User:Tarafa15/Saudi Arabia Economy

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Economy[edit]

King Abdullah Financial Center is one of the largest investment centers in the Middle East, located in Riyadh

As of October 2018, Saudi Arabia is the largest economy in the Middle East and the 18th largest in the world.[1] Saudi Arabia has the world's second-largest proven petroleum reserves and the country is the largest exporter of petroleum.[2][3] It also has the fifth-largest proven natural gas reserves. Saudi Arabia is considered an "energy superpower".[4][5] It has the third highest total estimated value of natural resources, valued at US$34.4 trillion in 2016.[6] Saudi Arabia's command economy is petroleum-based; roughly 63%[7] of budget revenues and 67%[8] of export earnings come from the oil industry. It is strongly dependent on foreign workers with about 80% of those employed in the private sector being non-Saudi.[9][10] Challenges to the Saudi economy include halting or reversing the decline in per-capita income, improving education to prepare youth for the workforce and providing them with employment, diversifying the economy, stimulating the private sector and housing construction, and diminishing corruption and inequality.[11]

The oil industry constitutes about 45% of Saudi Arabia's nominal gross domestic product, compared with 40% from the private sector (see below). Saudi Arabia officially has about 260 billion barrels (4.1×1010 m3) of oil reserves, comprising about one-fifth of the world's proven total petroleum reserves.[12]

Share of world GDP (PPP)[1]
Year Share
1980 2.73%
1990 1.64%
2000 1.42%
2010 1.36%
2017 1.40%

In the 1990s, Saudi Arabia experienced a significant contraction of oil revenues combined with a high rate of population growth. Per capita income fell from a high of $11,700 at the height of the oil boom in 1981 to $6,300 in 1998.[13] Taking into account the impact of the real oil price changes on the Kingdom's real gross domestic income, the real command-basis GDP was computed to be 330.381 billion 1999 USD in 2010.[14] Increases in oil prices in the aughts[peacock term] helped boost per capita GDP to $17,000 in 2007 dollars (about $7,400 adjusted for inflation),[15] but have declined since oil price drop in mid-2014.[16]

Office of Saudi Aramco, the world's most valuable company and the main source of revenue for the state

OPEC (the Organization of Petroleum Exporting Countries) limits its members' oil production based on their "proven reserves." Saudi Arabia's published reserves have shown little change since 1980, with the main exception being an increase of about 100 billion barrels (1.6×1010 m3) between 1987 and 1988.[17] Matthew Simmons has suggested that Saudi Arabia is greatly exaggerating its reserves and may soon show production declines (see peak oil).[18]

From 2003–2013 "several key services" were privatized—municipal water supply, electricity, telecommunications—and parts of education and health care, traffic control and car accident reporting were also privatized. According to Arab News columnist Abdel Aziz Aluwaisheg, "in almost every one of these areas, consumers have raised serious concerns about the performance of these privatized entities."[19] The Tadawul All Share Index (TASI) of the Saudi stock exchange peaked at 16,712.64 in 2005, and closed at 8,535.60, at the end of 2013.[20] In November 2005, Saudi Arabia was approved as a member of the World Trade Organization. Negotiations to join had focused on the degree to which Saudi Arabia is willing to increase market access to foreign goods and in 2000, the government established the Saudi Arabian General Investment Authority to encourage foreign direct investment in the kingdom. Saudi Arabia maintains a list of sectors in which foreign investment is prohibited, but the government plans to open some closed sectors such as telecommunications, insurance, and power transmission/distribution over time.

The government has also made an attempt at "Saudizing" the economy, replacing foreign workers with Saudi nationals with limited success.[21]

Graphical depiction of Saudi Arabia's product exports

Saudi Arabia has had five-year "Development Plans" since 1970. Among its plans were to launch "economic cities" (e.g. King Abdullah Economic City) to be completed by 2020, in an effort to diversify the economy and provide jobs. As of 2013 four cities were planned.[22] The King has announced that the per capita income is forecast to rise from $15,000 in 2006 to $33,500 in 2020.[23] The cities will be spread around Saudi Arabia to promote diversification for each region and their economy, and the cities are projected to contribute $150 billion to the GDP.

