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3 - Economy &
Statistics
Saudi
Arabia started producing oil in 1933. It is the
biggest petrol producer in the world.
Saudi
Arabia has hardly any other resources apart from
petrol, except the annual pilgrimage to Mecca which
brings in a large income to the country.
The
Gulf War and its huge financial cost for the
kingdom, combined with the fall in petrol prices,
which reached their lowest point in 1997 at $9 a
barrel, really gave the country cause to worry, as
80% of their income still comes from
oil.
Subsidies,
civil servant salaries, military expenditure,
demographic pressure and the level of the internal
debt (presently greater than the GDP) are
contributing to the deficit in public finance.
The debt has reached worrying proportions,
weakening the economy and stopping its
developement. Structural reforms are necessary to
ensure a continued growth.
Saudi
Arabia is presently facing the challenge of
modernizing while at the same time protecting its
traditional values.
Reforms risk creating social tensions.
Officially unemployment doesn't exist, but in fact
the employment situation is becoming more and more
worrying.
The population has grown during these last fifteen
years faster than the economic activity. 50% of
Saudi Arabians are under 15 years of age.
To create sufficient jobs for these young people
arriving on the job market the growth rate would
have to be 6% per annum and it is only 2%.
There is not enough technical training in many of
the sectors.
The
country has requested membership of the WTO (World
Trade Organization) in order to improve its access
to the international petro-chemical markets.
To fulfill the requirements as well as to dynamize
the economy, the government has undertaken reforms
: liberalizing trade, changing the investment
regulations, reforming the fiscal system and the
capital market. Foreign industrials can now benefit
from the same tax regime as Saudians and except for
in the petrol, commerce and distribution sectors,
can hold up to 100% of the capital in an
entreprise.
The
Saudi Arabian government has prepared a new
investment code.
It was adopted on the 11th April 2000 by the
Council of Ministers presided over by King
Fahd.
These new regulations, which have been prepared
over the last five years, will provide for the
increase in the period of tax exemption from 10 to
20 years, for the lowering of the maximum rate of
taxation on the foreign share in a co-enterprise,
will allow losses to be carried over and will
simplify the registration procedures for industrial
co-entreprises and ease up on the system of
'sponsoring'.
**(see the text of the new code at the bottom of
the section).
Saudi Arabia is a rich country with a GDP per
capita of $US 9,000 in 1999, but its citizens must
be convinced to repatriate the 700 billion dollars
which they have invested abroad so that the private
sector can find the necessary capital to diversify
the economy.
Saudi
Arabia has the most important economy in the Gulf
region and with the perspective of a customs union
between the Gulf countries by April 2005, the
kingdom could become the portal to a market of over
27 million people.
MAIN
ECONOMIC INDICATORS
|
|
1997
|
1998
|
1999
|
2000
|
|
economic
growth (%)
|
2.7
|
1.6
|
-2.0
|
1.1
|
|
inflation
(%)
|
0.0
|
-0.2
|
0.1
|
1.5
|
|
public
balance/GDP (%)
|
-2.9
|
-10.0
|
-5.9
|
-4.3
|
|
petrol
exports (billions of $)
|
53.2
|
33.4
|
40.9
|
43.3
|
|
average
price per Saudian barrel ($/b)
|
19.2
|
11.8
|
15.6
|
16.8
|
|
other
exports (billions of $)
|
7.4
|
6.3
|
6.6
|
7.1
|
|
imports
(billions of $)
|
26.4
|
27.5
|
27.3
|
28.2
|
|
current
balance/GDP (%)
|
0.2
|
-9.9
|
-2.7
|
-1.9
|
|
external
debt (billions of $)
|
24.3
|
30.7
|
37.0
|
41.8
|
|
of
which short term debt (billions of
$)
|
16.0
|
17.2
|
17.6
|
18.1
|
|
costs
of the debt/exports (%)
|
3.5
|
6.8
|
7.6
|
9.1
|
Import-Export
:
The
main goods exported are petrol and refined
products.
The main good imported are mechanical and transport
equipment (40.4%), foodstuffs, tobacco and drinks
(13%) and chemical products (11.3%).
Four different customs duties are used :
7%, 12%, 20% and 100%.
Some basic foodstuffs (meat, some cereals, sugar),
fertilizers, orthopedic material and military
equipment are exonerated from customs duties.
- the main suppliers are the USA (27.8%), Japan
(10.3%), UK (11.8%), Germany, Italy and France
- the main clients are the USA, Japan and the
European Union.
Since the Gulf War Saudi Arabia has been trying to
diversify its suppliers to escape from the
economical grip of the United States.
