An economic analysis of Saudi Arabia

Economy

Saudi Arabia has the biggest free market economic system in the MENA part keeping a 25 % portion of entire Arab GDP. The Kingdom ‘s is located in such a mode that it provides easiness of entree to the European, Asian and African markets. It has a increasingly turning place market ( one-year population growing of 3.5 per centum ) , which is adding to a immature and devouring population with strong purchasing power. Its new Foreign Investment Law allows 100 per centum foreign ownership of undertakings and existent estate. The Kingdom has a stable political environment every bit good as a stable economic environment. Saudi Arabia besides provides universe category substructure.

Saudi Arabia histories for 25 per centum of the universe ‘s oil militias. The Saudi authorities places no kerb on foreign exchange and repatriation of net incomes every bit good as capital. The currency is really stable and there are no foreign exchange limitations, and 100 per centum repatriation of net incomes is allowed. Saudi Arabia allows losingss to be carried frontward indefinitely, therefore relieving the revenue enhancement load for concerns till they turn profitable. Personal income revenue enhancement is zero. Labor cost in about all sectors is non really high. Extra inducements offered to investors include:

Exemption of export goods from storage fees for 10 yearss.

Annual land rent in industrial countries fixed at 2 US cents/square metre.

Decrease in corporate revenue enhancement by 30 per centum. 50 per centum decrease in port fees on all exports.

Exemption of industrial machinery and equipment from responsibilities.

Cardinal Facts about Saudi Arabia

Consumers in Saudi

27 million

Education Spending

8th in the universe

Free Labor Market

7th in the universe

Tax Rate

0 %

Fiscal Freedom

4th in the universe

Merchandise Exporter

12th in the universe

Commercial Servicess

33rd in the universe

Ease of Doing Business

13th in the universe

% of foreign ownership of undertakings and existent estate

100 %

Least Burdensome ordinance and least uneconomical public disbursement

20th in the universe

No Of Dayss to open a concern

15

Openness to Trade

Lowest norm weighted duty rate

Petroleum Militias

25 % of entire universe oil militias

Current Account Surplus

20-25 % of GDP

Macro Economic Stability

3rd in the universe

FDI inflows into Saudi Arabia vis-a-vis Dubai and Global Numberss [ 1 ]

Dubai

S. Arabia

In one million millions

Year

A

FDI

Dubai

FDI

Saudi

FDI

Global

Percentage to

Global

Percentage to

Global

% Change

A

% Change

A

2005

10.4

121.0

746.3

1.40

16.21

2006

12.6

183.0

934.7

1.34

19.58

0.21

0.51

2007

10.8

243.0

1,070.0

1.01

22.71

-0.14

0.33

2008

22.0

382.2

1,650.0

1.34

23.17

1.05

0.57

Saudi Arabia has programs to put $ 200 billion in the energy sector ( oil, gas, electricity and desalinization and petrochemical industries ) . Global oil companies are besides sing puting $ 100 billion over a period of 20 old ages in the production of natural gas. It is besides expected that $ 6 billion worth of domestic capital will be invested in the touristry sector. Saudi Arabia is a founding member of Convention on Arbitration and is in the procedure of obtaining World Trade Organization ( WTO ) rank. Saudi is besides a member in assorted international and regional organisations. [ 2 ]

Foreign Investment in Saudi Arabia

The new Foreign Investment Law [ 2 ] allows aliens to put in most sectors of the economic system. The jurisprudence has abolished the patron system and enabled foreign investors to ain existent estate for company activities and patronize their foreign employees. The new Real Estate Law allows aliens to ain existent estate except in the two Holy metropoliss of Makah and Medina. The Kingdom is drastically revising its business-related Torahs to increase transparence and beef up the state ‘s planetary fight. The Torahs presently under alteration include the Capital Markets Law, the Companies Law, the Agency Law, the Insurance Law, the Mining Law and the Labor Law. Many other Torahs are presently under alteration with the purpose of fostering the procedure of economic liberalisation. In May 2001 the authorities besides issued guidelines for transparence of economic and financial informations.

