Economic overview
Saudi Arabia sits on an estimated 16% of the world’s proven petroleum reserves and exports more oil than any other country. The petroleum sector accounts for roughly 80% of budget revenues, 45% of gross domestic product and 90% of export earnings, according to reporting by U.S. business magazine Forbes. The Saudi government directs economic activity and is encouraging private-sector investment and growth in petrochemicals, telecommunications and other sectors. The aim is to diversify the economy, create job opportunities for Saudi nationals, reduce dependency on millions of foreign workers and attract international investment. According to reports by the BBC and the Associated Press, Saudi Arabia’s investment in education and infrastructure projects has continued despite a sharp drop in oil prices. As a result, Saudi Arabia this year could experience its first budget shortfall since 2011. But it has plenty of cushion in its estimated US$750 billion reserves. GDP grew 3.6% in 2013.
Business travel industry insight
The oil-rich country draws business travelers from all over the world who come to work and invest. Visitors will find modern, well-developed infrastructure and facilities for travelers, especially in the capital Riyadh. Foreign business travelers and workers are expected to abide by conservative Muslim traditions. Business attire for Western men is a dark suit and tie. Western women should wear a long, loose-fitting dress that covers arms and ankles for women; a headscarf is optional. The U.S. State Department has issued warnings for travelers, particularly those headed to provinces along the Saudi border where attacks on foreigners have increased over the past several months.
Opportunities
- The government, which acceded to the World Trade Organization in 2005, is establishing six “economic cities” to promote foreign investment around the country and strengthen the private sector.
- Saudi Arabia has substantially boosted spending on job training and education, including the opening of the King Abdallah University of Science and Technology — the country’s first co-educational university.
- To increase access to foreign capital, the government last year announced plans to open the Saudi stock exchange to direct investment by foreigners.
Challenges
- Unemployment among Saudi nationals is about 10%. The country’s young adults are most affected by the lack of job opportunities; many lack the education and technical skills being sought by private sector companies.
- The climate for private-sector growth worsened during the oil boom of recent years, according to a World Bank global comparison report. Over five years, Saudi Arabia dropped from No. 13 to No. 49 for ease of doing business as measured in the report. The World Bank cited problems with resolving insolvency, starting a business and enforcing contracts.
- Direct foreign investment inflows to Saudi Arabia dipped from $39.5 billion in 2008 to $9.2 billion in 2013, according to the World Investment Report released in 2014 by the United Nations Conference on Trade and Development. The report attributed “persistent tensions in the region” and increased investment in North American shale oil as reasons for the decline.
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