exchange earnings to the Central Bank at the official rate. Now, private exporters may retain 75 to 100 percent of their export earnings in foreign exchange to finance imports of inputs and other items designated on a short list of basic commodities, surrendering the balance to the Commercial Bank of Syria, generally, at the "Neighboring Country" rate. Since 1991, the Commercial Bank of Syria may convert cash, travellers checks and personal remittances at the "Neighboring Country" rate.

3. Structural Policies

By law, the Ministry of Supply controls prices on virtually all products imported or locally produced, although enforcement in most sectors is spotty. The ministry also sets profit margin ceilings, generally up to 20 percent, on private sector imports. Local currency prices are computed at the SP 42 to USD 1 rate. In the agricultural sector, production of strategic crops (cotton, wheat) is controlled through a system of procurement prices and subsidies for many inputs, including seeds, fuel, and fertilizers. Farmers may retain a portion of production, but the balance must be sold to the Government at official procurement prices. Since 1989, the Government has increased farm gate prices to encourage production and to enable state marketing boards to purchase larger quantities of locally produced commodities. In

« iepriekšējāTurpināt »