Econ 220: Saudi Economy – Topic 6

Analyze the Saudi economy structure

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 The Main Sectors in Saudi Economy
Sector GDP by Economic Sector % of Total GDP

Mining & Quarrying 204,599 0.234727979

Manufacturing Industries 109,753 0.125915082

Finance, Insurance, Real Estate & Business Services 109,257 0.125346042

Wholesale & Retail Trade & Restaurants & Hotels 77,190 0.088556898

Transportation & Storage & Communication 64,754 0.074289589

Construction & building 60,382 0.069273774

agriculture forestry & fishing 39,986 0.045874286

Community & Social & Personal Services 33,865 0.038851915

Electricity, Gas & Water 16,161 0.018540848

Total Value 715,947 0.821376412

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The Main Sectors in Saudi Economy
 The data has been collected from SAMA annual report 2011.

 The total of the sectors were 82% and the rest is from the
government services and we are not interested in them.
 This topic in reviewing the information provided in the
pervious topics but it is reorganized in different way.

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 Mining & Quarrying
 Can be divided into:
 Crude oil & Natural Gas which is about 0.984 of the Mining and
Quarrying sector and 0.231 of total GDP.
 Other mining & quarrying activities which is about 0.015.

 This sector is the largest sector in Saudi economy.

 As we studied before Oil sector is more than 25% of the GDP,
23% as Crude oil and the rest is refining Oil which is counted
in the Industrial sector.

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 Mining & Quarrying
 All of Saudi economy reforming efforts and development
plans to date centralized around the fact that its economy is
essentially oil driven “Oil-based economy” with resultant
strengths and weakness (Ramady, 2005).
 Saudi holds more than 20% of the world’s proven petroleum.
Moreover, the petroleum sector accounts for roughly 80% of
the budget revenues. Also, 90% of export earnings comes
from oil sector.
 The other mining & quarrying activities such as Gold and
Phosphate expected to increase in the future due to the large
reserve in Saudi.

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 Manufacturing Industries
 Can be divided into:
 Oil Refining which is about 20% of the Manufacturing Industries.
 Other Industries which is about 80% of the Manufacturing Industries.
 Saudi Arabia has been Supporting the Manufacturing sector
since the third government plan until now and that in order to
diversify the economy.
 Saudi government has built the industrial city of
industrial cities of Al-Jubail and Yanbu. These cities built to
use the country's oil and gas to produce steel, petrochemicals,
fertilizer, and refined oil products.

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 Manufacturing Industries
 Saudi government support Manufacturing sector by providing
favorable environment for their activities:
 Government has built industrial area with full facilities in other cities
such as Jeddah and Riyadh. Government provided lands in these area
to companies with nominal prices as a way of support.
 Government also established the Industrial Fund in order to give long
term loans to companies with free interest rate.

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 Finance, Insurance, Real Estate & Business
Services
 Can be divided into:
 Finance
 Insurance
 Real Estate
 Business Services
 SAMA is the supervisor of the commercial banking system and the
Insurance companies in Saudi Arabia.
 There are 12 commercial banks in Saudi and their main role is lending
money. In addition to, ten international banks, established branches
in the Kingdom.
 SAMA was able to build up a strong banking system due to there
great policies and regulations. Also, it helped developing the Saudi
Stock Market and the Capital Market Authority.

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 Finance, Insurance, Real Estate & Business
Services
 There are about 80 investment banks in Saudi supervised by
the Capital Market Authority. The main role of the investment
banks are wealth management, trade in the financial market,
broker, and consultation.
 Business Services sector is one of the most growing sector
and hold most of the small and medium size businesses.
 Insurance sector is very young in Saudi Arabia but it is growing
notably due to the need in the market.
 There are about 25 Insurance companies and 57 Insurance
broker agencies opened in Saudi.

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 Finance, Insurance, Real Estate & Business
Services
 The Real Estate sector is one of the biggest investment sectors
in Saudi.
 Saudi government established the Real Estate Fund in order to
support Saudi families to buy houses.
 The larges project in this sector is building of the new
Economics Cities and the highest skyscraper in the world which
will be build in Jeddah.
 Saudi Arabia facing shortage of about one million residential
units which caused a significant increase in the Real Estate
sector. As a result, Saudi government has increased its lending
programes and preparing to put a tax on the massive lands
which are not developed and owned by the investors.
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 Wholesale, Retail Trade,
Restaurants & Hotels
 Can be divided into:
 Wholesale
 Retail Trade
 Restaurants
 Hotels
 Wholesale and retail trade in Saudi Arabia have increased
gradually. Panda, Danube, and Iben dawod are some of the
examples of the leading companies in the market.
International companies such as Carrefour and Geant also
have opened in Saudi which raised the competition in this
sector.

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 Wholesale, Retail Trade,
Restaurants & Hotels
 Restaurants has increase staidly in Saudi since 1990 providing variety of
food. Many of the international restaurants opened franchises in Saudi.
 The number of Hotels in Saudi increased specially in the western area
“Makkah and Madina”. That was because of the increase in the number of
pilgrims, in addition to the increase of short vacations which helped the
tourism to increase in Jeddah, Abha and other places.

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 Wholesale, Retail Trade,
Restaurants & Hotels
 Restaurants has increase staidly in Saudi since 1990 providing variety of
food. Many of the international restaurants opened franchises in Saudi.
 The number of Hotels in Saudi increased specially in the western area
“Makkah and Madina”. That was because of the increase in the number of
pilgrims, in addition to the increase of short vacations which helped the
tourism to increase in Jeddah, Abha and other places.

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 Transportation, Storage & Communication
 Can be divided into:
 Transportation
 Storage
 Communication
 Privatization helped the Transportation and Communication sectors to grow, develop,
and hold more of labor force. Also opening new companies in these sectors such as Nas
airlines and Mobily raised the sense of competition in the market which was in the
consumer advantage.
 Saudi government have built many storage area such as the one in south Jeddah
“Alkomra”. Lands in storage area were provided by nominal prices in order to support
companies to provide consumer with all the different products from logistic point of
view.

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 Construction & building
 Can be divided into:
 Construction & building
 Suppliers

 This sector has shown a an incredible increase due to the shortage in the
Real Estate sector and the new Economics Cities.

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 References
• Ramady M. (2005). “The Saudi Arabian
Economy”.Springer.
• SAMA (Annual Report, Financial Report).
• Saudi Eighth Plan (Ministry of Economy and
Planning).