|
Nowadays it’s people that represent the world’s most valued asset; the 21st century equivalent to oil. If this is true, then the Kingdom of Saudi Arabia is riding high on both fronts. With 60 percent of its 23.6 million-strong population below the age of 25 and boasting the world’s largest ‘black gold’ reserves with 260 billion barrels of known oil wealth - welcome to the unrivalled socio-economic powerhouse of the Arab region.
The ninth largest country worldwide and the vastest in the Arabian Peninsula, accounting for 80 percent of its territory, even amid a pervasive climate of global economic instability, it holds its own. Thanks to both its copious buffer of capital reserves built up during the oil-boom years and the government’s bold policy of economic diversification propelled by a proactive fiscal stance; this nation’s commitment to non-oil sectors vital to its sustainability, is unstinting.
|
This is a golden era for foreign investment in Saudi Arabia. With the Kingdom introducing sweeping new measures to facilitate international business, its planned $624 billion worth of projects earmarked by the year 2020, reflect its position as the fastest growing economy in the Middle East.
|
Given its strong ties to the global oil market – and therefore the global economy overall – it was inevitable that Saudi Arabia would feel the impact of the worldwide economic downturn. Indeed, while 2009 was not a year of straightforward progress, the Kingdom was soundly cushioned given its buffer of capital reserves. Moreover, the government has been careful to minimise the effects of the global crisis by
|
deploying its resource wealth to fund development, maintaining stable governance and pushing education to the fore. For instance, the 2011 budget of US$ 155billion is the largest to date, targeting the development of non-oil sectors crucial to long-term development, such as health and education, as well as the funding of expansive infrastructure projects that have underscored its policy of increasing competitiveness through sustainable investments.
With this buoyant performance carried on into 2010 and 2011, added to a reduction in inflation rates since the peaks of 2008, the Kingdom boasts unrivalled strength, matched by largely untapped potential across diverse spheres. While its petroleum resources undoubtedly remain the most prominent feature of its economy, it is by no means the Kingdom’s only asset. Expected to become the third most prominent bastion of the nation’s economy, together with energy and petrochemicals, mining is another appealing sector given the enormous reserves of gold, silver,
|
In 2010, the Kingdom ranked 13th out of 183 countries in the Top 20 countries in the World bank/IFC ‘Doing Business’ report which measures the quality of the regulatory environment. In 2008, Saudi Arabia stood 23rd out of 178 countries for ease of conducting business. Seventh for ease in paying taxes, third for ease in registering property and first in the MENA region for attracting foreign direct investment ($38 billion in 2008 according to UN sources).
|
copper and zinc to be found principally in the north-east and western mountains. Additionally, the advancement of manufacturing - from packaging and cars to electronics as well as construction - is rapidly feeding growing consumer demand. High average per capita incomes of close to $19,000 per annum means that the appetite for home-grown products is increasing. Equally, an insatiable demand for varied services, especially in the fields of leisure, real estate, telecoms and banking are also enjoying impressive government investment, as well as public-private sector collaboration. For instance, the real estate market – a sector in pitiful disarray elsewhere regionally and worldwide – is healthy given the numerous and largely prosperous population, added to the erstwhile market undersupply.
|
Shifting Gears
Also positive is Saudi Arabia’s emerging profile on the global policy arena. Traditionally this Islamic nation was perceived as insular and more of a global financial benefactor rather than an agenda setter. However, its increasingly prominent role in the G20 is transforming erroneous perceptions. For instance, its active participation in addressing some of the world’s most obstinate challenges, including energy supply and demand, is crucial. As one of the top six contributors to the IMF and one of the largest donors of international aid when compared with GDP, Saudi Arabia espouses stability, participation and competiveness as strategic global objectives. These are also goals which the government is working hard to promote domestically as a means of fostering social cohesion and increase employment. Ultimately, it’s
|
King Abdullah Financial City
|
in Saudi Arabia’s interest to see the global economy prosper since demand for oil depends on its health. However, it is also important for it to strike a balance between calls to support the international financial system and the imperative to invest internally in order to upgrade its education system and infrastructure as a route to greater economic diversity and balanced prosperity.
|
On the international policy-scape, Saudi Arabia’s enhanced participation in global economic structures is nowadays based more on reciprocity (like China and India’s roles) so that the kingdom leverages its presence advantageously, instead of limiting its role to providing funding to the IMF and to receive the recognition it deserves.
Participation in the G20 will give the Kingdom leverage to achieve greater regional consensus to emerge as a valid representative voice by the rest of the GCC and the Middle East.
It has been said that ‘if you don’t communicate, someone else will communicate around you…nature abhors a vacuum’. Today the message of Saudi Arabia is loud and clear, and its means for getting heard are powerful. The world is listening.
|
The private sector’s prominence in the Kingdom’s overall economic has expanded impressively. Until the 1980’s it accounted for less than 10 percent of GDP. In 2008, it touched 48 percent. This proves that entrepreneurship, if properly nurtured, can reap enormous wealth for the nation.
|
Did you know?
Today Saudi Arabia is the fourth largest holder of net foreign reserves worldwide and is one of the few G20 nations that present scarce macroeconomic worries. Within four years, Saudi Arabia’s economy has doubled to touch $500bn in 2010. Government debt to GDP (all domestically raised) has fallen below 10 percent from a high of 105 percent in 1999.