Econ 220: Saudi Economy - Topic 2

Saudi Government Plans

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 The Saudi’s Government Plans
1, 2, 3
 Saudi first two development plans, covering the 1970s,
emphasized infrastructure.
 The focus in third plan (1980-85) has been devoted to
education, health, and social services.
 Moreover, The plan focused on diversifying and expanding
productive sectors of the economy (primarily industry) by
building the industrial cities of Al-Jubail and Yanbu.
 These cities were built to use the country's oil and gas to
produce steel, petrochemicals, fertilizer, and refined oil
products.

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 The Saudi’s Government Plans
4
 The fourth plan (1985-90), the country's basic infrastructure
was mainly completed but education and training remained areas
of concern.
 Furthermore, Private enterprise was encouraged, and foreign
investment in the form of joint ventures with Saudi public and
private companies was welcomed.
 The private sector became more important, rising to 70%
of non-oil GDP by 1987.
 These private investments were supported by government financing
and incentive programs.
 While still concentrated in trade and commerce, private investment
increased in industry, agriculture, banking, and construction
companies.
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 The Saudi’s Government Plans
5,6
 The fifth plan (1990-95) emphasized consolidation of the
country's defenses, regional development, and social
services.
 In addition, replacing greater number of non-Saudis with
Saudis employees in the private sector “Saudization”.
 The sixth plan (1996-2000) focused on lowering the cost of
government services by managing them efficiently.
 Also, The plan reduced the kingdom's dependence on the
Oil sector by diversifying economic activity, particularly in
the private sector, with special emphasis on industry and
agriculture.
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 The Saudi’s Government Plans
7
 The seventh plan (2000-2004) the economy established
a real growth rate of 3.4% each year, with growths of
4.6% for the private sector and 3.9% for the non-oil
sector.
 This is as a result of financial and management
restructuring of the Transport and Communications
sector.
 The government also achieved their target of creating
817,300 new jobs for Saudi nationals.

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 The Saudi’s Government Plans
8
 The Eighth Five-Year Development Plan
(2005-09) was devised with a focus on:
 increasing foreign investment
as well as national investment,
and developing human resources.

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 The Saudi’s Government Plans
• Ninth Development Plan (2010 - 2014) approved August 9,
2010
• The Ninth Development Plan covering the period 1431/1432 -
1435/1436 H. (2010 - 2014).
• The development spending has reached SR 1.444 trillion [$385
billion], an increase of 67% over the Eighth Development Plan.
• The a majority of the spending was allocated to human
resource development, social development, health, municipal
services, housing, culture, and transport and communications.
•

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 The Saudi’s Government Plans
Ninth Development Plan
• Minister of Economy and Planning said the development plan
is part of the Kingdom’s long-term strategy of achieving
sustained development
• Aims at eradicating poverty, providing housing, employment,
education, health care and other public services and facilities.
• He expects an annual economic growth of 5.2 percent during
the development period.
• “We also expect that the per capita income would grow from
SR 46,200 [$12,320] in 2009 to SR 53,200 [$14,187] by 2014,”
he said. The private sector is expected to grow 6.6 percent
annually while non-oil sectors by 6.3 percent and investment
by 10.4 percent. 8
 The Saudi’s Government Plans
Out come of: The Ninth Development Plan
The Ninth Five-Year Development Plan will establish :
 117 new hospitals, 750 primary health care centers and
400 emergency centers,
 25 new colleges of technology, 28 higher technical
institutes and 50 industrial training institutes,
 Expanding the capacities of public universities to 1.7
million students and primary, intermediate and
secondary schools to 5.31 million students.
 The development plan also calls for doubling the
present capacity of desalination plants from 1.05 billion
to 2.07 billion cubic meters annually by 2014 9
 The Saudi’s Government Plans
(focused on)
1. Developing human resources, increase productivity
and replace non-Saudis with qualified Saudis.
2. Increase standard and quality of life.
3. Improve the health and social services.
4. Realized balance growth in all regions.
5. Provide favorable environment for the private sector
activities in order to play a greater role in
development.
6. Diversify economic base and reduce dependence on oil
production and export.
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 The result of the government plans

 Built advanced public services (education, electricity,

water, transportations, communication, health and
social services) in most of the Saudi cities.
 The private sector has overtaken the government
sector in both consumption expenditures and the
gross fixed capital formation (GFCF) since 1986
grown to be same as in developed economies.
 Life expectancy has increased from modest average
of 53.9 years between 1970 to 74 years in 2009.
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 The Eighth development plan
 Adult literacy for those who are fifteen years
and older had an impressive increase from
39% in 1970 to 86% in 2009.
 The GDP per capita has increased significantly
from 1462.57$ in 1972 to 18202.75$ in 2008.
 It is the first a strategic course to be traversed
by the national economy for the next twenty
years in four consecutive five year plans.

