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SAUDI ARABIA
MG. Jairo Camilo Zamora Escobar – 4A – International Economy- Universidad Santo
Tomas, Sede Villavicencio
Villavicencio, Colombia
Abstract
The purpose of the article is to make known the profile of the country, to know things as simple
as the name, the currency, the economy, which include the following aspects: products or services
that import and export in the country.
Understanding why Saudi Arabia has become one of the most economically successful countries
in recent years, becoming the largest economy in the Middle East and the richest Arab country.
One of its main economic activities is the extraction of oil.
Introduction
The article focuses on the Asian country Saudi Arabia, a country located in the Arabian Peninsula
with a form of government of absolute monarchy, we will deal in depth with very specific issues
such as its economy, investigating its macroeconomic indicators, current situation and future
projections in order to provide the greatest possible clarity in the country's profile, will deal with
points related to the main economic activities, exports and imports; Once these aspects of the
country are completed, there will be space to deal with its current situation and the main sectors
that contribute to the GDP, in this point we will discuss the percentage of participation of each
sector and on which each one is based, we will also deal with everything related to the
international, such as its main commercial partners, later the future projections will be announced.
Finally, the conclusions of the data, figures, drawings, concepts that were included in the body of
the essay will be given.
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
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1. Saudi Arabia Economy
Saudi Arabia's economy is mainly based on oil and the government controls most of the
economic activities in the country. The government is encouraging citizens to invest in the
private sector to reduce excessive dependence on oil industries and to diversify the
economy, while creating employment opportunities, since in 2018 their unemployment rate
increased to 12.9 % Although foreigners are concentrated in the oil and gas fields, about
two million Saudi citizens are unemployed despite the fact that the country has large cash
reserves. Saudi Arabia uses Saudi Riyal as its currency and about 80% of the workforce is
foreign. The country generates estimated revenues of $ 162 billion against $ 260 billion of
expenses that lead to the accounting of the debt of 9% of GDP.
Saudi Arabia has faced an open market economy with very few restrictions on goods and
services, except those that are in conflict with religion (For example: alcoholic products
for consumption and pork derivatives). Imports come from almost all over the world while
exports flow to the most industrialized and developed nations. Its main clients are the USA,
the European Union, the Far East. And China will be the biggest buyer in the imminent
future.
Saudi Arabia has also experienced a growth in its capital market and a boom in the real
estate sector, coupled with Initial Public Offers and privatization opportunities.
Financial markets
Today, Saudi financial markets - and the banking industry in particular are among the
strongest in the Middle East and, as a group, are one of the most financially profitable in
the world, with high capitalization above the required levels. internationally and a welldiversified range of financial services to clearly defined market segments.
Islamic finance has become more important, and both Islamic and non-Islamic banks have
entered this market segment to finance large-scale projects.
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
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Private sector
Foreign participation is important for the Kingdom's economy. Saudi Arabia uses a variety
of methods to obtain a technology transfer and training of its local staff through foreign
companies.
The relationship between government and the private sector and its evolution in areas of
planning, finance, regulation and revenue collection is being examined, as is the
importance of the government's role as a buyer and seller in the private sector.
Despite the boom in this economy, there are factors that have become inconvenient within
growth; as is the lack of prepared labor against the technological advance of the country,
which is why they are obliged to import labor, this is due to the few resources that are
destined for public spending by the government, which makes this country have a lack of
social development. In turn, the economy is stagnant and a large part of the population
continues to maintain them in poverty, according to IMF reports, 50% of its inhabitants
remain mired in poverty, also due to the poor distribution of wealth, where only few Saudis
accumulate most of the wealth of the richest Arab country.
1.1 Major economic activities
Illustration 1.Major economic activities vs GDP
FUENTE: TAKE FROM PORTAL SANTANDER TRADE
The three economic activities attributed to GDP are:
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
4
The agriculture that represents 2.54% of the GDP is a low percentage since this country has a
generally desert climate and this leads to not having enough water for agricultural production,
which are forced to import to supply their demand.
