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Long Term Prospects

 

 

Saudi Arabia EMPLOYMENTSaudi Arabia Long Term ProspectsSaudi Arabia EMPLOYMENT

 Also See
The Saudi Business Center

Author - U.S. Department of Commerce

Source:
STAT-USA on the Internet
US Department of Commerce
(202) 482-1986

 

1- COMPUTER SOFTWARE (CSF)      
Saudi computer software vendors estimated the software market at

$400 million in 1997 with 10 percent growth over the next three

years. The following are key factors to the growth of Ssaudi

computer software: The Saudi Government commitment to enforce

regulations aimed at curbing illegal reproduction of computer

software and other IPR products; local  establishment of the

Business Software Alliance (BSA) to support and train the

Ministry of Information personnel on the latest techniques for

detection of software piracy; and the ongoing re-engineering

process in various sectors of the Saudi economy, which help

create demand for information technology in general, and computer

software in particular.  The advent of Internet service in Saudi

Arabia will also impact the demand for software and associated

services. Finally, the Y2K millennium bug will also boost the

demand for computer systems and software.      
Adequate and efficient network solutions are becoming a most

important and intriguing aspect among the Saudi information

system and business communities.  Smaller businesses are

experiencing the advantages of acquiring and installing efficient

client/server configurations to help them increase work

productivity and cut communication costs.      
                              1997(E)   1998(E)   1999(E)

a.  Total Market Size          400       440       485

b.  Total Local Production      19        21        23

c.  Total Exports                0         0         0

d.  Total Imports              381       419       462

e.  Imports from the U.S.      268       295       346

The Saudi market for computers and peripherals remains the

largest in the Near East.  The Kingdom's computer market was

estimated at $240 million in 1997 and expected to grow seven to

eight percent annually over the next two years.  The expected

introduction of Internet service will generate even more

opportunities for U.S. hardware and software firms.      
IBM-compatible personal computers represent 40 percent of

installed units, but only approximately 20 percent of total

import value.  There are more than 30 brands of PCs available in

the Saudi market including: IBM, Zeos, HP, Digital, AST, Acer,

Mitac, Siemens Nixdorf, Gateway 2000, Compaq, Dell, Apple,

Twinhead, Leo, among others.      
Vendors are fighting for better positions in various niches by

offering more technologically advanced computers with added

features.  Several third-country manufacturers, especially from

Southeast Asia, are fiercely competing with American firms, while

many American manufacturers have set up manufacturing facilities

in Southeast Asian countries.  There are more than 300 local

computer dealers selling various computer brands throughout Saudi

Arabia.      
Saudi Aramco, the Kingdom's oil company, is considered to be the

largest buyer and user of computers in the whole Arabian Gulf

region.  The company operates more than 10,000 computer units and

spends over $3 million a year on new systems and system upgrades

annually.  Saudi Arabian Airlines, the national carrier, is

another major buyer of computers.      
In the private sector, banks are considered to be the largest

end-users.  There are 11 banks with a total of 1200 branches

operating throughout the Kingdom.  In addition to demand by

banking and financial institutions, several other industry

sectors are eager to modernize their computer/communication

systems.  One of them includes the hotel industry, which is

trying to upgrade customer services by automating room service,

quick check-out systems, payroll and reservation services.      
                              1997(E)   1998(E)   1999(E)

a.   Total Market Size         240       257       275

b.   Total Local Production     0          0         0

c.   Total Exports              0          0         0

d.   Total Imports             240       257       275

e.   Imports from The U.S.      82        87        96

Saudi Arabia is the largest and most sophisticated car market in

the Near East.  With the projected downturn in the economy, the

Commercial Service expects that new car sales will slump and,

consequently, car age will increase from five to almost ten years

during the next few years.  With this increase in automobile

life, the market for aftermarket parts is expected to expand, and

industry sources estimate a six percent growth.      
Imports will be expected to reach $580 million in 1998, excluding

tires and tubes.  The future composition of Saudi Arabia's car

market will, to a large extent, dictate the mix of the auto parts

industry.  As more car makes and models are introduced, the Saudi

spare parts market will expand accordingly.  The market is

already very competitive, and becoming increasingly so with a

growing demand for original and quality spare parts as opposed to

counterfeit.  Moreover, local and international auto spare parts

suppliers are aggressively campaigning against fake and

counterfeit automotive parts.      
                              1997(E)   1998(E)   1999(E)

