717-Golden Jubilee Institute Of Management

PART I
EXECUTIVE SUMMARY
OF
POLITICAL SYSTEM OF
SAUDI ARABIA
1
EXECUTIVE SUMMARY
Literally, Islam means submission, peace and salvation. The Islamic religion is the
absolute submission to God according to the heavenly revelations. Thus all Prophets,
peace be upon them, came with the same essentials of belief: belief in God‘s Existence
and Unity, final destruction, Resurrection and Judgment etc., as well as common pillars
such as worshipping God, paying zakat and abiding by noble values.
Each prophet hood differed in terms of details of rules and duties. Islam, which was
revealed to Prophet Muhammad, is the most comprehensive of all these forms.This was
clearly stated in the Holy Qur‘an: ―This day have I perfected your religion for you.
Completed My favor upon you, and have chosen for you Islam as your religion.‖
There is the system of faith and ideology, the system of worship, and the system of
people‘s mutual dealings, in addition to other systems such as that of ethics, sociology,
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politics, management etc. All this serves to confirm Islam as a comprehensive, integrated
way of life.
Saudi Arabia has a land area of 1,960,582 square kilometers according to U.S.
government statistics. Saudi Arabia faces numerous environmental challenges. The
country has very little arable land. Water scarcity is a constant concern, as are the related
issues of desertification and creeping sands The region‘s dryness results in frequent dust
and sand storms that can cripple transportation. The lack of perennial rivers or permanent
bodies of water poses a continual challenge, as does the depletion of underground water
resources. Additionally, coastal oil spills, though infrequent, contribute to pollution
Saudi Arabia‘s population is very homogeneous. The native population is 90 percent
Arab and 10 percent Afro-Asian. Arabic is the official language. The purpose of education
is to understand Islam correctly and comprehensively, to instill and disseminate the Islamic
faith, and to provide students with Islamic values, instructions and eminent principles
Among developing nations, as categorized by the United Nations in 2005, Saudi
Arabia ranks thirty-second out of 103 countries on the Human Poverty Index,through its
series of five-year development plans, Saudi Arabia continues to try to transform oil wealth
into broader economic prosperity. But despite high oil prices and rising oil production, the
average Saudi‘s standard of living has fallen, and unemployment, especially among young
adults, continues to rise
If we move to the modern Saudi state - the Kingdom of Saudi Arabia - we would face
no difficulty in acknowledging its reality and seeing to what extent it has adopted the
aforementioned pillars.
With regard to their subject to law, governments are divided into two types:Dictatorship:
The autocratic rule of an individual or group. Monocracy: Government through established
laws, to the leadership, governments areal so of two types Monarchy: Government of
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hereditary succession of leadership Republic: Government of which a president is elected
through voting. the source of authority, governments are of three types Dictatorship
An autocratic form of government where the government is ruled by a single person
Oligarchy: leadership by the few, where political power effectively rests with a small elite
segment of society Democracy: government by the people, either directly or
representatively (via elections).
A clearer picture of the Saudi system is obtained if we look at these authorities
individually, as found in the Basic Law of Governance. The judiciary authority is the most
noble and respected authority in Islam Prophets have guided their people and have ruled
them with justice, one of the most famous among being Prophet David, whom God
addressed in the Holy Qur‘an saying
The judiciary is an independent authority. There is no control over judges in the
dispensation of their judgments, except that of the Islamic shari’ah. The right to litigation is
guaranteed to citizens and residents of the Kingdom on an equal basis. The law defines
the required procedures for this
The courts will apply the rules of the Islamic shari’ah in the cases that are brought before
them there are many other laws related to the judiciary, but they are merely of an
organizational nature, the most famous of them being:The Law of Procedure before the
Shari’ah Courts,The Law of Criminal Procedures,The Code of Law Practice,In addition to
other related laws, like:
Real Estate Registration Law,Money Laundering Law,Arbitration Law.
Litigation in Saudi Arabia passes through two parallel channels,The General Judiciary
and The Administrative Judiciary,The General Judiciary has the jurisdiction to settle all
lawsuits that are not under the competence of the Administrative Judiciary.
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The executive authority, as referred to earlier, is the body responsible for the execution
of laws.It is simply referred to as the government, represented by its leader, such as a
King or President, and ministers under his leadership.The Saudi Basic Law of Governance
explains the nature of this authority and its undertakings.
The King, or whoever he deputizes, is responsible for the implementation of judicial
rulings, The King carries out the policy of the nation, in accordance with the provisions of
Islam; the King oversees the implementation of the Islamic Shari’ah, the laws, the state‘s
general policies and the protection and defense of the country.
The King is the Prime Minister; he is assisted in carrying out his duties by members of the
Council of Ministers, in accordance with the provisions of this and other laws
Fundamentally, a minister is one who assists and supports a King, but the term has often
referred to a particularly robust assistant, as Abu Bakr and Umar were to the Prophet,
peace be upon him The ministers are responsible to the King regarding the
implementation of the Islamic shari’ah, the laws and the state‘s general policy Within the
ministry there are different departments, committees, and authorities as well as other
structures.
The official governmental agencies and departments, as well as those independent from
the ministries, are part of the executive authority and are responsible for implementing and
maintaining law the Basic Law of Governance states: ―Ministers and heads of independent
departments are answerable to the prime minister for the ministries and departments
which they administer.‖
The Saudi regulator prefers the term ‗Regulatory Authority‘ for two reasons:There is a
linguistic difference between regulation and legislation. Regulation is to arrange matters
5
and construct them in a cohesive model, while legislation is the process of making and
passing laws.
Laws or legislations are divided into two main parts,The First: The basic law
(legislation) which is the constitution,The Second: Normal laws or legislations. State policy
may differ in the preparation and ratification of the first part. It may be issued by the
primary holder of Within its present status, the Shoura Council‘s decisions are non-binding,
which represents a different application of the Islamic concept of shoura.
The Council of Ministers, chaired by the King, exercises the same authority and
undertakes necessary decisions within this framework.This means that the Council of
Ministers exercises two authorities at the same time: the Regulatory Authority and the
Executive Authority, and this is a tradition also followed in other countries.
For normal legislations or laws, they are issued by the legislative, or regulatory
authority, as the term is used in Saudi Arabia.In Saudi Arabia, this authority is represented
by the Council of Ministers as mentioned earlier. The Shoura Council issues
recommendations and suggestions Saudi Law has adopted the legal term ‗citizens‘ and
not ‗people‘ the Basic Law of Governance.This may be attributed to the common use of
the term citizen as that which refers to a certain type of inhabitant of a country who also
carries its nationality
The rights of non-Muslims occupy a special position in Islamic jurisprudence due to the
recognition of Muslim scholars of the importance of this issue, and because every Islamic
society includes non-Muslims.
6
The status and position of these non-Muslims vary. Some may stay permanently in
the Islamic society, and they are known as Ahl Al-thimma, while others may have
temporary residency only, and they are termed mustamaneen
The Basic Law, which states: ―Residents on the Kingdom of Saudi Arabia shall observe
its laws. They shall respect the values, traditions and sensibilities of Saudi society.‖ The
King is also the prime minister, chief of state, the head of government, and commander in
chief of the military of Saudi Arabia.
The monarchy is hereditary, so there are no elections for the role.The King's Cabinet, or
Council of Ministers, is appointed by the King every four years, and includes many family
members. There are 22 government ministries that are part of the Cabinet.
In February 2009, King Abdullah appointed Norah Al-Fayez to be the first female
cabinet-level official, a deputy minister for women's education. She had formerly had
worked as an official in the Saudi Institute for Public Administration. This is made up of a
Consultative Council (also known as Majlis as-Shura or Shura Council) advises the King
on issues that are important to Saudi Arabia.
The Consultative Council currently consists of 150 members appointed by the King for
a four-year renewable term. Based on their experience, members are assigned to
committees. There are 12 committees that deal with human rights, education, culture,
information, health and social affairs, services and public utilities, foreign affairs, security,
administration, Islamic affairs, economy and industry, and finance.
In October 2003, the Council announced its intent to start elections for half of the
members of the local and provincial assemblies (there are 13 provinces, each with a
governor and deputy and its own council made up of at least 10 citizens), and one-third of
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the members of the Consultative Council incrementally over a period of four to five years.
No elections have yet been announced.
In September 2011, King Abdullah announced that women would have the right to be
appointed to the Consultative Council. And, in January 2013, the King appointed 30
women to serve four-year terms on the Council, following passing of a law stating that
women should constitute at least 20% of the Council's membership.
Saudi citizens cast votes to select one-half the members of the municipal councils.
The three-stage elections, which will continue through April 2005, represent a fundamental
step away from Saudi Arabia‘s absolute monarchy.
There are also some signs that a portion of the members of the Consultative Council
might be chosen via election in the near future. In general, the expanding power of the
Consultative Council, in comparison to the traditional dominance of the Council of
Ministers, is a positive sign for liberal reformers in the kingdom hoping for increased
popular sovereignty. Nevertheless, out of a population of nearly 26 million, only about 3
million (males only) are eligible to vote.
Political parties are illegal in Saudi Arabia, but distinct political divisions exist. The royal
family continues to fill most of the important political positions in the kingdom, but the king
and the Al Saud are forced to rule by consensus. The ulama, a large and powerful group
of religious leaders, perhaps numbering 10,000, ensure that the king observes Islamic law
above all other considerations. In order to placate the powerful religious majority of Saudi
society, the Al Saud pays close attention to the interests espoused by religious leaders.
Alliances made between important members of the Al Saud family and prominent
religious leaders have long shaped Saudi Arabia‘s society. Saudi Arabia‘s history of tribal
organization also plays into the kingdom‘s political mix. Leaders of the principal tribes still
command respect and authority. In past years, tribal leaders have proved able to mobilize
military units from among their followers. The traditional merchant families of Saudi Arabia
also have a measure of political influence. The royal family has depended on the
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merchants at various times for financial support, and merchant revenues continue to be a
steady source of government income.
Finally, the new class of Saudi professionals and technocrats, emerging as a result of
increased privatization of the economy, has informal influence on government ministers.
Petitions signed by members of this class have encouraged some reforms.
Supplementing the Shari‘ah courts is the Board of Grievances, which hears cases that
involve the government. The third part of the Saudi court system consists of various
committees within government ministries that address specific disputes, such as labor
issues.
The Supreme Council of Justice, which is comprised of 12 senior jurists, represents
the judicial branch of government. Justice is administered by a system of religious courts
whose judges are appointed by the King on the recommendation of the Supreme Judicial
Council. The independence of the judiciary is protected by law. The King acts as the
highest court of appeal and has the power to pardon.
Local elections in 178 municipalities were first held in 2005, and only male citizens over
21 were allowed to vote.
In September 2011, shortly before the municipal elections, King Abdullah announced
that in subsequent municipal elections, women would be allowed to run and to vote. The
next municipal elections are scheduled for 2015. There are no political parties in Saudi
Arabia.
Newspapers are privately owned but are subsidized and regulated by the government.
Because the Basic Law states that the media‘s role is to educate and inspire national
unity, most popular grievances go unreported in Saudi Arabia.
In recent years, however, the government has allowed some critical stories to be
written by selected journalists. Although self-censorship continues to be a method of selfpreservation for the nation‘s media outlets, government censorship seems to be
decreasing, especially on journalistic inquiries into crime and terrorism.
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The government owns and operates the radio and television companies in Saudi Arabia.
Censors remove objectionable material deemed offensive by the standards of Islam.
Government censorship, which has always plagued the press in Saudi Arabia, has been
less effective in its control of the Internet.
Legal access to the Internet must be via local servers, which the government monitors
for sites that are pornographic, politically offensive, or un-Islamic. Despite these controls,
however, Saudi Internet users have been able to access most sites they wish to visit by
simply connecting through alternate servers.
Saudi Arabia has strong ties to the nations of the Middle East as well as to other
Muslim states and Western nations such as the United States and Japan. As the guardian
of Islam‘s holy places, Saudi Arabia hosts millions of pilgrims from neighboring Islamic
countries annually.
Additionally, the mutual concern over oil prices has led to cooperation among oilproducing countries in the Middle East. As one of the more affluent countries in the region,
Saudi Arabia has pursued aid and development for less developed Arab and Muslim
states.
Although Saudi Arabia has, at different times, suspended diplomatic relations with Iran
and Egypt, among others, it continues to play a dominant role in the region. Saudi Arabia
has its strongest diplomatic relations in the region with other members of the Gulf
Cooperation Council (GCC): Bahrain, Oman, and the United Arab Emirates.
Saudi Arabia maintains a complex diplomatic position between the Middle East and the
West. It has consistently sought to promote Arab unity, defend Arab and Islamic interests,
and support a peaceful resolution of the Israeli-Palestinian conflict
Saudi Arabia is a member of the United Nations (UN), most UN specialized agencies,
and numerous other international organizations. Regionally, Saudi Arabia has fostered
close ties to other Arab and Islamic states through membership in organizations such as
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the Arab Bureau of Education for the Gulf States, Arab Monetary Fund, Arab Sports
Federation, Gulf Cooperation Council, Islamic Corporation for the Development of the
Private Sector, League of Arab States, Muslim World League, Organization of Arab
Petroleum Exporting Countries, Organization of the Islamic Conference, and Organization
of the Petroleum Exporting Countries (OPEC).
Saudi Arabia also has membership in the International Monetary Fund and the World
Bank and has applied for membership to the World Trade Organization.
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PART II
TRANSPOTATION SECTOR
12
INTRODUCTION TO TRANSPORTATION
In a country once accessible only via the camel caravan, Saudi Arabia has made rapid
improvements in its transportation and communications networks through its five-year
developmental plans. Improvements in roads, railroads, airports, and telecommunications
have come rapidly since 1970. However, with agricultural and industrial development,
traffic also has increased rapidly. Continuing improvements will be necessary to allow for
long-term economic growth as well as to decrease congestion and preserve the quality of
urban life.
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OVERVIEW OF SYSTEM OF GOVERNMENT
After 30 years of intermittent warfare over much of the Arabian peninsula, the late King
Abdul Aziz Ibn Abdul Rahman Al-Faisal Al-Saud completed his consolidation of the
Kingdom of Hejaz and the Kingdom of Nejd into the Kingdom of Saudi Arabia in
1932.1.The Kingdom of Saudi Arabia is an independent Islamic monarchy. His Majesty
King Abdullah Ibn Abdul Aziz Al-Saud, Custodian of the Two Holy Mosques, has been the
head of state since August 1, 2005. The King governs through a Council of Ministers, 2 on
which he serves as President. The King is assisted by His Royal Highness Crown Prince
Sultan Ibn Abdul Aziz Al-Saud, the First Deputy Premier; His Royal Highness Crown
Prince Nayef Ibn Abdul Aziz Al-Saud, the Second Deputy Premier; and by his other
Ministers.
The Basic Law of the Kingdom of Saudi Arabia 3 reaffirmed the Kingdom‘s status as an
Islamic monarchy and formalized its system of government. In 1993, the Consultative
Council was constituted as an advisory body to the Council of Ministers, with responsibility
for advising on the policies of the Kingdom, reviewing and commenting on laws, bylaws,
contracts, international agreements and special rights; and providing suggestions in
connection with annual reports prepared by the Ministries.
The Kingdom of Saudi Arabia is divided into 13 provinces, each of which is administered
by a provincial governor appointed by the King. Provinces are subdivided into
governorates, districts and centers. Each provincial governor is assisted by a vice
governor. These, together with not less than 10 other members approved by the Minister
of Interior and appointed by the King on the nomination of the provincial governor,
constitute the provincial councils. The provincial councils are empowered to determine the
development needs of their respective provinces, make recommendations for projects and
improvements and request appropriations in the annual state budget. Any member of a
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provisional council is entitled to submit written proposals to the provincial governor and
every proposal will be placed on the council‘s agenda for consideration.
TRANSPORTATION
The Kingdom of Saudi Arabia has built a massive network of modern roads linking all parts of the
country,in addition to a railway network and air transport services offered by Saudi Arabian Airlines, the
largest air carrier in the Middle East. Sea transportation has also witnessed rapid development,
including the establishment of a number of seaports linking the Kingdom with the rest of the world.
1. Roads
The length of the Kingdom's road network reached more than 42,000 kilometers in 1995 (1415
H).
* The length of paved agricultural roads reached 96,000 kilometers in 1995 (1415 H).
* The cost of the roads total more than SR 130 billion.
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2. Railways
The construction of a railway line linking the capital Riyadh with Dammam, the seaport on the Arabian
Gulf coast, dates to 1951 (1370.H), during the era of the Founding King, Abdul Aziz. As part of the
Kingdom's all-encompassing development a new line was constructed, allowing for the daily operation
of four express trains, two in each direction. This reduced the journey's duration to four hours.
3. Air Transport
Saudi Arabian Airlines (SAUDIA) is responsible for the transportation of passengers and baggage on its
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domestic and international flights. Saudia operates 107 planes of various types, including Lockheed,
Tristar, Airbus and Boeing 747. It has more than 10,000 employees. 73% of its pilots are Saudis. In
1994, Saudia flew 12 million passengers.
4. Airports
The Kingdom of Saudi Arabia has 25 airports. Three are international, eight regional and fourteen
domestic. International airports include:
King Khaled International Airport in Riyadh.
Thirty-five kilometers north of the capital Riyadh, it was opened in 1983 (1403 H). Built on an area of
225 sq. kilometers, its operational capacity is 7.5 million passengers annually.
Dhahran International Airport (Closed 1999)
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Built in the Eastern Region in 1953 (1371 H), it was the Kingdom's first international airport. It is an
International transit point for European and Asian airlines.
King Abdul Aziz International Airport in Jeddah
It was built in 1981 (1401 H) on an area of 105 sq. kilometers. Each of its three terminals is considered
a separate airport. There is one for domestic flights, another for international flights and a third for
pilgrim flights. Jeddah is the main air gateway for pilgrims.
King Fahd International Airport in the Eastern Region
This is the Kingdom's most modern airport, comprising an area of 780 square kilometers. Its facilities
are state-of-the-art.
5. Seaports
The number of quays at the Kingdom's ports increased from 27 in 1975 (1395 H) to 182 in 1994 - 1995
(1414 - 1415 H), including 23 at Yanbu's King Fahd Industrial Port. There are 112 maritime companies
in the Kingdom which owns 11 ships and has shares in 48 others.
The major seaports in the Kingdom of Saudi Arabia are:
1.Jeddah Islamic Seaport.
2.King Abdul Aziz Seaport - Dammam, on the Arabian Gulf.
3.King Fahd Industrial Seaport - Jubail, on the Arabian Gulf.
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4.King Fahd International Seaport - Yanbu, on the Red Sea.
5.Jizan Seaport - in the south of the Kingdom, on the Red Sea.
6.Jubail Commercial Seaport, on the Arabian Gulf.
7.Yanbu Commercial Seaport, on the Red Sea.
Secondary Seaports in the Kingdom include
1. Al Wajh Seaport Red Sea.
2. Haql Seaport Red Sea.
3. Dhiba'a Seaport Red Sea.
4. Al Kheraiba Seaport Red Sea.
5. Farasan Seaport Red Sea.
6. Rabigh Seaport Red Sea.
7. Al Laith Seaport Red Sea.
8. Al Qunfuda Seaport Red Sea.
9. Al Suhail Seaport Red Sea.
10. Al Khobar Seaport Arabian Gulf
11. Al Aqeer Seaport Arabian Gulf
12. Ras Abu Qamees Seaport. Arabian Gulf
These ports are run by the Saudi Ports Authority.
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TRANSPORTATION IN SAUDI ARABIA
There are several transportation modes in the Saudi Arabia.
Road Transportation
File:Riyadh-Mecca Road near Tuwaiq Escarpment.JPG
Riyadh-Mecca Road near Tuwaiq Escarpment in November 2006
Highway 60 passing through Hejaz Mountain Ranges near Taif
Total: 221,372 km
Paved: 47,529 km (includes 3,891 km of expressways)
Unpaved: 173,843 km (2006)
Roads in Saudi Arabia vary from eight laned roads to small two laned roads in rural areas. The city
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highways and other major highways are well maintained, specially the roads in the capital Riyadh. The
roads have been constructed to resist the consistently high temperatures and do not reflect the strong
sunshine. The outer city highways such as the one linking from coast to coast are not as great as the
inner-city highways but the government is now working on rebuilding those roads. (htt1)Saudi Arabia
encourages road transport as it has maintained one of the lowest petrol prices in the world, at $0.48 per
gallon ($0.13 per liter).
Some of the important inter-city highways include the following:
Dammam - Abu Hadriya - Ras Tanura Highway (257 km)
Khaybar - Al Ola Highway (175 km)
Mecca - Madinah Al Munawarah Highway (421 km)
Riyadh - Dammam Highway (383 km)
Riyadh - Sedir - Al Qasim Highway (317 km)
Riyadh - Taif Highway (750 km)
Taif - Abha - Gizan Highway (750 km)
Medina - Tabuk Highway (680 km)
Jeddah - Al Leith - Jizan Highway (775 km)
Jeddah - Mecca Highway (80 km)
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ROAD SUB SECTOR
Road sub-Sector/Infrastructure. Construction, rehabilitation and maintenance are expected to be
financed mainly by the public sector for the foreseeable future, with work executed under
competitively-bid contracts. The international experience supports the creation of independent Roads
Boards to represent user groups in overseeing the road network. Construction and maintenance should
be the responsibility of specialist Road Agencies rather than government depart ments. At times,
international experience endorses public enterprise style ―Road Funds‖ to redress long-term
under-funding of maintenance. These should be supported by road users through appropriate charge
mechanisms, and subject to high governance standards with oversight by the Roads Board. There
continues to be scope for PPP approaches to deliver additional capacity in the form of major highways,
bridges and tunnels. It is likely that multi-year, area-wide road maintenance contracts and concessions
will provide increasing opportunities for the private sector. Intelligent Transport Systems (ITS)
technologies, such as area-wide road pricing, are also possible candidates for PPP as technology risks
may be partly defrayed to the private sector. Road Haulage/Freight. International experience suggests
that road freight services are best provided by the private sector in competitive markets. However, the
industry is poorly developed in many of the developing countries where there may be a case for
enterprise development assistance to road freight operators, and to help build freight forwarding
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capacity. Road Passenger Services. The international experience preferred model is the creation of
competitive or periodically contestable operations by private bus companies, with specific
reimbursements or public service contracts to meet public service..
obligations. However, public ownership remains widespread in some developing countries. Private
sector participation could be for those that have efficient and sustainable business models, and/or in
association with the implementation of credible reform plans involving staged approaches to private
participation in service delivery.
Sea Transportation
Saudi Arabia has a well development sea transport network developed primarily to support the
transport of petrolchemicals. Saudi Ports Authority is the ports management organisation in the country,
overseeing the operations.
The major ports in the country are as follows;
Persian Gulf
Dammam
Jubail
Ras Tanura
Khafji
Khobar
Ras Al-Zour (under construction)
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Red Sea
Jeddah
Yanbu' al Bahr
Al Lith
Duba
Rabigh
Jizan
Farasan (city)
Air Transportation
See also: List of airports in Saudi Arabia
There are an estimated 204 airports in Saudi Arabia (2003 est.).
Airports with paved runways
total: 71
over 3,047 m: 32
2,438 to 3,047 m: 13
1,524 to 2,437 m: 12
914 to 1,523 m: 2
under 914 m: 2 (2003 est.)
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Airports with unpaved runways
total: 133
over 3047 m: 1
2,438 to 3,047 m: 5
1,524 to 2,437 m: 75
914 to 1,523 m: 38
under 914 m: 14 (2003 est.) (Saudia is the nation's flag carrier airline)
Heliports
9 (2009 est.) (htt2)
Rail Transport
This section needs to be further expanded
See also: Saudi Railways Organization
As a result of over-reliance on road and air travel, the rail transport has not received a similar level of
investment in Saudi Arabia. However, there are now plans to add more tracks and develop new railway
routes.
The Saudi Railways Organization (SRO) is a state-owned company that operates Saudi Arabia's rail
network.
SRO provides freight services on two main lines totalling 1018 km. These connect Riyadh with the port
of Dammam on the coast of the Persian Gulf.[4] SRO passenger trains operate between Riyadh and
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Dammam.
There are plans to extend the network to the Red Sea port of Jeddah and, eventually to the borders of
Jordan, Yemen, and perhaps all the way to Egypt.
There is a large scale railway project Haramain High Speed Rail Project underway currently in the
Western province, connecting Makkah with Jeddah and Madinah city. The primary objective of this
railway line is to provide an alternative for the Muslim pilgrims travelling between the 3 cities.
A recent addition is the Al Mashaaer Al Mugaddassah Metro also known as the Makkah Metro tram
system, which was developed in Makkah city. This is a 18.1 kilometers (11.2 miles) track developed to
shuttle a forecasted 8 million pilgrims between Mecca, Mount Arafat, Muzdalifa and Mina in the annual
Hajj pilgrimage.
The Kingdom of Saudi Arabia has built a massive network of modern roads linking all parts of the
country,
in addition to a railway network and air transport services offered by Saudi Arabian Airlines, the
largest
air carrier in the Middle East. Sea transportation has also witnessed rapid development, including the
establishment of a number of seaports linking the Kingdom with the rest of the world.
1.Roads
The length of the Kingdom's road network reached more than 42,000 kilometers in 1995 (1415 H).
* The length of paved agricultural roads reached 96,000 kilometers in 1995 (1415 H).
* The cost of the roads total more than SR 130 billion.
2.Railways
The construction of a railway line linking the capital Riyadh with Dammam, the seaport on the Arabian
Gulf
coast, dates to 1951 (1370.H), during the era of the Founding King, Abdul Aziz. As part of the
26
Kingdom's
all-encompassing development a new line was constructed, allowing for the daily operation of four
express
trains, two in each direction. This reduced the journey's duration to four hours.
3.AirTransport
Saudi Arabian Airlines (SAUDIA) is responsible for the transportation of passengers and baggage on
its
domestic and international flights. Saudia operates 107 planes of various types, including Lockheed,
Tristar,
Airbus and Boeing 747. It has more than 10,000 employees. 73% of its pilots are Saudis. In 1994,
Saudia flew 12 million passengers.
4.Airports
The Kingdom of Saudi Arabia has 25 airports. Three are international, eight regional and fourteen
domestic.
International airports include:
King Khaled International Airport in Riyadh.
Thirty-five kilometers north of the capital Riyadh, it was opened in 1983 (1403 H). Built on an area of
225 sq.
kilometers, its operational capacity is 7.5 million passengers annually.
Dhahran International Airport (Closed 1999)
27
Built in the Eastern Region in 1953 (1371 H), it was the Kingdom's first international airport. It is an
international transit point for European and Asian airlines.
King Abdul Aziz International Airport in Jeddah
It was built in 1981 (1401 H) on an area of 105 sq. kilometers. Each of its three terminals is considered
a separate airport. There is one for domestic flights, another for international flights and a third for
pilgrim
flights. Jeddah is the main air gateway for pilgrims.
King Fahd International Airport in the Eastern Region
This is the Kingdom's most modern airport, comprising an area of 780 square kilometers. Its facilities
are state-of-the-art.
5. Seaports
The number of quays at the Kingdom's ports increased from 27 in 1975 (1395 H) to 182 in 1994 - 1995
(1414 - 1415 H), including 23 at Yanbu's King Fahd Industrial Port. There are 112 maritime companies
in the Kingdom which owns 11 ships and has shares in 48 others.
The major seaports in the Kingdom of Saudi Arabia are:
1.Jeddah Islamic Seaport.
2.King Abdul Aziz Seaport - Dammam, on the Arabian Gulf.
3.King Fahd Industrial Seaport - Jubail, on the Arabian Gulf.
28
4.King Fahd International Seaport - Yanbu, on the Red Sea.