Wage Ratess and Labor Regulation [ 2 ]

Saudi Arabia is already basking important success in its new instruction scheme with a farther SAR 12 billion being distributed over the following five old ages. School support has increased coupled with school edifice and instructor enlisting plans. This has led to a phenomenal addition in literacy rates from 33 % in 1970 to 83 % today. The Kingdom allows companies to engage endowment from abroad if need be. There are approximately 6 million skilled and semi-skilled exile workers in Saudi, from senior managerial degree to labourers. Unskilled labour in Saudi Arabia costs US $ 2.77/hr compared to US $ 2.63/hr in Mexico and US $ 22.60/hr in France.

World Investment study 2009, UNCTAD web site: hypertext transfer protocol: //www.unctad.org

Saudi Industrial Property Authority web site: hypertext transfer protocol: //www.modon.gov.sa/English/AboutKingdom/Pages/SaudiEconomy.aspx

Banking Infrastructure and Financial Markets

Saudi Arabia has established a sound regulative model and fiscal substructure based on coverage criterions comparable to those in major industrial states. The Kingdom ‘s fiscal system consists of the cardinal bank ( SAMA, the Saudi Arabian Monetary Agency ) , the commercial Bankss, the specialized recognition establishments and the stock market. Banking is regulated under the Banking Control Law issued by Royal Decree in 1966. The authorities interest in commercial Bankss is less than 10 % . Adequate liquidness enables financing at competitory rates. Foreigners can put in the stock market through investing financess. The Saudi stock market is the largest in the part. The Saudi Riyal has a strong record of stableness and rising prices rates in Saudi Arabia are really low.

Incentives to investors [ 3 ]

Saudi Arabia is a signer to assorted regional bureaus vouching a flat playing field to foreign investors. It is a member of the Multilateral Investment Guarantee Agency ( MIGA ) . The Kingdom, hence, ensures the same intervention, protection and inducements accorded to a national capital. The pre-investment aid provided by SAGIA and other authorities bureaus includes assisting foreign investors prepare feasibility surveies for industrial undertakings. They besides provide information and statistics for investing undertakings within the range of Saudi Arabia ‘s development programs. Saudi Arabia offers the universe ‘s most competitory energy monetary values to investing undertakings. As such, Saudi Arabia continues to be a natural pick for investors in all energy-intensive industries.

Saudi Industrial Property Authority web site: hypertext transfer protocol: //www.modon.gov.sa/English/AboutKingdom/Pages/SaudiEconomy.aspx

Cardinal Indexs [ 4 ]

Particulars

2000

2005

2007

2008

Demographics

Population, entire ( 1000000s )

21

23

24

25

Population growing ( one-year % )

2

3

2

2

Economy

GDP ( current US $ ) ( one million millions )

188

316

384

469

GDP growing ( one-year % )

5

6

3

4

Inflation, GDP deflator ( one-year % )

12

19

4

17

Agribusiness, value added ( % of GDP )

5

3

3

2

Industry, value added ( % of GDP )

54

63

66

70

Servicess, etc. , value added ( % of GDP )

41

34

32

27

Exports of goods and services ( % of GDP )

44

61

65

69

Imports of goods and services ( % of GDP )

25

28

38

38

Gross capital formation ( % of GDP )

19

18

21

21

States and markets

Time required to get down a concern ( yearss )

N/A

64

15

12

Market capitalisation of listed companies ( % of GDP )

36

205

134

53

Global links

Merchandise trade ( % of GDP )

57

76

85

94

Net swap footings of trade index ( 2000 = 100 )

100

178

236

N/A

Net migration ( 1000s )

70

285

N/A

N/A

Workers ‘ remittals and compensation of employees, received ( current US $ ) ( 1000000s )

N/A

94

124

216

Foreign direct investing, net influxs ( BoP, current US $ ) ( 1000000s )

( 1,881 )

12,107

24,335

22,486

Net functionary development aid and official assistance received ( current US $ ) ( 1000000s )

22

25

( 131 )

N/A

Global FDI website – www.fdi.net

Saudi Arabian General Investment Authority

The Saudi Arabian General Investment Authority [ 5 ] provides the undermentioned information:

Information crucial to possible investors

Handiness

Investor Support Center

i??

List of Investment chances across the economic metropoliss

i??

Investing Incentives to foreign investings

i??

Detailss of relevant authorities organic structures

i??

Detailss on Monetary Policy and relevant links

i??

Detailss on funding avenues and options

i??

