Saudi Arabia: Economic Development Policy
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Saudi Arabia leapfrogs UK, France in military spending list

Saudi Arabia leapfrogs UK, France in military spending list | Saudi Arabia: Economic Development Policy |
New report says Gulf kingdom spent $67bn last year, up 14% on previous year; ranked fourth globally
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Saudi Arabia leapfrogged the UK, Japan, and France to become the world’s fourth largest military spender. The report said that military spending in Saudi Arabia increased by 14 percent in 2013, reaching an estimated $67 billion. In a report done, Middle Eastern countries are increasing spending on military however the world military expenditures has gone down. Possible causes are because of tensions with Iran, and a Saudi Arabian desire to maintain a strong loyal security force. For Saudi Arabia increasing military expenditures appears to be a good move in pushing the country in a better direction.

By increasing military expenditures, Saudi Arabia shifts demand to the right, because government expenditures are a component of demand. This shift in demand will increase real gdp production and thus have economic growth. Increasing the military will also decrease unemployment rate because more people will be employed. An indirect benefit of increasing the military is that the citizens will have more confidence in the government and thus the economy. This will further spur economic growth and push Saudi Arabia to become a more developed country.

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Saudi Arabia

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Saudi Arabia signed a pact to hire 5,300 women. This agreement forms part of initiative by Bab Rizq Jameel. He said that “women have the right to work side by side men, get the same rights and work benefits.” Because of this change, the unemployment among Saudi women has dropped from 35 percent in 2011 to 32 percent in 2013. The ministry wants women to be productive in society and advance from being saleswomen to owners of businesses. This has greatly changed the dynamics of the labor market. Although there is still discrimination against allowing women to work in all sectors, they are setting more environments that are suitable for women to work. The ministry is, moreover, very strict about not allowing women to work in these industries with heavy penalties on violators. Soon the Ministry of Interior and the Ministry and Labor will have a data of all employees.


Because Saudi Arabia hired more workers there is an increase in the labor force. This will shift supply to the right. This will increase the quantity produced and lower price of goods. This is a smart move by the Ministry because it promotes economic growth. This is also a good move because it lowers unemployment rate which means that the economy is getting approaching to a fully utilized economy. This further indirectly helps the economy by providing confidence to consumers to trust the economy. This will cause consumers to spend even more and further stimulate the economy.


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Saudi Arabia’s sharp turn on foreign policy

Saudi Arabia’s sharp turn on foreign policy | Saudi Arabia: Economic Development Policy |
The kingdom’s refusal to join the U.N.
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Summary: A conference by the council of ministers, a group of senior banking leaders, is going to meet to look at the development of Saudi Arabia’s stock exchange, and examine the careful steps being taken to allow greater foreign direct investment and enhance the regulatory framework. One area of the Saudi economy that is seeing significant development is infrastructure investment. The government is attempting to raise funds from public and private investments  to facilitate water, power, and housing projects. Saudi Arabia’s new decision signals the coming of age of a new forceful foreign policy. They know they will need to restructure their foreign policy and national security establishments to conduct themselves internationally. Although the road is long, it is clear that the Saudis fully intend to pursue their national security interests. Since the government is attempting to raise funds of from investments the saudi arabian economy will experience higher taxes. However since these taxpayer dollars are going towards capital investment, the economy, according to macroeconomics, will experience a rightward shift of their output potential.

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Signs of slowing Saudi consumer spending could prove a drag on nation’s economy | The National

Signs of slowing Saudi consumer spending could prove a drag on nation’s economy | The National | Saudi Arabia: Economic Development Policy |
Saudi Arabians are not spending as much as some economists have predicted.
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Saudi Arabian consumer spending appears to be on a downhill. While their economy is doing great, “some economists are concerned that higher interest rates and a lack of fresh stimulus may dampen consumer growth.” Back in 2011 Saudi government started a $130 billion social spending stimulus program which increased the amount of loans to individuals and so consumer spending. But now, this stimulus is wearing off.

Economists forecast that GDP growth will slow to around 3% from the 6-7% of the past decade. Nominal GDP is starting to plateau probably as it is already very high and so it is difficult to go higher quickly. One of the indexes of growth, the monthly purchasing managers index, is down to 57 from 58.6 in February though it is “still above the crucial level of 50 — a threshold that indicates continued economic growth.”