5.Jizan Seaport - in the south of the Kingdom, on the Red Sea.
6.Jubail Commercial Seaport, on the Arabian Gulf.
7.Yanbu Commercial Seaport, on the Red Sea.
Secondary Seaports in the Kingdom include
1. Al Wajh Seaport Red Sea.
2. Haql Seaport Red Sea.
3. Dhiba'a Seaport Red Sea.
4. Al Kheraiba Seaport Red Sea.
5. Farasan Seaport Red Sea.
6. Rabigh Seaport Red Sea.
7. Al Laith Seaport Red Sea.
8. Al Qunfuda Seaport Red Sea.
9. Al Suhail Seaport Red Sea.
10. Al Khobar Seaport Arabian Gulf
11. Al Aqeer Seaport Arabian Gulf
12. Ras Abu Qamees Seaport. Arabian Gulf
These ports are run by the Saudi Ports Authority.
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Transport in Saudi Arabia
Transportation in Saudi Arabia
30
There are several transportation modes in the Saudi Arabia.
Road Transportation
File:Riyadh-Mecca Road near Tuwaiq Escarpment.JPG
Riyadh-Mecca Road near Tuwaiq Escarpment in November 2006
Highway 60 passing through Hejaz Mountain Ranges near Taif
Total: 221,372 km
Paved: 47,529 km (includes 3,891 km of expressways)
Unpaved: 173,843 km (2006)
Roads in Saudi Arabia vary from eight laned roads to small two laned roads in rural areas. The city
highways and other major highways are well maintained, specially the roads in the capital Riyadh. The
roads have been constructed to resist the consistently high temperatures and do not reflect the strong
sunshine. The
outer city highways such as the one linking from coast to coast are not as great as the inner-city
highways but the government is now working on rebuilding those roads. (htt1)
31
Saudi Arabia encourages road transport as it has maintained one of the lowest petrol prices in the
world, at $0.48 per gallon ($0.13 per liter).
Some of the important inter-city highways include the following:
Dammam - Abu Hadriya - Ras Tanura Highway (257 km)
Khaybar - Al Ola Highway (175 km)
Mecca - Madinah Al Munawarah Highway (421 km)
Riyadh - Dammam Highway (383 km)
Riyadh - Sedir - Al Qasim Highway (317 km)
Riyadh - Taif Highway (750 km)
Taif - Abha - Gizan Highway (750 km)
Medina - Tabuk Highway (680 km)
Jeddah - Al Leith - Jizan Highway (775 km)
Jeddah - Mecca Highway (80 km)
32
Road sub-Sector/Infrastructure. Construction, rehabilitation and maintenance are expected to be
financed mainly by the public sector for the foreseeable future, with work executed under
competitively-bid contracts. The international experience supports the creation of independent Roads
Boards to represent user groups in overseeing the road network. Construction and maintenance
should be the responsibility of specialist Road Agencies rather than government depart ments. At
times, international experience endorses public enterprise style ―Road Funds‖ to redress long-term
under-funding of maintenance. These should be supported by road users through appropriate charge
mechanisms, and subject to high governance standards with oversight by the Roads Board. There
continues to be scope for PPP approaches to deliver additional capacity in the form of major highways,
bridges and tunnels. It is likely that multi-year, area-wide road maintenance contracts and concessions
will provide increasing opportunities for the private sector. Intelligent Transport Systems (ITS)
technologies, such as area-wide road pricing, are also possible candidates for PPP as technology risks
may be partly defrayed to the private sector. Road Haulage/Freight. International experience suggests
that road freight services are best provided by the private sector in competitive markets. However, the
industry is poorly developed in many of the developing countries where there may be a case for
enterprise development assistance to road freight operators, and to help build freight forwarding
capacity. Road Passenger Services. The international experience preferred model is the creation of
competitive or periodically contestable operations by private bus companies, with specific
reimbursements or public service contracts to meet public service..
obligations. However, public ownership remains widespread in some developing countries. Private
sector participation could be for those that have efficient and sustainable business models, and/or in
association with the implementation of credible reform plans involving staged approaches to private
participation in service delivery.
33
Sea Transportation
Saudi Arabia has a well development sea transport network developed primarily to support the
transport of petrolchemicals. Saudi Ports Authority is the ports management organisation in the
country, overseeing the operations.
The major ports in the country are as follows;
Persian Gulf
Dammam
Jubail
Ras Tanura
Khafji
Khobar
Ras Al-Zour (under construction)
Red Sea
Jeddah
Yanbu' al Bahr
Al Lith
34
Duba
Rabigh
Jizan
Farasan (city)
Air Transportation
See also: List of airports in Saudi Arabia
There are an estimated 204 airports in Saudi Arabia (2003 est.).
Airports with paved runways
total: 71
over 3,047 m: 32
2,438 to 3,047 m: 13
1,524 to 2,437 m: 12
914 to 1,523 m: 2
under 914 m: 2 (2003 est.)
Airports with unpaved runways
total: 133
over 3047 m: 1
2,438 to 3,047 m: 5
35
1,524 to 2,437 m: 75
914 to 1,523 m: 38
under 914 m: 14 (2003 est.) (Saudia is the nation's flag carrier airline)
Heliports
9 (2009 est.) (htt2)
Rail Transport
This section needs to be further expanded
See also: Saudi Railways Organization
As a result of over-reliance on road and air travel, the rail transport has not received a similar level of
investment in Saudi Arabia. However, there are now plans to add more tracks and develop new
railway routes.
The Saudi Railways Organization (SRO) is a state-owned company that operates Saudi Arabia's rail
network.
SRO provides freight services on two main lines totalling 1018 km. These connect Riyadh with the port
of Dammam on the coast of the Persian Gulf.[4] SRO passenger trains operate between Riyadh and
Dammam.
There are plans to extend the network to the Red Sea port of Jeddah and, eventually to the borders of
Jordan, Yemen, and perhaps all the way to Egypt.
There is a large scale railway project Haramain High Speed Rail Project underway currently in the
36
Western province, connecting Makkah with Jeddah and Madinah city. The primary objective of this
railway line is to provide an alternative for the Muslim pilgrims travelling between the 3 cities.
A recent addition is the Al Mashaaer Al Mugaddassah Metro also known as the Makkah Metro tram
system, which was developed in Makkah city. This is a 18.1 kilometers (11.2 miles) track developed to
shuttle a forecasted 8 million pilgrims between Mecca, Mount Arafat, Muzdalifa and Mina in the annual
Hajj pilgrimage.
Current practices in the transportation sector
The urban population in Arab countries makes up 57.5% of the total population, compared to a world
average of 49.1% (Croitoru and Sarraf, 2010). Increased urbanization and population growth have
contributed to a rapid rise in the demand for urban transport and hence to a high rate of private car use
and high traffic densities, particularly as mass public transit remains underdeveloped for the most part.
These dynamics are contributing to high emission rates, noise pollution, and land degradation. A
transport sector brief by the World Bank (2010) has thus concluded that ―many of the [Arab] region‘s
large urban areas, where the bulk of
[gross domestic product] GDP is produced, face increasingly difficult transport problems with a high
degree of traffic congestion, reduced mobility, and deteriorating air quality.‖
Transportation trends in Arab countries are characterized by:
37
• Rapid sprawling in the region‘s major urban centers such as Amman, Baghdad, Beirut, Cairo, and
Damascus, whose populations exceed one million inhabitants.
• Government-subsidized gasoline and diesel fuel in many Arab states.
• An ageing vehicle fleet in most of the region‘s cities, where the average age of cars is 15 years, with
countries of the Gulf Cooperation Council (GCC) being an exception. Cars are generally not well
maintained, which contributes to high fuel consumption and elevated levels of emission rates.
• Inefficient and inadequate public transport systems and excessive reliance on private cars.
• The existence of government policies that encourage private car ownership as opposed to other
modes of transport such as public transport, cycling, and walking.
• Inefficient traffic management systems and insufficient public awareness.
• Poor urban and physical planning resulting in long travel distances between residential and service
center areas and places of work.
• Inadequate governance setup to adequately manage the transportation sector manifested by weak
and insufficiently enforced environmental policies and regulations.
• For most Arab countries, ―especially those with a large rural population such as
Morocco, Egypt, and Yemen, all-weather access in rural areas is limited by the poor condition of road
networks and the inadequacy of basic transport services‖ (World Bank, 2010).
• High road traffic mortality rates relative to other regions of the world. Table 1 shows that estimated
death rates (per 100,000 population) in Arab countries are the highest compared with other regions of
the world. In fact, the period from 1990 to 2000 has seen a 20% increase in road accident deaths in the
Middle East, whereas in Australia, Europe, and Japan, mortality decreased by 10% during the same
period
(ESCWA, 2009a). Figure 1 shows that some countries in the Arab region have the highest road traffic
mortality rates (per 100,000 population) in the world.
38
Estimated Road traffics Deaths
MAJOR IMPORTS FROM SAUDI ARABIA
 Mineral Fuel (crude & products)
39
 Organic Chemicals
 Plastics & materials thereof
 Inorganic Chemicals and fertilizers
MAJOR EXPORTS FROM INDIA
 Mineral Fuels & products
 Cereals
 Nuclear Reactors
 boilers and parts
 Electrical machinery & equipment
 Sound recorders
 Television Image and Sound Recorders, and parts
 Iron & Steel and products thereof
 organic chemicals; and
 apparels.
40
REVENUE AND EXPENDITURES
APTCO‘s general budget is based on revenues of SR610 million from passenger
fares, cargo and charter operations. The company‘s expenditures were SR550 million, of
which SR522 million were for operation and maintenance and SR28 million were
administrative and other
overhead expenses. Direct costs of 94% are high by international standards, and although
the company achieves an over-age annual profit of SR60 million, i.e., about 10%,
revenues
are falling.
The drop in profits, despite the huge investments made, is due to competition by
privately-owned small buses and Hajj transportation. It is also due to competition from
international passenger transport companies that transport signifycant numbers of
passengers between cities and across the border of Saudi Arabia, from taxi services, and
from other unauthorized transport services.
SAPTCO plans to increase their market share by providing public transport services to
neighboring countries during the Hajj season and by contracting for services to serve
schools,government employees, women, private sector employees, etc. The company
strategy is to further expand private sector participation via expansion of the bus fleet,
improving the quality of services provided to the public, and in operation and maintenance
activities. SAPTCO is undergoing fleet upgrade and adding new routes, the net effect of
which is expected to further reduce profits and create a financial shortage, wherein lies an
opportunity for the private sector to fill this financial gap. However, several factors
41
discourage private sector investment in SAPTCO: (htt4)
INDIA-SAUDI BILATERAL RELATIONS
India and Saudi Arabia enjoy cordial and friendly relations reflecting the centuries old
economic and socio-cultural ties. The establishment of diplomatic relations in 1947 was
followed by high-level visits from both sides. King Saud visited India in 1955 and the Prime
Minister Jawaharlal Nehru visited the Kingdom in 1956. The visit of the Prime Minister
Indira Gandhi to Saudi Arabia in 1982 further boosted the bilateral relations. In the recent
times, the historic visit of King Abdullah to India in 2006 resulted in signing of ‗Delhi
Declaration‘ imparting a fresh momentum to the bilateral relationship. The visit provided
the framework for cooperation in all fields of mutual interest. The reciprocal visit by Prime
Minister Dr. Manmohan Singh to Saudi Arabia in 2010 raised the level of bilateral
engagement to ‗Strategic Partnership‘ and the ‗Riyadh Declaration‘ signed during the visit
captured the spirit of enhanced cooperation in political, economic, security and defence
realms.
42
RECENT BILLATERAL VISITS
A. Visits from the Saudi side
1. Visit of King Abdullah bin Abdulaziz to India (2006): The landmark visit of King
Abdullah bin Abdulaziz to India in January 2006 as the Chief Guest of Republic Day
celebrations opened a new chapter in the Indo-Saudi bilateral relations. King
Abdullah referred to India as his ‗second home‘ and signed the ‗Delhi Declaration‘,
first such bilateral document ever signed by a Saudi King which provided a
comprehensive road map for the bilateral relations.
2. Saudi Foreign Minister Prince Saud Al Faisal visited India in February 2006 to
follow up on King‘s visit and visited twice thereafter, in February 2008 and
December 2008. The other ministerial visits from Saudi side during 2006-08
included that of Justice Minister, Minister for Higher Education, Minister of Health,
Minister of Commerce & Industry and Petroleum Minister.
3. Prince Salman bin Abdulaziz Al Saud, the Governor of Riyadh, accompanied by a
high-level delegation, paid an official visit to India in April 2010.
4. Grand Imam of the Holy Mosque of Makkah Sheikh Abdul Rahman Al-Sudais paid a
five-day visit to India in March 2011. Sudais is the first ever Imam of Makkah to visit
India.
43
5. Prince Bandar bin Sultan, Secretary General of National Security Council of Saudi
Arabia visited India on March 28, 2011, as special envoy of the Saudi King and met
Prime Minister Dr Manmohan Singh.
6. Dr. Tawfiq Al-Rabiah, Saudi Commerce & Industry Minister led a 76-member
delegation to New Delhi from 4-6 January, 2012, for 9th Indo-Saudi Joint
Commission Meeting.
7. Saudi Assistant Petroleum and Mineral Resources Minister Abdul Aziz bin Salman
visited India and held meeting with Indian Petroleum and Natural Gas Minister S.
Jaipal Reddy on February 24, 2012.
8. Saudi Parliamentary delegation led by Shoura Council Chairman Dr. Abdullah bin
Mohammad bin Ibrahim Al-Sheikh visited India from May 7-10, 2012 and held
meetings with Vice President, Prime Minister, Lok Sabha Speaker and EAM.
9. Saudi Labour Minister Adel Fakeih visited India from November 5-6, 2012, to attend
a conference organised by World Bank titled ‗Employment and Development‘ and
met Minister of Overseas Indian Affairs Mr. Vayalar Ravi on the sidelines.
B. Visits from the Indian side
1. Visit of Prime Minister Dr. Manmohan Singh to the Kingdom of Saudi Arabia
(2010): Prime Minister Dr. Manmohan Singh visited Saudi Arabia from February
27-March 1, 2010 and held discussions with King Abdullah, Saudi Foreign Minister
Prince Saud Al Faisal, Commerce Minister Zainal Alireza and Petroleum and
Mineral Resources Minister Ali Al Naimi. King Abdullah felicitated Dr. Manmohan
Singh with the King Abdualziz Sash of the First Order. Prime Minister addressed the
Majlis Al Shura and Council of Saudi Chambers of Commerce and Industry during
the visit. The King Saud University conferred Honorary Doctorate on the PM.
2. Petroleum & Natural Gas Minister S. Jaipal Reddy visited Riyadh to participate in
the Extraordinary Ministerial Meeting of International Energy Forum (IEF) on
February 22, 2011 and held discussions with his Saudi counterpart Ali Al Naimi.
44
3. External Affairs Minister S.M. Krishna accompanied by Mohsina Kidwai,
Chairperson of the Haj Committee of India, visited Jeddah on March 26, 2011, to
sign the Haj Agreement for the year 2011. Shri Krishna met Fouad bin Abdulsalam
Al-Farsi, Saudi Haj Minister and asked for an increase in the Haj quota.
4. Union Health and Family Welfare Minister Shri Ghulam Nabi Azad visited Riyadh to
offer condolences on the death of the Crown Prince Sultan on October 25, 2011.
5. National Security Adviser Shri Shivshankar Menon visited Riyadh on December 4-5,
2011, to deliver a talk at ‗Gulf Forum 2011‘.
6. Defence Minister Shri A. K. Antony led a 9-member delegation to Riyadh from
February 13-14, 2012, and held discussions with Saudi King Abdullah bin
Abdulaziz, Defence Minister Prince Salman bin Abdulaziz and Deputy Defence
Minister Prince Khaled bin Sultan.
7. Deputy Chairman of Rajya Sabha, Shri K. Rahman Khan visited Saudi Arabia to
attend the G-20 Parliament Speakers‘ Consultative Meeting on February 25-26,
2012 and held meetings with Dr. Abdullah bin Mohammad al-Sheikh, Chairman,
Saudi Shoura Council; Prince Turki Al Faisal, Chairman, King Faisal Centre, and
Dr. Ali Qasim M. Al Qahtani, Saudi Assistant Deputy Minister for Manpower
Training Development.
8. MOS for External Affairs Shri E. Ahmed visited the Kingdom to participate in the
‗Friends of Yemen‘ meeting in Riyadh from May 23-26, 2012 and held meetings
with Yemeni Prime Minister Mohammad Basindawa and Foreign Minister Dr. AbuBakr Abdullah Al-Qirbi on the sidelines of the meeting. He also met Saudi Foreign
Minister Prince Saud Al-Faisal, Defence Minister Prince Salman, Haj Minister Dr.
Bandar bin Mohammad Al Hajjar during the visit.
9. Minister of Law and Justice Shri Salman Khurshid led a 3-member delegation to the
Kingdom from June 17-18, 2012, to offer condolences on the death of Crown Prince
Naif bin Abdulaziz Al Saud.
10. Minister of State for External Affairs Shri E. Ahmed visited Jeddah from September
17-20, 2012 and met Saudi Haj Minister Dr. Bandar bin Mohammed Al-Hajjar and
discussed Haj related issues. Shri E. Ahmad led Haj 2012 Goodwill delegation from
21 October – 1 November, 2012, and held meeting with Saudi Haj Minister Dr.
45
Bandar bin Mohammed Hajjar in Jeddah on October 23, 2012, to discuss Haj
related issues.
11. Secretary (East) Shri Sanjay Singh led a 3-member delegation to the Kingdom for
the review meeting of 9th JCM on December 23, 2012.
Bilateral Agreements/MoUs:
The bilateral Agreements and MoUs signed are as follows:
1. MoU for Foreign Office Consultations
2. MoU on the Establishment of Joint Business Council between Council of Saudi
Chambers of Commerce and Industry (CSCCI) and Federation of Indian Chambers
of Commerce & Industry (FICCI)
3. Bilateral Promotion and Protection of Investments (BIPA)
4. Agreement on Avoidance of Double Taxation and Prevention of Tax Evasion
(DTAA)
5. MoU on Combating Crime
6. Agreement in the field of Youth and Sports
7. MoU of Scientific and Educational Co-operation between the Ministry of HRD, India
and Ministry of Higher Education, KSA
8. Extradition Treaty
9. Agreement on Transfer of Sentenced Persons
10. MoU for Cooperation in Peaceful Use of Outer Space
11. Agreement on Scientific and Technological Cooperation
46
12. MoU between Centre for Development of Advance Computing (C-DAC) and King
Abdulaziz
City
for
Science
&
Technology
(KACST)
on
cooperation
in
Information Technology and Services
13. Agreement on News Cooperation between Saudi Press Agency (SPA) and Press
Trust of India (PTI)
14. MoU on Cultural Cooperation (htt5)
Legal structures allowed to foreign investors
For foreign investors wishing to engage in business in Saudi Arabia there is, therefore, a
wide range of legal structures available, although it is necessary to obtain permission for
each type from the relevant government bodies. If the business involves commercial
activities in Saudi Arabia, it is necessary to have a company or branch in the Kingdom, but
for public sector contractors there are special rules.
As mentioned above, foreign businesses are increasingly being encouraged to opt for the
joint stock company (corporation) or the limited liability company form in cooperation with
Saudi partners.
47
The rationale behind this is the Government's wish to see foreign businesses making a
more permanent commitment to the Kingdom in situations likely to lead to the transfer of
expertise and technology.The joint stock company is generally only available when it is
envisaged that shares will be issued to the general public in the future. This has been
applied to banking and ventures involving the exploitation of natural resources. In such
cases the joint stock company is the recommended form. For most investors, however, the
limited liability company is the practical form of local incorporation.
As stated above foreign companies wishing to do business in the Kingdom may also set
up a branch which as with most other forms of foreign investment falls within the scope of
the Foreign Investment Regulations. The branch is also subject to the regulatory authority
of the Ministry of Commerce.
ECONOMIC AND COMMERCIAL RELATIONS
Indo-Saudi economic relations have shown remarkable growth with bilateral trade
registering three-fold increase in the last five years. Saudi Arabia is the 4th largest trade
partner of India and the bilateral trade was USD 36 billion in 2011-12.
48
The import of crude oil by India forms a major component of bilateral trade with Saudi
Arabia being India‘s largest supplier of crude oil, accounting for almost one-fifth of its
needs. Saudi Arabia is the 14th largest market in the world for Indian exports and is
destination of more than 1.86% of India‘s global exports.
On the other hand, Saudi Arabia is the source of 6.35% of India‘s global imports. For
Saudi Arabia, India is the 5th largest market for its exports, accounting for 7.55% of its
global exports. In terms of imports by Saudi Arabia, India ranks 9th and is source of
around 3.27% of Saudi Arabia‘s total imports.
INVESTMENTS
According to Saudi Arabian General Investment Authority (SAGIA), it has issued 426
licenses to Indian companies for joint ventures/100% owned entities till 2010, which are
expected to bring total investment of USD 1624.60 million in Saudi Arabia. These licenses
are for projects in diverse sectors such as management and consultancy services,
49
construction projects, telecommunications, information technology, pharmaceuticals, etc.
Moreover, several Indian companies have established collaborations with Saudi
companies and are working in the Kingdom in the areas of designing, consultancy,
financial services and software development. On the other hand, Saudi Arabia is the
46th biggest investor in India with investments from April 2000 to June 2012 amounting to
USD 33.81 million.
Indian Investment and Joint Ventures
The bilateral investment between the two countries is growing steadily. Since mid-2000, a
number of Indian firms have taken advantage of the new Saudi laws and established joint
venture projects or wholly-owned subsidiaries in the Kingdom. According to Saudi Arabian
General Investment Authority (SAGIA), as of 31.01.2006 to 31.12.2010 it has issued 426
licenses to Indian companies for joint ventures/100% owned entities, which are expected
to bring total investment of US$ 1624.60 million in Saudi Arabia (as per latest figures
available). These licenses are for projects in diverse sectors such as management and
consultancy services, construction projects, telecommunications, information technology,
pharmaceuticals, etc. Moreover, several Indian companieshave established collaborations
with Saudi companies and are working in the Kingdom in the areas of designing,
consultancy, financial services and software development. On 12.12.12, Tata has signed a
letter of intent to establish factory in Saudi Arabia to produce 50,000 Land Rovers a year
by 2017. The initial investment is estimated at US$1.2 billion. (htt7)
Saudi investment in India
On the other hand, Saudi Arabia is the 46th biggest investor in India with investments from
April 2000 to December 2012 amounting to US$ 40.90 million. There are a number of
50
Indo-Saudi joint ventures or Saudi owned companies in India, in diverse fields such as
paper manufacture, chemicals, computer software, granite processing, industrial products
and machinery, cement, metallurgical industries, etc. (www1)
Indian Business delegations to Saudi Arabia
During last couple of years, a large number of Indian trade and industry delegationshave
visited Saudi Arabia to explore the opportunities for long-term partnerships and
cooperation, including joint ventures. These delegations received warm and enthusiastic
response from the Saudi business community. Indian and Saudi companies regularly take
part in trade fairs in each other‘s country. The important recent bilateral visits from India
include the historical official visit of Hon‘ble Prime Minister Dr. Manmohan Singh, from 27
Feb-March 1, 2010.
51
India-Saudi Trade (in million USD)
Year
( April –
March)
Imports from
Saudi Arabia
Exports to
Saudi
% increase % increase % increase
Total trade in bilateral in Indian
Arabia
trade
in Indian
imports
exports
2007-2008 19,470.30
3,711.16
23,181.46 -
-
-
2008-2009 19,972.74
5,110.38
25,083.12 8.20
2.58
37.70
2009-2010 17,097.57
3,907.00
21,004.57 -16.26
-14.40
-23.55
2010-2011 20,385.28
4,684.40
25,069.68 19.35
19.23
19.90
2011-2012 31,060.10
5,683.29
36,743.40 46.57
52.37
21.32
6,076.51
27,583.27 15.15
5.37
71.48
2012
(April-Nov)
21,506.76
Source: Department of Commerce, Ministry of Commerce and Industry, Government of India,
available at <http://commerce.nic.in/eidb/default.asp>.
CULTURAL TIES
52
Secretary Tourism, Government of India, led a high-level delegation consisting of State
Tourism officers and tour operators to the Kingdom to participate in ‗Road Shows‘ in
Dammam, Riyadh and Jeddah on 7th, 9th and 11th January, 2012, respectively. A cultural
troupe from ICCR comprising of a Shehnai and a Qawwali group, performed in Jeddah
and Riyadh from 25-29 January 2012, coinciding with the Republic Day celebrations. A 45member Saudi youth delegation visited India on 10-day tour from March 22, 2012, to
strengthen the cooperation in the information and communications technology (ICT) sector
and to step-up efforts to promote understanding and friendship among the youth of the two
countries. A 54-member cultural delegation visited the Kingdom to participate in the ‗Indian
Cultural Week‘, organized in Riyadh in collaboration with the Saudi Ministry of Culture from
November 3-7, 2012.
Indian Community in Saudi Arabia:
The 2 million plus strong Indian community in Saudi Arabia is the largest expatriate
community in the Kingdom and is the ‗most preferred community‘ due to their expertise,
sense of discipline, law abiding and peace loving nature. The contribution made by Indian
community to the development of Saudi Arabia is well acknowledged. The Haj pilgrimage
is another important component of bilateral relations with more than 1,70,000 Indians
performing Haj every year, representing third largest contingent performing Haj. (htt)
Bilateral investment
53
India and Saudi Arabia are developing countries and need two-sided flow of investment in
infrastructure and development. Progressive growth has been observed between the
countries in bilateral investment after the liberalization policy of India in 1991 and little bit
faster increase in new millennium. Saudi Arabia is ranked at 15th position in country-wise
FDI joint venture in India and it is second in Arab countries followed by UAE. Saudi has
$21.55 million dollar worth value in FDI joint venture during 2004–05 to 2007–08. Saudi is
also among the major FDI investing countries in India, it has invested 422.1 million INR
during August 1991 to December 1999 and 690.71 million INR during January 2000 to
August 2008. Investment is observed in diverse fields such as paper manufacture,
chemicals, computer software, granite processing, industrial products and machinery,
cement, metallurgical industries, etc. Indian firms also has shown the interest in Saudi
market after new Saudi laws and established joint venture projects or wholly owned
subsidiaries in the Kingdom. According to Saudi investment authority survey, India has 56
FDI projects having worth of 304 million SAR during 2005 in Saudi Arabia. These licenses
are for projects in different sectors such as management and consultancy services,
construction projects, telecommunications, information technology, pharmaceuticals, etc.
Moreover, several Indian companies have established collaborations with Saudi
companies and working in the Kingdom in the areas of designing, consultancy, financial
services and software development.