In addition to petroleum and gas, Saudi also has a significant gold mining sector in the ancient Mahd adh Dhahab region and significant other mineral industries, an agricultural sector (especially in the southwest but not only) based on vegetables, fruits, dates etc. and livestock, and large number of temporary jobs created by the roughly two million annual hajj pilgrims.[11]

Statistics on poverty in the kingdom are not available through the UN resources because the Saudi government does not issue any.[24] The Saudi state discourages calling attention to or complaining about poverty. In December 2011, the Saudi interior ministry arrested three reporters and held them for almost two weeks for questioning after they uploaded a video on the topic to YouTube.[25] Authors of the video claim that 22% of Saudis may be considered poor (2009).[26] Observers researching the issue prefer to stay anonymous[27] because of the risk of being arrested.

Saudi Vision 2030[edit]

Following the prolonged slump in oil prices from 2013, changes to the cabinet structure included the creation in 2015 of the Council of Economic and Development Affairs, chaired by then-Defense Minister Mohammad bin Salman.[28] The following year bin Salman announced the Saudi Vision 2030 program, which aims to diversify the Saudi economy and reduce its dependence on oil revenues and state spending.[29]

Central to the program is the Public Investment Fund of Saudi Arabia (PIF), which in 2017 began investing in sectors including infrastructure, real estate and technology with the aim of becoming one of the world’s largest sovereign wealth funds by 2030.[30] A series of projects were announced including Neom, a proposed $500 billion mega-city in the northwest of Saudi Arabia; and the Red Sea project, a tourist resort across 50 islands on the Red Sea coast.[31][32] The PIF also launched a new defense company, Saudi Arabian Military Industries (SAMI), with the aim of localizing 50% of the kingdom’s military spending by 2030.[33]

Additional reforms within Saudi Vision 2030 include a privatization program, which aims to raise the private sector’s share of GDP from 40% to 65%; a financial sector development program, which aims to diversify financial services; and a fiscal balance program, which commits the government to cutting the budget deficit and increasing its non-oil revenues.[34][35][36]

In September 2018 the Public Investment Fund completed a deal with a group of major global lenders for a loan of $11 billion. The deal raised more than initially planned and was the first time the PIF had incorporated loans and debt instruments into its funding.[37] The Saudi government had arranged a similar loan of $16 billion in March 2018.[38] According to data from Fitch Ratings, over two years starting from May 2016 Saudi Arabia went from having zero debt to raising $68 billion in dollar-denominated bonds and syndicated loans—one of the fastest rates among emerging economies.[39]

Each year, about a quarter-million young Saudis enter the job market. With the first phase of Saudization into effect, 70% of sales job are expected to be filled by Saudis. However, the private sector still remains hugely dominated by foreigners. The rate of local unemployment is 12.9%, its highest in more than a decade. According to a report published by Bloomberg Economics in 2018, the government needs to produce 700,000 jobs by 2020 to meet its 9% unemployment target.[40]

Agriculture[edit]

Al-Hasa is known for its palm trees and dates. Al-Hasa has over 30 million palm trees which produce over 100 thousand tons of dates every year.

Serious large-scale agricultural development began in the 1970s. The government launched an extensive program to promote modern farming technology; to establish rural roads, irrigation networks and storage and export facilities; and to encourage agricultural research and training institutions. As a result, there has been a phenomenal growth in the production of all basic foods. Saudi Arabia is now completely self-sufficient in a number of foodstuffs, including meat, milk and eggs. The country exports wheat, dates, dairy products, eggs, fish, poultry, fruits, vegetables and flowers to markets around the world. Dates, once a staple of the Saudi diet, are now mainly grown for global humanitarian aid. In addition, Saudi farmers grow substantial amounts of other grains such as barley, sorghum and millet. As of 2016, in the interest of preserving precious water resources, domestic production of wheat has ended.[41]

