Saudi economy wins accolades
The liberal measures encompassing foreign investment that were enacted in April 2000 encouraged foreign firms to own majority stakes in companies within the kingdom. it also helped saudi arabia’s accession to the wto in december, 2005 by Dr Jasim Husain Ali

Saudi Arabia has reasons to celebrate economic achievements on regional and international levels. Two global reports issued by the United Nations Conference on Trade and Development (UNCTAD) and the World Bank awarded Saudi economy the best points amongst Gulf Cooperation Council (GCC) and the Middle East and North Africa (MENA) at large. Also, the kingdom’s own statistics point out to outstanding budgetary results and economic activities.

Growing inward investments
According to World Investment Report 2009, issued by Unctad, inward foreign direct investments (FDI) into Saudi Arabia amounted to $38.2bn in 2008. This translates into an increase of $13.8bn or a growth rate of 36 per cent in a single year.

Much to its credit, Saudi Arabia stands out in the region when it comes to attracting FDI. The figure of $38.2bn represents 42 per cent of total FDI attracted by West Asian countries, which include GCC states, Turkey and Iran. The other top regional recipients, namely Turkey and the UAE attracted FDI worth $18.2bn and $13.7bn, respectively. To be sure, the size of FDI has increased substantially over the last few years, amounting to $24.3bn in 2007, $18.3bn in 2006 and $12bn in 2005. Conversely, inbound FDI averaged merely $245mn for the period spanning 1990 to 2000.

Welcome FDI
The extraordinary progress partly reflects sustained economic reforms, which were strengthened by the official drive to join the World Trade Organisation (WTO). Saudi Arabia acceded to WTO in December 2005 following a decade-long protracted negotiation. In particular, credit must be extended to liberal measures encompassing foreign investment law (FIL) that was enacted in April 2000. The FIL grants foreign firms the right to own majority stakes in companies within the kingdom. The law also allows foreign banks to operate in the form of locally incorporated joint stock companies or as branches of international financial institutions. In addition, Saudi Arabian General Investment Authority (Sagia), which looks after foreign investments, has put in place a one-stop-shop application process. Also, Sagia offers a 30-day deadline for decisions on investment applications.

Doing business
Such practices partly explain the outstanding result that Saudi Arabia achieved in World Bank’s Doing Business 2010 report. The report ranks Saudi Arabia at number 13 amongst 183 economies, the best within the entire Mena region. In fact, the report ranks Saudi Arabia as the best country in the world on the variable of registration of property. Clearly, this reflects ease of registration process. However, the report notes that Saudi Arabia has difficulty with regards to enforcing contracts, ranked as 140 globally. Certainly, Saudi authorities must overcome enforcement of contracts problem in order to send a positive signal to prospective investors.

GDP growth
In addition, the kingdom’s gross domestic product (GDP) grew by a hefty 22 per cent in 2008 in current terms on the back of exceptional rise of oil prices in the first seven months of the year. GDP at current prices or market exchange rate include effects of oil price rise but exclude inflationary pressures. Oil price had reached a record $147 per barrel in July 2008. The petroleum sector, which includes crude oil and processing plus gas, is uniquely significant in the Saudi economy by virtue of comprising three quarters of exports, two thirds of treasury revenues and more than one third of the GDP. To be sure, Saudi Arabia is largest oil exporter in the world followed by Russia. One such negative point here is that Saudi economy is over-dependent on the petroleum sector.

According to figures released by Saudi Arabia Monetary Agency (Sama), the country’s GDP reached a record $468bn in 2008, undoubtedly the largest in the Arab world. However, estimates by the Economist Intelligence Unit put the GDP in purchasing power parity rates at $591bn. In short, Saudi Arabia’s GDP is second to none in the Arab world.

Budgetary surplus
Still, there are other extraordinary economic results. Saudi Arabia’s budget posted a record surplus in 2008. Actual revenues increased by a hefty 144 per cent from $120bn to $293bn. Also, real total expenditures rose by nearly 25 per cent to $136bn. As a result, the kingdom posted a record $157bn surplus. In retrospect, Saudi Arabia registered surplus of $47bn in 2007 and $71bn in 2006, regarded the highest at the time. For good reasons, Saudi authorities made proper use of the surplus to reduce outstanding debt to 14 per cent of the GDP, down from 19 per cent in 2007. Often times, debts limit economic freedom of nations. In addition, the year 2008 produced other outstanding results notably that of per capita income rising by 19 per cent to $18,847. Still, the EIU put per capita income on PPP basis at $23,692. Nevertheless, Saudi Arabia has a long way to go to attain per capita on par with Qatar, a fellow GCC member state. EIU estimates put Qatar’s per capita income in 2008 at $67,348 in market prices but $58,635 in market and PPP basis, reflecting inflationary pressures.

Addressing unemployment
Yet, the authorities are expected to capitalise on the outstanding economic results notably budgetary surplus to address a pressing problem, namely unemployment. Total jobless figure stands around 11 per cent. By one account, unemployment rate is close to 25 per cent amongst females.

Undoubtedly, the government cannot overlook the unemployment problem amongst locals not least due to critical demographics. Some 38 per cent of Saudis are below the age of 14 and thus many youths would enter the job market in the years to come looking for suitable employment opportunities. The challenge relates to ensuring availability of job opportunities that meet the expectations of locals notably females with regards to working conditions and remunerations. Saudi authorities need right economic choices in order to address outstanding challenges.