Saudi Arabia country profile

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King Abdullah bin Abdulaziz al-Saud's visit to the UK in October 2007, the first by a Saudi monarch for 20 years, cements his reputation as a ruler of truly international importance.

With close ties to Western allies, particularly the US and the UK, and Middle East's Arab states, Saudi Arabia's role on the global stage is becoming ever more important. The country is closely involved with attempts to negotiate a peace settlement between Israel and Palestine, and its economic dominance in the region means it is considered the most important voice within the GCC.

Domestically Saudi remains the most traditional of the Middle East states, but King Abdullah is clearly leading the country down a path of reform. He is conscious of the need to implement any reform programme in small, incremental steps in order to maintain consensus between modernisers and the country's powerful conservatives. Inevitably this limits the pace of the liberalisation and diversification of the Saudi economy, which is progressing slower than in other Gulf states.

Although the kingdom's massive oil wealth has catapulted its economy into the 21st Century, Saudi Arabia's strict adherence to the Wahabi interpretation of the Qur'an means that there remains a large element within Saudi society that is wary of any change that could be construed as Westernisation. 

The country is named after King Adulaziz bin Abdulrahman al-Saud, the founder of modern Saudi Arabia, who united the country under his family's rule. Since 1953 the kingdom has been ruled by the sons of King Abdulaziz, and the Majlis al Shura, or Shura Council, created in 1992 and made of members appointed by the king.

In 2005 the country held its first experiments with democratic elections, putting 592 low-level seats in 178 councils up for election, although the success of extreme conservative candidates is likely to delay any significant expansion of democratic reforms.

Table: Saudi Arabia at a glance

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Government

Saudi Arabia is an absolute monarchy and has been ruled by the al-Saud dynasty since its inception. The king is responsible for appointing a council of ministers which he heads as prime minister, and also selecting a crown prince to act as deputy prime minister and heir to the throne. Crown Prince Sultan is the present crown prince. Kind Abdullah last year established the Allegiance Committee, made up of the sons and grandsons of King Abdulaziz, that would vote on the nomination of crown princes.

The Qu'ran is the constitution of the country.

Government officials

• King and Prime MInister: Abdullah bin Abdulaziz al-Saud

• Crown Prince: Sultan bin Abdulaziz (also serves as Deputy Prime Minister, Minister of Defence)

• Foreign Minister: Prince Saud al-Faysal Bin-Abd al-Aziz Al Saud

• Interior Minister: Prince Nayif Bin-Abd-al-Aziz Al Saud

• Minister of Economy and Planning: Khalid bin Muhammad Al-Qusaibi

• Minister of Commerce and Industry: Hashim bin Abdullah bin Hashim Al-Yamani

• Minister of Finance: Ibrahim bin Abdulaziz bin Abdullah Al-Assaf

• Minister of Petroleum & Natural Resources: Ali bin Ibrahim Al-Naimi 

• Minister of Health: Hamad bin Abdullah Al-Mane' 

• Minister of Justice: Abdullah bin Muhammad bin Ibrahim Al Al-Sheikh

• Minister of Transport: Jubarah bin Eid Al-Suraiseri

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Economy

Saudi Arabia holds the world's largest hydrocarbon reserves, reflected in its oil-dominated economy; the hydrocarbons sector accounts for 63 per cent of GDP and 75 per cent of government revenue.

Booming oil prices mean that a record budget surplus, 9.4 per cent higher that forecast, of SR290bn ($77.3bn) was recorded for 2006, this was at that same time that spending reached an all-time high of SR393bn ($105bn). The budget for future expenditure puts an emphasis on education and training.

GDP growth in 2008 is projected to accelerate to 5.8 per cent with oil revenues hitting $165bn and foreign assets $269bn

Despite its wealth, unemployment among the rapidly growing population presents the kingdom with a significant challenge, which it is attempting to address through the construction of six economic cities that will promote diversification and eventually contribute $150bn to GDP and provide jobs for 1.3 million people.

