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An Overview of Saudi economy: challenges ahead

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  1. An Overview of Saudi economy: challenges ahead KING FAHD UNIVERSITY OF PETROLUME & MINERALS DHAHRAN 31261 SAUDI ARABIA

  2. Saudi Arabia: Major Challenges • Despite diversification of economic base, still reliant on oil and oil-related products for exports, • Despite massive expenditure on education, yet mismatch between market needs and graduate output, • Despite massive government subsidies, yet so little on internal R&D to develop a knowledge based, sustainable economic infrastructure. But there is a light at the end of the tunnel.

  3. Table 1 Achievements and Directions

  4. Table 2 Achievements and Directions (Continue)

  5. Table 2 Achievements and Directions (Continue)

  6. Table 3 Conditions for growth

  7. Table 4 Conditions for growth (Continue) Adapted from the Arab World Competitiveness Report 2005

  8. Table 5 The changing face of the Saudi capital market

  9. Table 6 Saudi Arabia: Legal, commercial and dispute settlement system

  10. The SME Sector: • Previously neglected, concentration on capital intensive, high technology industry. • Available financial resources – state/private • Limited managerial experience • High foreign labor utilization • But they are powerful employment generators. • WTO uncertainties for big industries.

  11. Saudi Family Businesses: • A powerful positive and potentially negative economic force. • Hold around SR 250 billion in domestic investment, with 200 family companies dominating commercial life. • Majority of franchises and agencies owned by no more than 100 of the top Saudi companies. • Time for change

  12. Saudi Women and the National Economy: • More urgency on this matter. Government sympathetic as long as in conformity with Islamic principles. • Substantial women’s investment in domestic economy and impact: • 60% of bank account • Deposits SR 62 billion • 20% corporate shares • 15% of private companies • 10% real estate

  13. Table 7 Saudi businesswomen’s operating barriers:

  14. Table 8 Private sector challenges and solutions

  15. Table 9 Foreign direct investment: Saudi Arabia stock sheet

  16. Table 9 (Continued)

  17. Table 9 (Continued)

  18. Table 11 Saudization impact on selected Saudi industries Source: National Commercial Bank, 2005, SAMA, 2005.

  19. Saudi economy indicators (2006) • GNP for 2006 is $ 373.00 billion dollars (ranking # 20 world wide). • Hard currency reserves up to 2006 is 269 billion dollars • Saudi economy ranks # 12 in the volume of exports and # 20 in the volume of import world wide according to SAMA statistics (2005). • 80 % of Saudi income comes from sales of crude oil • The Growth rate of Saudi economy is in the range of 3.5 to 4 % • Emerging lucrative market in stocks & real state: • Over 500 billion dollars in Saudi stock market • Over 250 billion dollars in Saudi real state market

  20. Why to invest in Saudi Arabia • Saudi Arabia is a full member of WTO since 2005 • Political stability • Free economy system • Excellent infrastructure • Availability of reasonably cheap labor (Mainly from Egypt, India, Pakistan, and Philippine). • Genuine government support they target to have Saudi Arabia among the top 10 countries to attract F.D.I. by 2010 • Saudi Arabia ranks # 38 out of 177 countries in the most favored nations for investment opportunities according to world bank 2006 • Low inflation rate (1% in 2006 & expect to be 2.2% by end of 2007) • Government spending in the next few years for already approved & under execution projects are as follows: • 69 billion dollars in oil & gas section • 45 billion dollars in petrochemicals • 43 billion dollars in infrastructure

  21. Key indications on Saudi labor movement • 60 % of Saudi population are below 50 years old • 24 % of the Saudis labor force work in the industry sector • 31 % of the Saudi labor force work in the commerce sector • 350,000 Saudis enter the labor market every year • The unemployment rate is considerably high among Saudis. • Approximately one million Saudis work in government agencies, out of which 400,000 are women. • About 1.8 million Saudis work in private sector, out of which 20 % are women.

  22. Challenges Facing the education system • High growth rate (3.4%) of Saudi population currently 20 millions • The co density of the population is scattered all over the country (2.1 million K. square) • The cost of education is reasonably high compared to industrial countries (9% of G.N.P. vs. 5% in developed countries). • Lack of certain skills that are needed in the private sector • Slowness in updating the school books. • 50% of the higher education are in non-engineering disciplines

  23. But, As I said there is a light at the end of the tunnelThanks