The facts of this report seems to indicate that Saudi Arabia is nearing a peak in the business cycle and nearing a recession. Grow is slowing down but it is still a healthy growth (3% GDP growth) and the monthly purchasing managers index is also indicating growth. There shouldn’t be too much concern in all this as this is all part of the natural business cycle. If Saudi Arabia really wanted to expand quicker, it should use start another spending stimulus program as it did in 2011. But as the article says, nominal GDP is at “very high level and it is difficult to go much higher very quickly”. Saudi Arabia’s economy is still pretty healthy and so it should wait until a recession hits before it takes any action (stimulating the economy then will probably have a bigger effect). This slowing down of consumer spending and economic growth should be taken as a caution of an approaching recession and not a warning to take immediate action.

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Saudi Arabia to Sell 15% of National Commercial Bank in IPO - Middle East Real Time - WSJ

Saudi Arabia to Sell 15% of National Commercial Bank in IPO - Middle East Real Time - WSJ | Saudi Arabia: Economic Development Policy |
The Saudi government’s decision to sell part of its stake in the country’s largest lender through an IPO is expected to result in one of the Middle East's biggest share sales.
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“the Public Investment Fund is planning to sell a 15% stake in Jeddah-based National Commercial Bank (NCB).” The Saudi government still does not permit direct foreign investment in its stock market but that is expected to change. If the NCB IPO is successful, it would be a sign that the markets might be opened up soon. In the stock market crash of 2006, $500 billion was lost from stockholders. Since then, improvement to regulations have been made to decrease the risk of investment for Saudis. “The offering is positive and its timing is good too,” popular business columnist Rashid Al Fowzanwrote today, “in a period of increasing economic growth and an abundance of high liquidity.”


This is a good step in opening up the market in Saudi Arabia. A more permissive policy on foreign investment in Saudi Arabia’s stock market is likely to occur as markets open up soon. The increased regulations means that there will be demand for this new market and as stated, the offering is positive and the timing is good.

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Virulent | Saudi Arabia: Economic Development Policy |
Don’t breathe a word of it THE Red Sea city of Jeddah is the most relaxed spot in the kingdom of Saudi Arabia. But its residents are worried by a rise in the...
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There has been a disease hitting Saudi Arabia, especially in the city of Jeddah,  known as the Middle East Respiratory Syndrome (MERS). This disease is causing a scare among the people. Waiters have donned facemask, wedding guests are refusing to kiss each other hello, and some businessmen have started refusing to shake colleague's hands. The case may be even more severe, as the Saudi government has a tendency to keep the citizens in the dark on serious matters. Regardless, the disease is becoming very prevalent and many Saudis are becoming ill.

This hurts the economy because the city of Jeddah is one of the biggest tourist sites in Saudi Arabia. With this scare, there are far less people touring the Arab country, which means that the country earns less revenue. With many Saudis falling ill because of the contamination of the disease this reduces the work force. In addition, many Saudis, afraid of catching the disease, aren’t applying for jobs such as working in hospitals, which further reduces the work force. In the short run this will cause a decrease in GDP production as both supply and demand will shift to the left. This disease is hurting the economy, and if it doesn’t go away, or a cure is not found, there could potentially be long run changes.

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Women’s economic empowerment in focus

The fourth edition of the Women Economic Forum, themed “Building the future from women’s perspectives,” opens on Wednesday under the auspices of Princess Abeer bint Faisal bin Turki.
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More than 600 women are expected to attend the fourth edition of the Women Economic From which is themed “Building the future from women’s perspectives”. The forum “will address four main themes from the perspective of 11 female experts from Saudi Arabia and the Gulf”. The four themes are “Women's economic empowerment,” “Women in economic decision-making”,  “Women are economic wealth,” and “Saudi women and confident steps toward the future.” These forums are aimed to draw a “road map for strengthening the means of supporting the process of the development of women, and to explore the many challenges facing the development environment, the economy and the future of women’s investments in the Kingdom.”

These discussions and information forums shows that Saudi Arabia is moving towards greater gender equality and opening up their economy for women. This will allow them expand their productions possibilities as well as their long run aggregate supply. For decades, Saudi Arabia has neglected the potential output from women because of the restrictions on women employment. Now it appears that Saudi Arabia is putting more of it’s population to work increasing their productivity efficiency and thus overall economic welfare.

