Saudi Arabia’s accession to the World Trade Organization (WTO) this month and abundant available liquidity due to rising oil prices will bring more investment in the Kingdom.
Under the leadership of Custodian of the Two Holy Mosques King Abdullah, Saudi Arabia has adopted various economic reforms that will attract more foreign investment as the atmosphere becomes more investor-friendly.
King Abdullah this month laid the foundation stone of an SR100 billion ($26.6 billion) King Abdullah Economic City that will rise up in Rabigh, north of Jeddah, in what has been described as the biggest project of its kind in the region.
The King Abdullah Economic City will comprise six distinct components designed to make it a world-class location for overseas investors. Planners hope that the project will transform the Saudi economy into a global economic powerhouse with a magnetic pull for investors across the broad spectrum of information technology, industry, research and development, education, health and various other sectors.
Saudi Arabia has announced a series of measures recently to improve the country’s investment climate, remove obstacles facing private investors, allow foreign manpower recruitment and speed up licensing procedures.
Saudi Arabia has also eased business visa regulations. The new law allows owners, board chairmen and directors general of foreign companies, as well as investors, to get visas without an invitation. Saudi Arabia is seeking foreign investment to carry out a large number of projects worth SR2.34 trillion ($624 billion) in vital sectors.
According to Omar Bahlaiwa, secretary-general of the foreign trade development committee at the Council of Saudi Chambers of Commerce & Industry, infrastructure projects offer the largest investment opportunity of $140 billion. The petrochemicals sector comes second with $92 billion projects followed by electricity and water $88.9 billion, telecommunications $60 billion, tourism $53.3 billion, natural gas $50 billion, agriculture $28.3 billion and information technology $10.7 billion.
The Saudi Arabian General Investment Authority (SAGIA), set up five years ago, is playing an important role in luring foreign investment. SAGIA reported a massive increase in investments in licensed projects in the second quarter of this year. The total amount invested during the first half of 2005 reached SR65 billion, the organization said in a recent report.
SAGIA, in cooperation with the World Bank, is currently conducting a complete evaluation of the investment environment in the Kingdom to provide an appropriate scientific mechanism to measure and compare the progress made in the Kingdom’s investment climate.
Last year, Saudi and foreign investment in the country’s private sector stood at SR119 billion with domestic investment accounting for SR8 billion or less than seven percent of the total, SAGIA Governor Amr Al-Dabbagh said quoting statistics published by the Saudi Arabian Monetary Agency.
The Kingdom has also announced plans to set up 24 new industrial cities as part of a long-term vision to diversify its industrial base, improve the quality of products, promote investment and strengthen industrial technology.
The new industrial city in Yanbu (Yanbu-2), to be completed by 2019, will include industrial projects worth SR115 billion, according to Prince Saud ibn Abdullah ibn Thunayan, chairman of the Royal Commission for Jubail and Yanbu.
Covering an area of 66 sq. km., it is expected to contain 34 basic and secondary industries and 224 light industries, which will bring the total investments in Yanbu to more than SR200 billion.
The new Saudi Basic Industries Corp. (SABIC) projects include Yanbit-II, owned by SABIC and ExxonMobil with a total investment of SR9 billion and production capacity of four million tons annually of ethylene, polypropylene, polyethylene and ethylene glycol.
Another project that was completed this year is the SR236 million Industrial Gases National Company factory (second phase), owned 70 percent by SABIC and 30 percent by a group of national companies. The factory produces 900 tons of oxygen and nitrogen daily.
The Kingdom’s Eighth Five-Year Plan (2005-2010), which was approved by the Council of Ministers recently, is not so much about what the government is going to spend as where it wants to see spending take place and where the economy should go. Indeed it is much more a facilitating program than a spending list. But within that, it provides considerable investment opportunities for both overseas investors and the Saudi private sector.
The main thrust of the plan includes the privatization of state-owned corporations, the establishment of economically strategic downstream industries, the expansion of the natural gas industry, the growth in information technology, and the development of the mining and tourism sectors. The plan intends to diversify the Kingdom’s economic base, boost productivity, and beef up competitiveness, while eliminating bottlenecks facing domestic and foreign investors.
Developing a knowledge-based economy is another priority. The plan seeks to promote information and scientific research. It encourages the private sector to participate in electricity projects by providing investment-protection measures that will help ensure adequate power supply and beneficial competition.
There are also investment opportunities for Saudi women to raise their standard of living. Already, plans have been drawn up for setting up women-only industrial estates and supermarkets run and managed by women. Catering for wedding receptions is another business opportunity for enterprising Saudi women.
In the field of domestic tourism, a study conducted by the Supreme Commission for Tourism (SCT) has revealed that Saudi tourist cities require 129,000 hotel rooms and 74,000 furnished apartments to accommodate a growing number of tourists from within and outside the Kingdom. The study pointed out tourism would solve many problems being faced by the country including unemployment, low living standards, migration of labor to major cities and pressure on public utility services. It will also boost the country’s diversification drive. The study anticipates the Kingdom’s tourism revenue to reach SR101 billion by 2020.
