Reforms to Enhance Saudi Economy

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2 Saudi Arabia Key indicators. Saudi Arabia underlying strengths. Investment in Saudi Arabia. Foreign trade of Saudi Arabia. Saudi estimated Budget Reforms to Enhance Saudi Economy 2

3 SAUDI ARABIA KEY INDICATORS 2012 Area: km 2. Population: 29 million. GDP: $727 billion (preliminary) GDP per Capita: $ GDP Growth: 8.6 % (Current) 6.8% (Constant) Non-Oil Sector GDP Growth: %11.2. Currency: Saudi Riyal (SR) 3.75 = $1 Private Sector Growth rate: 8%. Exports:$396 billion.imports:$128 billion. 3

4 SAUDI ARABIA -UNDERLYING STRENGTHS Strong GDP growth. Significant budget surplus. Price level stability. Owns 25% of world s Oil reserve. Fourth Largest Natural Gas reserve. The largest economy in the Arab World, and among the top 20 Economies in the world (G20). The Largest producer of Petrochemicals in the Arab World. Open economy, a member of WTO. 4

5 SAUDI ARABIA -UNDERLYING STRENGTHS Cont. Political stability, member of many Arab & International Organizations. An attractive environment for investment, among the top 20 recipients of Foreign Direct Investment in the world. Investment incentives, Income tax free, financial facilities. Ranked 12 th in ease of doing businesses in th largest worldwide Exporter (excluding intra-eu (27) trade). 21 st largest worldwide Importer (excluding intra-eu (27) trade). 5

6 SAUDI ARABIA -UNDERLYING STRENGTHS Cont. 800 Saudi s GDP among Gulf countries saudi Arabia U.A.E Qatar Kuwait Oman Bahrain $ Billion

7 SAUDI ARABIA -UNDERLYING STRENGTHS Cont. Saudi Arabia s Ranking in Global Competitiveness 2013/2014 Indicator Ranking Among Arabic Countries Ranking Among World Countries Ease of doing businesses 1 12 Global competitiveness 3 20 Institutions 4 20 Infrastructure 4 31 Macroeconomic environment 2 4 Property rights 5 27 Health and primary education 5 53 Higher education and training 3 48 Goods market efficiency 4 27 Financial market development 3 27 Technological readiness 3 41 Market Size 1 23 Business sophistication 3 28 Innovation

8 INVESTMENTS IN SAUDI ARABIA 8

9 FDI (Inflows) Bn US$ Saudi Arabia Egypt Emirates Qatar Oman Kuwait

10 FDI TO SAUDI ARABIA BY COUNTRY ) 2% 1 % 3% 17% 4% 4% 5% 9% 8% 8% 7% 9% FDI in Saudi Arabia 2011: 16.4 billion US$ USA is the largest investor in Saudi Arabia. USA Kuwait France Japan UAE Bahrain China Germany UK Netherlands Jordan Malaysia 10

11 INVESTMENT INCENTIVES IN SAUDI ARABIA No bureaucracy and one gate to investment General Authority for Investment Arabia (SAGIA), 100 % land and corporate ownership to foreigners. No restrictions on the re-transfer of capital. No taxes on personal income, taxes 20 % of the benefits on foreign companies. The possibility of loss carry-over to later years rather than factoring them into tax settlements of profitable years. Foreign investors have the right to benefit from specialized financial institutions (local and international institutions.) 11

12 ADVANTAGES OF INVESTING IN SAUDI ARABIA Cont. Liberalized Market Domestic Market of over 29 Million People Proximity to big Markets Low Labor Costs Major source of energy Guarantee of Transfers National Treatment Reliable Investment Environment 12

13 ADVANTAGES OF INVESTING IN SAUDI ARABIA Cont. Topped the list of GCC and West Asian countries in terms of direct foreign investment. Topped the list of Arab host in terms of direct foreign investment, with estimated flows of $ 38.2 billion, up 39% of the total. Top of the list of Arab host of inter-arab investment interfaces, with an estimated worth of $ 11.6 billion, up 60.4% of the total. Major investments in west Asia go to three countries: KSA, Turkey and UAE. Kingdom concluded 41 bilateral agreements with various worldwide countries, including 17 investment agreements, and 24 avoidance of double taxation agreements. 13