The Kingdom likewise has some of the most modern and largest dairy farms in the Middle East. Milk production boasts a remarkably productive annual rate of 1,800 gallons per cow, one of the highest in the world. The local dairy manufacturing company Almarai is the largest vertically integrated dairy company in the Middle East.[42]

The Kingdom's most dramatic agricultural accomplishment, noted worldwide, was its rapid transformation from importer to exporter of wheat. In 1978, the country built its first grain silos. By 1984, it had become self-sufficient in wheat. Shortly thereafter, Saudi Arabia began exporting wheat to some thirty countries, including China and the former Soviet Union, and in the major producing areas of Tabuk, Hail and Qasim, average yields reached 3.6 tons per acre. The Kingdom has, however, stepped up fruit and vegetable production, by improving both agricultural techniques and the roads that link farmers with urban consumers. Saudi Arabia is a major exporter of fruits and vegetables to its neighbors. Among its most productive crops are watermelon, grapes, citrus fruits, onions, squash and tomatoes. At Jizan in the country's well-watered southwest, the Al-Hikmah Research Station is producing tropical fruits including pineapples, paw-paws, bananas, mangoes and guavas.[43]

The olive tree is indigenous to Saudi Arabia. In 2018 the Al Jouf Agricultural Development Company received a certificate of merit from The Guinness World Records for the largest modern olive plantation in the world. The farm covers 7730 hectares and has 5 million olive trees. The Guinness World Records also took into consideration their production capacity of 15000 tonnes of high quality of olive oil, while the kingdom consumes double that. The Al Jouf farms are located in Sakaka, a city in the north-western part of Saudi Arabia, which is a deeply-rooted in history. Sakaka dates back more than 4,000 years.[44] The Al Jouf region has millions of olive trees and the expected number is expected to go up to 20 million trees soon.[45]

Consuming non-renewable groundwater resulted in the loss of an estimated four fifths of the total groundwater reserves by 2012.[46]

Water supply and sanitation[edit]

Water supply and sanitation in Saudi Arabia is characterized by significant investments in seawater desalination, water distribution, sewerage and wastewater treatment leading to a substantial increase in access to drinking water and sanitation over the past decades. About 50% of drinking water comes from desalination, 40% from the mining of non-renewable groundwater and 10% from surface water, especially in the mountainous southwest of the country. The capital Riyadh, located in the heart of the country, is supplied with desalinated water pumped from the Persian Gulf over a distance of 467 km. Given the substantial oil wealth, water is provided almost for free. Despite improvements service quality remains poor. For example, in Riyadh water was available only once every 2.5 days in 2011, while in Jeddah it is available only every 9 days.[47] Institutional capacity and governance in the sector are weak, reflecting general characteristics of the public sector in Saudi Arabia. Since 2000, the government has increasingly relied on the private sector to operate water and sanitation infrastructure, beginning with desalination and wastewater treatment plants. Since 2008, the operation of urban water distribution systems is being gradually delegated to private companies as well.

Tourism[edit]

Although most tourism in Saudi Arabia still largely involves religious pilgrimages, there is growth in the leisure tourism sector. According to the World Bank, approximately 14.3 million people visited Saudi Arabia in 2012, making it the world's 19th-most-visited country.[48] Tourism is an important component of the Saudi Vision 2030 and according to a report conducted by BMI Research in 2018, both religious and non-religious tourism have significant potential for expansion.[49] Projects include the planned 34,000 sq km Red Sea tourist resort and the 334 sq km Qiddiya entertainment park near Riyadh.[50][51] Heritage sites in the northwestern Al-Ula region, including the Nabatean tombs of Mada'in Saleh, are due to receive tourists in 2022.[52]

Starting December 2018, the kingdom will offer an electronic visa for foreign visitors to attend sport events and concerts. The “sharek” visa process will start with 15 December, Saudia Ad Diriyah E Prix race.[53] Saudi Arabia aims to attract 30 million tourists annually by 2030.[54]

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