Doing Business in Saudi Arabia

In the current essay I would like to analyze the economy and political side of Saudi Arabia. It should be noted that Saudi Arabia ”“ is one of the most religious and closed countries of the Middle East. After the discovery of huge reserves of oil there, it evolved from undeveloped desert kingdom to one of the richest states in the region. Saudi Arabia shares borders with Jordan, Iraq and Kuwait in the north, Qatar and United Arab Emirates in the east, Oman in the southeast, and Yemen in the south. Saudi Arabia, with its huge oil reserves is the major state of the Organization of Petroleum Exporting Countries (OPEC). From 1992 to 2009 Saudi Arabia ranked first in the world petroleum production and export. Exports of crude oil is accounting for 95% of country’s export and 75% of income, and making it possible to maintain the welfare state. Thanks to it Saudi Arabia provides free education, including higher education for its citizens and covers all expenses for textbooks for students.

As a matter of fact, Saudi Arabia occupies about 80% of the Arabian Peninsula. Due to the fact that national borders are not clearly defined, the exact area of Saudi Arabia is unknown. However, according to official statistics, it is estimated on the level of 2 217 949 square miles. Anyway, Saudi Arabia occupies 14th place among the largest countries in the world. Most of the territory of Saudi Arabia is desert or semi-desert, which are populated by nomadic Bedouin tribes. The population is concentrated around several major cities, usually on the west or on the east coast, according to Saudi Arabia.

The economy of Saudi Arabia is the largest in the Arab world. Today, the basis of the economy of Saudi Arabia is a free private entrepreneurship. Meanwhile, the government controls the main spheres of economic activity. Saudi Arabia has the largest oil reserves in the world, and is considered as the largest oil exporter in the world. Moreover, Saudi Arabia plays a leading role in OPEC. Proved crude oil reserves are 261.7 billion barrels, or 35 billion tones (26% of world’s reserves), and natural gas – about 6.339 trillion cubic meters (January 2006). It should be noted that oil brings up to 90% of export earnings, 75% of government revenues and 35-45% of GDP. It is essential to note that approximately 25% of GDP comes from the private sector. In 1992 Saudi Arabia’s GDP was equivalent to 112.98 billion U.S. dollars, or 6.042 dollars per capita. In 1997, GDP amounted to 146.25 billion U.S. dollars or 7.792 dollars per capita in 2008 GDP rose up to 241 billion U.S. dollars, or 8460 dollars per person. It characterizes that the economy of the country is constantly growing. However, real economic growth lags behind the increase in the number of inhabitants, which leads to unemployment and a reduction in per capita income. The share of industries in non-oil production in GDP has increased from 46% in 1970 to 67% in 2006. In 1999 the government announced plans to begin the privatization of electric companies, which follow the privatization of telecommunications companies. To reduce dependence on oil of the kingdom and increase employment of rapidly grow Saudi population in recent years, authorities booming private sector. The main priorities of the government of Saudi Arabia in the near future is the allocation of additional funds for water infrastructure development and education, as water shortages and rapid population growth do not allow the country to become self-sufficient in agricultural products, according to Ali Shah (2010).

Leave a Reply