1 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 2 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 3 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 5 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 7 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 8 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 9 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