54
INDIA-SAUDI ARABIA BUSINESS RELATIONS
India-Saudi Arabia Business Relations
Indo-Saudi relations have received fresh impetus in recent years following two very
important State-level visits. The ‗Delhi Declaration‘ signed during the visit of His Majesty
King Abdullah bin Abdul Aziz al-Saud to India in January 2006 followed by the ‗Riyadh
Declaration‘ signed in the course of the Indian Prime Minister‘s visit to Saudi Arabia in
February-March, 2010 have both given a fillip to an increased level of interaction between
the two countries on areas ranging from oil and gas; science & technology; to energy,
banking & investment. Saudi Arabia and India have established a number of institutional
mechanisms for bilateral economic cooperation. These include the Saudi-India Joint
Business Council; the Indo-Saudi Joint Commission Meetings; the Joint Working Groups
on Hydrocarbons etc. India and Saudi Arabia are also actively engaged with each other in
forums like India-GCC Industrial Conference and the India-GCC Free Trade Agreement
Talks. Progress on these and finalization of tariff lines are expected to provide further
thrust to bilateral trade between India and Saudi Arabia. Earlier, the two countries had
signed the Bilateral Investment Protection and Promotion Agreement (BIPPA) and Double
Taxation Avoidance Agreement (DTAA) during the historic visit of King Abdullah bin Abdul
Aziz Al-Saud to India in January, 2006. (htt8)
India‘s bilateral trade with Saudi Arabia has been steadily rising. Saudi Arabia is the 4 th
largest trading partner for India. India imports almost 16.17% of its crude oil from Saudi
Arabia. Both countries are committed to elevate the current buyer-seller relationship into
strategic energy cooperation. Saudi Arabia is the 46th biggest investor in India with
investments from April 2000 to December 2012 amounting to US $ 40.90 million. There
are a number of Indo-Saudi joint ventures or Saudi owned companies in India, in diverse
55
fields such as paper manufacture, chemicals, computer software, granite processing,
industrial products and machinery, cement, metallurgical industries, etc. There is
considerable scope for diversification and further strengthening of the economic ties
especially in the field of investments. Saudi investors are also looking at raising the levels
of investment in India including in sectors like infrastructure and real estate.
Many Indian companies are operating in/from Saudi Arabia. According to The Saudi
Arabian General Investment Authority (SAGIA) Indian companies /entities have invested a
sum of US$ million 1624.60 in Saudi Arabia from January 2000 to December, 2010. Saudi
companies are also looking at India as an attractive investment destination.
There are opportunities for Indian businessmen and companies in sectors like construction
industry, petro-chemicals and health & pharmaceuticals in Saudi Arabia while similarly
attractive opportunities are there for Saudi businessmen and companies in sectors like
infrastructure and real estate in India.
Officials from the Saudi and Indian sides met at New Delhi from January 4-5, 2012 for
deliberations marking a successful 9th Joint Commission Meeting between the two sides.
The Saudi delegation, led by the Commerce & Industry Minister, Dr. Tawfiq Bin Fawzan
Al-Rabiah, comprised 76 officials and businessmen. The Chairman from the Indian side
was the then Hon‘ble Minister for Finance, Mr. Pranab Mukherjee. A whole range of issues
were discussed at great length and this Meeting is expected to provide even further thrust
and momentum to the ongoing bilateral co-operation between the two countries.
9th Joint Commission Review Meeting took place on 23rd December, 2012 in Riyadh. The
Indian delegation was led by Mr. Sanjay Singh, Secretary (East), Ministry of External
Affairs, GOI. Both sides discussed the progress made and to decide on actions to be
taken.
56
Introduction
India and Saudi Arabia are old business partners: their trade relations go back several
centuries in time. Today, the bilateral business ties are being steadily expanded and
further strengthened by continuous interaction and cooperation, including regular
exchange of business delegations. Besides being a major trade partner, India sees the
Kingdom as an important economic partner for investments, joint ventures, transfer of
technology projects and joint projects in third countries.
Trade
Saudi Arabia is the 4th largest trading partner for India: The value of the two-way trade
between the two countries in 2011-12 exceeded US$ 36 billion. Saudi Arabia is the 14th
largest market in the world for Indian exports and is destination of more than 1.86% of
India‘s global exports. On the other hand, Saudi Arabia is the source of 6.35% of India‘s
global imports (Source: www.dgft.gov.in).
For Saudi Arabia, India is the 5th largest market for its exports, accounting for 7.55% of its
global exports. In terms of imports by Saudi Arabia, India ranks 9 th and is source of around
3.27% of Saudi Arabia‘s total imports (2011 figures) (Source: Saudi Arabian Monetary
Agency (SAMA) Annual Report– 2011, www.sama.gov.sa, extracted from import, export
statistics published by Central Dept. of Statistics & Information, Ministry of Economy &
Planning, Saudi Arabia). (htt6)
57
Trade figures for the last six years are as follows:
Indo-Saudi Trade (in million US $)
Year
( April March)
Imports from
Exports to
Total
Saudi Arabia Saudi Arabia trade
Increase in Increase in Increase in
bilateral
Indian
Indian
trade
imports
exports
2006-2007 13,355.33
2,590.77
15,946.10 …….
……
……
2007-2008 19,470.30
3,711.16
23,181.46 45.37%
45.79%
43.25%
2008-2009 19,972.74
5,110.38
25,083.12 8.20%
2.58%
37.70%
2009-2010 17,097.57
3,907.00
21,004.57 -16.26%
-14.40%
-23.55%
2010-2011 20,385.28
4,684.40
25,069.68 19.35%
19.23%
19.90%
2011-2012 31,060.10
5,683.29
36,743.40 46.57%
52.37%
21.32%
58
Source: Department of Commerce, GOI. ; www.dgft.gov.in(as on 29.09.2012)
Indo-Saudi Trade (in million US $)
December 2011
Imports from Saudi
Arabia
Exports to Saudi
Arabia
Total
December
2012
April-
April-
December
December
2011
2012
% increase
2681.25
2781.19
23028.47
24803.52
7.71
396.23
693.64
3939.70
6776.67
72.01
3077.48
3474.83
26968.17
31580.19
17.10
Source: DGCI & S, Ministry of Commerce, GOI (as on 31.1.2013)
List of recent visits is as follows:
1. An eight member delegation from the Chemicals and Allied Products Export Promotion
Council of India (CAPEXIL) visited Riyadh from 28-30 January, 2011 to hold Buyer-Seller
Meet (BSM) with the Saudi businessmen. The BSM was held on 29th January, 2011.
2. A 16-member business delegation from Synthetic & Rayon Textiles Export Promotion
59
Council (SRTEPC) visited Saudi Arabia and held a BSM/ Exhibition in Riyadh Chamber of
Commerce & Industry from September 13th to 14th, 2011. The BSM/ exhibition in Riyadh
drew several businessmen including importers and suppliers of textile items. The SRTEPC
also held a similar BSM/ Exhibition in Jeddah from September 17th to 18th, 2011.
3. A 13-member delegation from the Confederation of Indian Industries (CII) visited the
Kingdom (December 10-18, 2011). The delegation was made up of representatives from
sectors like engineering and auto components; rubber moulded and extruded products;
infrastructure; hospitals; IT Consulting including business process outsourcing;
construction; communication technology; process plants in fields like fertilizers, ammonia
scrubbing etc.; management consultancy; and engineering solution provider in sectors like
energy and environment. The delegation had business meetings in the Chambers of
Commerce & Industry in Jeddah, Riyadh and Dammam. The delegation also met some
prominent businessmen in the cities of Jeddah and Riyadh. The visit of the CII delegation
is yet another testimony to the growing business interaction between India and the
Kingdom of Saudi Arabia.
4. A Tourism Road Show was held in the cities of Dammam, Riyadh and Jeddah (January
7-12, 2012). The tourism delegation, comprising representatives from State Tourism,
including the Tourism Minister from the State of J&K; tour operators, representatives from
airline industry; and officials from the India Tourism Office, Dubai participated in the Road
Show. The delegation was led by Secretary, Tourism, Mr. R.H. Khwaja. The delegation
had meetings with their opposite numbers in all the
5. A 3-member delegation from the Gems & Jewellery Export Promotion Council (GJEPC)
of India visited Riyadh and Jeddah from 27th to 29th May, 2012. The delegation organized
Road Shows in the cities of Jeddah and Riyadh.
6. A seven member business delegation consisting of growers and exporters of
Cardamom, headed by the Director (Marketing) Spices Board of India visited Riyadh and
Jeddah from 3rd to 5th June, 2012 and held Buyer-Seller- Meets (BSM) with Saudi
60
businessmen at the premises of Riyadh and Jeddah Chambers of Commerce and
Industries.
7. A five member high level official delegation led by the Secretary (Economic Affairs),
Ministry of Finance, Government of India, accompanied by senior officials from Ministry of
Commerce, Reserve Bank of India and the Securities and Exchange Board of India visited
Riyadh on 10th June, 2012 and organized a Road Show on ‗‗Investment Opportunities in
India‘ at Al Faisaliah Hotel, Riyadh. The delegation also had interactive meetings with
senior officials of Saudi Arabian Monetary Agency (SAMA) and Saudi Arabian General
Investment Authority (SAGIA).
8. Mr. Satyan Sharda, Director and Mr. M.P. Singh, Director (cost) from Ministry of
Commerce & Industry, New Delhi, India visited Saudi Arabia. The delegation visited
facilities and had meetings with officials of Saudi Basic Industries Corporation (SABIC) and
Saudi Petrochemical Company (SADAF) in Riyadh and Jubail respectively from 30th June
to 4th July, 2012.
9. A two member delegation comprising Shri Shashank Goel, Joint Secretary Ministry of
Heavy Industries and Public Enterprises and Shri A.K. Verma, Director Finance of
Engineering Projects (India) Limited (EPI), a Central Public Sector Enterprise under the
administrative control of Department of Heavy Industry visited Saudi Arabia from
14.07.2012 to 16.07.2012.
10. ITPO participated in Saudi Agro Food 2012 in Riyadh from September 24-27, 2012 at
Riyadh International Convention & Exhibition Center. 38 Indian companies including
APEDA participated in the Exhibition under the ITPO banner.
11. A three member delegation led by Shri Sanjay Singh, Secretary (East) visited Riyadh
on 23.12.2012 to participate in the 9th India-Saudi Joint Commission Review Meeting.
12.An 11 member business delegation from CAPEXIL held Buyer Seller Meet in Riyadh
Chamber of Commerce & Industry on 27.02.2013.
61
Proposed Indian delegations and Commercial events during 2012/
early 2013
1. India Food Festival at Elaf Jeddah Hotel from 20-28 March, 2013 by Consulate
General of India, Jeddah.
2. Catalogue Show of Indian Companies at Bisha Chamber of Commerce and Industry
from 25-26 March 2013.
3. Catalogue Show of Indian Companies at Yanbu Chamber of Commerce and
Industry from 29-30 April 2013.
4. Incredible India Tourism Road Show is planned at Jeddah (19th May 2013), Riyadh
(21st May, 2013) and Dammam (23rd or 24th May, 2013).
5. ITPO would be participating in Saudi Agro Food 2013 in Riyadh from 15-18
September 2013 at Riyadh International Convention & Exhibition Center.
6. Embassy of India Riyadh has proposed to Ministry of Commerce & India Trade
Promotion Organisation (ITPO) to organise an India Trade Fair in December 2013 /
early 2014.
7. The 3rd Round of FTA negotiations between India and GCC to be held in India (date
to be decided)
8. 4th GCC-India Industrial Conference is scheduled to be held in Jeddah, Saudi
Arabia from 25-27 May, 2013.
9. A delegation of Overseas Indian Facilitation Centre (OIFC) – {A not-for-profit
initiative of MOIA & CII} is planning to visit Saudi Arabia for a two day meet to
‗expand the economic engagement of the NRIs/PIOs in the Kingdom of Saudi
Arabia with India‘ and is likely to be held with GCCI-India Industrial Conference.
Saudi Business delegations to India
In recent times, the number of Saudi businessmen and delegationsvisiting India has grown
62
substantially, indicating a growing interest in emerging business opportunities in India.
List of recent visits is as follows:
1. A 33 member Saudi business delegation led by Dr. Abdulrahman Alrabiah, Chairman of
the Saudi-Indian Business Council (SIBC): (set up by Council of Saudi Chambers of
Commerce and Industry) visited India during February 2011 to attend the 3 rd India-Saudi
Joint Business Council Meeting held in New Delhi in February, 2011. The delegation had
interactive meetings with FICCI, CII and ASSOCHAM and Indian businessmen
representing various sectors. MOUs/JVC agreements between India and Saudi
Companies were also signed during the visit.
2. A six member Saudi technical team from Saudi Arabia under Saudi Food & Drug
Authority (SFDA) visited India during May- June, 2011 for inspection of meat processing
plants in India for approval of the exports of meat and meat products to Saudi Arabia.
3. A 11-member business delegation from Saudi Arabia led by a prominent Saudi
businessman, Dr. Tawfiq Al-Swailem, Vice Chairman of SIBC visited India in September,
2011 and had a business seminar in Mumbai on September 26th, where they met up with
members of the CII/ FICCI/ Indo-Arab Chamber of Commerce.
4. A 40-member Saudi business delegation led by Dr. Abdulrahman Alrabiah, Chairman of
the SIBC visited India during January 2012 to attend the 4 th India-Saudi Joint Business
Council Meeting held on the sidelines of the 9th Joint Commission Meeting (January 4-5,
2012). The Saudi delegation also had a meeting with members of the CII during their visit.
5. A 13 member Saudi-Indian Business Network (SIBN) delegation headed by Ghazi
Binzagr visited India from 22-30 November, 2012. The delegation visited Delhi, Agri,
63
Bangalore and Mumbai. It met Minister of State for External Affairs E. Ahamed and
Minister of State for Ministry of Commerce S. Jagathrakshakan. The delegates visited
Indian Institute of Management (IIM) in Bangalore, Tata Institute of Social Sciences (TISS)
in Mumbai, Indian Islamic Cultural Center (IICC) in New Delhi and the Energy and
Resources Institute (TERI). The delegation also had meeting with top members of the
Confederation of Indian Industry (CII) and toured the campuses of leading Indian IT firms
such as Infosys and Wipro.
6. A Saudi business delegation led by Dr. Abdulrahman Al Rabiah, Chairman of the Saudi
India Business Council (SIBC) visited India from 4.03.2013 to 08.03.2013. The delegation
visited Hyderabad, Delhi and Lucknow and held wide ranging meetings. It also hold 5 th
Joint Business Council in New Delhi on 6.3.2013 with Federation of Indian Chambers of
commerce and Industry (FICCI).
64
INDIA –SAUDI ARABIA ECONOMIC AND COMMERCIAL RELATIONS
India and Saudi Arabia enjoy cordial and friendly relations reflecting centuries old economic and sociocultural ties. In the beginning of second millennium, the trade relations between southern India and Arabia
flourished and became the backbone of the Arabian economy. Arab traders held a monopoly over the spice
tradebetween India and Europeuntil the rise of European imperialist empires. In modern times India was one
of the first nations to establish ties with the Third Saudi State. These ties increased many folds following the
visit of the Custodian of Two Holy Mosques King Abdullah to India in 2006, and the visit of HE Prime Minister
of India to the Kingdom in 2010. There is huge scope for expansion of economic and commercial ties
between India and Saudi Arabia. India is third largest economy in the world on GDP (PPP) basis. India is
leading country in sectors such as Information Technology, Telecommunications, Pharmaceuticals, Gems &
Jewellery, Engineering goods, Nuclear Reactors and boilers, Iron & Steel, leather products, infrastructure
development, apparels and cotton textiles. Saudi Arabia, with the goal of diversifying its economy, can get
benefit from this huge consumer market lying across the Arabian Sea.
During the financial year 2011-12, bilateral trade between India and Saudi Arabia reached more than US$ 36
billion. India is the 5th largest market for Saudi exports, while Saudi Arabia is the 7 th largest market for Indian
exports. Saudi Arabia is one of the fastest growing economy in the Middle East offering investment
opportunities. 486 Indian companies working under SAGIA license have established joint ventures with
Saudi partners in different sectors and have invested more than US$ 1.06 billion in Saudi Arabia. 46 Saudi
companies with investment of US$ 228.8 million are functioning in India.
The import of crude oil by India forms a major component of bilateral trade with Saudi Arabia being India‘s
65
largest supplier of crude oil, accounting for almost one-fifth of its needs. Energy cooperation is an important
aspect of bilateral economic ties and both sides are working towards the strategic energy partnership
including long term supply of uninterrupted supply of crude oil by Saudi Arabia to India to meet its growing
needs; cooperation and joint ventures in upstream and downstream oil and gas sectors in India and Saudi
Arabia.
(htt9)
India-Saudi Arabia Partnership Getting Stronger
Introduction
India, today, stands at a threshold in leveraging its economic and military growth in consonant with its
national security goals. This situation has not only earned a national identity but also an international status
where both economy and military strength are major determinants. India, during this period of unilateralism
and emerging multilateralism, has taken a number of steps that has attracted the international attention
which can be corroborated by the high level visit of P-5 countries. India is being considered by many
countries as the source of stability and security in the world in general and Asia in particular.
Geographical barriers do not matter in International Relations. India and Saudi Arabia without any concerned
about the past events, started developing an understanding on the need to improving the relations only after
the end of cold war politics and the disintegration of erstwhile Soviet Union. However, by the dawn of the
twenty-first century, the relationship has improved in a significant way that has never experienced before.
India‘s closer ties with Saudi Arabia have to be seen in the context of the former interests in Gulf Arab
region. The Gulf is both the world‘s primary source of oil reserves and has an extremely favorable
geographic location for bringing these reserves to India. While announcing the new policy, Prime Minister
Manmohan Singh has said, ―The Gulf region, like South-East and South Asia, is part of our natural economic
hinterland. We must pursue closer economic relations with all our neighbors in our wider Asian
neighborhood. India has successfully pursued a ‗Look East‘ policy to come closer to the countries of South66
East Asia. We must come closer to our western neighbors in the Gulf.‖With a changed global geopolitical
environment and increasing economic interdependence, Saudi Arabia today considers India not only a
strategic economic ally, but also a potential ‗bridging power‘ that can play a constructive role for regional
peace and stability.
Partnership between India and Saudi Arabia are getting stronger in recent times and is expected to gain its
momentum in the years to come. The economic complementarities are helping this relationship to grow
stronger. The official visit of Indian Prime Minister Manmohan Singh to Saudi Arabia last year was aimed at
strengthening the economic and diplomatic ties between the two sides. India and Saudi Arabia stands at a
threshold of significant gains out of this partnership. It is the common interests and the mutual desire that
have been the main driving force behind this partnership.
The paper argues that the relationship has the potential to not only serve the interests of both sides but on a
large scale it can bring peace, security and prosperity in the region. This way the paper explores the future
prospects of the partnership between India and Saudi Arabia. First, the paper highlights the strategic
significance of the partnership. Then the common interests of both countries are discussed. This is followed
by an analysis of the political, economic and defence relations between the two sides. In the final section, the
paper makes an assessment of the long-term areas of cooperation between the two countries. (htt10)
Strategic Significance of India-Saudi Arabia Partnership
Strategically speaking, the ties between India and Saudi Arabia are very important for both countries and
also for the Gulf Arab region as a whole. Today, both sides perceive each other as a strategic partner for
promoting peace, stability and economic development. India and Saudi Arabia have a lot to offer to each
other. If on the one side, India has a stable polity and democratic framework, a well developed legal system
and independent judiciary to safeguard the ‗rule of law‘, a free press, a rapidly growing economy with a huge
market and a strong tradition of entrepreneurship. Then Saudi Arabia is offering India with lot of opportunities
in petroleum and petrochemicals, power, water, railways, roads, telecommunications, information technology
(IT), banking and financial services.
Saudi Arabia‘s strategic location in the Middle East and the political and economic power that it leverages as
67
the largest repository of global oil reserves and the largest supplier of global oil supplies makes it an
important partner for India. While India on the other side has undergone significant transformation that today
New Delhi is being considered by many countries as the source of stability and security in Asia and the
World at large. India, traditionally a prominent leader of the South Asia, is transcending that role to play a
larger global role, which is endorsed by the United States, the European Union, Russia and Britain in their
respective strategic partnerships with India. The five major powers of the world seem to be reevaluating New
Delhi‘s position in the changing world scenario.
INDIAN COMPANIES IN SAUDI ARABIA
Sl.No.
Name & Address
Contact Person Telephone/Fax/Email
Sectors
Tel: 01-4786409
Fax: 01-4779924
[email protected]
1.
Air India
PO BOX 753
Mr. R. Prabhu
Riyadh 11421
Chandran,
Kanoo Tower, King Abdul Manager- Riyadh
Aziz Road,
Tel. 4772228Ext. 301/303 Fax: 014779924
E-mail: [email protected]
Mob. 0535160041
Airport Office:
Tel. 01-2202081
Res. 01-4783292
Fax: 01-4779924
Email: [email protected];
[email protected]
2
New India Assurance Co.
PO BOX 53842
Riyadh 11593
Tel:01-4197799
Ext. 207/ 208
Mr. S. Manohar,
Fax:01-4191366
Resident
Mob. 0504481826
Manager
Email:
[email protected]
3
LIC International
P.O BOX 130
Mr. Faisal
Siddiqui,
Tel:01-4880066 Ext. 294
Mob. 0554020710
Fax: 01-4881012
Travel
Insurance
Insurance
68
Riyadh 11411
Chief Organizer E-mail: [email protected]
4
Tel. 01-2150987 /2150983 Ext. 107
Saudi Indian Insurance Co. Mr. N. Toppo,
Fax: 01-2150984
Head Office: 305, Akaria -2, General Manager
Mob.0501264936
Insurance
PO Box:341413,
(Non-life)
E-mail:
Riyadh 11333
[email protected]
5
Telecommunications
Consultants India
(TCIL)Ltd.
PO BOX 88987
Riyadh 11672
( A 100% owned
government of India
Undertaking)
Tel:01-2378658/ 2378658
Fax:01-2356072/ 26242266
Mobile: 0505461832
Mr. C.V. VINOD Email:
Regional Director [email protected];
[email protected]; [email protected]
Telecommunication
and Civil
construction
Wipro Ltd.
Riyadh
Mr. Durga Prasad
Yanigalla
Tel:01-2192122Ext.3000
Business
Mob. 0564056042
Development
E-mail: [email protected]
Manager
7
Tata Motors Ltd.
PO Box: 54736,
Jeddah 21524
Tel. 02-6978080
Mr. Asif Shamim
Mob. 0557629713
Area Manager (
Mob. 0091-9833638997
Saudi Arabia,
Fax:02-6978080 Ext.400
Kuwait, Qatar)
Mob. 0544483394
Automotive
E-mail:
Mr. Azeem Khan,
[email protected]
Country Manager
[email protected]
(Saudi Arabia)
web: http://cvglobal.tatamotors.com
www.tatamotors.com
8
Tata Consultancy Services
Ltd. (TCS)
Akaria Plaza,
Office No. 302-303-307, CWing, 3rd Floor, Olaya
Road
P.O.Box - 301637
Riyadh 11372
Mr. Neeraj
Tel:01- 4191710/ 4191720/4191842
Kumar Srivastava Ext. 280
Information
Regional
Fax:01-4191068/ 4191522
Technolgoy
Manager, Saudi Mob.0505290834
Arabia
Email: [email protected]
9
Larson & Toubro Saudi
Arabia L.L.C,
PO Box: 295020
Riyadh 11351
Mr. T.J. George,
Executive Asst.
to Company
Management
6
Tel. 01-4793777
Fax : 014749223
Mob.0504981930
email : [email protected] :
IT
Construction
69
www.Lntecc.com
Tel. 01-2919409
Fax: 01-4789881
Mob. 0505429089
E-mail: [email protected]
Saudi Al-Terais Co. for
Contracting
PO Box: 10484,
Riyadh 11433
Mr. Nadeem
Tarin, General
Manager
11
3i Infotech,
3i Infotech Saudi Arabia,
PO Box: 876,
Al Khobar 31952
Mr. Farooque
Tel.03-8470453
Khan,
Mob.0501724800
Sr. Vice President
E-mail: [email protected]
and Operating
Web:
Head,
www.3i-infotech.com
12
Dayim Punj Lioyd
Contracting, construction
Co.
Al Khazama Tower, 8th
Floor, Prince Turki Bin
Abdulaziz Street
(Near Cornish)
PO Box: 31909
Al Khobar 31952
10
13
14
15
Lulu Saudi Hypermarkets
LLC
PO Box:4330,
Riyadh 11491
Polaris Software Lab Ltd.
Nahel Computer
PO BOX 59205
Riyadh 11525
Construction
IT
Mr. Adnan Abdul
Tel. 03-8969241
Jawad,
Mob. 0550541678
Mr. S.K.Handa,
Fax: 03-8969628
Vice PresidentConstruction
E-mail: [email protected]
Marketing
Web: www.punjloyd.com
Mob. 0500566195
Mr. Shameem
Tel.01-4783331
Mohamed Unni Fax: 01-4789331
General Manager E-mail: [email protected]
Supermarket
Mob. 0557577188
Mr. Shafi
Mob. 0506048899
Web: www.luluhypermarket.com
Mr.
Muraleedharan
Sec. to Country
Business
Manager & Asst.
Vice President
Tel:01-4649750/ 4645373 Ext.408
Mob. 0508451485
Fax:01-4649750
E-mail:
[email protected]
Mob. 0501129973
Nesto Hyper Market,
Mr. Ashraf,
Tel. 01-2867555.
Dallah Car Parking Building General Manager, Fax: 01-2865666.
Batha, Riyadh
Email: [email protected];
IT
Supermarket
[email protected] ;
70
[email protected]
16
Star Printing Press,
PO Box: 246370
Riyadh 11312
17
S.J. Iron & Metals,
PO Box: 630,
Riyadh 11341
18
19
20
21
Godrej & Boyce Mfg. Co.
ltd.,
PO Box: 221890
Riyadh 11311
Tel. 01-2412297
Mr. David Luke,
Mob. 0505230123
General Manager,
E-mail: [email protected]
Mr. Nazeer
Pallivalappil,
President,
Mr. Tajuddin
Ahmed,
Asst. General
Manager
Engr. Owais
Dar Arms International
Ahmad,
Contracting Establishment,
Managing
PO Box 230453
Director
Riyadh 11321
Arc Advertising,
PO Box: 122994
Riyadh 11731
JN Holding Company,
PO Box: 1321
Dammam
Tel. 01-2412569/ 4714939 Ex. 101
Mob. 0555336777/
0558900786
Fax: 01-4714752
E-mail: [email protected]
Tel.01- 4025345 / 4024068
Mob. 0501365788Phone : 01
4025345 / 4024068
Fax: 01-4025369
[email protected]
www.godrej.com
Web: http://www.godrej.com
Tel. 4800824 / 4801084
Mob. 0504458574/
Fax: 4801084
E-mail:
[email protected]
Tel. 01-2705376 /2705345
Mr. Cyril Philip,
Mob. 05052798542705575
Managing
E-mail:
Director
[email protected]
Mr. Syed Javeed
Syed Gani,
Managing
Director
22
Sona Jewellers
PO BOX 41404
Riyadh 11521
Mr. K. V.
Mohanan
Managing
Director
23
Al Kabeer
Sheik Abdul
Tel. 03-8501143
Mob. 0504995871
Fax: 03-8502584
E-mail:
[email protected];
[email protected]
Printing
Metals
Manufacturing
Construction
Advertisement
Metals
Tel 01-2434566/ 4038463/ 4032862
Mob.0505480929
Jewellery
Fax:01-2416538/ 4774433
Email:[email protected]
Mob. 0504745465
Meat and animal
71
C/o Al Jufailah Corp. for
Foodstuff
PO BOX 8019
Riyadh 11482
24
Zamil Birla Technical
Services Co. Ltd.
PO BOX 9
Al- Khobar 31952
25
Adroit Systems
PO BOX 221342
Riyadh 11311
26
Mohammed S. Q. Qureshi
Est.
IT solutions
PO Box: 325468
Riyadh 11371
Jarir Street, Malaz
Aziz,
Tel:01-2432306/2432307
Branch Manager Fax: 01-2432308
Mob. 0505605186
Mob.0505469657
E-mail: [email protected];
[email protected]
Mr. Shiv Mantri Tel:03-8943306/8950980
General Manager Fax:3-8951719
Email: [email protected]
Mr. T.K.C.