Division
of the GDP by activity sector :
agriculture : 7.0%
industry : 9.7%
mining : 37.9%
services : 45.4%
**
The text of the new foreign investment code
- Foreign companies can apply for an investment
permit (licence), either temporary or permanent, to
the SAGIA, an organization which has been created
to deal with the new code
- The SAGIA has to reply to the applicant within 30
days, counting from the day that the bone fida
dossier was deposited by the foreign company : once
this date is passed, if there has been no reply
from the SAGIA, permission is considered as
given.
- The supreme economic Council will publish a list
of sectors in which foreign investment is not
possible
- A foreign company can eventually obtain more than
one licence in different sectors of activity
- Foreign investors with a licence can own their
own installations, including the personnel housing,
which is necessary for the exercise of their
economic activities
- A foreign investment project which conforms to
the new code can benefit from the same advantages,
incentives and guarantees as a Saudian projet
- Capital which has been invested can be freely
transferred, either totally or partially,
abroad
- A foreign investor can be his own 'sponsor', as
well as that of his employees.
- Investments held by foreigners can only be
confiscated, either totally or partially, if there
is a legal decision to do so, and any expropriation
caused in the need of public interest should be
compensated correctly.
In the case of a conflict with the Saudian
authorities, the foreign investor can resort to a
procedure of amicable arrangement
4
- Agriculture
In
spite of the aridity of the country, agriculture is
a very important activity.
The government heavily subsidizes the sector and
encourages modern agricultural techniques, creating
research and training centres.
The aim is to reach the point of self-sufficiency.
There
has been huge government subsidies to install
desalination units to treat sea water in the
struggle against the encroaching desert, and Saudi
Arabia is today one of the best equipped countries
in the world with a daily production of 2 million
cubic meters of fresh water.
Saudi Arabia has a high enough production to be
able to export dates, milk products and flowers,
but it still has to import cereals.
It is the biggest importer of barley in the world
and imported 7 million tons of wheat in
1999.
Agricultural
production
(in millions of tons , of head )
|
Production
|
1996
|
1997
|
1998
|
1999
|
|
wheat
|
1.200
|
1.795
|
1.800
|
1.800
|
|
maize
|
0.007
|
0.007
|
0.007
|
0.007
|
|
millet
|
0.014
|
0.014
|
0.014
|
0.014
|
|
barley
|
0.500
|
0.400
|
0.400
|
0.400
|
|
potatoes
|
0.349
|
0.331
|
0.331
|
0.331
|
|
cattle
|
0.259
|
0.263
|
0.265
|
0.265
|
|
sheep
|
7.803
|
7.452
|
8.300
|
8.300
|
|
fishing
|
0.052
|
0.054
|
-
|
-
|
5
- Industry & mining
The
mining sector employs 2% of the labour force and
represents 36% of the GNP.
The industrial sector employs 24% of the labour
force and represents 16% of the GNP.
Natural
gas : 47.5 million tons (10th biggest producer in
the world).
Petrol : 412 million tons (biggest producer in the
world).
Petrol reserves : 33,385 million tons (biggest in
the world).
Reserves of natural gas : 6,426 million tons (5th
biggest in the world).
The
wells are situated on the west bank of the Persian
Gulf.
Natural gas has also been exploited since 1961 in
huge industrial complexes (Jubail).
Saudi
Arabia has the biggest petrol reserves in the world
and its status as the biggest world producer
guarantees it a dominating position within
OPEC.
Petrol represents 90% of the export returns and 80%
of the national budget, the moment there is a drop
in the price of crude oil the economy suffers
because of this dependence. 95% of Saudian petrol
is produced by the national company Aramco for
account of the government.
In
a totally different domain, Saudi Arabia is
reviving the secondary building sector.
It is a market which is open to foreign products
and there is a high demand in the electricity
field.
An Italian company has been charged with building
an electrical power station in Riyadh.
Other housing projects have been planned over the
next ten years.
Saudi
Arabia's candidacy for the WTO and the necessity to
diversify its industry is bound to radically change
the industrial scene.
The government has decided to develope and
modernize its sectors of energy, petro-chemicals,
banks and insurances.
At the same time the government is developing a
programme of education and training for its
citizens.
Nearly 39% of the industrial added value in the
country comes from the chemical industry (methanol,
ethylene, ammoniac, urea and light and heavy
oils).
The main Saudia Arabian industries are :
fertilizers, insolating material, soda, resin,
bricks and tiles, ornamental stones, cement,
plaster, sanitary installations, glass containers,
salt, adhesives, sodium silicate, titanium doixide
of titanium
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