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