The industry represents 45.4% of GDP and has the largest oil reserves and added to this is a large
producer and exporter in the world. As Fanack (2019) tell us:
The manufacturing sector has expanded widely since the mid-1970s, when the Saudi
Industrial
Development
Fund (SIDF, 1974) and the Saudi
Basic
Industries
Corporation (SABIC, 1976) were established by the government in order to develop
high-value industrial activities outside the upstream petroleum sector and thus
diversify the economy. SIDF provides preferential loans for new industrial
development and the modernization of existing development and provides technical
assistance to Saudi industry. (pág. 1)
The Services represent 52.5% of GDP and this sector generates large revenues thanks to
religious tourism. As Fanack (2019) says:
The annual Hajj brings about 2.5 million people to Mecca, and the total number of
religious tourists to the Mecca and Medina region each year is about 12 million. As
the pilgrimage is a religious obligation for observant Muslims with the financial
means, the potential for growth is enormous, and the Saudi government has made
investments in infrastructure and hotels (notably the Haramain High Speed Rail
Project and the USD 3 billion Abraj al-Bait Towers complex) to accommodate the
growing number of pilgrims. In 2010, total revenue from tourism was USD 17.6
billion, nearly all of which was from religious tourism. (pág. 1)
1.2 Major exporting products
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
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Saudi Arabia is mainly focused on exporting fuels and organic chemicals, a clear example of this
is the crude oil that June by 2019 accounted for 77.9% of its exports. In the following illustration
the main non-oil exports of the country are mentioned:
Illustration 2.Main exported products 2019
FUENTE: TAKE FROM STATS FILES MERCHANDISE
The illustration contains products that are not related to oil because it is more relevant and
interesting information, year after year the country’s export rates are mainly based on products
extracted from oil and its derivatives, now it is time to cover other types of products that are not
so recognized in the country. As Workman (2019) says:
From the more granular four-digit Harmonized Tariff System code level, crude oil represents
Saudi Arabia ’s most valuable exported product at an estimated 68.4% of the country’s total.
In second place were processed petroleum oils (9.8%) trailed by ethylene polymers (4.9%),
acyclic alcohols (3%), petroleum gases (2.1%), propylene or olefin polymers (also 2.1%),
cyclic hydrocarbons (1.2%), polyacetal or ether carbonates (0.6%), ethers (also 0.6%) then
fertilizer
mixes:
(0.5%).
(pág.
1)
Due to the low variety of main products that the country exports, it does not have many destinations
or export partners, but among its main destinations are important countries in the world economy,
as described in the following illustration:
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
6
Illustration 3. Main export destinations
DESTINATIONS
VALUE
United Arab Emirates
2,758
China
2,579
Singapore
1,2
India
1,144
Turkey
802
FUENTE: TAKE FROM STATS FILES MERCHANDISE
1.3 Major exporting services
There really isn't much specific data or relevant information regarding service exports, as WITS
(2016) says:
Saudi Arabia had a total export of 207,572,139.90 in thousands of US$ and total imports of
129,795,970.53 in thousands of US$ leading to a positive trade balance of 77,776,169.37 in
thousands of US$ The trade growth is -5.41% compared to a world growth of 1.59%. GDP of Saudi Arabia is 686,738,400,000 in current US$. Saudi Arabia services
export is 18,020,787,306.67 in BoP, current US$ and services import is 76,817,869,330.63
in Bop, current US$. Saudi Arabia exports of goods and services as percentage of GDP is
34.84% and imports of goods and services as percentage of GDP is 28.56%. (pág. 1).
1.4 Major importing products
Saudi Arabia stands out in terms of importing products in the agricultural sector. Export.gov
(2019) affirms: “The latest available U.N. trade data show Saudi Arabia imported USD 14.8 billion
of agricultural and related products in 2016, a decline of approximately 23 percent from imports
in 2015” (pág. 1). The percentage that has decreased from one year to another responds basically
to the decrease in grain prices and the decrease in imports of meat and dairy products. Despite
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
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these reductions in terms of importation. As Export.gov (2019) says: “food products are generally
viewed as meeting higher quality standards compared to those produced locally or imported from
other countries” (pág. 1). The high standards have generated an increase in the demand for these
commodities by United States.