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GENERAL FRAMEWORK FOR THE TWENTY
YEARS DEVELOPMENT PLAN'S
DIRECTIONS
 Standard of Living and Quality of Life.
 Poverty Reduction.
 Balanced Regional Development.
 Human Resources Development.
 Diversification of the Economic Base.
 Economic Stability.
 Domestic and Foreign Investment.

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 GENERAL FRAMEWORK FOR THE TWENTY
YEARS DEVELOPMENT PLAN'S
DIRECTIONS
 Institutional and Administrative Reform.
 Privatization.
 Public Finance.
 Rationalization of Water Utilization.
 Technology and Informatics.
 Economic, Social and Cultural Impact of Globalization.
 Increasing Participation of Women and Enhancing the
Role of the Family in Society.

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 MAJOR ECONOMIC AND SOCIAL OBJECTIVES
FOR THE EIGHTH PLAN
 Increasing economic growth rates (Target rate 4.6%) by
increasing the investment in government and private sector
as well as encourage investment by foreign capital.
 Increasing employment growth rates by Increasing economic
growth rates and Saudization.
 Providing Care for Poor and Needy Families.
 Increasing contribution of the private sector to economic
growth and national income.
 Expansion and Development of Public Services (Health,
Education, Housing and the Environment) by 3.8%.

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 MAJOR ECONOMIC AND SOCIAL OBJECTIVES
FOR THE EIGHTH PLAN
 Diversification of Economic Activities and Sources of National
Income. The target annual growth rate for the non-Oil sectors
is 5.2% and contribution to the GDP of 75.7% by the end of
the period in 2009. Besides, reduce the real domestic product
of the oil-and-gas by 2.7%.
 Improving the balance of payments.
 Realizing a high degree of economic balance and price
stability.
 Realizing balanced development in all regions of the Kingdom.
 Enhancing Integration with GCC States and the World
Economy (WTO).

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 Did they meet their goals?
1. GDP has increased from SR722.2 B in 2004 to about SR855.8 B in
2009, at constant 1999 prices, with annual growth rate of 3.5%.
2. The real domestic product of the oil-and-gas sector dropped at a
rate of around 0.2% per annum.
3. Non-oil sectors achieved an average annual growth rate of about
4.7% at constant 1999 prices, from about SR523.8 billion in 2004 to
about SR659.7 billion in 2009
4. The non-oil sectors accounted for approximately 95.7% of the total
investments made under the Eighth Plan, with an annual average
value of SR 218.8 billion; an increase of about 47.8%, compared with
the value of investments in these sectors made in 2004.

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 Did they
Did they meet
meet their
their goals?
goals?
 The size of total fixed investment increased, at constant 1999 prices,
from about SR152.4 billion in 2004 to about SR259.3 in 2009 (30.3% of
GDP) with 11.2% annual growth rate.
 The total budget has increased by 78% during the Eighth Plan
compared to the Seventh Plan.
 The growth of oil revenues enable the state to accomplish two major
tasks:
• Liquidation of a large part of the public debt.
• Enhancement of foreign assets owned by the government.
 the government services sector grew at an annual rate of 2.7%.
 www.tradingeconomics.com/saudi-Arabia/ >‫مهم‬
government-debt-to-GDP
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 Did they
Did they meet
meet their
their goals?
goals?
 The private sector contribution to the real GDP increased from
about 52.2% to about 57.4%,
 The real value of investments carried out by the sector increased
from about SR117.7 billion to about SR190.9 billion, which
represents an annual growth rate of about 10.2%.
 The upward trend in the value of oil exports caused a total increase
in the surplus of the balance of trade by 157.9% which contributed
to enhancing the current account of the balance of payments.
 The Accession WTO in December 2005 is an important step
towards increasing the degree of openness of the Saudi economy
and its integration into the global economy.

