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Flush with cash after more than two years of high oil prices, Saudi Arabia is pumping billions of dollars into infrastructure projects designed to improve living standards and ease social discontent in the wake of the 2011 uprisings elsewhere in the Arab world.
The Saudi Arabian government has recently awarded $22.5 billion in contracts to three foreign-led consortia for the design and construction of a metro rail system in the capital Riyadh.
The project, which will involve six rail lines extending 176 kilometers (110 miles) and carrying electric, driverless trains, is the world's largest public transport system currently under development, Saudi officials said.
Last August the government approved a $16.5 billion plan to modernize the transport system in its holy city of Mecca, including building a bus network and a metro system.
It is also building several other rail systems, including a 2,750 km line running from Riyadh to near the northern border with Jordan.
Saudi officials said Riyadh's population was projected to grow from 6 million to over 8 million in the next 10 years, making the metro vital to ease congestion and pollution in the capital's streets.
In addition to raising living standards, the government says it wants to upgrade the country's infrastructure to help the economy diversify beyond oil, making it less vulnerable to any future plunge of global oil prices.
Demand for electricity is increasing from both domestic and industrial users, as the kingdom’s population and economy continue to grow at rapid pace.
SEC currently has 12 major power projects, with a combined total capacity of 30,000MW, at various stages of the planning and design stage, which are all scheduled to be commissioned by 2025.
As the kingdom pushes ahead with investment in generation, the number of transmission and distribution projects will be required to grow in line with the new capacity. With local and international firms looking for a pick-up in the regional power market in the second half of 2013, Saudi Arabia should not disappoint.
FROM “GPO” DESK
A meeting was held under the Chairmanship of Shri Rajeev Kher, Additional Secretary, Department of Commerce on 4 July 2013 with representatives from Industry Associations and Export Promotion Councils regarding sensitization on issues relating to Regional Comprehensive Economic Partnership (RCEP).
The Chair initiated the discussion by briefing the participants about the emerging new trade architecture in the world. As much is not happening in the WTO and Doha round is in impasse, developed countries are trying to develop a new trade architecture in which in the first halo would be 30 major trading countries /economic entities of the world and the second halo would consist of rest of the WTO. In the first halo would be Trans Pacific Partnership (TPP) led by US on the right flank, Trans Atlantic Trade and Investment Partnership (TTIP) on the central flank and ASEAN led Regional Comprehensive Economic Partnership (RCEP) on the eastern flank. RCEP is driven by the manufacturers of the world primarily South Korea, Japan, China but TPP is driven by IP owners and rule makers (mainly US and new participant Japan). Geopolitical and economic considerations have led India to participate in RCEP negotiations. Our biggest strength is the size of our market. In this context, the Chair raised important question: can we leverage this strength? if yes, then how? What is the biggest gain we can achieve from RCEP? Can we set off some of the losses of the bilateral trade agreements in RCEP?
Some of the important concerns that emerged from the discussion are as under:
Japan is a potential market of software services and there is a lot of room to grow for India in this sector in Japan. But visa issues are impediment in getting access to these markets.
Impediments to market access in the form of non tariff barriers (NTBs) such as SPS/TBT, registration requirements, etc. particularly in China, Japan and South Korea were also pointed out.
Difficulty of mapping six digit tariff lines in trade in goods in some countries with eight digit tariff lines in other countries was also highlighted by the participants. They suggested for single tariff lines across the nations.
Another issue of concern highlighted by the industry and EPCs was inverted duty structure that emerged after the FTAs particularly with ASEAN. Many sectors such as engineering are afflicted by the inverted duty structure. It was suggested that while negotiating India should be cautious so as to not get into inverted duty structure.
MeP. E.P.C. PROJECT EXPORTS PROMOTION COUNCIL OF INDIA (PEPC)
India is a country with large and diverse infrastructure sector. The Government of India recognized the imperative need for the infrastructure sector and takes several initiatives like Committee of Infrastructure, National Highway Development Project (NHDP), National Maritime Development Programme (NMDP), Tax Holidays etc for the development and promotion of the sector. In the recent years, there has been several improvements in sectors like roads & highways, ports, railways and airports, the policy and regulatory framework is already in place and investment in infrastructure has risen considerably however there are still significant gaps that need to be bridged.
With a view to create a platform for all the stakeholders and for the conclusive growth & development of the Infrastructure sector, PEPC works with the Central and Foreign Governments, National & International development organizations like World Bank, Asian Development Bank etc, Government Agencies, and various other stakeholders to promote the Project exports.
PEPC discusses policy, regulatory and procedural issues with its members, industry experts etc. and advice appropriate reforms to the government for the development of the project exports. For making conducive business environment PEPC highlights encumbrances being faced by the industry players in the process of development of the sector and interacts with various national / international agencies for making feasible measures to overcome those encumbrances.