Sekharan
President
products
Technical Services,
IT
Tel: 01-4640097/ 4640097 Ext. 111
Mob. 0507476739
IT
Email: [email protected]
Tel.01- 4733833 Ext. 811
Mob. 0504101786
Mr. Mohammed Fax:01- 4733822
E-mail: [email protected];
Salim Qureshi
[email protected]
www.msq.com.sa
IT
27
Wareef
PO Box: 89436,
Riyadh 11682
Mr. L.D. Bhatia,
Tel. 01-4786969
Business
Fax: 01-4791756/ 4787656
Development
Service
Mob. 0503435624
Manager,
E-mail: [email protected]
28
Mohammad Ali Patel
Computer Establishment
PO Box:16435
Riyadh 11464
Tel. 01-4053678 /0506230824
Mr. Mohammed
Fax:01- 4053678
Ali Patel
E-mail: [email protected]
IT
29
Branch Kab India Projects
and Construction Pvt. Ltd.
PO Box: 79509
Al Khobar 31952
Mr. Yasser
Tel. 03-8875309
Mohd. Zakir,
Mob. 0504174369
General Director Fax: 03-8875304/
[email protected]
Construction
30
Branch Hindustan
Construction Co. Ltd.
PO Box: 2580
Jubail 31951
Tel. 03-3641757/8/9
Mr. Mohammed Mob. 0500097585
Basheer Ahmed, e-mail:
General Manager [email protected]
Fax: 03-3461760
Construction
72
www.hccindia.com
31
Rolta Saudi Arabia Ltd.
PO BOX 68371
Riyadh 11527
Mr. Ganeshan
Sales Manager
Tel: 01-2421212
Mob. 0504425086
Fax: 01-2421222
[email protected]
Email:[email protected]
Al KhobarFax: 03-8875476
Technology solutions
and services
32
Tariq Masood Ltd. Co.
(Zamace Multi Services
Contracting Co. Ltd.)
PO Box: 340430
Riyadh 11333
Mr. Tariq
Tel. 01-4808275 /4822375 Ext. 105
Masood,
Mob. 0505234690
Construction
General Manager Fax: 01- 4883322
E-mail: [email protected]
33
Atlas Jewellery House,
PO Box: 23061
Riyadh 11426
Mob. 0504418879
Mr. Moidu K
Tel. 01-4955022/ 4957374
General Manager Fax: 01-2132162
E-mail: [email protected]
Jewellery
34
Mohammad Aliyar
Galvanization & Iron
Manuf. Co.
PO Box:1152
Riyadh 1152
Mr. Ibrahim,
Manger
Mr. Mohammed
Aliyar, M.D
Manufacturing
35
Tel. 014081032
Al-Samsaq Perfumeries and Mr. Jamil UR
Fax: 01-4052141
Cosmetics Factory
Rehman,
Manufacturing
Mob. 0505488033
PO Box:7788
General Manager
E-mail: [email protected]
Riyadh 11472
Web: www.samsaqperfumes.com
36
Aslam Ansar Ansari Quilt
and Pillow Factory
PO Box:32767
Riyadh 11438
37
Kalanthoor Contracting
PO Box:325471
Riyadh 11371
Contracting, duct work…
Mr. Kunhi
Ahamed
Kalanthur,
Managing
Director
Tel.01- 2916612
Mob. 0504419461
Fax: 01-2916613
E-mail: [email protected]
Construction
38
Dalal lkhair Aluminium
Factory,
Dalael Alkheer Cont. Est.
Mr. Syed Zahid
Hussain,
Chairman
Tel. 01-4482800
Mob. 0504128396
Fax:01- 2950823
Manufacturing
Mob. 0565517927
Tel.01- 2420714
Fax: 01-2708114
E-mail: [email protected]
Mr. Aslam Ansar Tel. 01-4235569 Mob.0505491660
Ansari
Fax: 01-2985813
E-mail: [email protected]
Manufacturing
(quilts and pillows)
73
PO Box 25574,
Riyadh 11353
e-mail: [email protected]
Mr. Sayed
Mahmood
DirectorMarketing &
Sales,
39
Sufaian Mahmood Sayed
Est.
Industrial Valves Division,
PO Box: 30389
Al-Khobar 31952
40
Allied Technical Co. for
Operation, Maintenance and
Cleaning
Mr. Sahfiqur
PO Box: 325692
Rehman
Riyadh 11371
Cleaning, maintenance, sale
of chemicals etc.
41
42
Al-Rumeda Decorations and
Gypsum works Ltd.
Mr. Mohammed
PO Box:4954
Rafiq Chouhan
Al Khobar 31952
Three Lions Factory for
Cathode Protection
PO Box:63052
Dammam 31516
Tel. 03-8906633 / 8906644
Mob. 0503833297
Fax: 03-8905133
E-mail: [email protected]
Manufacturing
Mob. 0545902570
Tel. 01-2708115
Fax: 01-2707183
E-mail: [email protected]
Cleaning and
maintenance
Tel. 03-8679174
Mob. 0505882246
Fax: 03-8679598
E-mail:
[email protected]
Contracting (gypsum
works)
Tel. 03-8598555 /8598554
Mr. Ameer
Mob. 050587441703
Ahmed,
Fax: 03-8598522
General Manager,
E-mail:
[email protected]
Mr. Mahmood
Ali Kazi,
Managing
Director cum
Partner,
Manufacturing
Tel. 03-8640275/ 8944994/8901549
Mob. 0505814762
Fax: 03-8985512/ 8901543
Manufacturing
E-mail: [email protected];
[email protected]
43
Union Coils Industries
PO Box:1289
Al Khobar 31952
44
Tradewell Co.,
(Petrodam)
Po Box: 897
King Fahad Bin Abdulaziz
St.
Al Melehi Building 4th
Floor, Office No. 03,
Dammam - 31422,
Tel. 03-3 8351658/ 8344488
Mr. V.K.Murali,
Fax: 03 8340470
Group Managing
Chemicals
E-mail: [email protected]
Director
45
Branch Kab India Projects
and Construction Pvt. Ltd.
Mr. Yasser
Mohd. Zakir,
Tel. 03-8875309/ 8875304/
Mob. 0504174369
Construction
74
PO Box: 79509
Al Khobar 31952
Building construction
46
Basem International
Shipping & Logistics
Co. Ltd.
P.O. Box 16272,
Jeddah-21464
P.O. Box 23330, Riyadh
11426
General Director E-mail:
[email protected]
Mohammed
Aslam Kazi
(MD & CEO)
(branches Riyadh,
Dammam, Jubail, Dubai)
47
48
Al Jazeera Ambition factory
Co. for iron & Metal Works
Mr. Javid,
PO Box: 8919,
Manager
Dammam 31412
Tel: 02-667 1500
Mr. Riaz Mulla, Fax: 02-669 0403
General Manager Mobile: 050 4632418
E-mail: [email protected]
Website: www.itoindia.com
Jet Airways
PO Box: 364,
Riyadh 11411
30 street, Thakasusi Area,
Mr. Manilal ,
Sales Manager, in
Mob. 0500888612
charge of country
Tel. 01-2937666
Manager,
Fax: 01-2885966
Mob. 0530181796
Mr. Ashraf,
E-mail: [email protected]
Supervisor
Skab Center,
P.O. Box-18600
Jeddah-21425
51
Tel. 03-84113334
Mob. 0505927378
Fax: 03-8422508
E-mail: [email protected]
ATEICO Communications
P.O. Box-5791
Jeddah-21432
(Agent of Indira Gandhi
Open University, Delhi)
49
50
Tel: 02-6420333
Fax: 02-6441558
Mob. 0505628055 Riyadh
Tel. 01-4646918
E-mail:
[email protected];
[email protected]
www.basemintl.com
Tel. 01-464 6918
(5 Lines)
Fax. 01-466 0723
Email: [email protected]
Mobile: 050 566 5259
Mr. Dawood Ahamed
Halwanee & Sons Co.
Mr. SaleemPO Box: 19471, Jeddah
Managing
21435
Director
Co. for Perfumes & Beauty
Preparations
Cont: Mr. Abdul Kader
Mob. 0505601062
Tel. 02-6449999
Fax: 02-6440021
e-mail: [email protected]
ITL World / Eram Group
Tel. 03-8983222
Dr. Siddeek
Service - Freight
Forwarding &
Logistics
Metals
Service, education
Aviation
Cosmetics
Industrial
75
PO Box: 4658, Cross-A,
Prince Naser Bin Abdul
Aziz St.
Al Khobar 31952
Ahamed,
Managing
Director
Eram Group
Tower A - 6th Floor, Khobar
Business Gate
PB No: 4955,
Mr. Abdul
Al Khobar -1952
Razack
Chief Executive
Officer,
(Eram
Contracting Est.)
Mr. Venkata
Raman,
Manager Project
(Mechanical)
52
53
54
Middle East Co. Ltd. for
Contracting Finishing and
Building Maintenance
PO Box: 1799,
Al Khobar 31952
Tel. 03-8872001
Fax: 03-8872425
Mob. 0504393642
E-mail: [email protected]
Mr. Hemant
Contracting, project
management
solutions,
automotive,
healthcare, travel, IT,
manufacturing,
trading etc.
Mob. 0555939719
E-mail: [email protected]
Fax: 03 849 3880
E-mail:
[email protected]
Website:
www.eramgroup-sa.com
Tel. 03-8647674
Mr. Henry
Mob. 0505856471
Joseph,
E-mail:
General Manager [email protected];
[email protected]
Mr. Shailendra
Kulkarni, GM.
International
Business Div.
Mr. Mohsin
Jaquar & Co. Pvt. Ltd.
Pervez
306, Udyog Vihar, Phase II
Officer Gurgoan- 122016 Haryana
Business
Development
Saudi Arabia
(Eastern &
Central Province)
& Bahrain
Asmacs Cont. Est.
Mob. 0555859222
Tel: 03 849 3636
Fax: 03-8988997
E-mail: [email protected]
Maintenance
Tel.+91-124-4746800
Fax:+91-124-2346531
Tel. 02-6678521
Fax: 02-6678572
Mobile:0555340643/
+973 362 521 79 (Bahrain)
E-mail: [email protected]
Web:
www.jaquar.com
Tel. 03-8283601/02/03
Bathroom fittings,
fixtures &
accessories
Contracting
76
PO Box: 4799,
Dammam 31412
Swain,
Business Dev.
Executive,
55
Jeddah National
Hospital
Macrona St.
Box 8564
21492
56
Simplex Infrastructure
Saudi Business Centre,
INSO Office No. 118,
Jeddah 21414
57
58
59
60
Fax: 03-8283604/ 8281176
E-mail: [email protected]
Mob. 0505326459
Mr. V.P.
02-6710040 (11 Lines)
Mohammed Ali,
P.O
Fax: 02-6727909
Owner and CEO
Jeddah
E-mail: [email protected];
[email protected]
145
State Bank of India,
Al-Andulus Plaza,
Sitheen Street, Mushrefah
Dist.
PO Box: 55707,
Jeddah 21544
International Business Unit,
Emco Limited,
Plot Nol F5, Roan No, 28,
Wagle Industrial Estate,
Thane (W), 400 604
Setting up a unit for
transformers
ION Exchange
PO Box: 31410
Al Khobar 31952
Delcam-Terraze Engineering
PO Box: 34915,
Dammam 31478
Mr. O S Dhankar, Mob. 0568864471
Sr. Project
E-mail: [email protected];
Manager
[email protected]
Healthcare
Construction
Mr. Jajjuri
Tel. 02-6176143/ 6175307
Parameshwarappa
Mob. 0557765774
(J.P)
Fax: 02-6175307
General Manager,
E-mail: [email protected] ;
Banking
[email protected]
Mr. Barakat Ali,
Head of
Mob.0542277659
Operations
Tel: 02-6739613/ 6717462
Mr. Mohammed
Shafi,
Country
Manager- Saudi
Arabia,
Tel. 022-40404500/ 25830779
Mob. 0551956697
E-mail:
[email protected];
[email protected]
Tel. 03-8655184
Fax:03-8655184
Mr. Rakesh
Mobile:0561022294
Mishra, Country E-mail:
[email protected]
Manager
Web:
www.ionindia.com
Tel. 03-8276226
Fax: 03-8263548
Mob. 0541449646
Electrical
Water
Advanced product
development
solutions for the
manufacturing
industry.
77
61
Engineers India Ltd.
JV with Jabal Dhahran Co.
Ltd. IOT Infrastructure &
Energy Ltd.
Al Khobar,
62
Mob. 0541280211
Shapoorji Pallonji Mideast,
Res. 0097336083648
Sada Business Center 2,
Mr. Sagar S.P,
Tel. 01-4649942 (Direct)/ 4657344
Office No. 400, 4th Floor,
General Manager Fax: 01-2935736
Olaya Road,
& Country Head, Mob. 0553219483
PO Box: 300587,
E-mail:
[email protected]
Riyadh 11372
Web: www.shapoorji.in
63
M/s CAD Middle East
Pharmaceutical Industries
LLC
Near King Khaled Intl.
Airport,
PO Box: 26721,
Riyadh 11496
64
Aloula Geojit Capital
Abu Bakr Al Siddeeq Road
(Exit 6), Al Nozha Area,
Behind Marzulath between
Exit 10 & 9
(Member Saudi Stock
Exchange – TADAWUL)
P.O Box : 86303, Riyadh
11622 ,
65
Alukkas Jewellery
Al Khobar
Mr. Manoj
Kumar,
Dy. General
Manager,
Eng. Nizar Al
Hariri, C.E.O,
Mr. Agrawal
Sr. Director
(Projects &
Operation)
Mr. Jamal
Shekar,
Logistic &
Procurement
Manager
E-mail: [email protected]
Tel. 01-2201151 Ext. 1200
E-mail:
[email protected]
Mob. 0569586875
Mob. 09727727338 (India)
Tel.01- 2201151 Ext. 1207
Fax: 01-2201163
E-mail:
[email protected]
Engineering,
contracting
Construction,
engineering projects
etc.
Active
Pharmaceutical
Ingredient (A.P.I)
Tel. 01-4533510/ 4533540
Fax: 01-4543991
Mob: 0555083126/
0543756497/
0555076 12
Mr. Unnikrishnan E-mail: [email protected],
Manager
[email protected]
Web:
www.aloulageojit.net
Financial Services
Services:
Local Market
(Online Trading,
Fund Management,
Protfolio
Management,
Corporate Finance
Indian Market
Online Trading,
Demat Accounts,
Portfolio
Management
Services, QFIAdvisory Services
Mr. Dileep P.
Nair,
Regional
Manager
Jewellery
Mr.Khaled Johar,
Director,
Mr. Mohammed
Nassan, CEO
Mob. 0535549997
Fax: 03-8990916
Tel. 03-8998916
Riyadh:
78
Tel. 01-4024916
E-mail: [email protected]
67
68
69
70
71
AFCONS Infrastructure
Limited
(AFCONS Saudi LLC.)
C/o Shapoorji Pallonji
Mideast
302-Sayed Commercial
Tower – South, Tahliyah
Street,
Po Box: 300587
Riyadh – 11372
MKCL Arabia Limited
Alhassan Ben Ali Street,
Alrawdah
PO Box: 103224,
Riyadh -11695
Mr. Y.V.S.S.
Babu, Vice
President,
Business
Development and
Tendering,
Country Head,
Tel. 01-4642487
Fax: 01-2791928
Mobile: 0568474790
E-mail: [email protected]
Mr. Sameer
Pande
Tel. 01-2083737
General Manager,
Fax: 01-2089494
Business
Mob. 0541915777
Development
E-mail: [email protected]
Program
Saudi Ensas Company for
Engineering Services WLL
(A subsidiary of Voltas Ltd.
from Tata Group)
P O Box No. 8292
Salama Centre,
Tower 5B, 3rd Floor, Prince
Sultan Street, Jeddah 21482
Mr. Aftab
Ahmed,
Head of Business
Development
Voltas
Mob. 0504101493
Tel. 02 6831466, 6165957 / 8 / 9
(Board Line
Fax: 02 69115400
E-mail: [email protected]
NewMark Consultants ME
Farooque Khan
CEO
+966501724800
+971552231007
[email protected]
Dr. Siddeek
Ahmed
Managing
Director
Tel: 03-898 3222
Fax: 03-898 8997
Web: www.ITLworld.travel
Tel: 03 8983224
Mr. Shashi
Menon, CEO
Tel. 03 8989000
ITL Leisure Tourism &
Travel Company
Post Box 4658 Al Khobar31952
Ports, Bridges,
Infrastructure
Education and
training
Room ACs,
Commercial
refrigerators,
Water coolers,
Air conditioning
equipment for central
plant projects,
Forklift trucks,
cranes and
warehousing
equipment
Market Entry
Services
(Business
Consulting)
79
Email: [email protected]
Rafeeq
Mohammed
Regional Head
Yushah N.C
Head of
Administration & Tel. 01 2862016
Operations
Fax: 01 2862205
Email: [email protected]
Riyadh Brach:
Post Box
No:4168
King Faisal Street
(Wazeer Street)
Riyadh-11491
Arabian Power Electronics
Company (APEC)
72
73
74
P.O Box 3411,
Al Khobar- 31952,
Saudi Arabia
Mr. Jacob
ThomasBusiness Unit
Manager
Hydrofit Arabian Equipment
Co
P.O. Box No.589
Jubail-31951
K.S.A
Malabar Gold
Tel: +966 3 887 2001
Fax: +966 3 887 2125
Email: [email protected]
Web: www.apec.sa.com
Tel: 00966 (3) 361 5678
Fax: 00966 (3) 362 4567
[email protected]
Mr. Gafoor
Edakkuzhi,
Regional
Manager
Mobile: 0550933916
Tel. 03-8983745
Mr. Shabeer,
Br. Manager
Manufacturing of
Power Electronics
Products such as
UPS Systems,
Battery Chargers,
Frequency
Converters, Solar
Systems etc.
Supply, installation
and maintenance
service of all type of
Hydraulic
equipments
Jewellery
80
INDIA SAUDI COMMAN INTERESTS
The common interests that both India and Saudi Arabia share includes:-
Supporting Peace and Promoting Stable Security in the Gulf Region
India and Saudi Arabia share a same stake in supporting peace, security and prosperity in the Gulf Arab
81
region. India and Saudi Arabia together can work to ensuring peace and security in the region. Gulf security
environment continued to be influenced by developments within and its immediate neighbouhood where
rising instability remains a matter of deep concern. And since India consider Gulf region to be its immediate
neighborhood, any insecurity in the region will have its repercussions to India. The security of this region is
highly important for Asian Security in general and India in particular. This is based on the concept of
‗Common Security’. Common security means state cannot seek security at the expense of the other. New
Delhi cannot ignore the major security challenges facing Gulf States. Based on this concept, India‘s security
lies in ensuring the security of Gulf States. India, therefore, has a vital interest in the stability, security and
economic well-being of the Gulf.
For India, ensuring peace, security and stability in the region serves two purpose- one is the presence of
large number of the Indian diaspora and secondly, the presence of abundant energy reserves in the region.
Energy supplies from the region are threatened by instability, political unrest, military conflict, and overall
uncertainty. For which the Indian Navy has developed an interest in being able to project its power into the
Gulf, in cooperation with other countries such as the United States and Russia as a mechanism for securing
and protecting sea lanes of communication (SLOCs) that transport oil from the Gulf region to our country.
Combating Terrorism and its Related Activities
India and Saudi Arabia have developed a close understanding on the need to eradicating the menace of
terrorism. Such understanding has developed only after 9/11 incidents. Like India, Saudi Arabia also faces
the threat of terrorism which has a close linkage with Al Qaida. Given its experience in the fight against
82
terrorism, Indian can assist Saudi Arabia to dealing with serious foreign threats at any time in the foreseeable
future. However, unlike Saudi Arabia, India has been a victim of terrorism for many decades.
In the Riyadh Declaration, the leaders of the two countries renewed condemnation of the phenomena of
terrorism, extremism and violence affirming that it is global and threatens all societies and is not linked to any
race, color or belief. The two sides agreed to not only enhance cooperation in exchange of information relating
to terrorist activities, money laundering, narcotics, arms and human trafficking, but also develop joint
strategies to combat these threats. They welcomed the signing of the Extradition Treaty and the Agreement
for Transfer of Sentenced Persons. Besides, both sides also urged the international community to resolutely
combat terrorism.[vi] Both sides also concluded the Memorandum of Understanding (MOU) on combating
terrorism. This is a very good development to erase the past mutual misunderstanding of Saudi Arabia being
bracketed with Pakistan and viewed as the main financier of Pakistan state-sponsored terrorism and proxy
war against India.
Political Relations
Political relations between India and Saudi Arabia still remain one area where both sides need to focus on.
The end of cold war politics and the recent shift in Saudi Arabian approach toward India and Pakistan and in
particular to Kashmir issue have given way to understanding between the two countries on the need to
explore political opportunities. Today, Saudi Arabia calls for resolving the difference on the Kashmir issue
bilaterally based on the existing Shimla and Lahore agreements, which confirms with New Delhi‘s stand. [viii]
Even after the end of cold war, high-level official visits from both sides have remained low profile. Had there
been a frequent high-level official visits by leaders of both sides, the relationship today would have been very
different. This is not to say that the political understandings between the two countries on various regional
and global issues are not sound.
The visit of King Abdullah bin Abdulaziz to India in January 2006 as the Chief Guest of Republic Day
celebrations was a landmark one in a way that it opened a new chapter in the post cold war India-Saudi
Arabia relations. By inviting the kingdom, India wants to send a message of strategic importance New Delhi
attach to this partnership. During this visit, King Abdullah referred to India as his ‗second home‘ and signed
83
the ‗Delhi Declaration‘, one of the first such bilateral document ever signed by a Saudi King. The ‗Delhi
Declaration‘ provides a comprehensive road map on how the relationship should progress in the coming
decades. Both sides signed several agreements/MOUs during the visit including MOU on Combating Crime,
Bilateral Investment Protection Agreement and the Double Taxation Avoidance Agreement. This was
followed by Foreign Minister Prince Saud Al Faisal visit to India in February 2006. Thereafter, he visited India
twice in February 2008 and December 2008, and interacted with Indian leaders. The other ministerial visits
from Saudi side included that of Justice Minister, Minister for Higher Education, Minister of Health, Minister of
Commerce & Industry and Petroleum Minister. Intelligence Chief Prince Muqrin also paid two-day visit to
India on January 15-16, 2009 and held discussions with the then National Security Advisor M. K. Narayanan.
Saudi Commerce Minister Abdullah Zainal Alireza also visited India in August 2009 and met Prime Minister
Dr. Manmohan Singh in New Delhi to deliver a personal message from King Abdullah. Alireza also held
meetings with External Affairs Minister S.M. Krishna, Finance Minister Pranab Mukherjee and Commerce
and Industry Minister Anand Sharma.
From the Indian side, the first one to visit Saudi Arabia after the end of cold war was Dr. Manmohan Singh,
the then Foreign Minister of India in December 1994 for the Indo-Saudi Joint Commission Meeting and the
visit of External Affairs Minister Jaswant Singh to Saudi Arabia in January 2001. Then after a long gap,
External Affairs Minister Pranab Mukherjee visited Kingdom in April 2008 and held discussions with King
Abdullah and Finance Minister Prince Saud Al Faisal. The other visits from Indian side includes the visits of
Speaker of Lok Sabha, Minister of Human Resources Development, Minister of Youth Affairs and Sports,
Minister of Petroleum and Natural Gas, Minister of State for External Affairs, National Security Adviser.
Ministry of State for External Affairs E. Ahamed held discussions with Saudi counterpart Nizar bin Obaid
Madani in Riyadh on April 20, 2009.
The visit of Indian Prime Minister to Saudi in the month of February-March last year marked the beginning of
new era of strategic partnership when both sides signed the ‗Riyadh Declaration‘. The declaration outlines
the roadmap for cooperation in security, defence, political and economic areas.[ix] These visits signify the
eagerness of both sides to have qualitatively stronger and more comprehensive partnership. India and Saudi
Arabia have developed a common perception on various issues ranging from fight against terrorism to
mutual economic boom to ensuring peace, security and stability in the Gulf region. Although India does not
share a border with Gulf countries, but is equally concerned about the instability and insecurity in the region
owing to its likely spill over impact it would have in our country.
84
Economic and Trade Relations
India is an important trade and economic partner for Saudi Arabia. The Indian need for energy resources and
Saudi Arabian search for highly skilled and trained human resources can be fulfilled by working closely
together. Over the last one decade after the dawn of the twenty-first century, there has also been a
significant increase in two‐way trade and investments. India-Saudi economic relations have shown
remarkable growth with bilateral trade registering a many-fold increase in the last five years. The value of the
two-way trade between the two countries has increased from more than 2,713 million in 2004-05 to more
than 25 million in 2008-09 (Refer to Table 1). For Saudi Arabia, India is the fourth largest market for its
exports, accounting for 4.84 per cent of its total exports. In terms of imports by Saudi Arabia, India ranks
tenths and is source of around 2.73 per cent of Saudi Arabia‘s total imports. For Indian exports, Saudi Arabia
is the fourteenth largest market in the world and is destination of more than 1.9 per cent of India‘s exports.
On the other hand, Saudi Arabia is the source of 5.5 per cent of India‘s total imports.
The major items of export to Saudi Arabia by India include basmati/non-basmati rice, tea, manmade yarn,
fabrics, made ups, cotton yarn, primary & semi-finished iron and steel, chemicals, plastic & linoleum
products, machinery and instruments. While the major items imported by India, apart from crude oil, include
organic chemicals, inorganic chemicals, artificial resin, plastic materials, sulphur, iron pyrites, pulp and waste
paper, ores and metal scrap, coal, coke and briquettes, iron and steel, non-ferrous metals. However, there is
lack of meaningful diversification in the pattern of Indian exports and imports to and from Saudi Arabia. The
minerals, fuel and crude oil still account for more than 80 per cent of imports from Saudi Arabia.
Table 1: Merchandise Trade Between India and Saudi Arabia: 2000-01 to 2010-11 (AprSep) (in US $ millions)
Year
India’s
Exports to
Growth India’s
Growth Trade
Balance
Imports from
Turnover
85
Saudi Arabia Rate (%) Saudi Arabia Rate (%)
2000-01
822.94
10.83
621.12
-74.33
1444.05
201.82
2001-02
826.43
0.42
463.99
-25.30
1290.42
362.44
2002-03
940.74
13.83
504.72
8.78
1445.46
436.02
2003-04
1,123.31
19.41
737.77
46.17
1861.08
385.54
2004-05
1,412.06
25.71
1,301.15
76.36
2713.21
110.91
2005-06
1,809.77
28.17
1,632.34
25.45
3442.11
177.43
2006-07
2,590.77
43.15
13,355.33
718.17
15,946.1
-10,764.56
2007-08
3,711.16
43.25
19,470.30
45.79
23,181.46 -15,759.14
2008-09
5,110.38
37.70
19,972.74
2.58
25,083.12 -14,862.36
2009-10
3,907.00
-23.55
17,097.57
-14.40
21,004.57 -13190.57
2010-11
2,222.92
9,755.11
11,978.03 -7532.19
(Apr-Sep)
Source: Department of Commerce, Ministry of Commerce and Industry, Government of India, available at
<http://commerce.nic.in/eidb/default.asp>. (htt11)
From the above table, we can say that there witnessed improvements in the trade volume only in the recent
years. The growth rate clearly shows that consistency has been a matter of concern for both countries. The
balance of trade is tilting in favor of Saudi Arabia, requiring Saudi Arabia to take more steps to open the way
for imports from India.
Saudi Arabia is the largest supplier of crude oil to India. The public sector oil firms in India purchase about 10
Million Metric Tonnes (MMT) of crude per year. In addition, private Indian companies buy another 7 to 9
MMT of crude per annum from Saudi Aramco. During 2002-2003, India‘s imports of Crude Oil and petroleum
products from Saudi Arabia amounted to 18.816 MMT worth approximately US $ 3.6 billion, which was
around 23 per cent of India‘s crude imports during the year. With gaining understanding and the change of
time, India not only engages in energy trade with Saudi Arabia, but there also has been increasing trade and
investment ties between these regions.