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Local Demand, Not Shale, Poses Risk for Saudi Oil, Says Jadwa - Middle East Real Time - WSJ

Local Demand, Not Shale, Poses Risk for Saudi Oil, Says Jadwa - Middle East Real Time - WSJ | Saudi Arabia: Economic Development Policy |
Jadwa Investment reckons the threat from shale could be the least of Saudi Arabia's troubles, as the kingdom has to keep up with high, and growing, local oil demand.
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Countries in the middle east need to increase oil production to offset decreases in demand. Recently there has been a surge in supply of shale oil which is competing with the market for middle east oil. This discovery has driven many OPEC countries out of the U.S. and for other OPEC countries it has decreased the prices. Jadwa, an investment bank provides their view on the problem,“We believe that high internal demand, spurred by low internal energy prices, will not only distort internal economic decisions, but will also, in the long-term, crowd out and reduce the income from Saudi Arabia’s oil exports.” Within 20 years, Saudi Arabia will domestically consume 8.2 million barrels of oil a day out of 12.5 million barrels a day, or 2/3 of its current production. So Saudi Arabia currently should disregard the surge of oil in international trade and instead focus on the issues of domestic demand which is the more pressing issue.

There has been an increase in a substitute for Saudi Arabia’s shale oil which causes a decrease in demand for Saudi Arabia oil. This drives down prices which hurts the Saudi Arabia economy. In order to compensate Saudi Arabia may have to decrease supply to raise up the price again. There is also another trouble which is the domestic consumption of oil. There is a huge increase in demand for oil domestically which increases production and drives up the prices. However the prices aren’t hindering demand, as demand continues to rise at a 7% annual growth rate. Also there is a great increase in the amount of oil demanded, however Saudi Arabia is not producing enough oil to sustain this expansion in the long run. Soon the supply of oil will become too scarce and the Saudi Arabian economy could fall apart. To prevent this from happening, Saudi Arabia needs to enact contractionary policies to limit demand, such as raising the price or raising taxes on oil.

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Saudi Plan For 2014: More Spending - Middle East Real Time - WSJ

Saudi Plan For 2014: More Spending - Middle East Real Time - WSJ | Saudi Arabia: Economic Development Policy |
Saudi Arabia’s 2014 budget presses ahead in a multiyear-effort to build a private sector in part by sheer force of spending, pumping billions of dollars into the local economy for public jobs, construction projects, education and healthcare.
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More Spending 2014

Saudi Arabia has adopted its largest annual budget for 2014. This is all part of “a multiyear-effort to build a private sector in part by sheer force of spending, pumping billions of dollars into the local economy for public jobs, construction projects, education and healthcare.” A closer look at this $228 billion budget shows that $66 billion will used towards capital projects and investments to stimulate the private sector. 25% of the budget will be used towards education and manpower training, including “$5.9 billion for 185,000 Saudi students, and their families, to study abroad in 2014. The overseas scholarships are a key project of King Abdullah, to expose young Saudis to Western education and the world outside Saudi Arabia.”

This effort to boost the private sector is to move away from the dependency on oil which accounts for 90% of the government revenue. This along with the increased investment in the education of the youth, will allow Saudi Arabia to have a more balanced source of income.

All of this planning and investment will lead to growth in the private sector. “NCB analysts project real GDP growth of 4.1% for 2014. The non-oil sector – construction, trade and manufacturing – will grow faster, at 5.4%, NCB reckons.”

With this increase in planned spending, will Saudi Arabia be able to afford it? At “a price of $81 a barrel for Saudi crude export, at 9.4 million barrels a day, would be sufficient for revenues to balance with government spending. Both oil prices and production are currently significantly above those figures.” In 2013 there was a budget surplus of 7.4% of the GPD and there is a projected 4.2% surplus in 2014. This increase in investment will allow Saudi Arabia to expand, especially in the private sector, moving away from its dependency on oil.