PEPC supports the Government in its efforts towards projecting the project exports. It act as a reference point for investors (Domestic & International) interested in the sector and provide information related to government guidelines, investment opportunities, government & development agencies (which are involved in the development process of the sector).
For promotion of the sector PEPC works proactively and suggests necessary procedures during the process of policy formation, budgetary allocation, forming legal framework etc. by the government. To maintain smooth progress PEPC also insist government to make essential provision for timely upgradation of the policies on the basis of regular feedback from its members and industry players.
PEPC organizes several investment promotion programmes, conferences, seminars, workshops, etc on regular basis for facilitating interaction between various government agencies, international bodies, industry players and its members that provide prospects to raises issues pertaining to the sector and exchange ideas. These networking events provide a platform to share thoughts, explore business opportunities among the varied stakeholders of the project sector. These measures help to analyse the present developments and identifies the ways to overcome the constraint of the sector.
Project Exports from India commenced with a modest beginning in the late 1970s. Since then, project exports have evolved over the years, with Indian companies demonstrating capabilities and expertise spanning a wide range of sectors. The nature of Project Exports being undertaken reflects the technological maturity and industrial capabilities in the country. Project exports are broadly divided into four categories:
Supplies, primarily of capital goods and industrial manufactures
Each of the above are explained here:
Civil construction projects Construction projects involve civil works, steel structural work, erection of utility equipment and include projects for building dams, bridges, airports, railway lines, roads and bridges, apartments, office complexes, hospitals, hotels, and desalination plants.
Turnkey projects involve supply of equipment along with related services and cover activities from the conception stage to the commissioning of a project. Typical examples of turnkey projects are: supply, erection and commissioning of boilers, power plants, transmission lines, sub-stations, plants for manufacture of cement, sugar, textiles and chemicals.
Consultancy services Services contracts, involving provision of know-how, skills, personnel and training are categorised as consultancy projects. Typical examples of services contracts are: project implementation services, management contracts for industrial plants, hospitals, hotels, oil exploration, charter hire of rigs and locomotives, supervision of erection of plants, CAD/ CAM solutions in software exports, finance and accounting systems.
Supply contracts Supply contracts involve primarily export of capital goods and industrial manufactures. Typical examples of supply contracts are: supply of stainless steel slabs and ferro-chrome manufacturing equipments, diesel generators, pumps and compressors.
Project export contracts are generally of high value and exporters undertaking them are required to offer competitive credit terms to be able to secure orders from foreign buyers in the face of stiff international competition. Exim Bank plays a pivotal role in promoting and financing Indian companies in the execution of projects. It has been closely associated with the growth of project exports from India by way of providing finance, information and business advisory services. The bank supports Indian companies at all stages of the project cycle from advance tender information, guidance in preparation of competitive bids to providing financial facilities, including loans and guarantees. It extends funded and non-funded facilities for overseas industrial turnkey projects, civil construction contracts, as well as technical and consultancy service contracts. Exim Bank has in place a specialised cell to provide advance information to Indian companies on projects being funded by multilateral funding agencies in various countries. Over the past two decades, increasing number of projects have been executed by Indian companies in North Africa, West Asia, South & South East Asia, CIS and Latin America.
The Reserve Bank of India has simplified the procedures for project and service exports, such as deployment of temporary cash surpluses and inter-project transfer of machinery and funds. These measures, first announced in the Mid-Term Review of Annual Policy Statement for 2006-07, will provide more flexibility to exporters. The RBI said that the measures were subject to monitoring by banks. Exporters will now be allowed to use the machinery or equipment used for a turnkey or construction abroad, for executing a contract in another country. Currently, exporters are required to dispose of the equipment, machinery, vehicles purchased abroad or arrange their import into India after completion of the contracts. If it has to be used for another overseas project, the market value should be recovered from the second project. Under the modified procedures, the RBI has permitted exporters to deploy their temporary cash surpluses, generated outside India, in instruments such as deposits with overseas branches or subsidiaries of a bank in India, a triple `A' rate short term paper abroad, including treasury bills and other monetary instruments with a maturity or remaining maturity of one year or less. Now, exporters are required to approach the RBI for overseas deployment of their temporary cash surpluses. The apex bank has also permitted exporters to open, maintain and operate one or more foreign currency account in a currency of their choice with inter-project transferability of funds in any currency or country.
In accordance with the guidelines of Memorandum PEM (Project Export Manual) of the Reserve Bank of India, the Working Group considers proposals pertaining to civil construction contracts only from the Indian contractors who are on the approved list of the Ministry of Commerce & Industry(Govt. of India) on the basis of meeting the requisite criteria set by the screening committee as under:
Minimum acceptance criteria for Screening Committee clearance