SAUDI ECONOMY OVERVIEW
ECONOMY UPDATES
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SAUDI ECONOMY OVERVIEW ECONOMY UPDATES ............................................................................................................... |
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This is an oil-based economy
with strong government controls over major economic activities. Saudi Arabia
has the largest reserves of petroleum in the world (26% of the proved reserves),
ranks as the largest exporter of petroleum, and plays a leading role in
OPEC. The petroleum sector accounts for roughly 75% of budget revenues, 40% of GDP, and 90% of export earnings. About 35% of GDP comes from the private sector. Roughly 5 million foreign workers play an important role in the Saudi economy, for example, in the oil and service sectors. Saudi Arabia was a key player in the successful efforts of OPEC andother oil producing countries to raise the price of oil in 1999-2000 to its highest level since the Gulf war by reducing production. Riyadh expects to have a moderate budget deficit in 2001, in part because of increased spending for education and other social programs. The |
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government in
1999 announced plans to begin privatizing the electricity companies, which
follows the ongoing privatization of the telecommunications company.
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TRADE POLICY |
| Saudi Arabia has always advocated free trade, a free economy and encouraged the private sector to participate freely in every economic activity. In pursuing accession to the WTO the government is seeking, amongst other intentions, to enhance the level of business opportunities for Saudi businessmen in the expanded global environment. |
| The Kingdom is already a major participant
in world markets, trading as it does with some 136 countries, of which the
EU, as a single trading entity, was the prime partner in 2000, with bilateral
trade totaling US $17.6 billion. The United States was the largest trading
partner country in the same period. Some 90 percent of all the country’s
resources – predominantly oil – is exported and 95 percent of
all the country’s needs, be they finished or semi-finished goods or
raw materials, is imported. The Kingdom has played a prominent role as a member of the Great Arab Free Trade area (GATTA) that was launched in 1998 and will be fully implemented by 2005. By 2002 the 14 member countries had reduced customs on trade among them by 50 percent. Reductions will reach 60 percent in 2003 and 80 per cent in 2004. As part of Saudi Arabia’s moves to boost international trade, a number of new policies have recently been introduced. These have included the establishment of Jeddah Islamic Port; the reduction of customs duties such that today 6,875 line items, or 91 percent of all goods imported, are subject to just 5 percent duty (as compared with between 7 percent and 12 percent in the past); and all goods manufactured within the Gulf Cooperation Council (GCC) may now be imported without payment of duty, provided processing within the GCC has added 40 per cent by value, whereas in the past there was an additional requirement for 51 percent local ownership. Furthermore, the Kingdom, as a member of the GCC, is pursuing customs union with its neighbours by 2003 and a single currency by 2010. ............................................................................................................... |
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| ............................................................................................................... The trade sector also plays a key part in the Seventh Development Plan, which has laid down a number of objectives for the sector:  Develop and direct non-oil
trade and to enhance economic and trade relations with other countries; Increase the efficiency
of the private sector and to expand the scope of its commercial activities
both locally and overseas; Develop and qualify
the Saudi labour foce in trade activities and to substitute Saudi nationals
for non-Saudis; Improve the performance
of the trade sector and to ensure a plentiful supply of the goods and services
required by consumers; Support measures to
enhance Saudi non-oil exports; Develop and organise
business services and to promote financial services.In pursuit of these objectives, it seems clear that the government wishes to ensure that Saudi business people are fully prepared to fulfill their role in what will become not only an increasingly competitive environment once membership of the WTO has been attained, but also one where increased opportunities will be available for those ready and willing to accept them. |
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