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National Day sees much to celebrate
Saudi Arabia’s economy is mirroring the progress and approach of the country’s large companies - varied interests and activities in a range of sectors. It is paying off both on a national level and for Saudi companies

For the past few decades, Saudi Arabia has been synonymous with oil-based wealth. With the world’s largest oil production capacity and plans to increase this even further to 12.5 million barrels per day by 2009, massive refining capacity, low production costs and continued investment in the sector, it is likely to remain the world’s largest net oil exporter.

So it would be understandable if the Kingdom received the news of the recent three per cent drop in oil prices with apprehension. Fortunately, it has spent the last few years developing its non-oil based economy, and King Abdullah’s efforts to create an efficient and attractive economic environment have helped to bring in more than £2.7 billion in foreign investment. Today’s economic news stories, courtesy of national publishers Saudi Research and Marketing Group, are not so much about oil as about massive flows of non-oil investment and multi-billion dollar construction, infrastructure and industrial projects.

Non-oil exports, headed by petrochemicals, have risen 13 per cent to £9.9 billion since Saudi Arabia joined the WTO, and other sectors are gaining ground. The Saudi building materials industry is showing solid growth; new investment is being directed at aluminium and copper production facilities; and companies such as Tamer Group are fast creating a regional niche in healthcare and biotechnology investment. The national drive for economic diversification mirrors the efforts of firms such as Rawabi Holding Company, which combines its interests in oil and gas with telecoms, construction and manufacturing.

Celebrating its National Day on September 23, the Kingdom has much to rejoice over this year. In addition to the diversification of the economy, King Abdullah has also made great strides in improving poverty, empowering women in the workplace, expanding the country’s diplomatic role abroad, and opening Saudi up to new tourism. Now, keeping in mind the Kingdom’s youthful and fast-growing population, education, health and housing infrastructure are the priorities for government spending; employment is another. Six new mega-cities that will each concentrate on different aspects of the economy, and which form part of King Abdullah’s efforts to address regional inequalities within the country, are expected to create around one million jobs by 2020.

Work has begun on the King Abdullah Economic City, which will support Saudi Arabia’s bid to become one of the world’s biggest financial players, while the Jazan Economic City, developed by the Saudi Binladin Group, will be home to heavy industry, including oil refining, petrochemicals and metals processing.

The Saudi banking sector, one of the most profitable in the world, also has plenty of scope for growth. Even after it was opened up to foreign competition in 2005, profits have been consistently high – up by 30 per cent in 2006 – and the recent stock market shocks are having less of an impact than expected. Relative newcomers to the field Bank AlBilad and specialist service providers Bank AlJazira remain confident in their respective abilities to expand both nationally and regionally.

The government’s decision to liberalise the economy is benefiting national companies across the board. In property construction, Olaya Real Estate is behind several new housing projects; in aviation, new budget airlines have broken the monopoly held for 60 years by Saudi Arabian Airlines, itself heading towards privatisation; and winds of change in the insurance sector enabled veteran firm ACIG to launch a highly successful IPO in May this year.

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SAUDI ARABIA PROJECT TEAM
Project Director: Bertrand Epaud
Project Coordinator: Aleksandra Pancevska