86
Investment Relations
Investment cooperation is one area where India and Saudi Arabia has a lot to explore. Ever since the Saudi
government has introduced a new investment law and its subsequent establishment of the Saudi Arabian
General Investment Authority (SAGIA) in the mid of 2000, many Indian firms took advantage of the new
Saudi laws allowing for setting up of 100 per cent foreign owned projects in the Kingdom. Despite of this,
level of investment relations at present is not satisfactory given the huge scope of investment from both
sides. No doubt, Indian companies have made investment in Saudi in the areas of IT, software development,
designing, consultancy, financial services, etc.
While addressing the India-Saudi Arabia Joint Business Council meeting organised by Federation of Indian
Chamber of Commerce and Industry on 23 February 2011, Faisal Hassan Ahmed, Ambassador of Saudi
Arabia to India invited Indian companies to invest in Saudi Arabia in areas like science & technology,
education, IT, defence and security. While India on the other side, offers Saudi Arabia significant potential for
investment in multi- sectors for mutual benefit. It can undertake investments in India‘s infrastructure sector,
including airports and railways, which require investments in excess of US$100 billion.
According to the Department of Industrial Policy and Promotion, during the period between April 2000 to
October 2010, Saudi Arabia has invested US$ 31.59 million, compared to UAE investments worth US$
1,815.29 million.[xii] While, total Indian Foreign Direct Investments into Saudi Arabia during the period
between 1990 and 2008 is US$ 2.07 billion.
Defence and Security Ties
87
India‘s foreign policy seeks to promote an environment of peace and stability in its region and in the world, to
enable India's accelerated socioeconomic development and safeguarding its national security. In this
context, strengthening of defence cooperation with friendly countries including Saudi Arabia remains an
important objective and component of India's overall defence and foreign policies.
The emergence of international terrorism, as one of the primary threats to both India and Saudi Arabia, has
ushered in greater convergence in security perceptions. This has prompted both sides to have closer
security and defence related contacts, exchanges and cooperation and sharing of information, military
exercises, military training, etc. There is a need for expanding the defence cooperation beyond exchange of
courses and visits.
India and Saudi Arabia have in recent times developed an understanding on the need to expand the defence
and security ties to deal with common security threats. Both sides face the same problems emanating from
the issue of terrorism and other activities such as maritime piracy, money laundering, illegal arms trade, etc.
India has signed defence cooperation agreements with the Saudi Arabia. The defence agreements between
the two countries is aimed at providing military training, cooperation in military medical services, joint
exercises, joint development and manufacture of sophisticated military hardware, cooperation in product
support, services, defence science and technology etc and jointly combating pollution caused by the military
at sea. The Indian Navy has conducted exercises with the navies of Saudi Arabia. The Saudi Arabian can
learn a lot from the Indian Navy given its expertise. Besides, the Indian Air Force has also come forward to
conduct ariel exercises with their counterparts. With gaining understanding between the armed forces, such
type of exercises will help improve regional security.
The Indian Diaspora in Saudi Arabia
88
In recent years, the strength of the Indian community in Saudi Arabia has moved up to nearly 1.4 million.
They accounts for 20 percent of the total 7 million expatriates. With the increase of population, they have
made significant presence in various occupations in Saudi Arabia. They have left marks in the fields of
entrepreneurs, doctors, lawyers, engineers, chartered accountants and managers. This Indian diaspora has
a significant role to play in helping to strengthen the bilateral ties between the two countries. Indian
expatriates in Saudi Arabia can be categorized as under:
Professionally qualified (5 percent) – it comprises of doctors, engineers, chartered accountants,
managers etc.
White collar staff (10 percent) – it comprises of clerks, accountants, store keepers, booking clerks,
secretaries etc.
Laborers/technicians (85 percent) – those working on project sites, industrial establishments and on
operation and maintenance jobs.
Indian community is the ‗most preferred community‘ due to their expertise, sense of discipline and their
moderate and law abiding nature. Saudi leadership has appreciated the contribution made by Indian
community to the development of Saudi Arabia. The Indian community is being regarded as playing a vital
role in the development of the country. They helped in the proper operation and functioning of the
infrastructure and its industrial and agricultural establishments.
Other Areas of Strategic Cooperation
89
In the Riyadh Declaration, both India and Saudi Arabia expressed mutual desire to develop a knowledgebased economies based on advances in the areas of information technology, space science and other
frontier technologies. They welcomed the agreements signed between the two sides in the field of Research
and Education, Information Technology and Services, Science and Technology, and Peaceful Uses of Outer
Space. Today, Gulf countries including Saudi Arabia see India as a potential partner in the development of
their knowledge economy by taking advantage of India‘s achievements in science and technology,
particularly information technology, bio‐technology, space and telecommunications. Other areas of strategic
cooperation between the two countries are discussed below:
Educational Ties
Educational ties are another area of significant importance for India and Saudi Arabia. India has also pledged
to assist Saudi Arabia in setting up an Information and Communication Technology (ICT) Centre of
Excellence as well as institutes of higher learning, involving both education and research in the field of
technology. Both countries have signed a memorandum on higher education in the year 2006 which calls for
exchange of teaching faculty and students, encourage direct scientific and educational communications
among the institutions and exchange of delegations between the two countries.
Energy Cooperation
Given India‘s growing energy requirements to meet its domestic demand, there are huge scopes for
cooperation between the two countries in the area. India, the second largest population in the world known
for its significant economic growth has been facing the challenges arising out of the growing energy
demands to meet its population. At present India is the sixth largest energy consumer in the world and is
projected to emerge as the fourth largest consumer after the United States, China and Japan in the coming
decades. Its economy is projected to grow 7 per cent to 8 per cent over the next two decades. For India to
sustain this projected economic growth and eradicating poverty would require solving energy problem. If
India reduces the use of oil in its power and manufacturing sectors, the demand for oil in the transport sector
shows no sign of abating. Due to stagnating domestic crude production, India imports approximately 70 per
cent of its oil. Its dependence is growing rapidly. The World Energy Outlook, published by the International
Energy Agency (IEA), projects that India's dependence on oil imports will grow to 91.6 per cent by the year
90
2020.[xviii]
India‘s commitment to sustain high economic growth rate would remain unfulfilled if there is a shortage of
energy resources and its consequent infrastructure development. At this crucial juncture, Saudi Arabia is
favorably positioned to benefit from burgeoning demand for energy in India. Saudi Arabia as such is the
largest supplier of crude oil to India.
Science and Technology
Ever since India and Saudi Arabia have established the Joint Commission for Economic, Trade, Scientific,
Technical and Cultural Cooperation (JCM) in 1981, the two countries have been actively engaged in the
fields of science and technology and agriculture. The Council for Scientific and Industrial Research (CSIR)
and the Saudi Arabian Standards Organization (SASO) has an ongoing programme of technical cooperation
(POC) since June 1993. Under this programme, Indian experts in different scientific areas, particularly in
measurement and calibration are deputed to Saudi Arabia on a regular basis. Besides, several Saudi experts
have undergone advanced training in India. CSIR and the King Abdul Aziz City for Science and Technology
(KACST) have signed a MoU for bilateral cooperation in 1997 and have an ongoing programme of
cooperation in the areas of space science, remote sensing and installation of internet.
Health and its Related Pharmaceuticals Sector
Health is another area which offers significant potential for cooperation between the two countries. Both
sides by cooperating in this area will bring huge benefit. Saudi Arabia Health Minister Hamad bin Abdullah
91
Al-Manie while speaking at a conference organised here by industry lobby Associated Chambers of
Commerce and Industry of India (ASSOCHAM) during his visit to India in 2006 has said, ‗We hope
to
enhance cooperation in the field of health, especially in areas like telemedicine, training and doctors'
exchange programmes.‘ In India, the market for healthcare was $38 billion in 2007, expecting to reach $79
billion by 2012 with a growth rate of 15 per cent per annum. What they need to do is extending healthcare
services, building healthcare infrastructure and developing its related technologies. India is one of the largest
manufacturers and exporters of pharmaceuticals. Given
India‘s expertise in genotype drug design and
the presence of a large pool of trained doctors and cost effective research & development (R&D) activities, it
becomes imperative for India and Saudi Arabia to think over it.
SAUDI ARABIA KEEN TO INVEST IN INDIA
92
Saudi Arabia is keen to promote commerce and investment with India, especially in Andhra Pradesh,
Saudi Arabia's ambassador to India Saud Mohammed Al-Sati said, saying the oil-rich kingdom was
"investing heavily" abroad.
After a two-day visit to Hyderabad, Al-Sati told IANS in an interview: "Hyderabad is hub of innovation,
information technology, biotechnology, engineering and pharmaceuticals. We can explore the opportunities
for partnerships."
He added that opportunities for partnership with Andhra Pradesh in various sectors could be explored.
"I learnt about opportunities here in all sectors of the economy. I would like to see more Saudi companies
investing in India, especially in Andhra Pradesh," he said.
Al-Sati also invited businessmen and industrialists from the state to invest in Saudi Arabia. During an
interaction with business leaders Friday, he highlighted the investment opportunities in his country. He said
Indian companies evinced interest in the opportunities the kingdom offered.
During the visit, the ambassador met Andhra Pradesh Chief Minister N. Kiran Kumar Reddy, Governor E.S.L.
Narasimhan, among others.
"The purpose of the visit was to reach out to business communities, friends of Saudi Arabia and Saudi
citizens and students in Hyderabad, to strengthen bonds between the two friendly countries and serving the
interests of Saudi citizens and students," Al-Sati said.
"I discussed with the chief minister and the governor ways to strengthen relations, especially in commerce,
joint ventures and investments and to inform business communities, chambers of commerce and
industrialists about the business opportunities in the kingdom," he said.
He pointed out that Saudi Arabia's King Abdullah bin Abdul Aziz Al-Saud's visit to India in 2006 and Prime
Minister Manmohan Singh's visit to the kingdom in 2010 laid the foundation and vision for strong and close
93
relations.
While inviting people to invest in Saudi Arabia, he explained the initiatives taken by the oil-rich country to
boost development.
"The kingdom is investing heavily. The size of investment is unprecedented in infrastructure, transport, health
sector, renewable energy, airports and sea ports. I told this to friends of the kingdom and to people from all
walks of life and invited them to come and see the programme for themselves," the envoy told IANS.
The Saudi Industrial Property Authority (MODON) was established in 2001 for the development of industrial
cities with integrated infrastructure and services. Under MODON, more than 3,000 factories have come up in
industrial cities with investments of $50 billion and employing 300,000 people.
He said other avenue of investment for Indian investors was economic cities under Saudi Arabian General
Investment Authority (SAGIA). SAGIA was established in 2000 as a vehicle for investment in Saudi Arabia
for sustaining economic growth.
The envoy also explored Hyderabad, which has historic ties with the Arab nation. He visited the 105-year-old
Osmania University, which edits and publishes rare Arabic manuscripts. He offered Friday prayers at Mecca
Masjid, the 17th century mosque.
"I learnt about the very rich history of India, diversity of its culture and its people," said Al-Sati, who has
visited Lucknow and Hyderabad in the past since taking over as the Saudi envoy.
He also called on Director General of Police V. Dinesh Reddy to discuss the interests of 300 Saudi nationals
in the city
SAUDI ARABIA TO DOUBLE ITS EXPORT OF CRUDE OIL IN INDIA
94
Saudi Arabia has agreed to double its crude oil exports to India in a move that would reduce the Asian
country's dependence on Iranian crude.
Annual Indian crude imports from the kingdom could rise to more than 800,000 barrels per day, an Indian
official said yesterday in Riyadh on the sidelines of a Saudi energy conference.
"India appreciates the role of the kingdom as an important and reliable energy partner," said the official, who
is on the staff of the Indian embassy in Riyadh.
"Both countries are also working to diversify their seller-buyer relationship into a strategic energy
partnership."
An Indian-Saudi energy alliance has been in the works for at least 18 months.
In February last year, Saudi Arabia's King Abdullah paid a historic visit to New Delhi, becoming the first
Saudi head of state to visit India, which has hostile relations with the kingdom's long-held Muslim ally
Pakistan.
The Indian prime minister Manmohan Singh reciprocated by visiting Riyadh the following month.
Analysts said Riyadh wanted India's help in containing al Qa'eda activity in Pakistan and Afghanistan.
They also suggested the kingdom was seeking to weaken its regional rival Iran by supplying crude that India
would otherwise need to import from Tehran.
"Through oil diplomacy, Saudi Arabia hopes to sap Iran of important regional partners, a diplomatic coup the
US and other western nations have so far failed to achieve," Aaron Mattis wrote in the Harvard International
Review.
On the other hand, economic imperatives have proved more than sufficient for Saudi Arabia and other Gulf
oil exporters to strengthen trade ties with other rapidly developing Asian nations such as China and South
Korea.
95
Oil consumption in those countries, along with India, has risen sharply since 2008, even as it has fallen in the
developed world.
By last August, the Saudi-Indian energy initiative was gathering momentum.
"Opportunities exist to strengthen ties in investment between India and Saudi Arabia," Ali al Naimi, the Saudi
oil minister, said on the sidelines of a meeting of Asian oil buyers.
The kingdom was keen on entering into a 30-year oil supply contract with India, as it had done with several
other countries, he added.
Last February, the Saudi Al Qahtani Sons group formed a joint venture with India's SledgeHammer Oil Tools
to build a large manufacturing plant in Saudi Arabia for oilfield and drilling equipment.
"Many companies are looking for joint ventures.
"Such deals are important for expanding business in India and in Saudi Arabia," said Abdulrahman al
Rabiah, the chairman of the Saudi-India Joint Business Council.
Telvent has installed Saudi Arabia's first intelligent transportation system, the SmartMobility Road Suite, on
King Abdullah Road in Riyadh.
The system uses a centralised platform to manage six kilometres of interurban expressway traffic.
The smart solution also controls and manages four tunnels and the entire range of field devices placed along
the expressway, to improve infrastructure maintenance and increase user safety and security.
Ignacio González, Telvent chairman and CEO, said: "It is a pleasure for Telvent to attest to the achievement
of a high level of efficiency in Riyadh's traffic management and improvement in user safety, security and
mobility conditions."
Local authorities using the SmartMobility solution can get real-time information on traffic conditions on the
expressway and can coordinate and respond quickly in case of any incident occurring on the road.
96
Drivers can also use the smart solution to get real-time information on traffic and select the best route,
thereby reducing the travel time, fuel consumption and chances of possible accidents within the city limits.
The project started in the last quarter of 2010 as part of the strategic plan by the Arriyadh Development
Authority is contributing towards the development of the city in terms of economic, social, architectural and
environmental factors.
Telvent is also developing a new project for the implementation of SmartMobility advanced mobility
management technology in extending the road network in the Arriyadh Old Airport area
97
BUSINESS OPPORTUNITIES
MARKET OPPORTUNITIES
Saudi Arabia, the construction leader in the Gulf area, has budgeted US$385 billion on roads, airports
and energy projects for the five-year period from 2010 to 2014. The government is planning to spend
US$3 billion on 6,600 km of new roads in 2011 alone. Major rail and airport expansion projects are
also under way.
Saudi Arabia has the biggest IT market in the Gulf region, worth about US$3.3 billion in 2010 and
expected to grow to about US$4.6 billion by 2014.
All three of Saudi Arabia‘s GSM operators are in the process of implementing higher data
transmission speeds over their 3.5G networks. This development should stimulate increased demand
for mobile broadband services in the long term.
Saudi Arabia‘s ambitious rail plans are fuelling activity in the infrastructure sector, with US$30 billion
worth of contracts under way or at the bidding stage. Major projects include the North-South railway,
the Saudi Land Bridge, and the Mecca-Medina (or ―Haramain‖) railway.
Saudi Arabia is the third largest consumer of water per capita in the world, but has limited
groundwater to tap. Desalination forms the backbone of the government‘s water strategy. The Saudi
government has committed US$6bn a year to bolstering the water sector over the next two decades.
98
The state-owned utility Saudi Electricity Company (SEC) intends to invest US$70 billion by 2018 to
add 22MW to the nation‘s power-generating capacity in order to meet the growing demand from a
rapidly increasing population. SEC‘s goal is to reach a power-generation capacity of 65,000 MW by
the end of the year 2018.
The new foreign investment law encourages foreign companies to establish industrial and non industrial
ventures in Saudi Arabia. There are good opportunities for companies in the following areas:
Tire manufacturing plants,
Service equipment,
Body and chassis parts,
Automobile transmissions and spare parts,
Auto chemicals,
Car batteries,
Maintenance and diagnostic equipment,
Brakes and emission systems tools.
99
CONCLUSION
In the long run, India will continue to remain an important partner for Saudi Arabia and vice versa. The
present level of cooperation between the two countries is beyond the actual potential. There are huge scope
for improvement in every sectors including economic and trade ties, defence and security ties, etc. Both
sides will need to work hard if they are to strengthen the present level of ties which is not comprehensive in
nature, so as to gain strategic character. This partnership will enable both countries to harness the vast
potential of bilateral relations, drawing upon complementarities and each other's intrinsic strengths, and work
together to address regional and global challenges.
following steps must be taken to express their desire for a comprehensive strategic partnership:a. The frequency of high-level official exchange must be improved so that the political understanding
improves.
b. High-level military exchanges, joint training of troops and use of training courses must be encouraged.
c. Both sides should refrain from taking any steps that would harm the interests of the other sides.
d. Both sides must show the eagerness to open and more and more areas for cooperation.
e. Create a climate conducive for investments from both sides which are mutually beneficial.
100
Bibliography
www.dgft.gov.in
http://www.linkedin.com/groups/Successful-Indian-in-Kingdom-Saudi-4653332
http://en.wikipedia.org/wiki/Transport_in_Saudi_Arabia
http://theses.gla.ac.uk/1454/1/Fakeeh_DBA
http://cgijeddah.mkcl.org/Content.aspx?ID=735&PID=689
http://riyadhef.com/siteimages/pdffile/TransportSTUDY.pdf
http://cgijeddah.mkcl.org/Content.aspx?ID=779&PID=683
http://www.indianembassy.org.sa/Content.aspx?ID=867&PID=686
http://www.daijiworld.com/news/news_disp.asp?n_id=166823
(www.dipp.nic.in)
http://embassies.mofa.gov.sa/sites/india/EN/AboutHostingCountry/SaudiRelations/Pages/d
efault.aspx
http://www.indianembassy.org.sa/Content.aspx?ID=849
http://www.transnationalstudies.org/node/46
http://commerce.nic.in/eidb/default.asp
Source: Department of Commerce, Ministry of Commerce and Industry, Government of India,
available at <http://commerce.nic.in/eidb/default.asp>.
www.google.com
www.wikipedia.com
101
A
Global / Country Study and Report
On
“AVIATION SECTOR OF SAUDI ARABIA”
Submitted To:
Gujarat Technological University
IN PARTIAL FULLFILLMENT OF THE
MASTER OF BUSINESS ADMINISTRATION
Under the Guide:
Prof. CHIRAG SONI
Submitted By:
GUPTA AKASH
Enrolment No.
.
117170592007
SONI HIREN
.
117170592008
CHAUDHRY HUSENALI
117170592009
GAUSWAMI KAMLESHGIRI
117170592011
CHAUDHRI VARSHA
117170592012
TURKI ALTAMAS
117170592013
Institute Name:
Golden Jubilee Institute of Management & Technology
SIDDHPUR
102
Affiliated
Gujarat Technological University
AHMEDABAD
Students‟ Declaration
We, GROUP:- B, hereby declare that the report for Global/ Country Study Report entitle
AVIATION SECTOR OF SAUDI ARABIA is a result of our own work and our indebtedness to
other work publications, references, if any, have been duly acknowledged.
Place:……..
Date :
103
Institute‟s Certificate
―Certified that this Global /Country Study and Report Titled ―AVIATION SECTOR OF SAUDI
ARABIA ‖ is the bonafide work of Mr./Ms/Group ..GROUP :- B (Enrollment NO:- 117170592007
TO 117170592013), who carried out the research under my supervision. I also certify further, that
to the best of my knowledge the work reported here in does not form part of any other project report
or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this
or any other candidate.
Signature of the Faculty Guide
(Name and Designation of Guide)
(Certificate is to be countersigned by the Director/HOD)
104
_______________________________________________________
PREFACE
Master of business administration is professional cource which develops the personality with
knowledge & skill and make it available for those seeking challenging carriers in the changing
environment of the world
The goal of the global/country study is to give an understanding of specific country contexts that
affect business decision and opportunities for the Soudi Arabia based business and or new venture
for export , import ,investment ,joint venture , collobrations and partnership. The real business
problem are different from class room and case solving. Global / country study aims to providing
little insight into working of an organization to a management trainee among every stage of
knowledge being included in student. Practical training in the corporate world plays a significant
role in exhibiting and pruning their capabilities
The purpose behind writing report is developing framework for understanding economical
environment of Saudi Arabia.
105
Acknowledgement
A successful report is fulfill culmination of efforts of many people. Some directly involved and
others who have quietly encouraged and extended their support while being in background.
First of all We would like to thanks Mr. Chirag Soni , Vishal Patel co-ordinator of project for his
valuable support and guidance throughout semester. We also thankfull Dr.jay Mishra for their
continuous efforts to make the best report.
Lastly I would like to thanks my institute Golden Jubilee institute of management for providing me
this oppurtunities.
106
INDEX
SR.NO.
Sub
Particular
Page No
No
Part .
1
Student declaration
I
College certificate
II
Preface
III
Acknowledgement
iv
Summary of part-1
1
7
Part-2
History of aviation
8
2.1
Introduction to Saudi Aviation
12
2.2
Global Outlook
15
2.3
Aviation Economic Benifits
16
2.4
Structure
19
2.5
Future of Saudi Arabia aviation sector
24
2.6
The Importance of Saudi Arabia to the World Economy
26
2.7
Saudi Arabia aviation sector growth
28
2.8
General Authority of Civil Aviation
29
2.9
International market dominates growth
30
107
in Saudi Arabia
2.10
FORECASTED AVIATION PLAN OF SAUDI ARABIA
Part-3
31
32
3.1
Comparative Analysis
33
3.2
Players In Saudi Arabia
34
3.3
The Saudi Academy of Civil Aviation
36
3.4
SWOT analysis of aviation industry in the Saudi Arabia
37
40
3.5
Indian Aviation sector
Part .
CH.5
4
3.6
Airport infrastructure
42
3.7
SWOT analysis of Indian aviation sector
43
3.7
Players in the Indian aviation
45
India-saudi relation
55
findings
71
conclusion
73
108
Part-1
109
Summary of Part-1
The goal of the global/country study is to give an understanding of specific country contexts that
affect business decision and opportunities for the Saudi Arabia based business and or new venture
for export
, import
,investment
,joint
venture
,collobrations and
partnership.
The
real
business problem are different from class room and case solving. Global / country study aims to
providing little insight into working of an organization to a management trainee among every stage
of knowledge being included in student. Practical training in the corporate world plays a significant
role in exhibiting and pruning their capabilities
The Kingdom of Saudi Arabia has a population of 27.1m, of whom 31% are expatriates. The
national population has a relatively high proportion of young people, and the economy has
struggled to create enough jobs for new labour market entrants. The population is forecast to grow
at an annual rate of 3.4% in 2011-12
Saudi Arabia‘s recent economic successes have provided a historic opportunity for the government
to make targeted policy changes and investments to lay the groundwork for a sustainable increase in
the Kingdom‘s long-term rate of economic expansion. This opportunity has been coupled with
ambitious vision on the part of His Majesty King Abdullah, Custodian of the Two Holy Mosques, to
encourage the economy‘s advancement and diversification beyond the petroleum sector.
The Saudi economy is dominated by the oil sector, which accounted for an average of 54% of GDP
over the last five years. Despite being the world‘s largest oil exporter, the sizable population means
that relativeoil wealth per national is lower than in other GCC countries
Petroleum is an integral part of the Saudi economy; Saudi Arabia is the world‘s largest producer
and exporter of oil. In recent decades the Kingdom has increasingly diversified its economy, and
today produces and exports a variety of industrial goods all over the globe.
110
The government will continue to invest heavily in oil refining and boosting natural
gas production, to
help meet
rising
domestic
energy
demand.
It
is
also
supporting
the petrochemicals sector and non-oil energy intensive industries
Saudi Arabia aims to diversify the economy from its dependence on oil, create more
jobs and spread wealth to different regions. A key pillar of government plans is the development of
four ―economic cities‖, initiated with around $70bn of seed investment
GCC real GDP growth is expected to surge to 7 percent in 2011 on the back of increased oil
production and soaring oil revenues which are being spent by governments on boosting salaries and
employment as well as supporting development agendas.
The benign global inflation environment will help keep GCC rates under control, despite high
public spending. The dollar exchange rate peg will be maintained and GCC interest rates will
remain low in line with US rates.
In conjunction with political protest movements that swept the Middle East in 2011, the al-Saud
family has been faced with increased calls for political reform including greater separation of
powers, elections, accountability and transparency, and even the establishment of a constitutional
monarchy.
Today, Saudi Arabia exports wheat, dates, dairy products, eggs, fish, poultry, fruits, vegetables and
flowers to markets around the world. Dates, once a staple of the Saudi diet, are now mainly grown
for global humanitarian aid.
Saudi Arabia‘s free market economy has undergone remarkable changes in a relatively short period
of time. It has evolved from a basic agricultural society into a regional and global economic power
with a modern infrastructure.
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
111
The government offered incentives for the establishment of private companies at the industrial
cities. The Saudi Arabian Basic Industries Corporation (SABIC), created in 1976, set up non-oil
industrial facilities that use as feedstock natural gas and natural gas liquids manufactured by the oil
industry.
Saudi Arabia has a modern banking industry with 13 commercial banks. Saudi banks provide retail
and corporate banking, investment services, brokerage facilities, and derivative transactions in
addition to credit cards, ATMs and point-of-sale transactions.
The banking and finance sector is overseen by several government agencies. The Ministry of
Finance supervises economic policies. The Saudi Arabian Monetary Association (SAMA) manages
fiscal policy, issues the country‘s currency, the Saudi Riyal and oversees the nation‘s commercial
banks.
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.
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
Saudi Arabia‘s education system has gone through an astonishing transformation. When the
Kingdom was established in 1932, education was available to very few people, mostly the children
of wealthy families living in the major cities.
The energy sector is the backbone of the Saudi economy. The Kingdom possesses a quarter of the
world‘s proven oil reserves, and is the world‘s largest producer and exporter of oil.Saudi Arabia is
also developing its additional energy resources – natural gas that once flared off oil wells is
collected and used, and the Kingdom has become a producer of refined oil products and
petrochemicals such as kerosene, diesel oil and gasoline.
112
The establishment of a modern health care and social services system has been one of Saudi
Arabia‘s most stunning successes. The Saudi health care network provides free care to the general
public and some of the most sophisticated specialized care available anywhere in the world.
The economic philosophy of the Saudi Arabian royal family has not changed since the reign of A al
Aziz, but the economic role of the government has grown tremendously. The stated goal of Saudi
rulers has been to improve the economic conditions of the country's citizens while retaining the
society's Islamic values. Imbedded in this social contract, however, is the issue of political control.
The Al Saud recognized that the key to political power in the kingdom lay in replacing the old
economy with lucrative new economic opportunities for the country's citizenry.
In the early stages of the kingdom, the only nontraditional economic opportunities for Saudi citizens
were linked to employment in the military, distribution of land, and some modest contracts and
commissions.
