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Country name: Kingdom of Saudi Arabia
Population: 27,601,038 includes 5,576,076 non-nationals
Land Area: 2,240,000km²
Languages: Arabic is the national language, but English is widely spoken in business circles
Currency: Saudi Arabian Rial (SAR) = 100 halalah
Capital: Riyadh
The Kingdom of Saudi Arabia is the biggest country of the Arabian Peninsula and has the biggest national economy of the region. It is bordered to the northwest by Jordan, to the north by Iraq and Kuwait, to the west by the Red sea and to the east by Qatar, the UAE and Oman, and finally to the south by Yemen.
The Kingdom plays a key international role through its membership of various organizations such as the UN, the Arab League, the Gulf Cooperation Council and OPEC. It is also a member of the WTO. The country remains a leading producer of oil and natural gas and holds approximately 25% of the world's proven oil reserves. Saudi Arabia continues to pursue economic reform and diversification, particularly since its accession to the WTO in December 2005, and actively promotes foreign investment in the Kingdom. A burgeoning population, aquifer depletion, and an economy largely dependent on fluctuating world oil prices are all ongoing challenges that are now being seriously addressed.
The oil sector accounts for roughly 75% of the Kingdom’s budget revenues, 45% of GDP, and 90% of export earnings. The kingdom's economy is awash with liquidity at the moment primarily due to continuing high oil prices. It recorded a GDP of $347,4 billion in 2006 (2007: $403 billion prognosis), representing a real growth rate of 4.6% for the year. About 40% of GDP comes from the private sector. Roughly 5.5 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors. The country is seeking to encourage private sector growth to lessen the kingdom's dependence on oil and to increase employment opportunities for the local population.
Saudi Arabia’s fast-growing economy is creating opportunities for both exporters and investors. These are further boosted by moves to diversify the economy away from dependence on oil and gas; by ongoing economic reform and market liberalization; and by an emerging and growing private sector. It aims to position itself among the top ten competitive nations in the world for inward investment by 2010 according to the Saudi Arabia General Investment Authority (SAGIA). It announced that the Kingdom is looking to attract $300 billion in investment in the “energy-intensive industries” over in the next 13 years and a further $100 billion of investment for 'knowledge-based' industries and a similar amount for transportation ventures.
Private sector and foreign participation is being promoted in the power generation, telecoms, natural gas, and petrochemical industries. With high oil revenues enabling the government to post large budget surpluses, the Kingdom has substantially boosted spending on job training and education, infrastructure development. The current plans to establish six "economic cities" in different regions of the country represent a key initiative aimed at attracting investment for development and diversification of the economy.
Foreign and joint investments have helped create more than 255,000 jobs in the Saudi market. The successes in attracting investment are attributed to the economic reforms that the Kingdom has undertaken in recent years. The private sector was playing an important and growing role in advancing economic and social development in the country. Foreign investment had been attracted in various sectors but oil and gas, petrochemicals and energy remained the main ones.
Speaking in March 2007, the SAGIA official stressed that the balance of foreign investments was in excesses of 194 billion Saudi riyals ($52 billion). Stressing that the importance of foreign investments was not only limited to their volume, but included the added benefit of rehabilitating and upgrading the skills of Saudi nationals, through training and development programs offered by these companies. FDI also helped to significantly increase Saudi Arabia's non-oil exports with the value of these exports reaching 71 billion riyals in 2006. This accounts for more than a 67% increase in the total non-oil exports of Saudi Arabia making these investments value-added to the Gross Domestic Product (GDP) of more than 50 billion riyals.
Saudi Arabia's nominal GDP was estimated to have grown by 12.4% in 2006, reaching 1.30 trillion riyals while real GDP is estimated to have grown by 5.6% to 799.9 billion riyals.
The energy sector is the backbone of the economy. The Kingdom possesses a quarter of the world’s proven oil reserves, and is the world’s largest producer and exporter of oil.