14 PLANNED SAUDI INVESTMENTS UP TO 2020 $200 billion $92 billion $90.7 billion $88 billion $70.7 billion $53.5 billion $50 billion $28.3 billion $10.7 billion $22 billion Physical Infrastructure Petrochemical Expansions Electric Power Generation Water Desalination Telecom and IT Tourism and Leisure Development Natural Gas Production Agricultural Expansion Educational and Training Riyadh metro line 14

15 INVESTMENT OPPORTUNITIES IN HOUSING King Abdullah decree to support the Housing Sector through increased allocations totaling $14.67 billion to the General Housing Authority and the Real Estate Development Fund. The royal decree to support the Housing Authority in building up to 500,000 housing units for citizens. King s initiative will bring down the existing shortage of housing units from 1.2 million to 700,000. The decision to increase the real estate loan from SR300,000 ($80 thousand) to SR500,000 ($133 thousand) and build as many as 500,000 housing units, was reflected in the market with a boost in demand for plots of land for building houses and increased activities in the real estate market. 15

16 INVESTMENT OPPORTUNITIES IN RIYADH METRO LINE Riyadh s population is projected to grow up to 8.5 million people in the next decade (from six million currently.) Saudi Arabia awarded more than $22 billion in contracts to develop a metro line in Riyadh.. It is the biggest infrastructure project to be undertaken in the Kingdom of Saudi Arabia, and is a cornerstone of the bold future for Riyadh city. Six lines will serve the capital city s center, government facilities, universities, commercial areas, the airport and the financial district. Construction of the 175-kilometer (109-mile), and 85-station network will be the longest metro line in the world under construction, and will create 15,000 jobs over five years. 16

17 FOREIGN TRADE OF SAUDI ARABIA 17

18 DEVELOPMENT OF SAUDI ARABIA S FOREIGN TRADE Billion Dollars EXPORTS IMPORTS TRADE VOLUME Today, Saudi Arabia is the 10 th biggest exporter and the 21 st largest importer in the world. (excluding intra-eu (27) trade). 18

19 TO (10) FOREIGN TRADE PARTNERS SAUDI ARABIA EXPORTS TO USA 14% Japan 13% China 13% S. Korea 10% India 8% Singapore 4% Taiwan 3% Italy 3% UAE 3% Bahrain 3% SAUDI ARABIA IMPORTS FROM China 13% USA 13% Germany 7% Japan 6% S. Korea 6% UAE 4% France 4% Italy 4% India 3% UK 3% 19

20 MAIN EXPORTS OF SAUDI ARABIA Petrochemical Products Electric Power Towers (High Tension) Paper Industries Medicine Prefab. Steel Structure Buildings Air Conditioning Materials Cleaning Materials Plastic Textiles Insulating Materials Plastic pipes and fittings and bottles Miscellaneous Plastic Material Electric Cables Irrigation Industries Electric Poles Steel Angles for Electric Power Towers Transparent Glass Carpets Cement Foodstuff Copper Wire, bars and jewelry 20

21 SECTORAL BREAKDOWN OF SAUDI S IMPORTS % 15% Food stuffs Chemical products 12% Textiles& Textiles Articles 28% 13% 3% Base metals Electrical machines Others Electrical machines have the biggest share in Saudi s imports with 28%. 21

22 ADVANTAGES OF SAUDI S EXPORTED PRODUCTS More than 2000 commodity within 17 groups. Applying International Standard & Specification. Accessibility to more than 148 International Markets. High Quality of Packaging. Suitable & competitive price. Financing programs. Ease of Transport. Air, sea & land cargo from various ports. 22

23 SAUDI ESTIMATED BUDGET Expenditure Revenues $218.7 Billion $221 Billion SECTORAL BREAKDOWN OF EXPENDITURE % 8% 8% Transport & Communications 12% 14% Water, Agriculture, Industry Education 25% Health & Social Development Development Funds 23

24 REFORMS TO ENHANCE SAUDI S ECONOMY Re-evaluation and issuance of new laws. Developing IT and Communication platforms. Attention to sectors in which Saudi Arabia has comparative and competitive advantages. Creating more jobs for Saud youth. Enhance PPP Private / Public partnership. Accelerating Privatization Program. Support SME s and Family Business. Promotion of Non-Oil Export. 24

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