Detailss on assorted Torahs applicable to Saudi Arabia

i??

Detailss on international understandings entered into by Saudi Arabia with full text

i??

Datas on Cost of making concern including rent, public-service corporations and employee costs

i??

Information on subsequent inside informations required by investors to back up their concern

Endowment

i??

Infrastructure

i??

Telecommunications

i??

Support Options

i??

International Presence of SAGIA across US, Europe, Asia

i??

Ability of International locations to publish licences in the host states

i??

Country-wise influxs into Saudi Arabia

i??

List of Top Companies puting into Saudi Arabia with value of investing

i??

Information on cardinal sectors in Saudi Arabia

i??

Detailss on forecasted new investings in each sector and bomber sector

i??

Detailss on sectors which need investing in close hereafter from P.O.V of Saudi Arabia ‘s strategic growing program

i??

Measure by Step guide to set up concern in Saudi Arabia

A

Pre Application demands

i??

Application Form

i??

Detailss on Residency and investor visa

i??

Commercial Registration/ Company Registration

i??

Economy Indexs with comparing against GCC and US, UK

Nominal GDP

i??

Real GDP

i??

Real GDP per capita

i??

Sector Wise GDP

i??

Inward FDI

i??

Balance of Trade

i??

Inflation

i??

Tax Ratess

i??

Population

i??

Population Growth Rate

i??

Public Outgo on Education as a % of GDP

i??

Unemployment

i??

Household Consumption outgo as a % of GDP

i??

Saudi Arabia General Investment Authority – www.sagia.gov.sa

Central Department of Statistics and Information

The Central Department of Statistics and Information [ 6 ] provides the undermentioned information

Information Provided by CDSI

Handiness

Constitution nose count

Number of workers

i??

Number of constitutions – private

i??

Economic nose count

Population & A ; Housing Census ( 2003 )

i??

Consumption Expenditure nose count

i??

Labor Force Census

Sex-wise

i??

Engaged in concern

i??

Engaged in Employment

i??

National Income Statisticss

GDP at current monetary values

i??

GDP Growth rates

i??

GDP – Institutional Sector-wise

i??

Price Index Statistics

Cost of Living Index

i??

Sweeping Price Index

i??

Foreign Trade Statisticss

Imports – Country-wise

i??

Imports – Commodity/Service-wise

i??

Exports – Country-wise

i??

Exports – Commodity/Service-wise

i??

Sector-wise Statisticss

Employee Stats

i??

Compensation

i??

Grosss

i??

Outgos

i??

Net income Statisticss

i??

Wages and Wagess cost

i??

Capital Outgos

i??

Note: All the indexs on the statistics section web site are outdated. They pertain to pre 2005-levels.

Saudi Arabia cardinal section of statistical information – hypertext transfer protocol: //www.cdsi.gov.sa

Ease of Making Business: Saudi Arabia vs. UAE

A comparative survey based on the Ease of Business Report [ 7 ] clearly shows the greater challenges that an investor faces while establishing a Business in UAE as compared to Saudi Arabia. The clip required to Get down a Business is a competitory advantage that an investor has in Saudi Arabia as compared to UAE. In add-on to that, Saudi Arabia provides better investor protection as compared to UAE.

Another of import thing to observe is that while it takes merely a twelvemonth and half to go out a concern in Saudi Arabia, it takes, around 5 old ages to make the same in UAE. The higher cost and lower Recovery rate in UAE is besides something that can be a hindrance to investors who are more risk averse and wish to go out in instance things do n’t work out.

Parameters

Saudi Arabia

UAE

Get downing A concern

13

44

Procedures ( figure )

4

8

Time ( yearss )

5

15

Cost ( % of income per capita )

7.7

6.2

Protecting Investors

16

119

Extent of revelation index ( 0-10 )

9

4

Extent of manager liability index ( 0-10 )

8

7

Ease of stockholder suits index ( 0-10 )

4

2

Strength of investor protection index ( 0-10 )

7

4.3

Closing a Business

60

143

Time ( Old ages )

1.5

5.1

Cost ( % of Estate )

22

30

Recovery Rate ( cents on the dollar )

37.5

10.2

Ease of Making Business – World Bank ( 2010 ) . – hypertext transfer protocol: //www.doingbusiness.org/exploreeconomies/ ? economyid=163