- Tax and Accounting
- How COVID-19 is impacting trade and business resilience in the GCC
How COVID-19 is impacting trade and business resilience in the GCC
By Diana Caceres, Senior Tax Research Manager, Asia & Emerging Markets, Thomson Reuters MENA
The coronavirus pandemic is an unprecedented challenge on a global scale. In just a few short months, the COVID-19 outbreak has disrupted trade, brought the travel industry to its knees and wiped trillions of dollars from stock markets worldwide. S&P Global Ratings predicts a global recession this year, due to market volatility and increasing credit pressure.1
In the GCC region, governments have implemented a raft of measures to mitigate the outbreak. These include partial curfews and work suspensions; the temporary closure of schools and universities, tourism hotspots, cultural destinations and family entertainment zones; the cancellation of public events and sports activities; and restrictions on the movement of goods and people. In this environment, trade and supply chains have been significantly affected.
Impact on regional trade
The pandemic’s impact on China-GCC trade could hit the region hard. In February 2020, oil demand from China fell substantially, with consumption decreasing by 20%.2 This is significant, give that China is a chief buyer of oil from the Gulf states; and the region’s largest economic partner, responsible for investment and tourism flows into the region.
When China was first impacted by the novel coronavirus, GCC states showed their support and sent aid. Qatar Airways, for example, donated 300 tons of medical supplies to China.3 Hopefully, as China begins to emerge from the first phase of its health crisis and the GCC region begins battling the virus in earnest, Gulf states will manage to find a balance between protecting their citizens and maintaining healthy diplomatic ties with China.
While the GCC is not closed for business, trade is constrained by the COVID-19-related restrictions being put in place regionally and globally. Therefore, all local businesses engaged in trade are at risk.
Additionally, COVID-19-related restrictions could threaten food security in states that depend on imports to meet a substantial portion of their food requirements.
This is a fast-developing situation and a lot can change from day to day. As at 23 March 2020, here is a brief overview of the measures that the various governments in the region have put into place:
In Dubai, Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum has announced an AED1.5 billion ($409 million) stimulus package – aimed at shoring up the retail, trade, tourism and energy sectors.
The UAE Central Bank will also roll out an AED100bn ($27bn) credit and capital support scheme to bolster the economy. This includes temporary exemption from principal payments and interest on existing loans for private sector businesses and individuals impacted by the pandemic. SMEs and real estate organizations are receiving “special consideration” in this plan.4
In line with this initiative, banks across the UAE have agreed to implement measures to provide financial relief to organizations in the aviation, hospitality, healthcare, retail, event management, consumer goods and education sectors. Approaches include rescheduling or delaying loan payments, reducing instalments and decreasing fees.5 These banks include Emirates NBD, Dubai Islamic Bank, Emirates Islamic, Mashreq and Commercial Bank of Dubai.6
In Abu Dhabi, the Executive Council (ADEC) has introduced a series of initiatives under the government’s accelerator program, Ghadan 21. These include programs to support SMEs and make loans more accessible to local companies.7
Here’s a snapshot of all 16 initiatives8:
In addition to these measures, the UAE has suspended all passenger flights in and out of the Emirates from 25 March.
The Kingdom has pledged a SR50 billion ($13 billion) package to help SMEs, e-commerce companies and other organizations impacted by closures in Mecca and Medina.
Travel restrictions have also been imposed, with the Ministry of Interior suspending all international flights from 15 March – initially for a two-week period. All maritime passenger shipping services between Saudi Arabia and 50 countries have also been suspended. These include 27 EU nations, as well as the UAE, Kuwait, Bahrain, Oman, Iraq, Lebanon, Syria, Egypt, South Korea, China, EU states, Switzerland, India, Pakistan, Turkey, Eritrea, Sri Lanka, Ethiopia, Kenya, Sudan, Djibouti, Somalia, Southern Sudan and the Philippines. There is currently no ban on cargo and evacuation services.9
Kuwait Council shut down Kuwait International Airport from 13 March, grounding commercial flights run by Jazeera Airways and Kuwait Airways.
According to notification no (30) 2020, Kuwait Customs have banned the export of food products, medicines and medical supplies from 12 March, unless the exporter has written confirmation from the Ministry of Trade and Industry.
Kuwait Customs have also banned the import of all types of birds (fresh, chilled, frozen and processed), as well as their derivatives and table eggs from the countries listed below, due to the bird flu outbreak in these countries – effective from 26 January:
The Ministry of Commerce and Industry has also suspended all events and exhibitions planned in Kuwait until further notice.10
Qatar has placed a temporary ban on people entering the country from various nations, including India, Bangladesh, China, Egypt, Iran, Iraq, Lebanon, Nepal, Pakistan, Philippines, South Korea, Sri Lanka, Syria and Thailand. This impacts all individuals, including those with residence and work permits, as well as temporary visitors who would have obtained visas upon arrival.11
In Bahrain, the government will be implementing a $11.38 billion economic stimulus package to support citizens and businesses. This generous package is equivalent to 29.6% of Bahrain’s annual GDP.12
The nation has also temporarily suspended flights to and from a number of destinations around the world.13
The Sultanate’s corporate and business community has adopted measures designed to protect the health and wellbeing of their staff – and the safety of the population at large. These include work-from-home programs and advisories on overseas travel.14
WHAT CAN YOUR BUSINESS DO?
While these interventions by the public sector will provide much needed relief, it is important for businesses to take action now and develop a continuity plan for the months ahead.
In the volatile situation we find ourselves in, your business needs the tools and technologies to stay agile, manage fast-changing regulations and rules, and control risk.
- Is your company ready for remote work?
Making sure every employee has the IT assets and support required to work from home is an essential aspect of any COVID-19 business contingency plan. Solutions that facilitate team communication, data accessibility and digital workflow management are ideal in this environment.
- Improve supply chain communication and monitoring
As you adapt to new trading challenges, you may want tools to communicate with your global business partners in various languages and monitor supply chain risk more comprehensively. An automated solution can provide electronic collection, standardization and organization of business partner information, with workflow tools that allow you to digitally route assessments, requests and reminders to the relevant stakeholders.
- Manage exports more efficiently
As export rules change, you need to confidently maintain export control classifications for products and generate accurate documentation. An export management solution can reduce your risk of non-compliance, while making clearance, screening and document creation processes more efficient.
- Gain complete control over imports
A purpose-built import solution can help you to securely exchange the trade data required for the importation of goods into any country around the world, from purchase order to final delivery. With a complete, automated system for consolidating the necessary information for import filing – and the tools to validate that data against current regulatory content – you can optimise efficiency in your supply chain.
- Know who you’re doing business with
In turbulent times, it’s critical to continue protecting your business against risk that could be hiding in your business relationships – especially if you’re planning to adapt your trade lanes. You need a trusted solution for screening potential and existing business relationships against current global lists for restricted persons, companies, and sanctioned or embargoed countries.
The way forward
Due to the unpredictable trajectory of this health crisis, its impact on the GCC and global trade is a developing story. We can help you to steer your business through this dynamic environment during 2020 and beyond.
At Thomson Reuters, we take our role as your trusted partner to heart.
As the Coronavirus (COVID-19) continues to spread globally, our main objectives now are to support you and your businesses, and to navigate this complicated and ever-changing environment together with you. Rely on these free resources, created by our legal and tax experts, to assist you as you prepare and respond to issues. Visit our resource centre: https://www.thomsonreuters.com/en/resources/covid-19.html or you can email us at email@example.com
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