a.  Total Market Size          579       613       650

b.  Total Local Production      85        87        89

c.  Total Exports               51        54        54

d.  Total Imports              545       580       615

e.  Imports from the U.S.      145       155       165

Saudi Arabia is the largest market for medical equipment and

supplies in the Near East.  Industry sources estimated the market

at $252 million in 1996 and expected it to reach a three-year

high of $269 million in 1998, an increase of more than six

percent over 1996.  U.S. suppliers account for more than half of

all Saudi medical imports, and the U.S. share is expected to grow

at an average annual rate of three percent.      
The growing demand is linked to a rising number of private

hospitals and clinics, expansions and upgrades at various medical

facilities, and the constant need for advanced equipment.      
There are currently 285 hospitals, both general and specialized,

with a total capacity of 41,916 beds in Saudi Arabia.  Of these

hospitals, 175 are run by the Saudi Ministry of Health, 36 by

other Government agencies, and 74 are owned by the private

sector.  In addition, approximately 1,800 primary health care

centers and polyclinics are scattered Kingdomwide.

The Ministry of Health continues to convert these polyclinics

into 30-50 bed general hospitals to gradually replace existing

mobile clinics.  Approximately 45 percent of the hospitals are

located in the Western Region, while 35 and 20 percent are found

in the Central and Eastern Regions, respectively.      
                              1997(E)   1998(E)   1999(E)

a.   Total Market Size         251       265       280

b.   Total Local Production     17        18        18

c.   Total Exports               0         0         0

d.   Total Imports             234       247       262

e.   Total Imports from U.S.   140       144       154

The Saudi telecommunication market will continue to expand.  The

Government is already expanding the telecommunication network

under TEP 6 and is evaluating plans for further expansions under

TEP 7 and later TEP 8.  The cellular network is already

functional and is also being expanded.  The long-awaited

privatization of the Telecommunication Ministry has begun, and

the new company will present opportunities for both

infrastructural and consumer equipment.  The introduction of

Internet service, anticipated before the end of 1998, will

provide additional market opportunities for U.S. firms supplying

telecommunication and computer equipment and parts.  The

prospects for Saudi Arabia are encouraging and a sustained growth

in the demand for telecommunication products up to the year 2000

is likely.  Except for fiber optic cables, local manufacturing of

telecommunication equipment is non-existent.  One license,

however, is pending for the assembly of telephone sets and small

PBX units.  Another factory was awarded a $100 million contract

by Lucent Technologies to manufacture circuit boards for TEP 6.      
                              1997(E)   1998(E)   1999(E)

a.   Total Market Size          96       108       118

b.   Total Local Production      0         3         5

c.   Total Exports               0         0         0

d.   Total Imports              96       105       113

e.   Imports from The U.S.      80        89        96

Saudi Arabia is the world's largest producer of desalinated water

with 23 plants scattered along the Red Sea and the Persian Gulf.

The Kingdom produces 520 million gallons per day (MGD),

representing 30 percent of the world's desalinated water

capacity.      
The Saudi Water Conversion Corporation (SWCC) is the only

Government agency responsible for design, construction, operation

and maintenance of desalination plants.  There are other plants

that fall under the jurisdiction of the Ministry of Defense and

Aviation and the Royal Commission for Jubail and Yanbu.      
Given that water is a scarce resource, the Saudi Government

implements a "national water plan".  The Ministry of Water and

Agriculture is overseeing the plan and the Government has

allocated $4.3 billion to be able to provide water to all regions

of the Kingdom over the next 10 years.      
The Government has already spent $20 billion on desalination

projects; and in addition to the $4.3 billion, the Government

plans to spend another $3 billion to raise the Kingdom's capacity

to 1.3 billion gallons a day.      
                              1997(E)   1998(E)   1999(E)

