With a population of around 27 million, of which around 5.5 million are expatriates, and nearly 20 per cent of the world’s conventional oil reserves, Saudi Arabia is the Middle East’s largest economy. While the private, non-oil sector’s contribution to GDP has increased over the past decade, oil and oil derivatives still account for around 90 per cent of Saudi export earnings and budget revenues, and about 45 per cent of GDP. Ambitious plans for further investment in the development of the petrochemicals, oil refining, phosphates and gas sectors could further increase the percentage of oil and oil derivatives in export revenues. Saudi Arabia’s economy weathered global economic turmoil better than most countries, maintaining GDP growth throughout recent years. The growing economy has been matched by an increase in demand for imports, driven largely by massive construction projects. In March 2007, the opening of new sectors to foreign investment including insurance services, wholesale/retail trade, communications services and air/rail transport services, was announced. The Government, through the public sector, plays a major role in the Kingdom’s industrial activity; however in recent years, the private sector has, with the Government’s encouragement under the national system of free enterprise, become increasingly involved in and responsible for industrial development and diversification. As to ranking among the world, Saudi Arabia is the first in oil production and reserves, fifth in natural gas reserves, ninth in natural gas production.


The Saudi Arabian Oil Company, or Saudi Aramco, is the world’s largest oil producing company. Set up by Royal Decree in 1988. Saudi Aramco has its headquarters in Dhahran, on Saudi Arabia’s east coast. The company controls almost all of the Kingdom’s vast hydrocarbon enterprises. Saudi Aramco’s mission, as an integrated international oil company, is to engage in all activities related to the oil industry on a commercial basis and for profit. Saudi Arabia exports more crude oil and natural gas liquids (NGL) than any other country, almost all of it through Saudi Aramco facilities on the Arabian Gulf and Red Sea coasts. The government also established Petromin as the State Petroleum Company in 1962 (1381/82 AH). Petromin’s role was to maximize the usefulness of Saudi oil, gas and minerals. It was thus engaged in the production of natural resources (including, for example, the engagement of foreign partners), in the exploitation of natural resources (such as the evolution of a wide range of hydrocarbon products, like petroleum, LPG and asphalt), and in the marketing, both domestically and internationally, of these products. Its range of activity was therefore vast. Refining, pipelines, storage, and power generation – all fell within Petromin’s province.


Industry in Saudi Arabia is related to oil and natural gas: refining and petro chemistry. The most important industrial products are: cement, tar, steel rods, ethylene, fodder, ethylene glycol, industrial ethanol, Deklo’rour ethylene, Alstaarin, caustic soda, nitrogen, citric acid, oxygen, melamine, and there is also a sea water desalination and the food industry. Along with that, Saudi Arabia is currently witnessing a significant growth in agro-industries – food and consumer goods industry, which is based on private capitals.

Industrial Development

A key element in the Saudi Arabian government’s economic strategy is industrial diversification, a process which has as its primary objective the reduction of the dependency on oil revenues. To this end, the government has encouraged the development of a wide range of manufacturing industries. The government has provided a range of incentives to encourage the private sector to participate in the national industrial effort. Eight industrial estates provide private Saudi manufacturing companies with the necessary infrastructure and services at a very low cost. Credit facilities on generous terms are readily available for such enterprises. Saudi Arabia has adopted a free market economic model. The financial, industrial and trade sectors of the economy have made rapid progress, enabling the private sector to play an increasingly important role in the development and diversification of the economy, especially in the fields of construction and farming. The Ministry of Economy and Planning formulates economic and social development plans that set long-term economic goals. Additional sectors of the economy are overseen by individual ministries, such as agriculture, energy, transportation, communications and finance. The private sector is playing an increasingly larger role in the Saudi economy – it now accounts for 48 percent of the gross domestic product (GDP). The sector is expected to continue growing, especially as Saudi Arabia opens its doors further to foreign investment.


Saudi Arabia’s agricultural development over the last three decades has been astonishing. Large areas of desert have been turned into agricultural fields – a major accomplishment in a country that receives an average of about four inches of rain a year, one of the lowest rates in the world. Today, Saudi Arabia exports wheat, dates, dairy products, eggs, fish, poultry, fruits, vegetables and flowers to markets around the world. Dates, once a staple of the Saudi diet, are now mainly grown for global humanitarian aid. The Ministry of Agriculture is primarily responsible for agricultural policy. Other government agencies include the Saudi Arabian Agricultural Bank (SAAB), which disburses subsidies and grants interest-free loans; and the Grain Silos and Flourmills Organization, which purchases and stores wheat, constructs flourmills, and produces animal feed. The government also offers land distribution and reclamation programs and funds research projects. The private sector has played a major role in the Kingdom’s agricultural development. This is mostly due to government programs that offered long term, interest-free loans, technical and support services, and incentives such as free seeds and fertilizers, low-cost water, fuel and electricity, and duty-free imports of raw materials and machinery.

