Historical, Current state of the issue and Emergence of Saudi Arabia as free market
Historical
Saudi Arabia is a total monarchy ruled by King Abdallah bin Abdul Aziz Al Saud. Saudi Arabia has appeared to be satisfied with advance in economic. As a primary for oil producer and exporter, Saudi Arabia controls the whole Organization of Petroleum Exporting Countries.
Saudi Arabia’s free market economy has incredible changes in a relatively short term of time. I t has grown from agricultural base community into the regional and global economic power with a modern infrastructure. Petroleum is a fundamental part of the Saudi Arabia’s economy comprising 45 percent of the country’s GDP. Saudi Arabia is the world’s largest producer and exporter of oil, accounting for 20 percent of the oil reserves. GDP in 2010 was estimated at USD622BN ( USD 24,200 per capita). GDP growth in 2010 was 3.7%.
Petroleum is an integral part of the Saudi economy comprising 45 percent of the country’s GDP. Saudi Arabia is the world’s largest producer and exporter of oil, accounting for 20 percent of the world’s oil reserves. GDP in 2010 was estimated at USD622 BN (USD 24,200 per capita). GDP growth in 2010 was 3.7%
Saudi Arabia was first graded in the 1996 Index, and its economic freedom score has declined since then by 6.1 points. Rating gains in trade freedom, investment freedom, and the management of government spending have been overwhelmed by substantial double-digit declines in property rights, freedom from corruption, and overall regulatory efficiency.
Reflecting the lack of progress toward greater economic freedom, Saudi Arabia’s economy has been rated only “moderately free” throughout the country’s 19-year history in the Index. The kingdom’s overall economic freedom remains constrained by institutional shortcomings. The perceived level of corruption has increased, and the legal system remains susceptible to political influence. Saudi Arabia’s property rights score is now lower than the world average.
Saudi Arabia’s average tariff rate is 5.5 percent. Non-tariff barriers affect several categories of imports. The government limits foreign investment in several sectors of the economy. The financial sector has undergone gradual transformation, and some restrictions on foreign investment in financial services have been eased. The government retains majority shares in the largest bank and offers subsidized credit to preferred sectors.
Current state of the issue
The government has an essential role in industrial and economic development. 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. 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.
Emergence of the issue
When the modern Kingdom was established in 1932, the Arabian Peninsula was an agricultural society that depended on farming and commerce – especially date exports and trade generated by pilgrims coming to Makkah and Madinah. It lacked the infrastructure needed to support the kind of economic growth envisioned by its founder, King Abdulaziz bin Abdulrahman Al-Saud.
The discovery of oil in commercial quantities in 1938 changed that. Soon after World War II, steady oil exports provided the funds to build a basic infrastructure of roads, airports, seaports, schools and hospitals.
In 1970, Saudi Arabia introduced the first of a series of ongoing five-year development plans to build a modern economy capable of producing consumer and industrial goods that previously had been imported. The country’s infrastructure was expanded, allowing industry and commerce to flourish.
At the same time, the national oil company, Aramco, invested in new production facilities, pipelines, plants and shipping facilities and continued exploring for new deposits to maximize earnings from the oil sector, which were needed to fund further growth. The result has been a steady economic transformation of the country. Today, Saudi Arabia is one of the fastest developing countries in the world.
Saudi Arabia is the 19th largest exporter and the 20th largest import market in the world. Exports now represent all economic sectors. Topping the list of exports to some 90 countries are petrochemicals, plastics, metal goods, construction materials, and electrical appliances. Saudi Arabia’s commercial sector is growing rapidly. This is mainly due to generous government incentives such as the provision of long-term interest-free loans and support services and facilities. In addition, chambers of commerce and industry in the major cities and regions promote commercial ventures. There are some 584,000 licensed firms involved in commercial activities in the Kingdom. Their total invested capital is estimated at more than $54 billion. The sector is overseen by the Saudi Arabian General Investment Authority (SAGIA), which offers private entrepreneurs free consulting and support services and publishes lists of investment opportunities. SAGIA announced plans to open offices abroad, including in China, the United States, Britain and Germany to attract investment in infrastructure projects. The role of the private sector in commerce is substantial – private companies account for some 48 percent of the nation’s GDP of $248.82 billion. They manufacture, distribute and sell domestic products.
Private companies also handle most imports of consumer and industrial goods and the bulk of the exports of non-oil products. Saudi Arabia is among the top 20 export and import markets in the world, and exports of non-oil products to some 90 countries average around six billion dollars per year.
Foreign investment is also growing in the Kingdom. Investors from all over the world are joining Saudi partners to set up ventures, attracted by the Kingdom’s political, economic and social stability, modern infrastructure, inexpensive energy supplies and strategic geographic location.
On April 11, 2000 Saudi Arabia made it easier for foreign investors in the Kingdom by introducing a new law giving foreign investors the right to the same benefits, incentives and guarantees offered to Saudi individuals and companies. It also allows foreign investors to own property and real estate. The future of the commercial sector is promising. Saudi Arabia’s membership in the WTO boosts commercial activity and provides Saudi products with more opportunities in global markets. Another positive development is the formation of free-trade zones that Saudi Arabia has undertaken with several neighbouring countries.
Saudi Arabia’s economic freedom score is 62.2, making its economy the 77th freest among the 2014 Index. It reflects the improvements in the control of government spending.
Saudi Arabia was first graded in the 1996 Index, and its economic freedom score has declined since then by 6.1 points. Rating gains in trade freedom, investment freedom, and the management of government spending have been overwhelmed by substantial double-digit declines in property rights, freedom from corruption, and overall regulatory efficiency.
Reflecting the lack of progress toward greater economic freedom, Saudi Arabia’s economy has been rated only “moderately free” throughout the country’s 19-year history in the Index. The kingdom’s overall economic freedom remains constrained by institutional shortcomings. The perceived level of corruption has increased, and the legal system remains susceptible to political influence. Saudi Arabia’s property rights score is now lower than the world average.
Saudi Arabia is a total monarchy ruled by King Abdallah bin Abdul Aziz Al Saud. Saudi Arabia has appeared to be satisfied with advance in economic. As a primary for oil producer and exporter, Saudi Arabia controls the whole Organization of Petroleum Exporting Countries.
Saudi Arabia’s average tariff rate is 5.5 percent. Non-tariff barriers affect several categories of imports. The government limits foreign investment in several sectors of the economy. The financial sector has undergone gradual transformation, and some restrictions on foreign investment in financial services have been eased. The government retains majority shares in the largest bank and offers subsidized credit to preferred sectors.