a.   Total Market Size         340       357       375

b.   Total Local Production     67        70        73

c.   Total Exports              16        17        17

d.   Total Imports             289       304       319

e.   Total Imports from U.S.   116       121       127

Demand for electrical power is increasing at an average annual

rate of 11-12 percent.  More than $2.9 billion has already been

approved by the Ministry of Industry and Electricity for various

electricity projects up to the year 2000.  Overall power

generation capacity rose from 4,000 MW in 1977 to 22,311 MW in

1997.  A number of power projects are taking place, including the

construction of a 1200 MW power plant in Riyadh (PP9), and a 2400

MW plant in Ghazlan, while a decision on the Shuaiba plant in the

Western region is expected soon.  An additional six new major

projects are expected to be awarded in the next two years, for a

total capacity of 4480 MW.  Other expansion projects are also

under way including the Shoaiba expansion for an additional 1800

MW capacity, and the Shuqaiq expansion with an additional

capacity of 1200 MW.      
                              1997(E)   1998(E)   1999(E)

a.   Total Market Size        1082      1104      1124

b.   Total Local Production     99       104       109

c.   Total Exports              11        12        13

d.   Total Imports             994      1012      1028

e.   Imports from the U.S.     270       275       280

A number of factors help to keep Saudi Arabia a growing and

promising market for U.S. apparel manufacturers/suppliers,

namely, an above-average population growth figure of about 3.5

percent, visits to Islam's holy sites in Makkah and Medina by an

average of two to three million pilgrims every year, and two

annual religious celebrations, the "Eid Al-Fitr" at the end of

the holy month of Ramadan and the "Eid Al-Adha" at the end of the

Hajj rituals.      
A slower economy will negatively affect Saudi per capita GDP,

which is expected to fall from $7,200 in 1997 to $6,200 in 1998.

Similarly, consumer spending will be hit by lower disposable

income, and apparel sales in the mid-to-upper range will be

affected.  Apparel imports will not grow as much as they did in

previous years, a modest three percent over the next two years.

Still, the market is large.  Although the U.S. share of the Saudi

apparel market is low compared to European and Southeast Asian

suppliers, U.S. apparel exports to Saudi Arabia are expected to

grow by an average four percent annually.      
                              1997(E)   1998(E)   1999(E)

a.  Total Market Size          920       947       975

b.  Total Local Production      70        75        78

c.  Total Exports               12        13        14

d.  Total Imports              862       885       911

e.  Imports from the U.S.       79        82        85      
Urban development and industrial growth have compounded Saudi

Arabia's environmental problems.  Population growth, a

significant construction market, continuing growth of Saudi

Arabia's oil, gas and petrochemical industry, the rising level of

ground water, an insufficient sewage system, increasing air

pollution and solid waste, have all contributed toward making the

Saudi environmental technology market a promising one.      
Saudi Arabia's environmental technology market size was estimated

at $42 million in 1997, and expected to grow by an average of ten

percent annually over the next two years.      
Although it is still a small market by world standards, the Saudi

Government is actively working to implement and enforce a number

of guidelines to help reduce the levels of pollution and damage

to the environment.  Once those guidelines are implemented, the

Saudi market is expected to expand tremendously; outfitting and

refurbishing of industrial facilities alone will cost billions of

dollars.      
The best prospects include recycling systems and equipment, waste

water treatment systems, sewage systems, solid waste equipment

and systems, equipment and treatment systems for marine

pollution, air pollution control equipment and monitoring

devices.      
There is no local industry for any environmental equipment in the

Kingdom except for waste water treatment plants, membrane

manufacturing, and some solid waste compacting.      
                              1997(E)   1998(E)   1999(E)

a.  Total Market Size           42        46        50

b.  Total Local Production       5         6         7

c.  Total Exports                0         0         0

d.  Total Imports               38        40        43

e.  Imports from the U.S.       12        13        14

Manpower training requirements are expected to double over the

next two to three years as a result of the Saudiization program

being implemented by the Government.  There are an estimated four

million foreign workers, and the Government intends to replace 60

percent of these with Saudi nationals over the next several

years.  In 1996, the Saudi Government published a regulation

requiring each company with over 20 employees to include a

minimum of five percent Saudi nationals, and to increase the

number of Saudi nationals by annual increments of 5 percent.  In

addition, certain job positions may no longer be held by non-Saudis.  These rulings are now being implemented and companies

are being penalized for non-compliance.      
As companies replace trained expatriates with semi- or untrained

Saudis, they find it increasingly necessary to provide training.