Saudi Arabia is now developing its additional energy resources – natural gas that once flared off oil wells is collected and used productively. The Kingdom has become a producer of refined oil products and petrochemicals such as kerosene, diesel oil and gasoline. Saudi Arabia has taken steps to expand the energy sector and encourage greater investment, especially by foreign companies. In May 2000, the Supreme Council for Petroleum and Minerals – which oversees the maximization of natural resources – announced a decision to allow foreign investment in the gas sector and downstream industries. The Kingdom continues to invest in its energy sector and in September 2006 announced plans for $70 billion in oil and gas projects over five years. Foreign investors and partners are actively sought to realize its ambitious proposals.
The Kingdom possesses valuable mineral resources in addition to oil and gas. With the discovery of deposits of precious and semi-precious metals, Saudi Arabia expects to become a major exporter of minerals in the coming decades. As early as 1000 BC, gold, silver and copper were being extracted from the famous Mahd Al-Dhahab mine some 290km northeast of Jeddah. The introduction of modern mining and extraction methods has once again made the mine a major producer of precious metals.
Exploration projects over the past two decades have unearthed extensive deposits of precious and industrial minerals throughout the country. These include not only gold and silver, but also copper, tin, tungsten, nickel, chrome, zinc, lead, phosphates, iron ore, bauxite, potassium ore and even table salt.
The Kingdom is also probing the mineral-rich sediments on the Red Sea floor for commercial exploitation, with plans to process them at the Yanbu industrial complex.
Saudi mining company, Maaden, has embarked on a project to mine phosphate in the north and process it at a fertilizer plant near Jubail. This project is scheduled for completion in 2008. Meanwhile, Maaden is in the process of privatizing its activities, beginning with its gold-mining operation.
The Ministry of Petroleum and Mineral Resources has identified 1,270 sources of precious stones and 1,170 sources of other minerals, and issues an increasing number of mining and exploration concessions.
Steps have also been taken in recent years to encourage greater private sector involvement in the development of the mining sector. These include incentives for investment by both foreign and domestic companies, and support services intended to facilitate development of minerals.
In April 2007, the Saudi Minister of Finance Ibrahim Al-Assaf signed contracts with a consortium of three national and international companies worth $1.9 billion to build north-south railway project. The project will cover approximately 1,765km and will provide for the transportation of both minerals and passengers. It is expected to be completed in 42 months.
The first contract covers a 358-mile stretch of railway from Ras Al-Zoor to the Al-Zubairah bauxite mine. The second contract is for the 600km part of the railway from Al-Zubairah to the Great Nofood, and the third is for the 750km stretch from the Great Nofood to Al-Haditha, Hazm Al-Jalamid and Al-Basita. This railway project is seen as critical to the success of an ambitious $3.5 billion downstream oil and gas project and is also crucial for a multibillion fertilizer plant and an aluminum smelter to be developed at Ras Al-Zour by Maaden.
The project also falls within the Saudi Railways Expansion program, which includes the Riyadh Light Railway project aimed at decongesting the capital, and the Landbridge project, which will link the Arabian peninsular from the Gulf in the east to the Read Sea in the west. The high-speed passenger link between the two holy cities of Mecca and Medina is due to reduce transit times for pilgrims.
Saudi Arabia has a massive electricity distribution network that extends to cities, towns and villages across the country. Its network consists of 14,000km of transmission lines, 83,700km of distribution lines and over 85,300km of service connections.
The Kingdom also uses desalination plants to generate electricity using the steam that is a by-product of the desalination process. It generates more than 26,300 MW of electricity, 2,800 MW of which is produced by the desalination plants. There are developed plans to increase the electricity produced by these desalination plants to equal half of the total output.
The Saudi Electric Company (SEC) manages existing power generation, distribution and delivery facilities, as well as investment in new general plants. The SEC also sets the price of electricity sold to consumers and industry under rules set by a governing body based on the cost of production, distribution and services. Saudi Arabia is working with its fellow GCC countries to link their national power grids in a project that eventually plans to extend the network with the rest of the Arab world and Europe through Turkey and Syria.
