Economy

 

Saudi Arabia, an oil-based economy, is the world?s leading oil producer/exporter with strong government control over major economic activities (i.e. private enterprises). SA is the largest free market economy in the Middle East, accounting for 25% of the region?s gross domestic product (GDP) and in the summer of 2009 World Bank reported that Saudi Arabia is the strongest Arab economy. Saudi Arabia possesses about 20% (250 billion barrels (41 km?)) of the world's proven petroleum reserves (largest in the world), ranks as the largest exporter of petroleum, and plays a leading role in OPEC. Overall, Oil accounts for more than 90% of the country's exports, 45% of GDP and nearly 75% of government revenues. Since its discovery more than 70 years ago, oil has produced more than $1 trillion USD for the Saudi treasury.

Over the course of the last decade, Saudi Arabia has been encouraging the growth of the private sector in order to diversify its economy and to employ more Saudi nationals. Diversification efforts are focusing on power generation, telecommunications, natural gas exploration, and petrochemical sectors. Roughly 5.5 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors, while Riyadh is struggling to reduce unemployment among its own nationals. Saudi officials are particularly focused on employing its large youth population, which generally lacks the education and technical skills the private sector needs. (Excerpts taken from www.cia.gov)

As part of its effort to attract foreign investment, Saudi Arabia acceded to the WTO in December 2005 after many years of negotiations. As part of its commitments to the WTO, SA has revised many of its business regulations and replaced them with more investor-friendly laws. The government also has begun establishing six "economic cities" in different regions of the country to promote economic development. The Economic Cities will offer investors an unparalleled, business-friendly environment within a globally competitive regulatory and incentive-offering framework. In 2006, SA also created the national competitive center.

Over the years, Saudi Arabia has established a sound regulatory and financial infrastructure based on financial standards and payment systems equivalent to those present in major industrial countries. The financial system in Saudi Arabia consists of the central bank (SAMA), commercial banks, specialized credit institutions, and stock exchange (Tadawul). The Saudi stock exchange (Tadawul) ranks as the largest stock market by capitalization in the Middle East. The Tadawul and its financial markets are regulated by the CMA (SA?s Capital Market Authority). Five years of high oil prices during 2004-08 gave the Kingdom ample financial reserves to manage the impact of the 2009 global financial crisis, but tight international credit, falling oil prices, and the global economic slowdown reduced Saudi economic growth in 2009, prompting the postponement of some economic development projects. The stock market capitalization of listed companies in Saudi Arabia was valued at $646 billion in 2005 by the World Bank and due to the global economic downturn it was valued at $326 billion in September 2009. However, Saudi authorities supported the banking sector during the crisis by making direct capital injections into banks, reducing rates, and publicly affirming the government's guarantee of bank deposits. (Excerpts taken from www.cia.gov)

As it stands the SA government has made substantial progress in its reform aspirations and in the process has become a top 15 economically competitive country and an attractive destination for foreign investors. According to the World Bank?s "Doing Business 2010" report, Saudi Arabia was rated for the 5th year in a row the best place to do business in the Middle East and North Africa, as well as the 13th most economically competitive country in the world, moving up from 67th to 13th, in terms of competitive environment, business performance, and investment.

Economy at a glance: (source mainly www.cia.gov)

Currency: Saudi Riyal (SAR)

Fiscal year: Calendar year

Trade orgs: WTO, OPEC

GDP: $592.886 billion (PPP; 22nd), $469.426 billion (nominal; 23rd)

GDP growth: -0.6% (2009 est.)

GDP per capita: $23,814 (PPP; 38th), $18,855 (nominal; 41st)

GDP by sector agriculture: 3.2%; industry: 60.4%; services: 36.4% (2009 est.)

Inflation (CPI): 5% (2009 est.)

Labor force: 6.922 million (2009 est.) note: about 80% of the labor force is non-national

Labor force by occupation---- agriculture: 6.7%; industry: 21.4%; services: 71.9% (2005 est.)

Unemployment: 11.6% among Saudi males (2009 est.)

Main industries: crude oil production, petroleum refining, basic petrochemicals, ammonia, industrial gases, sodium hydroxide (caustic soda), cement, fertilizer, plastics, metals, commercial ship repair, commercial aircraft repair, construction

Exports: $180.5 billion (2009 est.)

Export goods: petroleum and petroleum products 90%

Main export partners: US 17.2%, Japan 15.3%, South Korea 10.2%, China 9.4%, India 5.9%, Taiwan 4.6%, Singapore 4.4% (2008)

Imports: $86.61 billion (2009 est.)

Import goods: machinery and equipment, foodstuffs, chemicals, motor vehicles, textiles

Main import partners: US 12%, China 10.4%, Japan 7.6%, Germany 7.3%, South Korea 5.1%, Italy 4.7%, India 4.5%, UK 4% (2008)

Gross external debt: $72.45 billion (31 December 2009 est.)

Public finances:

Public debt: 20.3% of GDP (2009 est.)

Revenues: $167.7 billion (2009 est.)

Expenses: $164.3 billion (2009 est.)

Economic aid (Donor): $100 million in 1993 to Lebanon; since 2000, Saudi Arabia has committed $307 million to Palestinians; pledged $240 million to Afghanistan; pledged $1 billion in export guarantees and soft loans to

 

Over the past decade major privatization and economic reform progress has been made in an attempt to diversify and expand SA?s economic revenue. In the year 2000 SA initiated a program referred to as ?10x10? which targeted 2010 as the year SA would break the top 10 most competitive countries list. As of Sept. 2009, SA was ranked as 13th most competitive country by World Banks Annual Report. The development of the Economic cities is drawing and will continue to draw major investments/interest to the region from local and international companies. There are ample opportunities for investment building the actual cities as well as city ? specific industry. There are Investment opportunities in areas such as infrastructure, telecommunications, power generation, utilities, real estate, financial services, tourism and transportation. Construction projects alone are expected to attract an estimated $168 billion, while the transportation sector is expected to draw in another $100 billion worth of investments. As far as the ICT sector is concerned; internet usage is up from 5% of the population in the year 2000 to 38.5% in 2010. Due to this rapid growth, Foreign investment in the ICT sector continues to increase, with more than $2.6 Billion in 2008 alone. Cisco, GE, Dell and Microsoft are among the U.S. companies that are already participating in the healthy investment opportunities available in the economic cities. To say the least, the economic future of Saudi Arabia is bright and there appears to be no reason why it won?t continue to grow.