The private sector, with the added problem of a high attrition

rate among Saudi employees (estimated at 70 percent, considerably

more than the 20 percent experienced in the Government sector),

is particularly hard pressed to keep up with training needs, but

has the least funds available for training purposes. An

increasing number of organizations, both Government and private,

now offer business related training courses, either in-house or

in training institutions.  The market is highly fragmented

because of an effort to cater to numerous different customer

groups.  Many ready-made training courses are not suitable for

Saudi Arabian culture and must be adapted.  Distance learning is

being explored with interest being shown in the possibilities

provided by the Internet, when this becomes available in Saudi

Arabia (expected by the end of 1998).

The marketplace is competitive and price conscious.  While no

estimates of this maturing market are currently available, the

statistics below represent a guide to potential market size.      
Estimated number of job seekers entering market during current

6th 5-Year Plan (1995-2000)              660,000

No. of SAG training institutions             87

Estimated private training institutions    260

Training centers for in-house company use  N.A.

Average annual growth of

school/university graduates             30% (1996-2000)      
Saudi Arabia produces 8.4 million barrels of crude oil per day,

and 90 percent of that is exported.  The Kingdom's state-owned

oil company, Saudi Aramco, plans to carry out the following

projects in the oil and gas sectors:      
-    Build a grassroots gas treatment plant in Hawiya; auxiliary

     facilities; sulphur recovery facilities; and utilities. The

     cost of this project is $2 billion.  The expected completion

     year is 2001.

-    Upgrade and expand Rabigh Oil Refinery.  The cost of this

     project is $1.8 billion.  The expected completion year is

     2002.      
The cost to undertake the above projects is projected at $5

billion.  U.S. companies active in the following sectors should

have good prospects in bidding on those projects:      
- Design engineering.

- Project management.

- Construction.      
Other U.S. manufacturers/suppliers of materials, equipment and

parts related to the oil and gas sectors along with service

providers will also stand a good opportunity from these projects.

Some of the needed equipment and materials will range from

tubulars, casings, valves, compressors, pumps, chemicals,

turbines, drilling rigs (onshore, offshore), to computers and

software, telecommunication equipment, industrial process

controls, fire fighting and safety equipment, refinery equipment

and parts, and storage monitoring systems, among others.      
                                             (Millions U.S.

dollars)

HS Code

Product                            1996      1997(E)   1998(E)      
7304

Iron/steel line pipe and casing     56.7      59.5      62.4

7305

Iron/steel line pipe or drill pipe  15.6      16.3      17.1

7306

Other line pipe used for oil/gas   457.5     480.3     504.3

9025

Floating instruments & parts         8.9       9.3       9.7

9026

Flow measurement instruments        56.9      59.7      62.6

9027

Gas/smoke analysis apparatus

Chromatographs & electrophoresis

instruments                         21.5      22.5      23.6

8413

Liquid pumps & parts               145.9     153.1     160.7

8411

Gas turbines & parts               205.3     215.5     226.2      
(Note: The above figures, except for HS 7305 and 7306, are import

figures which cover a number of sectors including the oil and gas

sectors.)      
Commercial Service Saudi Arabia estimates a five percent annual

growth for oil and gas equipment and materials in 1998 and 1999.

The demand for oil and gas products and services fluctuates

yearly with the world price of oil; however, operation and

maintenance of facilities require ongoing parts and materials

plus services.

Saudi Arabia is the region's dominant producer of petrochemicals.

The Saudi Basic Industries Corporation (SABIC), the largest

Government parastatal company, is one of the largest

petrochemical companies in the world.  SABIC is already

undertaking its third major expansion program, which will

increase its total output to 28 million tons a year by 2000.  The

company produces basic petrochemicals such as methanol, ethylene,

propylene, butane, benzene, butadiene and xylene. Toluene will be

produced in the year 2000.      
Capacity at SABIC's plants increased four percent in 1996 to

about 23 million metric tons.  Its latest annual report revealed

that close to 74 percent of its capacity was exported as follows:

petrochemicals and chemicals (49 percent), fertilizers (16

percent), plastics (13 percent), industrial gases (5 percent) and

polyester (1 percent).      
List of Planned Expansion Projects at SABIC Facilities as of