Saudi Arabia is also looking at alternative energy sources, including solar energy. The Kingdom receives some of the most intense sunlight in the world – 105 trillion kilowatt hours a day, which is roughly the equivalent of 10 billion barrels of crude oil in energy terms. Solar energy is also an appropriate energy source for use in remote locations. As an example, it is used to power emergency telephones and signs along vast stretches of desert roads. Scientists at the King Abdulaziz City for Science and Technology (KACST) are working on groundbreaking projects to make solar power generation more economically feasible. Other programs focus on utilizing solar energy for water desalination, agriculture, and the generation of hydrogen.
Agricultural development over the last three decades has been astonishing with large stretches of desert having been turned into productive agricultural fields – a major achievement in a country that receives an average of about four inches of rain a year, one of the lowest rates in the world. Saudi Arabia is now an exporter of wheat, dates, dairy products, eggs, fish, poultry, fruits, vegetables and flowers to markets around the world. Dates, once a staple of the Saudi diet, are now mainly grown for global humanitarian aid.
The Saudi Ministry of Agriculture is primarily responsible for agricultural policy, supported by other government agencies including the Saudi Arabian Agricultural Bank (SAAB), which disburses subsidies and grants interest-free loans; and the Grain Silos and Flourmills Organization, which purchases and stores wheat, constructs flourmills, and produces animal feed.
The private sector plays a major role in the Kingdom’s agricultural sector encouraged by government programs that offered long-term, interest-free loans, technical and support services, and incentives such as free seeds and fertilizers, low-cost water, fuel and electricity, and duty-free imports of raw materials and machinery.
Historically, agriculture in the Arabian Peninsula was limited mostly to date farming and small-scale vegetable production in widely scattered oases, except in a small coastal strip in the southwest. Small plots produced enough food for the local communities, and any extra was sold to passing caravans. Serious agricultural activities began in the 1970s. The government launched an extensive investment to promote modern farming technology; to establish rural roads, irrigation networks and storage and export facilities; and to encourage agricultural research and training institutions. As a result, there has been a phenomenal growth in the production of all basic foods. Saudi Arabia is now completely self-sufficient in a number of foodstuffs, including meat, milk and eggs.
Water, of course, is the key to agriculture in Saudi Arabia. The Kingdom has successfully implemented a multifaceted program to provide the vast supplies of water necessary to achieve the tremendous growth of the agricultural sector. A network of dams has been built to trap and utilize precious seasonal floods. Vast underground water reservoirs have been tapped through deep wells. Desalination plants have been built to produce fresh water from the sea for urban and industrial use, thus freeing other sources for agriculture. Facilities have also been put into place to treat urban and industrial runoff for agricultural irrigation. Through its efforts Saudi Arabia has witnessed the transformation of vast tracts of the desert into fertile farmland. Land under cultivation, less than 400,000 acres in 1976, reached millions of acres by the 21st century.
Saudi Arabia’s bid to develop the largest financial centre in the region came one step closer to fruition when the master plan for the King Abdullah Financial District (KAFD) gained approval from the project's executive committee in March 2007. KAFD is billed as not only the largest but also one of the most technologically advanced financial centres in the Middle East and is set to be a fully integrated site with residential properties, hotels, sports facilities, retail and commercial outlets. Floor space of some 3.3 million m2 will be created. Located near the capital's Olaya commercial district, the centre is being designed to include living and work areas - including state-of-the-art facilities for doing business and facilitating investment and enterprise in the kingdom. Key stakeholders include the Finance Ministry, Public Pensions Authority, CMA and Saudi Arabian Monetary Authority (SAMA), which is equivalent to the central bank.
The area incorporating the best practice from international financial centres will be the headquarters for the CMA, the Tadawul - the kingdom's stock exchange, and its commodities exchange. It is hoped that banks, accountancy firms and other financial services providers will also move into the purpose-built district. The project is expected to create some 43,000 new jobs.
Quelle: Ghorfa, Arab-German Chamber of Commerce and Industry e.V.
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