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Saudi Arabia dampens hopes of quick WTO entry

Saudi Arabia is dampening hopes it will soon gain entry to the World Trade Organisation ahead of a WTO meeting in Qatar on November 9, officials and business leaders said on Sunday.

A Saudi negotiator for the kingdom's WTO bid, launched by Riyadh years ago, was quoted on Sunday as saying the country would not compromise its special status as birthplace of Islam to win WTO entry.

"We will not pay a heavy price to join WTO. This will be according to sharia law which serves Islam and Muslims," Fawaz al-Alami, Commerce Ministry Undersecretary for Technical Affairs, told the English-language Saudi Gazette.

But Saudi officials said privately that strict adherence to Islamic principles was not the main obstacle for Saudi Arabia, one of the world's four largest economies still outside the WTO and the only Gulf Arab state which has not yet joined the body.

"The kingdom's accession will not oppose its religious principles," an official negotiator, who asked not to be named, told Reuters.

But he said Saudi membership was not imminent and that the kingdom had not yet decided if it would join this week's meet in Doha of WTO member states and 29 others bidding to join.

"This issue (attending the meeting) has not been settled now," the official said. "I do not expect the kingdom to join before two years," he added.

A few months ago, officials said that Saudi Arabia had made substantial headway in meeting entry requirements, and would probably be in the WTO by the end of 2001.

MORE ECONOMIC, LEGAL REFORMS NEEDED

Saudi economists say the world's biggest oil exporter must liberalise more sectors of its economy and overhaul parts of its legal system before it can meet stringent WTO requirements.

"The pressure being put on Saudi Arabia by the WTO has more to do with economic and commercial aspects than with religious issues," Saeed al-Shaikh, chief economist at Saudi Arabia's National Commercial Bank, told Reuters.

"The main issue is opening up other sectors of the economy. It will probably take a long time before they are a member."

Saudi Arabia sees WTO membership as vital to diversifying its energy-led economy and creating enough jobs in the private sector to halt rising unemployment among its nationals.

It has issued a new investment law allowing foreigners for the first time to own projects and property, and decided to cut tariffs on some imported goods to five per cent from 12 per cent.

Analysts say these steps were helpful, but that some sectors are still effectively subsidised with preferential tax rates for Saudi firms and 20 per cent tariffs on imports of many products which are manufactured in the kingdom.

Another big problem is that many important areas -- such as telecommunications, health, pharmaceuticals, oil, aviation and banking -- are still not open to foreign ownership.

WTO negotiators have pointed out that Saudi Arabia also has to approve insurance regulations, copyright laws, and abide by international tribunals for trade disputes.

"At present, when there is a dispute between companies, a Saudi judge can overrule the contract -- this is a big problem with a lot of foreign companies," said a Saudi financial analyst. "We don't have a sound legal system -- it all depends on who is looking at the case," he added.

Another potential problem is delayed regulation for the insurance sector, which is to abide by Islamic principles.

The Saudi official who wished to remain anonymous said the kingdom had drawn up required WTO regulations for trademark and copyright law, and was working on others.

Saudi officials have said they will introduce reforms after gaining entry, but the WTO says they must be implemented first.

Saudi Arabia first applied to join the forerunner of the WTO, the General Agreement on Tariffs and Trade, in 1993.

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