The Kingdom of Saudi Arabia is dedicated to the concept of free trade based on competition. There
are no foreign exchange controls, quantitative restrictions or tariff barriers. Any increase in imports
from any country depends on competitive prices, good quality, and punctual delivery. Imports,
wholesale, and retail trade are in the hands of the Saudi private sector. On the whole, Saudi Arabia
pursues a predominantly liberal trade policy. No price restrictions or quotas are imposed on
importers except for alcoholic beverages and pork products which are prohibited.
Saudi Arabia plays an incredibly important role in the economy of the United State, largely because
of its position as one of the most influential members of OPEC, the group, which is formed of the
countries which are net exporters of oil. Saudi Arabia has huge oil reserves and it is currently the
country with the best capacity for increasing or decreasing its oil production in response to changes
in oil prices and demand.
In the past, India‘s relations with Saudi Arabia have been impacted by the Cold War, regional
political dynamics and divergent interests of both countries. India‘s relations with Israel, the
Kashmir issue and Indian support for Arab nationalist regimes in Egypt, Iraq and Syria are other
aspects that have created misunderstandings between the two countries. The author sees a shift in
Saudi Arabia‘s foreign policy following the September 11, 2011 attacks as since then, it has been
marked by an attempt to look beyond its traditional allies and to build closer relations with other
countries, especially with major Asian powers such as India.
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Saudi Arabia‘s investments in developing its education and political system and opening its
economy to increased foreign investment, privatization and diversification have together prepared
the Kingdom and its citizens well for their participation in the global economy and community.
Together, these developments and a decade of other economic reforms led to Saudi Arabia‘s
accession to the World Trade Organization, making the nation the 149th member of the organization
on December 11, 2005. This has opened the Saudi economy to unprecedented opportunities for
foreign investment and job creation. The best indicator ofSaudi Arabia‘s economic growth is the
increase in its Gross Domestic Product (GDP) from $20 billion in 1970 to $447.80 billion (at
current prices) in 2010, according to the Saudi Arabian Monetary Agency (SAMA) 47th annual
report.
The study was conducted to analyze the business practices of Saudi Aramco and the strategies
devised by the company. The study findings suggested that the company has three
strategic approaches for its business practices which includes profit maximization strategy, resource
mobilization strategy and cultural diversification strategy. The company has complete political
backup from the government and it is fully monitored by the state. The company enjoys unique
position in the market due to near monopoly in the Saudi domestic markets.
To summarize, it can be said that Saudi Aramco is an interesting that shows that business profits
can co-exist with larger socio-political goals in a state owned corporation if they are aided by the
external conditions. Saudi Aramco mainly serves the policies of its government but at the same time
it has successfully exploited the conditions and used the privileges it has obtained from the
government to the fullest.
It has also successfully diversified into multiple fields. However, in order to be globally competitive
this company must try to diversify further and also explore different geographical markets. It must
also invest more in research and development and put more effort towards innovating cleaner fuels
and greener technologies keeping the changing times in mind.
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Part-2
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History of aviation
Many cultures have built devices that travel through the air, from the earliest projectiles such as
stones and spears, the boomerang in Australia, the hot air Kongming lantern, and kites. There are
early legends of human flight such as the story of Icarus, and Jamshid in Persian myth, and later,
somewhat more credible claims of short-distance human flights appear, such as the flying
automaton of Archytas of Tarentum (428–347 BC), the winged flights of Abbas Ibn Firnas (810–
887), Eilmer of Malmesbury (11th century), and the hot-air Passarola of Bartolomeu Lourenço de
Gusmão (1685–1724).
The modern age of aviation began with the first untethered human lighter-than-air flight on
November 21, 1783, in a hot air balloon designed by the Montgolfier brothers. The practicality of
balloons was limited because they could only travel downwind. It was immediately recognized that
a steerable, or dirigible, balloon was required. Jean-Pierre Blanchard flew the first human-powered
dirigible in 1784 and crossed the English Channel in one in 1785.
In 1799 Sir George Cayley set forth the concept of the modern airplane as a fixed-wing flying
machine with separate systems for lift, propulsion, and control. Early dirigible developments
included machine-powered propulsion (Henri Giffard, 1852), rigid frames (David Schwarz, 1896),
and improved speed and maneuverability (Alberto Santos-Dumont, 1901)
First assisted take-off flight by the Wright Brothers, December 17, 1903 While there are many
competing claims for the earliest powered, heavier-than-air flight, the most widely-accepted date is
December 17, 1903 by the Wright brothers. The Wright brothers were the first to fly in a powered
and controlled aircraft. Previous flights were gliders (control but no power) or free flight (power but
no control), but the Wright brothers combined both, setting the new standard in aviation records.
Following this, the widespread adoption of ailerons rather than wing warping made aircraft much
easier to control, and only a decade later, at the start of World War I, heavier-than-air powered
aircraft had become practical for reconnaissance, artillery spotting, and even attacks against ground
positions.
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Aircraft began to transport people and cargo as designs grew larger and more reliable. The Wright
brothers took aloft the first passenger, Charles Furnas, one of their mechanics, on May 14, 1908. In
contrast to small non-rigid blimps, giant rigid airships became the first aircraft to transport
passengers and cargo over great distances. The best known aircraft of this type were manufactured
by the German Zeppelin company.
Hindenburg at Lakehurst Naval Air Station, 1936
The most successful Zeppelin was the Graf Zeppelin. It flew over one million miles, including an
around-the-world flight in August 1929. However, the dominance of the Zeppelins over the
airplanes of that period, which had a range of only a few hundred miles, was diminishing as
airplane design advanced. The "Golden Age" of the airships ended on May 6, 1937 when the
Hindenburg caught fire, killing 36 people. The cause of the Hindenburg accident was initially
blamed on the use of hydrogen instead of helium as the lift gas. An internal investigation by the
manufacturer revealed the coating used to protect the covering material over the frame was highly
flammable and allowed static electricity to build up in the airship.Changes to the coating
formulation reduced the risk of further Hindenburg type accidents.Although there have been
periodic initiatives to revive their use, airships have seen only niche application since that time.
Great progress was made in the field of aviation during the 1920s and 1930s, such as the first
transatlantic flight of Alcock and Brown in 1919, Charles Lindbergh's solo transatlantic flight in
1927, and Charles Kingsford Smith's transpacific flight the following year. One of the most
successful designs of this period was the Douglas DC-3, which became the first airliner that was
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profitable carrying passengers exclusively, starting the modern era of passenger airline service. By
the beginning of World War II, many towns and cities had built airports, and there were numerous
qualified pilots available. The war brought many innovations to aviation, including the first jet
aircraft and the first liquid-fueled rockets.
NASA's Helios researches solar powered flight.
After World War II, especially in North America, there was a boom in general aviation, both private
and commercial, as thousands of pilots were released from military service and many inexpensive
war-surplus transport and training aircraft became available. Manufacturers such as Cessna, Piper,
and Beechcraft expanded production to provide light aircraft for the new middle-class market.
By the 1950s, the development of civil jets grew, beginning with the de Havilland Comet, though
the first widely-used passenger jet was the Boeing 707, because it was much more economical than
other planes at the time. At the same time, turboprop propulsion began to appear for smaller
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commuter planes, making it possible to serve small-volume routes in a much wider range of
weather conditions.
Since the 1960s, composite airframes and quieter, more efficient engines have become available,
and Concorde provided supersonic passenger service for more than two decades, but the most
important lasting innovations have taken place in instrumentation and control. The arrival of solidstate electronics, the Global Positioning System, satellite communications, and increasingly small
and powerful computers and LED displays, have dramatically changed the cockpits of airliners and,
increasingly, of smaller aircraft as well. Pilots can navigate much more accurately and view terrain,
obstructions, and other nearby aircraft on a map or through synthetic vision, even at night or in low
visibility.
On June 21, 2004, SpaceShipOne became the first privately funded aircraft to make a spaceflight,
opening the possibility of an aviation market capable of leaving the Earth's atmosphere. Meanwhile,
flying prototypes of aircraft powered by alternative fuels, such as ethanol, electricity, and even solar
energy, are becoming more common.
http://www.globalaircraft.org/history_of_aviation.htm
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2.1 Introduction to Saudi Aviation
121
Aviation is defined as the design, manufacture, use, or operation of aircraft - in which the term
aircraft refers to any vehicle capable of flight. Aircraft can either be heavier-than-air or lighter-thanair: lighter-than-air craft including balloons and airships, and heavier-than-air craft including
airplanes, autogiros, gliders, helicopters, and ornithopters.
In Saudi Arabia, the process of market liberalization of the aviation sector started just recently.
Saudi Arabian Airlines (SAUDIA) began its privatization process by splitting its operation into
seven Strategic Business Units, which are all subject to privatization. Further in 2007G / 1428H,
two new airlines commenced national air service in Saudi Arabia. Both newcomers have to comply
with a number of prerequisites including air service on so-called PSO routes in the Kingdom. While
privatization of air services is carefully introduced at domestic levels, next steps toward
international routes are already underway.
Regulatory tasks for aviation are allocated to the General Authority for Civil Aviation, which on the
one side is the regulatory agency for the aviation sector, and on the other side it operates the 27 civil
airports in the Kingdom. However, these two tasks bear a conflict of interests and therefore GACA
is undergoing a restructuring process towards commercialization of business unites which include
airport operation and air navigation service.
GACA is in the process of separating regulatory functions and operational activities. This process
has already been initiated and it divests airport operation into a commercial environment and leaves
the authority with regulatory functions. A further intention is to reduce direct and indirect subsidies
as those have evolved with the public sector and establish fair market conditions for commercial
airlines that operate domestically. A further issue is the provision of air services to less dense
regions which are being considered as a public service obligation (PSO). With the new arrival of
commercial airlines the subsidy structure of the past is not workable anymore and a new support
mechanism to aviation services (which may include subsidies) needs to be found for concerned
regions and cities, to maintain such air services.
With the arrival of new domestic airlines and the market orientation of SAUDIA on its way towards
privatization new challenges to improve air travel facilities are immanent. Now, domestic terminals
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have to cater for competing airlines, and with regard to international travel airports and airlines may
have to enter into new market segments such as transit passenger services in order to become
internationally competitive. In this context SAUDIA‘s concept of being only an origin – destination
carrier may need to expand towards hub and spoke services like it is successfully demonstrated by
other airlines of the region.
Until now domestic air service has been supported by exempting airlines from airport and
navigation fees, and the air fares are partly regulated by cap fares. Understanding that this can not
continue in a commercial and competitive environment, GACA is considering measures to
gradually liberate the tariff policy and to introduce applicable airport and navigation fees, while
cautiously safeguarding the development of a healthy competition.
Over the past decades the aviation sector worldwide has been undergoing remarkable changes that
are characterized by liberalization and privatization of a strictly regulated sector, and
commercialization of airports and passenger services. Since 2006 G (1427 H) these changes are
taking place in the Kingdom with the privatization process of SAUDIA and licensing of two private
airlines for operating domestic services. The responsibilities of the regulatory authority for aviation
GACA have included the operation of air navigation and of all civil airports, though these functions
shall now be independent from the regulatory body. GACA is resolving the inherent conflict of
interest between regulatory functions and operational activities by divesting airport operation and
navigation services into separate business units outside the management of the authority.
Safety of the aviation sector is internationally well regulated and the Kingdom has an outstanding
safety record. Adherence to international regulations and the monitoring of compliance with safety
regulations by all operating carriers and airports in the Kingdom is an important task. While the
concerned authority is divesting airport operations in the Kingdom, it has to assume a stronger role
in monitoring safety compliance. This monitoring role needs also be addressed with the growing
number of commercial airlines operating in the Kingdom.
http://www.saudinf.com/main/g31.htm
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2.2 Global Outlook
The air transport industry is the global network of commercial aircraft operators, airports, air
navigation service providers and the manufacturers of aircraft and their components. It is
responsible for connecting the global economy, providing millions of jobs and making modern
quality of life possible. The Air Transport Action Group (ATAG), based in Geneva, Switzerland,
represents the full spectrum of this global business. ATAG brings the industry together to form a
strategic perspective on commercial aviation‘s sustainable development and the role that air
transport can play in supporting the sustainability of other sectors of the economy. ATAG‘s Board
of Directors includes: Airports Council International (ACI), Airbus, ATR, Boeing, Bombardier,
Civil Air Navigation Services Organisation (CANSO), CFM International, Embraer, GE Aviation,
Honeywell Aerospace, International Air Transport Association (IATA),Pratt & Whitney and RollsRoyce.
Key facts and figures from the world of air transport
56. 6 million Jobs supported by aviation worldwide
192 air navigation service provider
3.5 % Of global GDP is supported by aviation
www.centreforaviation.com › Profiles › Countries
www.atag.org
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2.3 Aviation Economic Benifits
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Aviation sector integral part of Saudi economy
Saudi Arabia Accounts for 1.8 percent of Kingdom‟s GDP, provides some 152,000 jobs
JEDDAH – Commercial aviation is a critical component of the Saudi economy, providing 1.8
percent of the Kingdom‟s GDP or SR30.2 billion annually, a study commissioned by the
International Air Transport Association (IATA) and completed by Oxford Economics, said.
The study was presented to Prince Fahad Al-Abdullah, President of the General Authority for
Civil Aviation (GACA) and Chairman of the Board of Saudi Arabian Airlines, by Tony Tyler,
IATA‟s Director General and CEO who is visiting Saudi Arabia.
Moreover, aviation is a quality employer, providing work for some 152,000 people in the
Kingdom, the study said, adding that the productivity of these jobs is 1.8 times higher than
the average for Saudi Arabia. Besides, aviation-enabled tourism in the Kingdom employs a
further 139,000 people and supports some SR23.6 billion of economic activity annually, the
report
said.
In total, aviation and aviation-enabled tourism accounts for 3.2 percent of Saudi Arabia‟s
GDP and 3 percent of employment, the study noted.
Highlights of the study include:
Aviation supports 1.8% of Saudi Arabia‘s GDP equal to SAR 30.2 billion annually.
Aviation is a quality employer, providing work for some 152,000 people in Saudi Arabia.
The productivity of these jobs is 1.8 times higher than the average for Saudi Arabia.
Aviation-enabled tourism in Saudi Arabia employs a further 139,000 people and supports
some SAR 23.6 billion of economic activity annually.
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Benefits of Aviation
The Flight Path to Economic Growth
Aviation benefits passengers and freight with swift, cost-effective transportation
Aviation contributes to the overall economic growth of nations
Aviation provides significant revenues to national public finances
Aviation creates large numbers of high-value jobs
Aviation delivers extensive catalytic benefits to international trade and tourism
All this illustrates the pivotal role aviation plays in driving today‘s global economy. A productive
and efficient aviation industry serves as the strong foundation for the development of our globalized
economy.
www.saudigazette.com.sa/index.cfm?method=home.con.
http:// http://www.aviationbenefitsbeyondborders.org/download-abbb-report
www.benefitsofaviation.aero/Pages/default.aspx\
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2.4 Structure
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Commercial Activities
1. Across the world, the trend is towards a very high percentage, ranging from 60 to 70%, of the
total revenue of airport operators being generated from non-aeronautical sources at major airports.
In India, although these services are even now provided by private agencies, the comparable figure
for AAI at international airports is just 22%. There will be a major thrust towards increasing the
share of commercial revenue emerging from non-aeronautical sources. This will help in optimal
exploitation of the full commercial potential of airports and make many airports not only viable but
capable of generating surpluses for further expansion and development.
2. In order to maximize the revenue while at the same time maintain transparency, there will be a
master plan for development of commercial activities and facilities, as part of the overall master
plan approved by the management, for the airport as a whole. The space-use patterns will normally
not be deviated from.
3. In the allocation of space among concessionaires, there will be a strict adherence to stipulated
procedures, while maintaining sufficient flexibility in order to ensure quality products and services
and attract the holders of reputed brand-names. For this purpose, innovative tendering procedures
involving limited tenders, two-bid system, use of net present value of bids spread over several
years, grant of management contracts, bunching of similar facilities etc. will be devised.
4. Except for user developmental fees, there will be total freedom for airport operators in the matter
of raising revenue through non-aeronautical charges and there will not be any Government control
over the same.
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Civil aviation
Civil aviation includes all non-military flying, both
Cargo aviation
air transport.
Air transport
There are five major manufacturers of civil transport aircraft (in alphabetical order):
Airbus, based in Europe
Boeing, based in the United States
Bombardier, based in Canada
Embraer, based in Brazil
United Aircraft Corporation, based in Russia
Boeing, Airbus, Ilyushin and Tupolev concentrate on wide-body and narrow-body jet airliners,
while Bombardier, Embraer and Sukhoi concentrate on regional airliners. Large networks of
specialized parts suppliers from around the world support these manufacturers, who sometimes
provide only the initial design and final assembly in their own plants. The Chinese ACAC
consortium will also soon enter the civil transport market with its ACAC ARJ21 regional jet.
Until the 1970s, most major airlines were flag carriers, sponsored by their governments and heavily
protected from competition. Since then, open skies agreements have resulted in increased
competition and choice for consumers, coupled with falling prices for airlines. The combination of
high fuel prices, low fares, high salaries, and crises such as the September 11, 2001 attacks and the
SARS epidemic have driven many older airlines to government-bailouts, bankruptcy or mergers. At
the same time, low-cost carriers such as Ryanair, Southwest and Westjet have flourished.
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General aviation
General aviation includes all non-scheduled civil flying, both private and commercial. General
aviation may include business flights, air charter, private aviation, flight training, ballooning,
parachuting, gliding, hang gliding, aerial photography, foot-launched powered hang gliders, air
ambulance, crop dusting, charter flights, traffic reporting, police air patrols and forest fire fighting.
Each country regulates aviation differently, but general aviation usually falls under different
regulations depending on whether it is private or commercial and on the type of equipment
involved.
Many small aircraft manufacturers serve the general aviation market, with a focus on private
aviation and flight training.
The most important recent developments for small aircraft (which form the bulk of the GA fleet)
have been the introduction of advanced avionics (including GPS) that were formerly found only in
large airliners, and the introduction of composite materials to make small aircraft lighter and faster.
Ultralight and homebuilt aircraft have also become increasingly popular for recreational use, since
in most countries that allow private aviation, they are much less expensive and less heavily
regulated than certified aircraft.
The largest aircraft to be built, to date, is the Antonov An-225. This aircraft comes from the
Ukraine, and it was built back in the 1980's. This aircraft includes 6 engines, mounted on the wing.
It's wingspan is 88 metres (290 inches) and it is 84 metres long (276 inches). This aircraft holds the
world payload record, after it transported 428,834 pounds worth of goods. Weighing in at 1.4
million pounds, it is also the heaviest aircraft to be built.
Military aviation
Simple balloons were used as surveillance aircraft as early as the 18th century. Over the years,
military aircraft have been built to meet ever increasing capability requirements. Manufacturers of
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military aircraft compete for contracts to supply their government's arsenal. Aircraft are selected
based on factors like cost, performance, and the speed of production.
Types of military aviation
Fighter aircraft's primary function is to destroy other aircraft. (e.g. Sopwith Camel, A6M
Zero, F-15, MiG-29, Su-27, and F-22).
Ground attack aircraft are used against tactical earth-bound targets. (e.g. Junkers Stuka, A10, Il-2, J-22 Orao, AH-64 and Su-25).
Bombers are generally used against more strategic targets, such as factories and oil fields.
(e.g. Zeppelin, Tu-95, Mirage IV, and B-52).
Transport aircraft are used to transport hardware and personnel. (e.g. C-17 Globemaster III,
C-130 Hercules and Mil Mi-26).
Surveillance and reconnaissance aircraft obtain information about enemy forces. (e.g.
Rumpler Taube, Mosquito, U-2, OH-58 and MiG-25R)
Unmanned aerial vehicles (UAVs) are used primarily as reconnaissance fixed-wing aircraft,
though many also carry payloads. Cargo aircraft are in development. (e.g. RQ-7B Shadow,
MQ-8 Fire Scout, and MQ-1C Gray Eagle).
Missiles deliver warheads, normally explosives, but also things like leaflets
aviation sector include:
Air traffic control
Helicopter and private charter services
Airport management
Express delivery service
www.linkedin.com/title/aircraft-engineer/at-saudi-arabian-airlines
2.5 Future of Saudi Arabia aviation sector
The job market for the aviation industry is good and is looking good for the future. Salaries for the
pilots are up and steady. The airline industry is profiting along with the airline manufacturing
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companies. With more and more people utilizing the airways to conduct business and to travel, the
future of the aviation industry will only improve.
With the rate that airline pilots are retiring, there looks to be a good market for future pilots.
Currently about 1200 pilots a year are retiring with the number to increase to about 2500 per year
by the year 2007. Not only are more pilots retiring but the number of pilots coming from the
civilian sector is increasing also. Two years ago, 75% - 80% of the pilots came from the military
forces, while today that number has almost reversed with 66% of the pilots coming from the civilian
job market (Benensen, 1998). This is a boost to the private flying school because more students will
pursue this market. Aviation schools have increased enrollment in the last few years due to the
increasing demand. The draw of more jobs available and the high wages being paid ($133,000 per
year average) will continue to bring more pilots into the job area (Arlington, 1998).
The airline industry has a whole is doing well. Most airline executives are optimistic that traffic will
be strong and the bottom line will remain in the black for 1999 (Henerson, 1999). "Although traffic
and revenue growth will stagnate, the world's airlines will enjoy net profits of $8 billion, the same
as in 1998, as revenues rise 3% to $309 billion." (Henderson, 1999) The increase in aviation jobs in
the LaGuardia and Kennedy airport area is even more evident by the double enrollment in the local
College of Aeronautics (Toy, 1998). Even job search sites on the Internet have seen how the
aviation industry has a whole is on the uprise. Although initially designed to market pilots, they
have expanded into universal applications to address everything in the aviation industry (Flint,
1997). Indications of the industry remaining strong are evident in the recent 10 year, $2 billion
contract that Lockheed Martin signed with NASA to utilize five of their sites (Anonymous, 1999).
Manufacturing of aircraft is looking strong for the future. The airlines are projected to purchase
between 11,000 and 12,000 new planes per year for the next few years (Benenson, 1998). Boeing s
market outlook is 17,000 airplane by the year 2017 at a value of 1.2 trillion dollars
(www.boeing.com). This will continue to keep the aviation industry growing. The manufacturing
companies will continue to employ thousands of personnel and even be hiring more employees in
the future. With the increase demand for air travel, new and better airplanes will always be in
demand.
The aviation industry is alive and well and will continue to grow in the future. We have looked at
how the aviation industry is really made up of not only the pilots but everyone involved with getting
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the plane off the ground. This includes the manufacturing of aircraft, operations of airports, and
maintenance of the aircraft. Not only commercial airlines but also the private industry and military
aviation. We have seen that there are numerous jobs created by the airline industry which are not
involved in aviation at all, but would not exists without the airline industry. These include jobs in
sightseeing/tours, hotel, and restaurants.
These various businesses strive on the amount of passengers that travel through an airport during
the course of a day. These businesses account for a large portion of the jobs created but certainly do
not cover all of the jobs created. We have also looked at how the job market for the aviation
industry is good and is looking good for the future. The future for pilots looked strong for the future
along with future orders for new aircraft. The airline industry, as a whole, is going strong and
projections for the future are positive.
www.ffs.aero/en-US/Madinah/OEMA/
www.mongabay.com/reference/new_profiles/250sa.html
www.prnewswire.com/.../the-future-of-airlines-in-saudi-arabia-to-
2.6 The Importance of Saudi Arabia to the World Economy
Saudi Arabia plays an incredibly important role in the economy of the United State, largely because
of its position as one of the most influential members of OPEC, the group, which is formed of the
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countries which are net exporters of oil. Saudi Arabia has huge oil reserves and it is currently the
country with the best capacity for increasing or decreasing its oil production in response to changes
in oil prices and demand.
The US economy is highly dependent on oil, relying on oil for about 40 percent of its energy
production and 97 percent of its vehicle fuel, as well as for the supply of the petrochemicals that are
used by many manufacturing industries. Although the United States does produce some of its own
oil, it has to import approximately two thirds of the oil that is uses. This means that it is very
dependent on the oil producing nations, particularly the OPEC countries and Saudi Arabia. Saudi
Arabia has a significant impact on the global oil and petrochemicals industry, which means that it
can therefore have a potentially significant influence on the economy of the United States. About 13
percent of the oil that is imported into the US every year, over 100 million barrels a day, comes
from Saudi Arabia. This is a significant amount, but Saudi Arabia, as a key player in OPEC, also
has an indirect influence on the US, economy through its influence on the other sources of US oil
imports.
The United States, with its economy that is dependent on oil, is an important export market for
Saudi Arabia, which has an economy that is dominated by oil production. The United States is the
largest export market for Saudi Arabia. Meanwhile, Saudi Arabia is one of the largest markets in the
Middle East for exports from the United States. Saudi Arabia is also an important market for US
exports, with many commercial and manufactured products made in the United States being
exported to Saudi Arabia. Saudi Arabia is a particularly important market for the defense sector in
the United States, with a lot of US made equipment being exported to Saudi Arabia.
The United States has a very special relationship with Saudi Arabia. This is largely based upon the
importance of the trade of oil and other goods for both countries, but Saudi Arabia has also been
courted by the United States due to its strategic location and importance in the Middle East. The
good relationship between the US and Saudi Arabia, and the influence of Saudi Arabia on the
stability of its region, is very important for the US politically as well as economically, and this
political side to the relationship also has economic effects in the US, by ensuring a reliable source
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of Arab oil into the United States and by helping to make it possible for the US to trade with other
Arab countries.
The arabamericangiving.org website is a good place to find out more about the importance of the
Arab world for the economy of the United States, including information about the relationship
between the US and other Arab countries.
www.saudiembassy.net/about/country.../economy_global_trade/ www.alriyadh.com/2013/01/18/article802696.html Saudi Arabia
2.7 Saudi Arabia aviation sector growth
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After several years of sagging performance, Saudi Arabia‘s aviation market reported its strongest
growth in passenger traffic in more than a decade in 2011, even against the background of the
Middle East‘s regional social unrest. Despite the Arab Spring uprisings in North Africa and some of
the Gulf states, Saudi Arabian passenger traffic boomed in 2011, up 13.6% year-on-year in 2011, to
just over 54 million passengers, as the national economy expanded 6.8% (real GDP estimate) on
expanding
oil
output
and
renewed
government
and
private
sector
investment.
Large infrastructure investments are fuelling high movements of migrants workers from around the
Gulf as well as India, Southeast Asia and China.
The increase in passenger traffic continues a trend of improving growth in the Saudi market seen
over the past few years. Since the beginning of the liberalisation of the Saudi market in 2007,
passenger traffic has grown at an average of 7.7% p/a, almost double the average growth of the
previous five years.
While there have been setbacks, such as the failure of Sama and the virtual abandonment of the
domestic market by NAS Air over the past two years, the creeping liberalisation in Saudi Arabia is
beginning to produce results.
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2.8 General Authority of Civil Aviation
The General Authority of Civil Aviation of Saudi Arabia is the national institution of Saudi
Arabia in charge of aviation and related matters, headquartered in central Jeddah.
GACA emerged from the former Presidency of Civil Aviation that was created when the
institution controlling aviation was split into a civil department and the Royal Saudi Air Force. The
Presidency of Civil Aviation was among others also in charge of the Saudi Arabian Airlines and the
Meteorology Department. The Saudi Arabian Airlines was split from the Presidency of Civil
Aviation in 1960 and became an independent public institution in 1963. The Meteorology
Department became an independent institution with own budget in 1966. The name of the
Presidency of Civil Aviation was changed to General Authority Of Civil Aviation in 1977. The
former president of GACA is Faisal Hamad Al Sugair. Its current president is Fahd bin Abdullah,
brother or Saudi education minister, Faisal bin Abdullah. Fahd bin Abdullah was appointed to this
post in November 2011.
