Real economic growth in Saudi at 4.3 per cent

(AFP)   

Saudi Arabia is one of the growing economies in the region with real economic growth at 6.1 per cent in 2005 and 4.3 per cent in 2006, according to the latest available figures.

The past few years were prosperous for the Kingdom mainly due to the strength of its oil sector, better domestic geo-political environment, acceleration of reforms, membership of the World Trade Organisation, growth of foreign assets of the Saudi Arabian Monetary Agency, increased liquidity, strong private sector growth and high corporate earnings, said the report by Kuwait-based Global Investment House.

Oil has a major share in the country’s revenue. Government officials have set a vision for the year 2025, where the economy will be diversified and private-sector driven, providing rewarding job opportunities, quality education, healthcare facilities and necessary skills to ensure positive growth momentum.

The Kingdom is focusing on development of an attractive investment environment. In the past years corporate tax on foreign-owned firms was reduced from 45 per cent to 20 per cent, which has aided in foreign direct investment inflows to increase from $183 million (Dh671m) in 2000 to $1.83bn in 2006. The Kingdom also benefited from accession to the World Trade Organisation three years ago, the report said.

Saudi Arabia also aims to be among the top ten competitive nations in the world for inward investment by 2010. Authorities are also looking to attract $300bn of investment in “energy-intensive industries” over the next 13 years. A further $100bn of investment is also being sought for “knowledge-based” industries and a similar amount for transportation ventures. A variety of industrial projects, transport developments, building of six new cities, liberalisation initiatives as well as oil and gas ventures are certain to increase the level of investment desired by the country, the GIH report said.

Among the strongest drivers of investment demand in Saudi Arabia are capacity expansions currently undertaken by commodity exporters, mainly Saudi Aramco and Sabic. Both companies are currently in the middle of major capacity expansion projects, out of which a sizable chunk will be completed in 2008-10. Saudi Aramco started its phase one of expanding its production capacity from approximately 10.5mbpd at present to 12.5mbpd by 2009 through a series of projects. Sabic, on the other hand, is also moving forward with its expansion plan to boost its production capacity to 60mtpa by 2008, 80mtpa by 2012 and 100mtpa by 2015.

Saudi Arabia is putting investment and training into the manufacturing sector, as it pushes to become less reliant on oil for its economy. But the Kingdom is facing increased pressure to improve training and education. The Kingdom is pushing ahead with a number of industrial cities which are expected to attract investment, develop a much broader economy and provide the job opportunities the nation’s young population requires.

A dozen industrial estates have been built throughout the Kingdom, accommodating more than 1,600 industrial units. The number of manufacturing and industrial enterprises in the Kingdom now total more than 3,800. A national industrial cluster development programme has recently been established to expand the industrial base.