December 1996:      
Name of Company               Product   Expansion Completion Year

                                        (1000 M.T.)      
National Industrial Gases     Oxygen         438       1999

                              Nitrogen       500       1999

Saudi Arabian Fertilizer      Ammonia        500       1999

                              Urea           600       1999

Eastern Petrochemical Co.     Ethylene glycol 500      2000

                              LLDP           300       2000

National Chem. Fert. Co.      Sulfuric acid  887       2000

                              Phosphoric acid 265      2000

                              Aluminum fluoride 16     2000

Saudi-Yanbu Petrochemical Co. Ethylene       800       2000

                              Propylene      250       2000

                              Polypropylene  260       2000

                              PE             535       2000

                              Ethylene glycol 410      2000

Arabian Petrochemical Co.     Ethylene       800       2000

                              Propylene      275       2000

Saudi-European Petrochem. Co. Polypropylene  200       2000      
In the private sector, Saudi companies are also moving forward

with a number of projects to manufacture solvents, butadiene,

formaldehyde, polystyrene materials, polyester and epoxy resins,

latex and titanium dioxide.  The Saudi private sector has

undertaken additional projects to produce propylene,

polypropylene, para-xylene, soda ash, linear alkyl benzene (LAB)

and maleic anhydride.  Industry sources estimate total investment

of the Saudi private sector in petrochemical industries to reach

$2 billion.      
Despite the high charges of U.S. visas for Saudi Arabian

applicants ($245), travel to the United States has increased

substantially in recent years.  In order of priority, Saudis

travel to the United States principally for tourism, business,

education and medical treatment purposes.  The market potential

for travel and tourism services, including sales of organized

tour service to new destinations in the U.S., is promising.      
A combination of relatively high disposable income, a long summer

break coupled by hot and harsh climate, and a well developed

international travel infrastructure, all help to make Saudi

Arabia a good market for reverse travel to the United States.

Moreover, the U.S. Government is hopeful that Saudi authorities

will soon agree to issuance of multi-year, multiple-entry visas

on a reciprocal basis.      
                                   1997(E)   1998(E)   1999(E)

a.  Spending on Foreign Vacations   220       246       275

b.  Spending on Domestic Vacations   60        72        86

c.  Total Spending                  280       318       361

No concrete data are available on the size of the Saudi

franchising market. The Saudi franchise market still presents

good potential for U.S. companies and is virtually untapped in

many sectors, especially non-food.  Recently, a number of

boutique-type retail outlets have emerged in Saudi Arabia which

specialize in particular brands.  This "franchise" type of

selling appears to be a good model for other American

manufacturers wishing to establish a presence in the market.  The

"branded" apparel boutiques are mushrooming, especially for

French and Italian designers.      
Non-food franchises account for 55 to 60 percent of the total

Saudi franchise market with total sales estimated at $274 million

in 1997.  That sector is expected to grow between 9-10 percent

annually over the next two years.  Best opportunities exist for

business services, telecommunications, automotive products and

services, printing and graphic design, mail and packaging,

courier services, hotels and motels.      
                                   1997(E)   1998(E)   1999(E)

a.   Total Sales                    214       231       249

b.   Sales by Local Outlets          60        69        75

c.   Sales by Local Outlets          60        69        75

d.   Sales by foreign outlets       214       231       249

e.   Sales by U.S. outlets          150       161       174

Best Prospects for Agricultural Products

Livestock and poultry farming are growing steadily in Saudi

Arabia.  The two largest poultry producers, Al Watania and Al

Fakieh, completed expansion projects in 1996, causing broiler

output to jump 30 percent. As a result, U.S. corn exports to

Saudi Arabia rose 25 percent in value from 1996 to 1998.  The

United States accounts for nearly 95 percent of imported corn,

and the market is expected to increase as small to medium size

farms also increase production.  Despite the increase in output,

Saudi Arabia remains a significant importer of frozen broilers;

hence there remains much room for expansion.      
                                   1997(E)   1998(E)   1999(E)