It is the operator of four international and 23 domestic airports within the country.
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2.9 International market dominates growth in Saudi Arabia
International traffic dominated the growth in the Saudi market in 2011, with passenger numbers up
18.2% year-on-year to 29.3 million. Saudi Arabia is the economic powerhouse of the Middle East
and also one of the region‘s most populous countries. As a result, it has become an increasingly
important market for local airlines, as well as for carriers from further afield.
Regional carriers such as Gulf Air, Qatar Airways, Bahrain Air and Etihad Airways all devoted
more capacity and attention to the Saudi Arabian market in 2011. Air Arabia CEO Adel Ali said in
Jun-2012 that the carrier recognises the potential in the Saudi Arabian market and local authorities
have ―gone a long way‖ in developing the country‘s aviation market.
The Bahrain-based Gulf Air and Bahrain Air in particular have shifted increasing amounts of
capacity into the market. In late 2011, Gulf Air CEO Samar Majali described Saudi Arabia as the
carrier‘s most important market. Bahrain Air selected Dammam as its second hub in late 2011 and
launched services from the city to Beirut and Khartoum in Jun-2012.
Foreign airlines have been granted increasing levels of access to Saudi Arabia‘s smaller "domestic"
airports. The Kingdom has been busily upgrading and refurbishing its smaller airports over the past
few years, as part of a USD50 billion infrastructure investment programme in the aviation and
transport sector.
While the majority of international traffic still flies into Madinah, Riyadh, Jeddah and Dammam,
smaller cities have attracted new services from a variety of international carriers, such as Turkish
Airlines, Ethiopian Airlines, Air Arabia and Flydubai. Passenger numbers at the country‘s domestic
airports jumped a record 21% in 2011, while flight numbers increased 13.1%. International traffic at
the 21 domestic airports jumped 161% in 2011, mostly at Taif, Al-Gassim, Tabuk, Yanbu and
Abha.
Foreign carriers handled approximately 62% of passenger traffic to/from Saudi Arabia in 2011, up
from 58% in 2010 and 55% in 2009. Increasingly, Gulf regional carriers, both full service and
LCCs, are offering a high frequency of connections into Saudi airports. Domestically, Saudia
handles 94% of passengers while NAS Air handles 6%.
139
2.10 FORECASTED AVIATION PLAN OF SAUDI ARABIA
As oil states look to diversify their economies by turning to tourism as an alternative revenue
source, it is predicted that air arrivals to the Middle East will increase 7% to 26 million this year.
The increase in the number of arrivals is driven by the emergence of new airlines and the staggering
expansion rates of existing ones. In light of presented facts, the growth in aviation activity in the
Gulf States is sustainable. As many Middle Eastern countries now look to tourism to help diversify
their economies, the region's aviation sector is becoming increasingly segmented as new start up
airlines emerge to challenge incumbent, Dubai-based carrier, Emirates Airline, for a share of the
global aviation pie.
Emirates currently commanded a 0.1% share of the global air sector, but claimed that once the
A380s had been delivered, the airline was on track to boast a 10% market share of total global long
haul air travel. Emirates planned to carry 35 million passengers by 2012, representing 50% of total
airport capacity, and that with other international carriers flocking to Dubai, there would soon be
nowhere to park the planes. Predictions are that by 2010, the Middle East would welcome 38
million air arrivals annually representing 58% growth on 2005. This will drive a 35% increase in
bed nights to 387 million. The leading destinations are likely to be the UAE, Saudi Arabia and
Qatar. (Emirates Airlines, n.d.)
The Gulf region is emerging as an international air hub, with many air passengers transiting through
this region, rather than through Europe. Dubai is experiencing 15% growth in passenger movement
through the airport and cargo tonnage is rising 30% and coming to a point where it can't take any
more. The World Tourism Organization also predicts that by 2010, more than 60% of all tourist
arrivals will be long haul and the remainder, intra-regional, dominated by the growing middle
classes in Jordan, Kuwait, Saudi Arabia and the UAE, where disposable income is forecast to rise
between 11 and 17% by 2010. (Emirates Airlines, n.d.)
140
PART-3
141
3.1 Comparative Analysis
Saudi Arabia
3. Air Transport
Saudi Arabian Airlines (SAUDIA) is responsible for the transportation of passengers and baggage
on its domestic and international flights. Saudia operates 107 planes of various types, including
Lockheed, Tristar, Airbus and Boeing 747. It has more than 10,000 employees. 73% of its pilots are
Saudis. In 1994, Saudia flew 12 million passengers.
4. Airports
The Kingdom of Saudi Arabia has 25 airports. Three are international, eight regional and fourteen
domestic. International airports include:
King Khaled International Airport in Riyadh.
Thirty-five kilometers north of the capital Riyadh, it was opened in 1983 (1403 H). Built on an area
of 225 sq. kilometers, its operational capacity is 7.5 million passengers annually.
Present position
Saudi aviation sector has witnessed a phenomenal growth chart in the last decade. Today, Saudi
Arabia is the 19 th aviation market in the world and ranks 54 th in domestic passenger volumes.
Airport Structure
In Saudi arabia, airports were totally owned and managed by government or the armed forces. The
Airport Authority of Saudi Arabia , a body functioning under the Ministry of Civil Aviation was
responsible for managing the airports Saudi arabia. It owns35 airports,
4 international
7 region
15 domestic
9 Cargo
142
3.2 Players In Saudi Arabia
Qatar Airways,:
The Qatar aviation is one of the most dynamic in the region; the airline is taking advantage of its
Government sponsorship to land be placed amongst the world's fastest growing. The carrier also
manages Doha International Airport Aviation airlines.Additionally, the Government has appointed
Akbar Al-Baker as the CEO of fast-expanding Qatar Airways, and also as the official head of Qatar
Civil Aviation (along with the directorship of the Qatar Tourism Authority). With the flag carrier
expanding exponentially and the country looking to entice new airlines, the Government decided
that the airport--which was enlarged in 2003, bringing capacity from 4.2 million annual passengers
to 7.5 million--would need to be replaced in total. The new facility is being built in two stages, with
the first phase due to be completed in 2008. By that time, the country, with only 900, 000 residents,
will have an airport capable of processing 24 million passengers.
Etihad Airways.
Etihad is a global carrier in the making, and its growth plans are as ambitious as any start-up airline.
Currently operating 21 wide body aircraft (with a further 20 twin-aisle models on order), it carried
2.8 million passengers in 2006 and has forecast 4. 5 million for 2007, during which year it will take
delivery of eight more wide body aircraft. The capital emirate has an ambitious target of attracting
3.3 million visitors by 2010 up from the 2005 level of 825, 000 passengers. Airport large scale
expansion provides the foundation for Abu Dhabi's traffic growth, held above the $5 million mark
in 2006 (falling just 2.9% year-on-year). Etihad has since significantly ramped up capacity as the
Government of Abu Dhabi finalized the move of its aviation investment from Gulf Air to Etihad.
The first half of 2007 saw strong growth in passenger numbers of about 27%. (Etihad Airways,
2008)
143
Saudi Arabian Airlines,
Because of the bureaucratic management system, Saudi Arabia's national aviation sector has long
lagged the field. In the very recent past, however, the Government has shown a strong,
unprecedented commitment to support the airline in the new plans and strategies to compete with
the rivals. As the government begins moving forward with the privatization of the flag carrier, the
licensing of two new domestic LCC competitors and possibly the corporatisation of the airports, the
Kingdom's aviation sector has positioned itself to experience a near-total renaissance.
the aviation sector began to grow during the period when the price of oil petroleum--which accounts
for 90% of the country's exports, reached historical highs. With about 25% of the world's known
reserves and a history of using government expenditure to maintain social stability,
Emirates Airline
On 25th October 1985, Emirates flew its first routes out of Dubai with just two aircraft—a leased
Boeing 737 and an Airbus 300 B4. Then as now, our goal was quality, not quantity, and in the years
since taking those first small steps onto the regional travel scene, Emirates has evolved into a
globally influential travel and tourism conglomerate known the world over for our commitment to
the highest standards of quality in every aspect of our business.
Though wholly owned by the Government of Dubai, Emirates has grown in scale and stature not
through protectionism but through competition—competition with the ever-growing number of
international carriers that take advantage of Dubai‘s open-skies policy. Not only do we support that
policy, but we see it as vital to maintaining our identity and our competitiveness. After making its
initial start-up investment, the Government of Dubai saw fit to treat Emirates as a wholly
independent business entity, and today we are thriving because of it. The airline has recorded an
annual profit in every year since its third in operation
144
3.3 The Saudi Academy of Civil Aviation
The Saudi Academy of Civil Aviation was established as a result of planned scientific studies. It is
held responsible for preparing , teaching , training and rehabilitating air traffic controllers, fire men
,fire and rescue officers, airports_ operations and safety staff, and navigational equipment
maintenance technicians. It also plays its role in supporting the General Authority of Civil Aviation
in performing its responsibilities.
The Council of Ministers decision No. 33 dated 11/02/1426 H. approved the organization of the
General Authority of Civil Aviation as the organization responsible for the Kingdom_s civil
aviation industry and for the application of standard rules and recommendations of the International
Civil Aviation Organization.
The decision also stated that one of the responsibilities of the Authority is to train and to qualify
manpower to work in the various sectors of civil aviation, as well as the establishment of institutes
and training centers for the development of the labor force. In light of this plan, it was approved to
establish a Saudi academy for civil aviation.
Establishing the Academy was approved on the basis of the detailed presentation of the Saudi
Academy of Civil Aviation, which was introduced at the third meeting of the Executive Committee
of the Council of the General Authority of Civil Aviation in Riyadh on 22 /11/1428 H. / 2nd
December, 2007. This approval of the Council on the establishment of the Saudi Academy of Civil
Aviation was followed by the decision of the Committee No. (3 T -32) dated 22/11/1428 H. ,which
was signed by His Royal Highness the Crown Prince, Deputy Prime Minister and Minister of
Defense and Aviation and Inspector General, and Chairman of the Board of the General Authority
of Civil Aviation to transfer Jeddah Aeronautical Training Institute to the Saudi Academy of Civil
Aviation. His Royal Highness ,the Crown Prince , also approved the names proposed for the Board
of Trustees of the Academy in his telegram No. 1/1/4/21952 on 19/10/1429 H
www.gaca.com
145
3.4 SWOT analysis of aviation industry in the Saudi Arabia
Strength:
The market in this region for airlines is still in the growth stage. The overall economy is growing
healthy. This has positively affected travel and tourism industry particularly, which are showing
upward movement in the growth chart. Oil based economy and offers unique advantage to
maintain the resilience of multidimensional challenges. Due in part to this reason too,
expatriates from across the world in general and Asia in particular travels to and from the
home country in large volume with varying frequency.
Weakness:
Like all the regions worldwide, this region, too is faced with weaknesses. The industry lacks
professional management. The local people usually hold key positions though they do not possess
demanded skills. This curtails transparency in the management which often results in lack of trust
and confidence. Besides, for almost every thing, the industry has but to rely on imported materials
that is outsourcing. Often, it is challenging to outsource the talent from across the region. Besides,
diversity of the employees poses a constant challenge to the management. Cultural differences at
times give birth to trust deficit. As a result, employers and employee confidence is not very strong.
Opportunities:
The region abounds in opportunities. The whole market is in the upward movement which is still
in growth stage. Since entire economy is developing and not saturated, therefore overall
opportunities are quite promising, be it in population growth, infrastructure development, and
mobility of expatriates, economic development and so on. Added, lots of new routes can be
explored and or code sharing agreement and alliances can be forged on to gain business mileage.
Locationally, Middle East region is at the central location between Asia and Europe. All these
offer quite good opportunities in the future.
146
Threats:
Aviation industry in this part of world is haunted by intermittent threats. Terrorism every now and
then looms large anywhere, more threats are in the European and US market. Pricing and fuel cost
closely related to each. Price war, especially predatory price is very damaging to the competitors.
In recent times, LCCS are entering the marketing thereby challenging the major legacy carriers
and the existing ones are spreading the wings in the potential markets. Government policies and
regulations are
beyond the control of the companies and whatever a change in the regulation and laws either
regionally or internationally is made, the airlines operators are to abide by which should be
viewed positively for the whole society at large. Then, natural disaster or calamities take its own
toll from time to time, which is quite threatening, to the operators.
Flights
Airports
Passengers (thousands)
Cargo (tons)
2010
2011
2010
2011
2010
2011
International Airports
370,375
392,970
41,567
46,866
553,342
626,992
Domestic Airports
78,641
84,032
6,386
7,594
14,224
14,904
Totals
449,016
477,002
47,953
54,460
567,566
641,896
F L I G H T S
International Airports
International*
2010
King Abdulaziz International
Airport
King Khaled International
Airport
King Fahd International
AirportMohammad
Prince
Bin Abdulaziz
Internat
T
ionalo
Airport
t
a
l
s
Domestic
2011
2010
2011
General Aviation
Totals
2010
2011
2010
2011
86,813
95,971
49,570
51,929
17,273
14,938
153,656
162,838
49,685
55,410
59,887
60,668
20,040
19,679
129,612
135,757
24,337
29,003
21,175
21,933
11,004
11,124
56,516
62,060
11,971
13,654
17,892
17,977
728
684
30,591
32,315
172,806
194,038
148,524
152,507
49,045
46,425
370,375
392,970
147
Cargo at Kingdom’s International
Airports
Cargo (in tons)
International
International Airports
King Abdulaziz International
Airport
King Khaled International
Domestic
Gen. Aviation
Totals
2010
2011
2010
2011
2010
2011
2010
2011
186,709
226,438
44,295
39,191
0
0
231,004
265,629
186,920
221,028
42,588
42,858
5,605
10,456
235,113
274,342
71,224
72,025
11,641
10,231
561
576
83,426
82,832
1,562
2,016
2,237
2,173
0
0
3,799
4,189
446,415
521,507
100,761
94,453
6,166
11,031
553,342
626,992
Airport
King Fahd International
Airport
Prince Mohammad Bin
Abdulaziz
International
T
Airport
o
t
a
l
s
Total Traffic at Domestic Airports
Total Traffic
Passengers ( in thousands )
Flights
Domestic Airport
2010
2011
12,924
Change %
15,860
2010
1
Abha
2
Tabuk, Prince Sultan
8,025
3
Taif
4,687
4
Al-Gassim
4,505
5
Hail
4,372
6
Gazan, King Abdullah
7
Al-Baha
8
Wadi Al-Dawaser
9
Sharurah
1
01
Turaif
1,229
1,244
1.2%
Bisha
2,773
2,987
7.7%
2011
Cargo ( in tons )
Change %
1,809
2010
2011
Change %
22.7%
1,437
25.9%
3,210.2
3,671.4
14.4%
8,061
0.4%
687
5,393
15.1%
348
797
16.0%
2,500.6
2,062.9
-17.5%
530
52.4%
568.3
498.4
-12.3%
5,948
32.0%
409
595
45.5%
3,962
-9.4%
291
333
14.2%
1,014.2
1,140.5
12.5%
1,225.4
1,276.4
4.2%
8,401
8,128
-3.2%
901
920
2.1%
2,811.4
3,258.9
15.9%
2,359
2,543
7.8%
231
268
16.2%
60.1
87.5
45.6%
972
1,110
14.2%
58
69
17.7%
9.3
12.6
35.3%
1,883
1,856
-1.4%
96
95
-0.7%
52.0
54.6
4.9%
58
51
-13.4%
107.8
32.4
-69.9%
238
275
15.7%
69.6
77.4
11.1%
11
21
Ar'ar
2,241
2,249
0.4%
161
181
12.4%
427.9
440.4
2.9%
Wedjh
1,069
1,011
-5.4%
51
52
1.9%
16.6
18.7
12.3%
13
4
1
Rafha
797
1,008
26.5%
25
37
48.2%
24.2
27.8
15.0%
Nejran
6,391
5,656
-11.5%
416
481
15.8%
652.2
662.5
1.6%
Hafr Albatin Airport *
1,086
1,291
18.9%
59
75
27.9%
95.6
86.4
-9.7%
Al-Jouf
3,657
3,711
1.5%
280
309
10.6%
590.3
623.0
5.5%
15
6
1
17
8
1
Al-Ahsa
5,141
5,126
-0.3%
159
177
11.7%
181.0
185.0
2.2%
Al-Gurayat
1,240
1,640
32.3%
106
146
38.5%
277.7
340.2
22.5%
29
02
Yanbu, Prince Abdulmohsin
4,277
4,837
13.1%
355
377
6.2%
320.8
343.4
7.0%
Hafr Albatin, KKMC Airport *
162
4
-97.5%
8
0
-98.5%
4.7
0.0
-100.0%
Dawadami, Prince Salman
370
389
5.1%
12
15
21.7%
3.2
2.7
-14.1%
Rabigh
80
18
-77.5%
0
0
-50.0%
0.4
0.5
23.2%
21
22
3
T
o
t
a
l
*
*
78,641
84,032
6.9%
6,386
7,594
18.9%
14,223.6 14,903.7
4.8%
148
3.5 Indian Aviation sector
The Indian Aviation Industry has been going through a turbulent phase over the past several years
facing multiple headwinds – high oil prices and limited pricing power contributed by industry wide
over capacity and periods of subdued demand growth. Over the near term the challenges facing the
airline operators are related to high debt burden and liquidity constraints - most operators need
significant equity infusion to effect a meaningful improvement in balance sheet. Improved financial
profile would also allow these players to focus on steps to improve long term viability and brand
building through differentiated customer service. Over the long term the operators need to focus on
improving cost structure, through rationalization at all levels including mix of fleet and routes,
aimed at cost efficiency. At the industry level, long term viability also requires return of pricing
power through better alignment of capacity to the underlying demand growth.
While in the beginning of 2008-09, the sector was impacted by sharp rise in crude oil prices, it was
the decline in passenger traffic growth which led to severe underperformance during H2, 2008-09 to
H1 2009-10. The operating environment improved for a brief period in 2010-11 on back of recovery
in passenger traffic, industry-wide capacity discipline and relatively stable fuel prices. However,
elevated fuel prices over the last three quarters coupled with intense competition and unfavorable
foreign exchange environment has again deteriorated the financial performance of airlines. During
this period, while the passenger traffic growth has been steady (averaging 14% in 9m 2011-12),
intense competition has impacted yields and forced airlines back into losses in an inflated cost base
scenario. proposal to allow foreign carriers to make strategic investments (up to 49% stake) in
Indian Carriers (b) proposal to allow airlines to directly import ATF (c) lifting the freeze on
international expansions of private airlines and (d) financial assistance to the national carrier.
149
However, these steps alone may not be adequate to address the fundamental problems affecting the
industry.
Historically, the Indian aviation sector has been a laggard relative to its growth potential due to
excessive regulations and taxations, government ownership of airlines and resulting high cost of air
travel. However, this has changed rapidly over the last decade with the sector showing explosive
growth supported by structural reforms, airport modernizations, entry of private airlines, adoption
of low fare - no frills models and improvement in service standards. Like elsewhere in the world, air
travel is been transformed into a mode of mass transportation and is gradually shedding its elitist
image.
India position
Indian aviation sector has witnessed a phenomenal growth chart in the last decade. Today, India is
the 9th largest civil aviation market in the world and ranks fourth in domestic passenger volumes
with a market worth of US $12bn. As per AAI, passenger handling capacity has risen two-fold from
72 million (FY 06) to 143 million (FY 11), and freight traffic has risen from 1.5 million MT (FY
‗06) to 2.3 million MT (FY ‗11).
The Airport Authority of India (AAI) was the only major player involved in developing and
upgrading airports in India for a long time, but private sector participation has increased post
liberalisation. Major private sector players in aviation are GMR Infrastructure, GVK, Siemens,
Larsen & Toubro Ltd., Maytas Infra Ltd., and Unique Aviation Services Pvt. Ltd.
icra.in/Files/ticker/Indian%20Aviation%20Industry%20(NEW).pdf
www.emergingmarketsdirect.com/asia/india-aviation-industry-1h12
150
3.6 Airport infrastructure
In India, airports were totally owned and managed by central government or the armed forces. The
Airport Authority of India (AAI), a body functioning under the Ministry of Civil Aviation was
responsible for managing the airports in India. It owns 122 airports, 61 of which are operational.
The breakdown is as follows:
11 international
94 civil and
27 civil enclaves at defence airfields.
The AAI operate most aspects of the airport (including air traffic control) and procure most of their
equipment directly (via global/local tenders). India‘s airports handle 42 million passengers, of
which the four Metro gateway airports (Delhi, Mumbai, Kolkata and Chennai) account for 47% of
revenue and 66% of the passengers.
Until 2000, there were five major international airports, - Mumbai, Kolkata, Delhi, Chennai and
Trivandrum. But the GoI announced a further six airports including Amritsar, Bangalore,
Hyderabad, Cochin during the course of 2002.
According to projections, Indian air passenger traffic was estimated to grow to 100 million
passengers by 2012 from 36.98 million in 1998-99. Growth projections in the cargo front were also
promising. Airport infrastructure is linked to development of India's international competitiveness
and her ability to attract foreign investments. The policy opened the doors of private investment in
this sector, including investments from foreign airport authorities.
151
3.6 SWOT analysis of Indian aviation sector
Strength
Growing tourism.
Due to growth in tourism, there has been an increase in the number of international and domestic
passengers. Growth in the number of domestic passengers is estimated at 50 per cent per annum,
while growth for international passengers is 25 per cent.
Rising income levels.
The rise in disposable income is expected to increase the number of flyers.
Weakness
Under-penetrated market.
The total passenger traffic was only 50 million as on Dec. 31, 2005, amounting to only 0.05 trip per
annum compared to 2.02 trips per annum in developed nations like the United States.
Untapped air cargo market.
The air cargo market has not been fully tapped in India and in the coming years, a large number of
players are expected to have dedicated fleets.
Infrastructural constraints.
Infrastructure development has not kept pace with growth in the aviation services sector. Huge
investment is required for development of physical infrastructure for airports.
Opportunities
Investments.
Huge investments are expected to take place in the aviation sector in the near future.
Growth in market size.
Growth in the aviation sector is 25-30 percent.
152
Threats
Shortage of trained pilots.
There is a shortage of trained pilots, copilots and ground staff, which is severely limiting growth
prospects.
Shortage of airports.
There is a shortage of airport facilities, parking bays, air-traffic control facilities, and takeoff and
landing slots.
High prices.
Though a good enough number of low-cost carriers already operates in the industry, majority of the
population still can‘t afford air fares
www.efymag.com/admin/issuepdf/Aviation-June10.pdf
153
3.7 Players in the Indian aviation
I. Air India
The history of Air India is the History of Indian Aviation. It is one of the oldest and the largest
airline of India. Air-India was founded by J.R.D. Tata in July 1912 as Tata Airlines. Founded as a
small, private, domestic carrier in 1932, Air-India is now owned by government. It operates only on
International routes and has negligible presence in the domestic traffic.
II.
Indian
Airlines:
Indian and Air India were born with nationalization of Air Transport in 1953 by way of Air
Corporation Act, 1953. Indian Airlines emerged as a merger of 8 domestic carriers. It caters mainly
to domestic routes and in some nearest nations.
The two national carriers have enjoyed sole monopoly in the air transport segment over a long
period of time as private carriers were debarred from entering the segment under the Air
Corporation Act, 1953. The private players like Jet, Sahara and others were made to enter the
segment only after the New Economic Policy, 1991 came into existence. Another major turning
point has come in the history of the Air Industry when Air India was granted permission from the
GOI (Government of India) to merge with Indian Airlines, the two national carriers of India. This
Mega Merger marked the first marriage in the Indian skies which was followed by other mergers.
The name of the new airline remained Air India, since it is known worldwide.
III. Jet Airways:
In May 1974 Jetair (Private) Limited was founded. In 1991, as part of the ongoing diversification
programme of his business activities, Naresh Goyal (founder of Jet Airways) took advantage of the
opening of the Indian economy and the enunciation of the Open Skies Policy by the GOI, to set up
the company for the operation of scheduled air services on domestic sectors in India. It started its
International Operations in the year 2004 and carries more than 7 million passengers per annum. In
May 2007, Jet Airways took 100% stake in Air Sahara.
IV. Air Sahara:
Like Jet, Sahara also began its operations in the year 1993 after the domestic Air Market was
opened by the GOI in 1990‘s. It is owned by the diversified Sahara India Parivar group. Now Air
Sahara is being taken over by Jet Airways and it is being renamed as ―Jet Lite‖. Jet has intensions of
converting Air Sahara in sync with LCC model to reach every segment of air travelers.
154
V. Air Deccan:
India‘s first budget carrier arrived in the Air Industry in the year 2003. It is headed by Captain
Gopinath, Air Deccan redefined the accessibility to the Indian Skies with new model and concept in
the aviation sector. It injected competitive spirits into the system and gave common man wings by
reducing airfares which matched the first Class Railway Fares. The third wedding in skies was
marked when Vijay Mallya of Kingfisher Airlines picked up 26 % stake in Air Deccan.
Air Deccan is the Nano of the Airline sector; what Tata - Nano plans to do to the automobile
industry (converting two wheelers into four wheelers) Air Deccan has done to Aviation industry
(shifting people from rail travel to travel by air). Presently, there is a new segment of travelers; the
leisure customers. Yet another segment is introduced and that is the first time travelers. Air Deccan
introduced the concept of dynamic pricing which means selling at a higher
price during high season (tourist season) and selling cheap during the off-seasons. Therefore,
everyday the price would change depending upon the kind of competition and also the load factor.
Also it introduced various schemes and prgrammes.
http://www.docstoc.com/docs/29471588/Competitive-Analysis-of-Airline-Industry-using-porter-five-forces-model
155
3.8 Mid East aviation sector is world's least competitive
The Middle East has the least competitive airline industry of any region in the world, with 50
percent of routes served by only one or two carriers, according to a global analysis.
Airline competition has been increasing world-wide, but the Middle East continues to lag behind,
the report by aviation technology firm Amadeus says.
Only 10 percent of routes in the region are served by five or more operators, compared to a global
average of 18.2 percent.
Four airlines compete on 16 percent of Middle East routes (compared to a global average of 20.1
percent), while 24 percent of routes have three carriers, 28 percent have two and 22 percent are
dominated by only one airline (compared to a global average of 11.7 percent).
Asia has the most competitive aviation industry, with 49 percent of routes operated by at least four
airlines.Competition in the Middle East aviation industry, which carried 99m passengers, up from
97m in 2011, is often stifled by governments, which own many of the airlines. In most Gulf
countries, only two or three airlines are based in each capital.
Bahrain now has only one carrier after privately owned Bahrain Air went into voluntary liquidation
in February, claiming the government was unfairly demanding immediate payment on past
government debts related to political unrest in the country.
156
Saudi Arabia recently granted licenses to Bahrain‘s Gulf Air and Qatar Airways, both state-owned,
to operate domestic flights within the kingdom because its two airlines are unable to cope with
growing demand.
Europe, with 680 million passengers in 2012, also has low competition, with 45 percent of its routes
served by only one or two carriers, the report says.However, globally, the airline industry has
become consistently more competitive over the past three years.
―The percentage of air traffic served by just one or two airlines has fallen by 2 percent each year
from 39 percent in 2010 to 35 percent in 2012. Concurrently, the percentage of air traffic with four
or more competing airlines has also risen consistently from 35 percent in 2010 to 38 percent in
2012,‖ the report says.
The report also found the Middle East had little representation of low cost carriers compared to
other regions, despite their share of traffic increasing from 11.7 percent in 2011 to 13.5 percent in
2012.The presence of low cost carriers has significantly increased in the past decade, but mostly in
traditional markets such as Europe and North America, which had penetration of 38 percent and
30.2 percent, respectively. South West Pacific also had a large share, with 36.6 percent.