Imported $ 96.2 billion, resulting in a positive trade balance of $ 74.2 billion. Among its
outstanding products in importation are petroleum products, medicines, cars and radio telephone
emitting devices. The main origins of its imports are China ($ 18.3 billion), the United States ($
7.66 billion), Germany ($ 7.19 billion), South Korea ($ 5.15 billion) and France ($ 5, 05 Billion).
1.5 Major importing services
The tertiary sector (services) offers a slightly higher percentage of 50% of Saudi Arabia's imports.
As WITS (2016) says: “services import is 76,817,869,330.63 in Bop, current US$” (pág. 1). which
means that it has a high representation in the market, in addition to generating employment of labor
in percentages greater than 70%. Among the most prominent or representative services sectors in
exports is construction, transportation, tourism, energy, etc.
FUTURE PLANS
Saudi Arabia's plan to develop its economy over the next decade and beyond is to strengthen the
contribution of women to society and the economy.
The Saudi economy will provide opportunities for all (men and women, young and old) with the
objective that they can contribute to the maximum of their capabilities.
Saudi women are also another great asset. Being 50% of female university graduates, they will
continue to develop their talents, investing in their production capacities and giving them the
possibility of consolidating their future and contributing to the development of society and its
economy.
Women now account for 30% of the total Saudi workforce in the private sector within the retail,
hospital and construction sectors. The first two sectors in particular have been the focus of the
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
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main governmental campaigns of Saudization and feminization, designed with the objective of
promoting the incorporation of women into the world of work.
By providing women with more freedom and more opportunity to contribute financially, Saudi
Arabia is taking strategic and proactive action to meet two of its main objectives included in the
Vision 2030 program: first, lower the unemployment rate of the country from 12.9% to 7%; and
secondly, increase the participation of women in employment up to 30% by 2030.
Saudi Arabia also plans to launch six economic cities to create more employment opportunities
and diversify the economy.
CONCLUSION
Another major challenge for Saudi Arabia is volatile oil prices that are subject to a combination of
multiple factors, favorable or unfavorable, another important factor is that the global economy
presents a wide variety of risks, being the most important for Saudi Arabia the dislocation of the
US economy since a recession in this country would influence oil prices and could generate a
recession in Saudi Arabia.
On the other hand, Saudi Arabia has an extreme dependence on a non-renewable natural resource
that constitutes 90% of its total exports, which means that this source of wealth will only bear fruit
in the short and medium term. Consequently, other sources of income should be sought, preventing
the collapse that could occur when oil runs out while no new reserves are discovered, threatening
the stability of the economy. The lack of freedom and the slow social and economic development
have taken a large number of citizens out of employment in the main industries. Slow growth is
also attributed to poor education, lack of opportunities for women and biased selection of skilled
workers.
2. Bibliografía
Export.gov. (24 de 06 de 2019). Saudi Arabia-Market overview. Obtenido de Export.gov:
https://www.export.gov/article?id=Saudi-Arabia-Market-Overview
FANACK.COM. (2 de 09 de 2019). Economy of Saudi Arabia. FANACK.COM, pág. 1.
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
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FANACK.COM. (2 de 09 de 2019). Economy of Saudi Arabia. Obtenido de Economy of Saudi
Arabia: https://fanack.com/saudi-arabia/economy/
OANDA. (2019). Saudi Riyal. OANDA , 1.
Ochsenwald, H. S. (31 de 08 de 2019). ENCYCLOPAEDIA BRITANNICA. Obtenido de
ENCYCLOPAEDIA BRITANNICA: https://www.britannica.com/place/Saudi-Arabia
Laura Marcela Urrego Rengifo – International Business Student – Universidad Santo Tomás –
[email protected] – Villavicencio, Meta – No. 1121962629 – April 16, 1999
International Economy 4ª - 2019
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