a.   Total Market Size               260      270       281

b.   Total Local Production            9        5         5

c.   Total Exports                     0        0         0

d.   Total Imports                   251      265       276

e.   Imports from the U.S.           239      251       261

Soybean meal is used principally in poultry output and to a

lesser extent in livestock rations,  The recent increase in local

poultry production resulted in a 30 percent increase in the value

of soybean meal imports by the Kingdom in 1998 compared to two

years earlier.  With nearly 85 percent market share, the United

States is the dominant supplier of soybean meal to Saudi Arabia,

followed by India.  As with corn, U.S. exports of soybean meal

will continue to increase as small to medium size poultry

producers expand production.      
                                   1997(E)   1998(E)   1999(E)

a.   Total Market Size              180       187       190

b.   Total Local Production           0         0         0

c.   Total Exports                    0         0         0

d.   Total Imports                  180       175       176

e.   Imports from the U.S.          153       159       162

The market for rice in Saudi Arabia is large and growing.  The

country relies on imports to cover all of its needs for this

product.  Though the United States is a major player in the rice

market, competition is stiff.  India is the dominant force in

this market with about 60 percent market share followed by the

United States with about 20 percent.  Indian rice competes

aggressively with U.S. rice both on price and promotional

activities.  Other competitors include Pakistan, Thailand and

Australia.      
The Saudi population is growing at 3.4 percent a year and more

than 80 percent of Saudi and most of the expatriates in the

Kingdom consume rice daily.  Recently,  major Saudi rice

importers  started importing bulk rice and bagging them for re-export to nearby African and Arab countries.  U.S. rice is

shipped in bulk to a modern packing plant in Jeddah and a

percentage is transhipped as well.  There are opportunities for

the United States to regain market share, but U.S. exporters must

be price competitive and aggressive.      
                                   1997(E)   1998(E)   1999(E)

a.   Total Market Size              350       364       379

b.   Total Local Production           0         0         0

c.   Total Exports                    0         0         0

d.   Total Imports                  370       385       404

e.   Imports from the U.S.           67        68        70

The demand for processed fruits and vegetables in Saudi Arabia is

substantial.  The growth of supermarket food sales is helping to

broaden the market, and good market growth is expected to

continue.  Local production of canned fruit and vegetables has

increased over the past five years; however, insufficient local

fruit and vegetable output and the high costs related to

importing them for use in local processing suggest that a

significant demand for processed fruits and vegetables will

continue to be met by imports.  About 60 percent of the local

production reported in this section is for dates which are

locally produced and processed.      
                                   1997(E)   1998(E)   1999(E)

a. Total Market Size                335       348        362

b. Total Local Production           210       230        251

c. Total Exports                      5         6          7

d. Total Imports                    125       118        111

e. Total Imports from U.S.           25        25         24

The last official census indicated that more than 60 percent of

the Saudi population is in its teens, and as a group is a heavy

user of snack foods.  Local production has dramatically increased

in recent years.  Leading organizations have realized the market

potential for snacks and have launched massive production units.

There is a general decline in imports of corn and wheat-based

snacks.  Candies and chocolates are also being manufactured on a

large scale.  However, scopes for quality branded chocolates and

snacks still exist.  Exporters may also look into supplying  raw

materials for the fast growing snack industry.  The United States

has a strong positive image in the market, since U.S. products

are associated with quality.  Products focusing on Saudi trade

preferences, which tend to favor sweeter items, generally find

better market reception.      
                                   1997(E)   1998(E)   1999(E)

a. Total Market Size                110       114       119

b. Total Local Production            65        70        75

c. Total Exports                     10        12        13

d. Total Imports                     45        44        44

e. Total Imports from U.S.           20        19        18

The United States has been the market leader in this sector.

However, Kellogs (Germany) and other breakfast cereals from

Europe have brought down U.S. market share significantly.

However, the demand for breakfast cereals is on the rise.      
Promotion and advertising efforts are particularly important to

acquaint potential consumers with these non-traditional products

in order to gain wider consumer acceptance.      
                                   1996(E)   1997(E)   1998(E)

a. Total Market Size                 37        38        40

b. Total Local Production             4         5         6

c. Total Exports                      0         0         0

d. Total Imports                     31        33        34

e. Total Imports from U.S.           15        17        18      
Major Investment Opportunities

The economic slowdown in 1998 will highlight the need for and the

challenge of economic reforms the Saudi Government is pursuing.