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Top Report-Construction in Saudi Arabia - Key Trends and Opportunities to 2017

Top Report-Construction in Saudi Arabia - Key Trends and Opportunities to 2017 | Saudi Arabia: Economic Development Policy |
Construction in Saudi Arabia - Key Trends and Opportunities to 2017

Via jeniferdsouza
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Saudi Arabia is attempting to diversify their economy so that they can eventually become less dependent on their main resource of natural gas. They government supports the industrialization of the country because it will facilitate Saudi Arabia’s adaption from a oil based economy to one that also involves manufacturing and services. The demand for a shift into a manufacturing comes from the recent rise in disposable income and increased the demand for residential, commercial and institutional buildings. “The country’s population growth has caused housing demand to outstrip supply. Demand for affordable housing is particularly strong, with low and middle-income households making up over 75.0% of the unmet demand. The government is making large-scale investments in developing low-income housing. Government policies, low interest rates, easy credit accessibility, demographics, and the large housing deficit will continue to support growth in low-income residential property demand in the country.” The increased demand for housing along with the large amount of tourists that come to Saudi Arabia during religious holidays make it important for the country to expand their manufacturing of buildings both, residential and commercial. This rise of a new industry (other than oil) will allow Saudi Arabia to expand without fear of disaster in the case of an oil crisis.
jeniferdsouza's curator insight, February 21, 2014 1:26 AM
This report provides detailed market analysis, information and insights into the Saudi Arabian construction industry including:


The Saudi Arabian construction industry's growth prospects by market, project type and type of construction activityAnalysis of equipment, material and service costs across each project type within Saudi ArabiaCritical insight into the impact of industry trends and issues, and the risks and opportunities they present to participants in the Saudi Arabian construction industryAssessment of the competitive forces facing the construction industry in Saudi Arabia, and profiles of the leading operatorsData highlights of the largest construction projects in Saudi Arabia.


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Executive summary


The Saudi Arabian construction industry registered a compound annual growth rate (CAGR) of 6.94% during the review period (2008–2012). Industry expansion was supported by the government’s initiatives to transform the country from an oil-based economy to one more reliant on manufacturing and services. This resulted in significant investments in infrastructure development, which positively affected other markets in the industry. Population growth and a rise in disposable income also increased the demand for residential, commercial and institutional buildings. The industry is expected to record a forecast-period (2012–2017) CAGR of 5.54%, driven by an increase in government expenditure on infrastructure construction.




This report provides a comprehensive analysis of the construction industry in Saudi Arabia. It provides:


Historical (2008-2012) and forecast (2013-2017) valuations of the construction industry in Saudi Arabia using construction output and value-add methodsSegmentation by sector (commercial, industrial, infrastructure, institutional and residential) and by project typeBreakdown of values within each project type, by type of activity (new construction, repair and maintenance, refurbishment and demolition) and by type of cost (materials, equipment and services)Analysis of key construction industry issues, including regulation, cost management, funding and pricingAssessment of the competitive environment using Porter’s Five Forces analysisDetailed profiles of the leading construction companies in Saudi Arabia


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Reasons to buy


Identify and evaluate market opportunities using Timetric's standardized valuation and forecasting methodologiesAssess market growth potential at a micro-level with over 600 time-series data forecastsUnderstand the latest industry and market trendsFormulate and validate business strategies using Timetric's critical and actionable insightAssess business risks, including cost, regulatory and competitive pressuresEvaluate competitive risk and success factors


Key highlights


According to the Central Department of Statistics and Information, Saudi Arabia’s population increased from 28.4 million in 2011 to 29.2 million in 2012, registering an annual growth of 2.9%. This growth was significantly lower than the last five-year (2008–2012) average rate of 3.2%, as the birth rate (per 1,000) declined from 23.6 in 2007 to 21.8 in 2012. The gender distribution of the population remains skewed, with males accounting for 55% of the total population and females accounting for 45.0%. According to UN estimates, Saudi Arabia’s population is expected to reach 33.5 million by 2020.The unemployment rate averaged at 5.37% during 2009–2012, but fell to 5.1% in 2013. The reduction has been attributed to government policies in early 2013, aimed at reducing the number of unskilled expatriates in the labor force, which initially had an adverse effect on sectors that were dependent on that form of labor. However, it has resulted in a number of individuals being able to find jobs. Timetric expects this scheme, along with the general economic performance, to bring the unemployment rate down to 4.9% by 2017.


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Table of contents


1 Executive Summary

2 Market Overview

2.1 The Domestic Economy

2.2 Key Trends and Issues

2.3 Key Construction Indicators

2.4 Benchmarking by Market Size and Growth

2.5 Price Dynamics


3 Commercial Construction

3.1 Performance Outlook

3.2 Key Trends and Issues

3.3 Data and Project Highlights


4 Industrial Construction

4.1 Performance Outlook

4.2 Key Trends and Issues

4.3 Data and Project Highlights


5 Infrastructure Construction

5.1 Performance Outlook

5.2 Key Trends and Issues

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