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 Did they meet their goals?
 11 international banks, established branches in the
Kingdom, leading to increased competition in this sector.
 About 80 investment banks have taken licenses, and
most of them are Saudi- foreign joint ventures.
 Commercial banks in Saudi maintained normal levels of
liquidity and high net worth during the financial crisis;
thereby continuing to achieve high performance and
profitability rates.
 The inflation rate has increased from 2.2% in 2006 to
9.9% in 2008

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 Main Items of the State Budget
under Eighth Development Plan (SR billion)
Average for
First Four
Items 2004 2005 2006 2007 2008
Years of
Eighth Plan
3 Total
392.3 564.3 673.7 642.8 1101.0 745.5
Revenues
1+ 2 Oil
330.0 504.5 604.5 562.2 983.4 663.7
Revenues+2

3 Total
285.2 346.5 393.3 466.2 520.1 431.5
Expenditure
2 Investment
37.6 62.3 70.9 119.0 131.2 95.9
Expenditure
1 + Current
247.6 284.2 322.4 347.2 388.9 335.6
Expenditure

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 Government Expenditure under Seventh and Eighth
Development Plans by Development Sector (SR billion)
Appropriations in Seventh Appropriations in Eighth
Development Plan Development Plan
Development Sector
value % value %

Human Resources 276.9 57.1 480.0 55.6

Social and Health

92.6 19.1 155.9 18.0
Services

Economic Resources 54.4 11.2 105.8 12.2

Infrastructure 61.4 12.6 122.2 14.2

Total 485.3 100.0 863.9 100.0

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Appropriations to Development Sectors of
Budget Surplus for 2004-2006

Development Sector SR billion %

Human Resources 26.5 24.5

Social and Health Services 28.5 26.4

Economic Resources 26.0 24.1

Infrastructure 27.0 25.0

Total 108.0 100.0

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 Contributions of Major Sectors of National Economy in
Provision of Employment Opportunities to National Labor Eighth
Development Plan (Thousands)

2004 2009 Average

Development Sector Number of Number of
Annual
% % Growth %
Employees Employees

1. Non-Oil Sector          

a. Production Sectors value value value value 8.3

b. Private Service
Sectors
276.9 276.9 276.9 276.9 2.9
c. Government
Sector
92.6 92.6 92.6 92.6 3.6

2. Oil and Gas Sector value value value value (-2.2)

Total 276.9 276.9 276.9 276.9 3.5

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 7 Strategic Issues and local challenges

1. The High Rate of Population Growth Which Increase The Demand

on The Basic Services.
2. Increase The Job Opportunities in Order to Accommodate The
high Unemployment Rate.
3. Intensified Importance of accelerating the rate of provision of
quality training to the national workforce to equip it with the
knowledge and skills necessary to keep abreast of international
scientific and technological developments.
4. Raising Standard of Living and Improving Quality of Life.
5. The Overuse Of Critical Economics Resource Particularly Water.

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 7 Strategic Issues and local challenges
6. Achieving Sustainable Development :
Diversification of Economic Base (In Order to
Reduce the Oil Influence).
Balanced Regional Development (In Order to
Have Equal Standard of Living and Quality of
Life in Whole Saudi).
Development and Productive Employment of
Human Resources.
7. Enhancement of Competitiveness
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 8 International challenges
1. Continued globalization and integration of
the world economy : the growing volume of
trade among countries due to liberalization
of the world trade system.
2. Continued formation of international and
regional economic blocks and free trade
zones with consequent effects on the
foreign trade activities of the Kingdom.

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 8 International challenges
3. Increased importance of science and
technology as an essential, decisive tool for
achieving economic benefits under mounting
competition locally and internationally.
4. Diminished importance of raw materials in
constituting competitive advantage of
products and enhanced importance of
knowledge and technology.

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 8 International challenges
5. Increased importance of trade in services
internationally, with communications and
information technology contributing to
strong growth in across-borders services
leading to emergence of a highly
competitive global services market.
6. Increased international competition for
attracting capital and foreign investments.

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 8 International challenges
7. Instability of global financial markets, rates
of foreign exchange, and raw material
markets with the concomitant fluctuations
in prices and revenues.
8. Regional and Arab Integration.

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 References
 Ramady M. (2005). “The Saudi Arabian
Economy”. Springer. Chapter 2
 Saudi Ninth Plan (Ministry of Economy and
Planning).

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What is the benefit of the lecture ?
 Help you to find the data:
 World Bank website.
 Ministry of Finance website.
 Ministry of Planning and Economy website.
 Ministry of Commerce.
 Saudi Arabian Monitory Agency (SAMA) website.
 Saudi Customs website.
 You can use this data for vary proposes :
 Research.
 Feasibility study.
 Businesses.
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