Global Trade

Saudi Arabia’s free market economy has undergone remarkable changes in a relatively short period of time. It has evolved from a basic agricultural society into a regional and global economic power with a modern infrastructure. Petroleum is an integral part of the Saudi economy; Saudi Arabia is the world’s largest producer and exporter of oil. In recent decades the Saudi Arabia has increasingly diversified its economy, and today produces and exports a variety of industrial goods all over the globe. In December 2005, Saudi Arabia joined the World Trade Organization (WTO), a significant development that gives Saudi products greater access to global markets, creates jobs and encourages foreign investment.


The development and industrial growth to the Saudi Arabia is positively reflected on commerce. Commerce has changed from a seasonal limited trade (depending largely on the pilgrimage season for example) into a commerce based on economic stable bases, due to the comprehensive development in various industrial, agricultural and human resources fields. It is noted the growth of exports in the previous twenty five years from the beginning of the first five years development plan.

Foreign Aid

Kingdom of Saudi Arabia comes at the top of world countries offering aids compared to the gross national production. The percentage decided by the United Nations to the granted countries is 0.70% of its total income. The percentage offered by Saudi Arabia to the developing countries reached 5.45% of the annual average for the gross national production. Saudi Development Fund is considered the principal department to offer the Saudi aids to the developing countries. Saudi Arabia comes at the top of world countries to aid the effected from natural calamities and the civil wars that broke in some of the Arab and Muslim countries through the agencies and popular committees supported by the government of the Custodian of the Two Holy Mosques.

Investment in Saudi Arabia

Saudi Arabia has many relatively high advantages in some strategic sectors at regional and global levels, which make it attractive for international investments. For example, the Saudi Arabia is ranked first with regards to prices of energy provided for investment projects. Investment in Saudi Arabia realizes high profit ratios for local, foreign and shared projects, with low risk exposures, and a simple form of taxes and property registration fees. Here, the Saudi Arabia, globally, occupies the fifth position regarding taxes and forth in property registration costs, according to business performance reports 2006/ 2007 issued by the International Bank.
According to a comprehensive study published by Arab Forbes Magazine’s in late 2006, assessing the performance of (1616) joint-stock companies in the Arab world, the first three positions were Saudi companies, and among the best 50 companies, 22 were Saudi companies, including Saudi and joint companies, applying a number of standards such as: operational efficiency, market value, sales, revenues, dividends and return on equity, in addition to the company expected growth. Another example in the banking services sector is that the ten Saudi banks are of the best banks, most growing and profit realizing in the Arab World. These Saudi banks comfortably rest within the list of biggest 1000 banks of the world, according to the Financial Times 2006. Also the 3 biggest banks in the Arab world are Saudi.
Saudi Arabia is the most ideal environment for projects depending on energy consumption, because it provides energy for investment projects with the least prices at global level. In addition, there are many natural resources in mining that are supported by the geographical location of the Saudi Arabia making them of easy access to European, Asian and African markets. Saudi market has a high purchasing power and of continuing expansion.
The Saudi currency (Riyal) is one of the most stable currencies in the world. There was no significant change in its exchange value during the last 3 decades. There are no restrictions on foreign currency exchange and outgoing money transfers. Inflation rates in Saudi Arabia are very low and the kingdom is endeavoring to sign bilateral agreements with an increasing number of countries regarding investment encouragement, protection and arrangement of taxation issues.

Credit Institutions

Saudi Arabia has established specialized credit institutions to provide long-term loans to the vital sectors of the economy such as industry, agriculture and real estate, in addition to supporting professions and small businesses.

The Saudi Industrial Development Fund (SIDF)

SIDF provides low-cost medium and long-term loans for industrial projects. The Fund also provides marketing, technical and financial advice to all Fund-financed projects to enhance their chances of success. With the issuance of the new foreign investment law, SIDF will extend its loans to projects fully owned by foreigners.

The Public Investment Fund

Provides medium and long-term loans to the large scale government and private industrial projects that Saudi commercial banks fail to finance.

The Real Estate Development Fund

Provides medium or long-term loans to individuals or organizations for private or commercial housing projects.

The Saudi Arabian Agricultural Bank

Provides loans and credit facilities to farmers and agricultural projects.

Saudi Commercial Banks

Saudi commercial banks also provide investors with various types of loans. Major banks are:

• Arab National Bank.
• Al Jazira Bank.
• Al Rajhi Banking and Investment Corporation.
• National Commercial Bank.
• Riyadh Bank.
• Saudi American Bank.
• Saudi British Bank.
• Saudi Fransi Bank.
• Saudi Hollandi Bank.
• Saudi Investment Bank