The Saudi Government is promoting further expansion of the

private sector in hopes that it will create jobs for the large

number of young Saudis.  Moreover, the Government is taking a

number of needed steps to promote diversification and

competitiveness, including pursuing accession to the World Trade

Organization, revising its foreign investment regime, and taking

initial steps toward privatization of telecommunications,

electric power generation, and civil aviation.      
The 1998 budget is relatively austere, slowing the rate of growth

in all major categories of expenditure.  Already, the Government

has sought to reduce spending levels and is taking steps aimed at

keeping the deficit from growing dramatically.  Major impacts

will be felt across the economy, particularly among those

companies that depend heavily on business with the Saudi

Government.      
Nevertheless, a number of sectors will exhibit good growth

potential in the years ahead, namely:      
Petrochemicals: Petrochemicals account for 42 percent of Saudi

Arabia's non-oil exports, and the Saudi Basic Industries

Corporation (SABIC) remains the backbone of the Saudi

petrochemical industry.  The company has achieved considerable

growth and currently exports to more than 75 countries.  SABIC

operates mainly through joint venture partnerships with

international companies.      
The company is currently implementing an ambitious expansion

program which will increase its annual production capacity to 28

million metric tons by the year 2000.  In addition, by the year

2002, SABIC will have three world-scale ethylene crackers on

stream.  Nine SABIC ventures are undergoing expansions.

Investment opportunities in those projects will be in billions of

U.S. dollars.      
Saudi private sector petrochemical plants produce solvents,

butadiene, formaldehyde, polystyrene materials, polyester and

epoxy resins, latex and titanium dioxide.  The Saudi private

sector has undertaken additional projects to produce propylene,

polypropylene, p-xylene, soda ash, linear alkyl benzene (LAB) and

maleic anhydride.  The total investment of the Saudi private

sector companies in planned petrochemical projects will be around

$2 billion.      
Mining:  Saudi Arabia has substantial commercial deposits of

minerals, including 20 million tons of gold, 60 million tons of

copper, 10 billion tons of phosphate, and millions of tons of

various other minerals.  As part of the Saudi Government's policy

to prioritize the development of non-oil resources, the Ministry

of Petroleum and Mineral Resources is actively seeking foreign

investors to establish mining joint-ventures in the mineral

sector.  New investment opportunities are continuously being

created by the completion of feasibility studies regarding the

mining of precious and base metals, as well as industrial

minerals.  To attract investors to these projects, the Saudi

Government provides incentives, such as a tax exemption for five

to 10 years and a 30 year extraction concession.      
In April 1997, through the issuance of a royal decree, Saudi

Arabia established the state-owned Saudi Arabian Mining Company,

Ma'aden (Arabic for minerals).  The company was established to

organize the Saudi mining sector, promote its development, and

consolidate all mining projects in which the Saudi Government is

involved.  Ma'aden would operate under the same mining code

applied to all companies seeking concession rights in Saudi

Arabia and the company would not have monopoly rights over all

mining areas in the Kingdom.  Although Ma'aden would not release

gold concessions to foreign mining interests, there would be no

similar restrictions on other mining deposits.  Once the company

turns a profit, shares in it will be floated for public

subscription.  Since its inception, the Saudi Government has

begun to issue a series of tenders for a range of mining

concessions.  A tender for bauxite has just been released, with

others for copper and silica sands expected shortly.  The

potentially most important concession, for phosphates, despite

expectations to the contrary, has still not been released for

tender.  The mining sector is expected to grow at an average

annual growth of nine percent up to the year 2000.      
Insurance:  Saudi Arabia is the largest insurance market in the

Arab world.  Estimated at $2 billion, the Kingdom's insurance

market is bound for more growth. The Government diversification

and industrialization program will open new avenues in both

personal and commercial insurance, especially against fire and

theft.  Medical and automotive insurance premiums now account for

60 percent of the business.  That sector of the insurance market

is expected to grow tremendously as soon as the Government enacts

mandatory medical insurance for private sector employees.

Foreign involvement in this sector is complicated by the absence

of a formal regulatory structure.  The Saudi Arabian Monetary

Agency is currently reviewing proposed business structures case

by case.  At present, a Government-owned insurance cooperative is

the only entity legally authorized to sell insurance products.      

 

 

 

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