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

2. 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. 3 Table 1 Achievements and Directions

4. 4 Table 2 Achievements and Directions (Continue)

5. 5

6. 6 Table 3 Conditions for growth

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

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

9. 9 Legal System Observations  Judicial System  Consists of both general courts and specialized tribunals. Courts may consist of a combination of judges and non-judges. Decisions can be quick or lengthy. Decisions may be appealed.  Jurisdiction  Sharia’h courts are courts of general jurisdiction. Sharia’h judges preside over almost any disputes, unless Saudi law provides otherwise. Sharia’h judges apply Islamic law to decide a case. Decisions may be appealed.  Board of Grievance  Has exclusive power to decide disputes over Saudi government contracts and may decide some types of commercial disputes. Unlike Sharia’h, the board observes a system of precedent. Decisions may be appealed.  Civil Rights Directorate  Responsible for enforcing judgement of Saudi courts or tribunals.  Negotiable Instruments Committee  Decides on cases involving bills of exchange, promissory notes and checks.  The SAMA Committee  Resolves disputes between banks and clients  Conciliation Committee  At the Saudi Chambers of Commerce, assisting in problems between foreign partners and Saudi companies, especially in agency matters.  Preliminary Committee for Settlement of Labour Disputes  Hears all matters related to labour and employee relations. Table 6 Saudi Arabia: Legal, commercial and dispute settlement system

10. 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. 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. 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. 13 Table 7 Saudi businesswomen’s operating barriers:

14. 14 Table 8 Private sector challenges and solutions

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

16. 16 Table 9 (Continued)

17. 17 Table 9 (Continued)

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

19. 19 Saudi economy indicators (2006) GGGGNP for 2006 is $ 373.00 billion dollars (ranking # 20 world wide). HHHHard currency reserves up to 2006 is 269 billion dollars SSSSaudi economy ranks # 12 in the volume of exports and # 20 in the volume of import world wide according to SAMA statistics (2005). 88880 % of Saudi income comes from sales of crude oil TTTThe Growth rate of Saudi economy is in the range of 3.5 to 4 % EEEEmerging lucrative market in stocks & real state: OOOOver 500 billion dollars in Saudi stock market OOOOver 250 billion dollars in Saudi real state market

20. 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. 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. 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. 23 But, As I said there is a light at the end of the tunnel Thanks