The Supreme Economic Council was established in 1999 to lead the diversification of the economy away from oil, and was followed in 2000 by the formation of the Saudi Arabian General Investment Authority (Sagia) to encourage foreign direct investment into the Kingdom.

The general public is becoming more concerned about inflation, which hit a 10-year high of 4.8 per cent in October 2007, driven by soaring rental costs and global food inflation. Although not in double digits like in neighbouring Qatar and the UAE, the issue has become of such concern that King Abdullah in October called for the Interior Minister and regional governors to produce a plan to moderate future price rises.

TABLE: Economic indicators

($ million, unless stated)

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Sectors

Oil & Gas

National oil company (NOC) Saudi Aramco, the largest oil company in the world, dominates the sector, both in terms of production, for which it is responsible for more than 95 per cent of the country's oil output, and has the world's largest proven crude oil reserves. The company was also voted the region's best-run NOC by industry leaders.

From its headquarters in Dhahran in the Eastern Province the company manages almost all of Saudi Arabia's hydrocarbon enterprises. It has announced plans to invest $31bn to boost crude production capacity to 12.2 million barrels a day, part of a $90bn five-year plan to cement the company's reputation as the world's biggest oil firm.

Banking

The last few years has seen dramatic growth in the banking sector, particularly as the glut of initial public offerings of government companies, considered a way for oil wealth to be redistributed to the public, gave banks a steady stream of advisory and trading income. However, the collapse of the stock market in early 2006 meant the attraction of listing ended, and trading dried up. Most of the country's banks are now trying to boost income from other sources, particularly retail lending, but are still likely to see profit growth fall in 2007 as the full impact of the stock market collapse works through the economy.

The difficulty in obtaining a licence to operate in Saudi means that only 11 banks operate, dominated by Al-Rajhi bank, the country's most profitable and one of the world's largest Islamic banks, and National Commercial Bank the largest by asset size in both Saudi Arabia and the whole GCC. The market is considered one of the region's most lucrative because of the size of the, largely unbanked, Saudi population, and the lack of penetration of products like mortgages and insurance.

A number of international banks have entered the market by taking stakes in domestic firms, such as HSBC's 40 per cent stake in Saudi British Bank (Sabb) and ABN Amro's 40 per cent stake in Saudi Hollandi Bank, which could soon be up for sale.

Financial markets

Much like the banking sector, the Saudi Stock Exchange (Tadawul) is the largest in the region, however, it has yet to recover from the collapse in prices that began in 2006 and is also one of the least open to foreign investors. During 2006 the market lost around 60 per cent of its value from a peak of over 20,000 points in February of that year.

In late 2007 the government announced that the exchange would be open to all GCC nationals to trade in shares listed on the Tadawul in accordance with the deepening integration of the GCC.

Industry & Petrochemicals

Much like the oil sector, industry and petrochemicals is dominated by one company. Saudi Basic Industries Corporation (Saab) is the kingdom's biggest publicly traded company despite still being 70 per cent government owned. It was created in 1976 to help further exploit the kingdom's natural resources. In 30 years it has become one of the world's biggest industrial companies involved in the production of industrial polymers, chemicals, fertilisers and metals.

The other major player in the sector is Saudi Arabian Mining Company (Madden), which is developing a world-scale fertiliser and aluminium complex at Ra's al-Our, and which is also planning a $husband IPSO by early 2008. The company is also involved in five gold mining projects as part of the government's attempts to develop its mining sector which includes the development of phosphate and bauxite deposits.

Transport

Massive investment is under way to develop transport projects including the North-South railway, the Mecca-Medina railway, the Riyadh Metro, Medina monorail, the Saudi Land bridge project to link the Gulf with the Red Sea via Riyadh, and the development of King Abdullah Port in Amman and a new port in Jeddah.

Although Dubai's Eel Ali port remains the Gulf's pre-eminent Trans-shipment hub, Saudi Arabia's large population and economy have led to speculation that the country could eventually eclipse its neighbour.

The government is also seeking new operators for its international airports at Jeddah, Riyadh and Amman to develop them into commercial enterprises and improve the standards and services of air travel in the Kingdom in a bid to become a regional hub for air travel.