News Archive
Investment pours into Saudi Arabia
Released on 16/09/2008
Around US$800 billion will be invested in Saudi Arabia over the next decade as the oil-rich kingdom looks to develop its infrastructure and fuel economic growth.
Awaad Al-Awwad, the deputy governor of the Saudi Arabian General Investment Authority (SAGIA), told Arabian Business that around US$200 billion of the total investment would be spent on the construction of buildings.
A sizeable chunk of the money will be ploughed into the development of the four new economic cities, the most high-profile of which is King Abdullah Economic City (KAEC).
Al-Awwad refuted concerns that the cities will not succeed in diversifying Saudi Arabia’s economy away from oil, saying, “They are all in very good shape.”
He also confirmed rumours that the Government is planning to build two more cities, but refused to give further details. “They are still in the pipeline,” he said.
The word “pipeline” is entirely apt for Saudi Arabia, the world’s biggest oil exporter. It has experienced soaring sales on the back of record oil prices, which hit an all-time high of $147 in July. The country earned about US$220 billion from crude sales in the first eight months of 2008, nearly $26 billion more than its total sales for the whole of 2007, according to estimates by the Energy Information Administration.
Al-Awwad said high prices “are helping to rebuild the infrastructure and energize the economy”.
Despite its oil wealth, Saudi Arabia faces several longstanding socio-economic challenges: unemployment reported at 12%, a fast-growing population and terrorist threats. Recent spikes in the price of crude have erased predicted budget deficits, but its national debt remains significant. The kingdom is heavily reliant on oil – petroleum represents 90% of the kingdom’s exports and 75% of government revenues – and breaking this reliance is a key plank of the government’s economic strategy.
The sprawling Saudi royal family, with its thousands of princes, many with multiple wives, has been criticized for wasting many billions of oil revenues during the 80s and 90s on luxurious living. Former monarch, King Fahd, reportedly took eight aircraft, including five Boeing 747s, on a private holiday.
Asked by Arabian Business whether the global slowdown was having a negative impact of foreign investment, Al-Awwad said the West’s economic problems were drawing more companies to high-growth markets such as Saudi Arabia.
“In general we see more investment coming into the kingdom. Companies are really trying to diversify from economies going into recession,” he said.
Awaad Al-Awwad said the investment, which amounts to US$80 billion a year, will come from both the public and private sectors. As well as focusing on the construction of new homes, academic institutions and healthcare facilities, many existing roads, ports and airports will be upgraded.
“With this booming economy and also from the money coming from oil the government is trying to take it and expand the infrastructure and prepare it for the next generation,” Al-Awwad said.