The analysis also revealed 15 percent of all Europe to Asia air traffic last year was via one of the
Gulf‘s three major hubs, Dubai, Doha and Abu Dhabi, which experienced about 10 percent annual
growth.About 50 percent of each airports‘ total air travel volume related to a connecting flight, the
study found.
―When the three airports are taken as a group they already serve around 15 percent of air traffic
volume between Asia-Europe and Europe-South West Pacific.
―It is particularly interesting to note that overall traffic volume between Europe and Asia is growing
by approximately 7 percent year over year, but traffic volume between these two locations and
routed via the Middle East grew by approximately 20 percent between 2011 and 2012.‖
http://www.arabianbusiness.com/mideast-aviation-sector-is-world-s-least-competitive-498977.html#.UX0cgyJ2HI
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3.9 Policies & norms
Article (3): Scope of application
The provisions of this Law shall apply to the following:
1. Civil aviation activities and operations within the territory of the Kingdom.
2. Civil aerodromes, air carriage facilities and ensuring aviation safety and security
within the territory of the Kingdom.
3. Civil aircraft registered in the Kingdom.
4. State aircraft other than military ones.
5. Any aircraft registered in a foreign country and operated or maintained by a Saudi
national by virtue of a lease, exchange or any similar agreement, if an agreement
between the Kingdom and the aircraft registration country so states.
Article (4): Implementing international treaties and agreements
Provisions of, and annexes to, the Chicago Convention and all other international treaties
on civil aviation to which the Kingdom is party shall be deemed supplements to this
Law.
Article (5): Powers of the Authority
The Authority shall be solely in charge of all civil aviation affairs in the Kingdom,
including undertaking all telecommunication services related to aviation safety and air
traffic regularity.
Article (6): Inspection of and preventing aircraft from flying and seizing the
documents thereof
international treaties, the Authority shall have the right to inspect and prevent aircraft from
flying or seize any relevant documents for the purpose of overseeing implementation of
this Law. Rules for inspecting and preventing aircraft from flying and seizing documents
shall be specified in the Regulations.
www.gaca.gov.sa/gaca/Attachments/.../Civil_Aviation_Law_English.pdf
158
Article (9): Aviation licenses and permits
The Authority may issue aircraft licenses and permits, without which, no aircraft may
operate in the territory of the Kingdom. Licenses and permits shall be deemed personal
property and may not be assigned to others. Conditions for licenses and permits shall
be specified in the Regulations.
Article (12): Dangerous goods
Subject to applicable international laws on carriage of dangerous goods, no dangerous goods
may be carried on board an aircraft unless permitted by the Authority in accordance with
procedures specified in the Regulations.
Article (22): Aviation fees and charges
National and foreign air carriage and aviation companies and establishments must pay
civil aviation fees and charges due
on
their
operations and
domestic and
international flights as per rates set in the Civil Aviation Tariff Law and Implementing
Regulations thereof.
Article (24): Establishing and operating aviation companies or establishments
Without prejudice to the provisions of the Companies Law and
no
national
other
relevant laws,
companyor establishment may be established for engaging in commercial air
carriage or air operations, whether in the Kingdom or abroad, without an air operator
license and the approval of the Authority pursuant to conditions stipulated in the
Regulations
Article (25): Approval required for operation
National air carriage companies and establishments may not operate any airline or any new
model of aircraft without approval by the Authority pursuant to conditions stipulated in the
Regulations.
www.gaca.gov.sa/gaca/Attachments/.../Civil_Aviation_Law_English.pdf
159
Article (26): Establishment, alteration and cancellation of airlines
Prior to establishment or cancellation of airlines,
or alteration of the number of flights
operated from, to or within the Kingdom, national and foreign air carriage companies and
establishments must obtain the prior approval of the Authority.
Article (28): Licensing of offices, representation and agencies
1. No foreign
air carriage or airline
company
or establishment may establish an
office or representation thereof in the Kingdom without obtaining the necessary license
from the Authority on the basis of reciprocity.
2. Foreign
air
carriage
or
airline
companies
or establishments may only
assign representations or agencies in the Kingdom to licensed Saudi companies or
agencies upon the approval of the Authority.
Article (29): Conducting aircraft ground services
Aircraft ground services may not be provided in civil aerodromes in the Kingdom without
obtaining a license from the Authority. Such licenses may only be issued to foreign air
carriage companies and establishments on a reciprocalBasis
Article (30): Submitting data and information
National and foreign air carriage companies and establishments as well as air freight
and aircraft ground service companies and agencies must submit all information, data and
statistics on airline operations, as well as economic and technical studies on said airlines,
air carriage charges and other data and information required by the Authority.
Article (51): Saudi National Aircraft Register
1. The Authority shall establish a register for national civil aircraft named ―the Saudi
National Aircraft Register‖. The Regulations shall specify data to be entered into said
Register as well as necessary aircraft registration requirements.
2. The Authority may grant others access to data contained in said Register in
accordance
with conditions set thereby.
www.gaca.gov.sa/gaca/Attachments/.../Civil_Aviation_Law_English.pdf
160
3. Each aircraft registered in said Register shall enjoy the nationality of the Kingdom
and must display nationality and registration marks in accordance with rules stipulated in
the Regulations.
Article (52): Aircraft registration certificates
The Authority shall
issue aircraft
registration certificates upon completing necessary
procedures, provided that each certificate contains data specified in the Regulations.
Article (109): Reporting foreign aircraft accidents within the territory of the Kingdom
Subject to the provisions of Annex (13) to the Chicago Convention on aircraft accident
investigations, the Bureau shall, upon knowledge of an aircraft accident involving a foreign
aircraft within the territory of the Kingdom, report said accident, as soon as possible, to
the following:
1. Aircraft registration country or common mark registering authority.
2. Operator‘s country, if other than the registration country.
3. Country of design.
4. Country of manufacture.
5. Country sustaining damage as a result of the accident.
6. International Civil Aviation Organization.
www.gaca.gov.sa/gaca/Attachments/.../Civil_Aviation_Law_English.pdf
161
3.10 Registration
FILING FOR REGISTRATION BY ON-DEMAND OPERATORS
(a) Every on-demand operator who plans to commence operations under this Subpart shall register
with the Authority not later than twenty (20) days prior to the commencement of such operations.
(b) The registration of an on-demand operator shall remain in effect until it is amended by
the carrier or canceled by the Authority.
(c)Registration by all on-demand operators shall be accomplished by filing with the Authority
the following
(1)The name of the carrier and its mailing address;
(2)The carrier's principal place of business, if different from its mailing address, and its
telephone number
(3) The carrier‘s AOC number;
(4) The type of service the carrier will offer ( on-demand passenger, on-demand cargo, or
other service such as air ambulance operations, firefighting or seasonal operations);
(5) A list of the aircraft that the carrier proposes to operate, or, in the case of an
amendment to the registration, the aircraft that it is currently operating in its ondemand operations, and the aircraft type, registration number and passenger capacity of each
aircraft
162
PART- 4
163
4.1 India-Saudi Arabia Business Relations
Introduction
India and Saudi Arabia are old business partners: their trade relations go back several
centuries in time. Today, the bilateral business ties are being steadily expanded and further
strengthened by continuous interaction and cooperation, including regular exchange of
business delegations. Besides being a major trade partner, India sees the Kingdom as an
important economic partner for investments, joint ventures, transfer of technology projects
and joint projects in third countries.
Trade
Saudi Arabia is the 4th largest trading partner for India: The value of the two-way trade
between the two countries in 2011-12 exceeded US$ 36 billion. Saudi Arabia is the 14th
largest market in the world for Indian exports and is destination of more than 1.86% of
India‘s global exports. On the other hand, Saudi Arabia is the source of 6.35% of India‘s
global imports
For Saudi Arabia, India is the 5th largest market for its exports, accounting for 7.55% of its
global exports. In terms of imports by Saudi Arabia, India ranks 9th and is source of around
3.27% of Saudi Arabia‘s total imports (2011 figures) (Source: Saudi Arabian Monetary
Agency (SAMA) Annual Report– 2011, , extracted from import, export statistics published
by Central Dept. of Statistics & Information, Ministry of Economy & Planning, Saudi
Arabia).
http://www.dgft.gov.in/
164
Trade figures for the last six years are as follows:
Indo-Saudi Trade (in million US $)
Year
( April March)
Imports from
Saudi Arabia
Exports to
Saudi Arabia
Increase in
Total trade bilateral
trade
Increase in
Indian
imports
Increase in
Indian
exports
2006-2007
13,355.33
2,590.77 15,946.10
…….
……
……
2007-2008
19,470.30
3,711.16 23,181.46
45.37%
45.79%
43.25%
2008-2009
19,972.74
5,110.38 25,083.12
8.20%
2.58%
37.70%
2009-2010
17,097.57
3,907.00 21,004.57
-16.26%
-14.40%
-23.55%
2010-2011
20,385.28
4,684.40 25,069.68
19.35%
19.23%
19.90%
2011-2012
31,060.10
5,683.29 36,743.40
46.57%
52.37%
21.32%
Source: Department of Commerce, GOI. ; http://www.dgft.gov.in/(as on 29.09.2012)
Indo-Saudi Trade (in million US $)
AprilDecember
December
December 2011
2012
2011
Imports from Saudi
Arabia
Exports to Saudi Arabia
Total
Source:
DGCI
&
S,
AprilDecember
2012
% increase
2681.25
2781.19
23028.47
24803.52
7.71
396.23
693.64
3939.70
6776.67
72.01
3077.48
3474.83
26968.17
31580.19
17.10
Ministry
of
Commerce,
GOI
(as
on
31.1.2013)
Main Indian exports
Main Indian exports include Mineral Fuels, mineral oils and products thereof; cereals;
nuclear reactors, boilers; electrical machinery and equipment; Iron and steel; organic
chemicals; meat and edible meat offal; articles of Iron or steel; articles of apparel and
clothing
accessories;
etc.
http://www.sama.gov.sa/
165
India‟s major imports
India‘s major imports from Saudi Arabia are Mineral Fuels, mineral oils and its products;
organic chemicals; plastic and its articles; inorganic chemicals; fertilisers; aluminium and its
articles; iron and steel; copper and its articles; miscellaneous chemical products; raw hides
and skins (other than furskins) and leather; etc.
Indian Manpower
Approximately 2.0 million Indians are at present working in Saudi Arabia, over 70% are in
the blue-collar category. These people have made immense contribution to Saudi economy,
and they play an important role in strengthening the Indo-Saudi bilateral relations.
Indian Investment and Joint Ventures
The bilateral investment between the two countries is growing steadily. Since mid-2000, a
number of Indian firms have taken advantage of the new Saudi laws and established joint
venture projects or wholly-owned subsidiaries in the Kingdom. According to Saudi Arabian
General Investment Authority (SAGIA), as of 31.01.2006 to 31.12.2010 it has issued 426
licenses to Indian companies for joint ventures/100% owned entities, which are expected to
bring total investment of US$ 1624.60 million in Saudi Arabia (as per latest figures
available). These licenses are for projects in diverse sectors such as management and
consultancy services, construction projects, telecommunications, information technology,
pharmaceuticals, etc. Moreover, several Indian companieshave established collaborations
with Saudi companies and are working in the Kingdom in the areas of designing,
consultancy, financial services and software development. On 12.12.12, Tata has signed a
letter of intent to establish factory in
Saudi investment in India
On the other hand, Saudi Arabia is the 46th biggest investor in India with investments from
April 2000 to December 2012 amounting to US$ 40.90 million. There are a number of IndoSaudi joint ventures or Saudi owned companies in India, in diverse fields such as paper
manufacture, chemicals, computer software, granite processing, industrial products and
machinery, cement, metallurgical industries, etc. (source: http://www.dipp.nic.in/)
file:///F:/%C2%A0/import%20export%20construction%20sector.htm
Indian Business delegations to Saudi Arabia
166
During last couple of years, a large number of Indian trade and industry delegations have
visited Saudi Arabia to explore the opportunities for long-term partnerships and cooperation,
including joint ventures. These delegations received warm and enthusiastic response from the
Saudi business community. Indian and Saudi companies regularly take part in trade fairs in
each other‘s country. The important recent bilateral visits from India include the historical
official visit of Hon‘ble Prime Minister Dr. Manmohan Singh, from 27 Feb-March 1, 2010.
file:///F:/%C2%A0/import%20export%20construction%20sector.htm
60
4.2 India - GCC Relations
167
Introduction
The Gulf Cooperation Council (GCC) as a collective entity has tremendous significance for
India. The Gulf constitutes the ―immediate‖ neighborhood of India separated only by the
Arabian Sea. India, therefore, has a vital stake in the stability, security and economic wellbeing of the Gulf. As a group, the GCC has been increasingly determining the economic,
political, and security policies of its member States. The GCC countries are moving ahead
rapidly with their economic integration efforts. The GCC has emerged as a major trading
partner for India; it has vast potential as India‘s investment partner for the future. The GCC‘s
substantial oil and gas reserves are vital importance for India's energy needs. The GCC
countries are collectively host to a large Indian expatriate community. In short, the GCC
offers tremendous potential for cooperation in trade, investment, energy, manpower, etc.
Economic and commercial relations
India enjoys traditionally cordial relations and cooperation with the GCC. India‘s old,
historical ties with GCC states, coupled with increasing imports of oil and gas, growing trade
and investment opportunities, and presence ofapproximately 6 millionIndian workers in the
region, are of vital interest to India. India‘s economic linkages with the GCC have increased
steadily especially due to growth in oil imports. These continue to make steady progress todate. During2011-12, India‘s exports to GCC were US$ 45.36 billion. The bilateral two-way
trade during the period wasUS$ 145.72billion, marking a 24.13% increase over the previous
year, and growing at a steady pace. A table of India's trade with the GCC States during 200910, 2010-11 and2011-12is given below.
India‟s trade with GCC countries
(All figures in US $ million)
168
Countr 2009-10
y
Import Export
2010-11
Total
Import
2011-12
Export
Total
Import
Export
Total
KSA
17,097.5
21,004.5 20,385.2
3,907.00
4,684.40 25,069.68 31,060.10 5,683.29 36,743.40
7
7
8
UAE
19,499.1 23,970.4 43,469.5 32,753.1 33,822.3
35,925.5
66,575.55 35,790.39
71,715.91
0
0
0
6
9
2
Oman
3,499.89 1,032.93 4,532.82 4,002.07 1,086.48 5,088.55 3,329.31 1,322.13 4,651.45
10,313.6
1,856.01 12,169.65 16,375.37 1,181.41 17,556.78
4
Kuwait 8,249.49
782.45 9,031.95
Qatar
536.97 5,185.49 6,819.87
375.39 7,195.27 12,923.82
807.95 13,731.77
250.21
651.83 1,293.08
439.99 1,316.28
Bahrain
Total
4,648.52
502.86
753.07
641.25
876.30
53,497.4 30,479.9 83,977.4 74,915.2 42,476.5 117,391.7 100,355.2 45,360.2 145,715.5
3
6
0
7
0
8
9
9
9
* The above figures of Indian imports include imports of crude oil and petroleum products.
Source: www.dgft.gov.in(as on 29.9.2012)
Strategic relations
From the strategic point of view, India and GCC share the desire for political stability and
security in the region. The common political and security concerns of India and GCC
translate into efforts for peace, security and stability in the Gulf region and South Asia. The
emerging common security perceptions create further opportunities for GCC-India
cooperation in the future. The GCC states are going through important changes and
transformation; the process of understanding and integration is coming of age. Along with it
the areas for cooperation are also widening beyond investments, trade & commerce and
sharing & development of human resources to security.
India-GCC Industrial Conference
169
The first GCC-India Industrial Conference was held in Mumbai in February 2004. The 4th
GCC-India Industrial Conference is scheduled to be held in Jeddah Saudi Arabia from 19-21
February, 2013.
India-GCC FTA
India and GCC signed a Framework Agreement for enhancing and developing economic
cooperation between the two sides in New Delhi in August 2004. Two rounds of talks for
finalizing aspects like tariff rules, rules of origin etc. have been held. 3rd round of FTA
negotiations between India & GCC is to be held in India (dates yet to be decided).
http://www.indianembassy.org.sa/Content.aspx?ID=708&PID=686
4.3 Sectors - Safety & Economic Regulations
170
Safety and Economic Regulation (S&ER) as a Sector of the General Authority of Civil
Aviation (GACA), is the sole Regulator and Auditor of the aviation industry in Saudi Arabia.
The S&ER has the authority to register civil aircrafts and certify domestic and international
airlines, repair station and schools that wish to operate in/from the Kingdom of Saudi Arabia.
Furthermore, S&ER issues licenses and medical certificates to airmen and operational members
associated with civil aircrafts and certified domestic and international airline. The S&ER is
obliged to implement and uphold the highest international aviation standards as published in
the International Civil Aviation Organization (ICAO) Standards and Procedures, annexes
published as well as in the United States' Federal Aviation Administration (FAA) Regulations.
The S&ER implements auditing for all domestic and international airlines, repair stations and
schools, which operate in/from the Kingdom of Saudi Arabia, in order to ensure that they
maintain their operating standards in accordance with the national, international regulations,
best industry practices and so as to insure the highest quality and reliability standards and
safety in the K.S.A. aviation industry are maintained.
The S&ER investigates every civil aviation accident in the K.S.A. and issues safety
recommendations aimed at preventing future accidents by determining the probable cause. The
S&ER is also responsible for maintaining the government's database of civil aviation accidents
and also conducts special studies of aviation safety issues of national significance.
The S&ER provides investigations to serve as K.S.A. accredited representatives as specified in
international treaties for accidents outside the Kingdom involving Saudi-registered aircraft. The
S&ER is also responsible for airport certification and for the implementation and monitoring of
Air Navigation Systems safety.
4.4 Opportunity for india
Economic & Commercial Relations: Indo-Saudi economic relations have shown
remarkable growth with bilateral trade registering three-fold increase in the last five years.
171
Saudi Arabia is the 4th largest trade partner of India and the bilateral trade was USD 36
billion in 2011-12. The import of crude oil by India forms a major component of bilateral
trade with Saudi Arabia being India‘s largest supplier of crude oil, accounting for almost onefifth of its needs. Saudi Arabia is the 14th largest market in the world for Indian exports and
is destination of more than 1.86% of India‘s global exports. On the other hand, Saudi Arabia
is the source of 6.35% of India‘s global imports. For Saudi Arabia, India is the 5th largest
market for its exports, accounting for 7.55% of its global exports. In terms of imports by
Saudi Arabia, India ranks 9th and is source of around 3.27% of Saudi Arabia‘s total imports.
Investments: According to Saudi Arabian General Investment Authority (SAGIA), it has
issued 426 licenses to Indian companies for joint ventures/100% owned entities till 2010,
which are expected to bring total investment of USD 1624.60 million in Saudi Arabia. These
licenses are for projects in diverse sectors such as management and consultancy services,
construction projects, telecommunications, information technology, pharmaceuticals, etc.
Moreover, several Indian companies have established collaborations with Saudi companies
and are working in the Kingdom in the areas of designing, consultancy, financial services and
software development. On the other hand, Saudi Arabia is the 46th biggest investor in India
with investments from April 2000 to June 2012 amounting to USD 33.81 million.
4.5 Business Opportunities in future
Investment Climate
Saudi Arabia‘s investment environment reflects the country‘s traditions of liberal,openmarket private enterprise policies. There are no restrictions on foreign exchange and no
172
restrictions on the repatriation of capital and profits. In April 2000, the Saudi Government
approved a new foreign investment law, significantly revising the way foreign investment has
been conducted in the Kingdom for more than 20 years.
Saudi Arabia‘s foreign investment law allows international companies the possibility of 100
percent ownership of the projects and the property required for the project itself, while
enabling them to retain the same incentives given to national companies. Projects, for
instance, that are 100 percent foreign-owned are eligible for loans from the Saudi Industrial
Development Fund. Investors are also allowed to hold investment licenses in more than one
type of activity. The law brought significant changes to the previous sponsorship regulations.
Foreign investors and their non-Saudi employees can be sponsored under the new licensed
firm. Another significant change is the reduction in the corporate tax rate for foreign
companies. A new income tax law passed in January 2004 cut taxes on corporate profits to
20 percent from 45 percent.
Concurrent with the passage of the new investment law was the establishment of the Saudi
Arabian General Investment Authority (SAGIA). SAGIA is responsible for proposing and
implementing policies to promote foreign investment in Saudi Arabia, and for issuing
investment licenses, visas, residence permits, and other related papers to foreign investors.
SAGIA has streamlined the foreign investment application process by creating investor
service centers. The centers are required to respond to investment applications within 30
days. If SAGIA does not make a decision within that time frame, the license will be issued.
If SAGIA declines the application, the foreign investor may appeal the decision. Foreign
investment in Saudi Arabia has been rising steadily. U.S. companies are the leading foreign
participants in joint ventures, with 357 projects through March 2004, valued at $21.9 billion.
From its inception in April 2000 to May 2004, SAGIA has issued licenses for 2,280 projects
for a total value of $15.4 billion, 82.7 percent of which included foreign investors from 64
different countries. Other major investors in Saudi Arabia are Japan, the United Kingdom,
France, Germany, India, and Canada.
In July 2003, Saudi Arabia and the United States signed an agreement to further develop
trade and investment between the two countries. As part of the agreement, the two sides
established a Council on Trade and Investment, which will be chaired by the Saudi
Ministry of Commerce and Industry and the Office of the U.S. Trade Representative.The
173
purpose of the Council is to monitor trade and investment relations and look for
opportunities for expanding trade between the two countries. The agreement recognizes the
need to eliminate non-tariff barriers to facilitate greater access to the markets of both
countries, and provides measures for the protection and enforcement of intellectual
property rights.
Regulations on Exchange Transactions
The Saudi economy is based on the principles of free enterprise. There are no restrictions on
the transfer of capital, or on exports and imports of goods and services. Therefore, there are
no taxes, subsidies, or restrictions on converting or transferring funds associated with an
investment (including remittances of investment capital, earnings, loan repayments, lease
payments). There is no limitation on the inflow or outflow of funds for remittances of
profits, debt service, capital, capital gains, and returns on intellectual property or imported
inputs. Investors are not required to purchase from local sources or export a certain
percentage of output, and their access to foreign exchange is not linked to the level of their
exports. In addition, the government does not impose conditions on investment such as
locating in a specific geographic area, a specific percentage of local equity, substitution for
imports, export requirements or targets, or financing only by local institutions. Investors are
not required to disclose proprietary information to the Saudi Government as part of the
regulatory approval process. The text of the Executive Rules of the Foreign Investment Law
is located in Appendix
GETTING STARTED IN SAUDI ARABIA
Saudi Arabia presents a wide variety of business opportunities for U.S. companies. To be
effective and successful, an executive must have a basic knowledge of the business
community in Saudi Arabia and the Saudi legal system. The first decision for any business
174
is the type of operation to establish. Because a great deal of business in Saudi Arabia
involves government contracting, a foreign company should be aware of the basic rules and
practices for this area. Before a business establishes its presence, it should develop a basic
understanding of the laws governing its operations. Finally, a business should know how to
resolve legal disputes if and when they arise.
How to Operate in Saudi Arabia
A company may do business in Saudi Arabia in a variety of ways. The options range from
informal contractual relationships to direct investment in the economy. Most businesses
require some form of license from the Saudi Government, and some require the investment or
employment of Saudi citizens. The optimal form will depend on a variety of factors,
including the type of business, the duration of the involvement, and the nature of the
transactions.
Direct Exports
The simplest form of doing business in Saudi Arabia is direct export into the country. A
company generally may sell its goods directly to Saudi Arabian customers, assuming the
goods meet the applicable health and safety standards. Hiring a local agent is not a
requirement of doing business. However, most companies have a local presence to sell their
goods effectively.
Commercial Exports
A commercial agent may be more familiar with the local market and may be able to
facilitate certain transactions. A company should choose its agent carefully; terminating or
changing agents can be a difficult process. The term commercial agent describes a variety
of roles and responsibilities. Some commercial agents sell goods; others sell services.
Some commercial agents buy goods directly from the manufacturer and resell them; others
sell goods for the manufacturer and receive a commission. All are covered by commercial
agency law in Saudi Arabia, which is currently under review.
The Saudi Ministry of Commerce and Industry must approve the agreement between the
U.S. company and the Saudi commercial agent. The Ministry provides a model agency
agreement (see below), but most western companies find it necessary to amend and
augment the model agreement. A company can negotiate its own agreement, but the
175
Ministry is more likely to approve one that resembles the model agreement.
Any termination or change of a commercial agent must be fair to the old agent. Under some
circumstances, the failure to renew an agent may be considered a form of termination.
Wrongfully terminating an agent may expose a company to liability and may make it more
difficult to obtain government approval of a replacement agency agreement. As a result, the
termination section of any agency agreement must be carefully spelled out and should
generally provide for fair treatment of all parties upon termination.
Commercial Agency Regulations
No one can act as a commercial agent unless his name has been entered into the Register
maintained by the Ministry of Commerce and Industry. According to the Ministry of
Commerce and Industry‘s Implementation Rules:
•
Saudi distributors are responsible for registering each foreign contractor they
represent. Copies of the agency agreement must be filed with the
registration application in order to avoid fines and to provide the Saudi distributor
with protections built into the regulations
•
For the term of the agency agreement and for the earlier of one year after a
contract‘s termination or until appointment of a new agent, the agent must provide
consumers with necessary spare parts and maintenance at reasonable prices,
available within 30 days of request.
•
Commercial agency contracts must include certain basic terms (parties, subject
matter, term, termination procedure, etc.) and any other matters not inconsistent
with the regulations in force in Saudi Arabia. A model contract (originally issued
in 1981 but revised in 1983) was recommended by the Ministry of Commerce for
this purpose.
4.6 Trend of Business
176
The Saudi Arabian economy is entirely based on oil. The country has the largest oil reserves
in the World and is also the World's biggest oil producer and exporter. Oil accounts for more
than 90% of the country's exports and nearly 80% of government revenues. The recovery of
the demand in 2010 helped to stabilize growth and offers hope for a favorable recovery in
2011.
The big construction works policy led by the government as well as direct foreign
investments and the solidity of the banking and financial system have allowed this country to
become the first economy in the region and one of the major ones in the world.
Inflation, which had reached a record 10% in 2008, mainly due to the increase in the prices of
food products has decreased. In addition to this, the kingdom‘s authorities wish to abolish all
the existing subsidies, which will in fact lead to an increase in prices.
The government wants to reduce the kingdom's dependence on the oil sector by diversifying
its economic activities and in developing mainly the agricultural, food, and industry sectors.
The kingdom has a stable and high-quality banking and financial system.
Private investments are supported by generous government financing and incentive plans.
The standard of living is one of the highest in the region with USD 15,352 GDP/inhabitant.
The country is still marked by an unemployment rate of about 11%. Tourism generates highly
significant revenues (nearly 4 million tourists per year), exclusively on account of the
pilgrimage to Mecca. Main Sectors of Industry
Agriculture accounts for 3% of the GDP and employs 15% of the active population. It is not a
very productive sector despite the huge state investments. Saudi Arabia imports most of its
agricultural and food product requirements because of the geographical and climatic
contraints. Water scarcity is a serious regional problem that the country is likely to face in the
coming years, as growing cultivation of wheat presents a strong threat of water depletion.
The industrial sector represents two thirds of the GDP. It is dominated by non-manufacturing
177
activities (oil drilling). The industrial sector portion, other than oil, is growing due to Saudi
state investments, to diversify the economy, the kingdom having tapped into its financial
reserves accumulated by the soaring oil prices.
Lastly, services represent 22% of the GDP. This sector is mainly dominated by tourism,
financial and insurance services and the banking sector.
•
Electrical Power Systems
•
Water Resources Equipment
•
Oil and Gas Equipment and Services
•
Security and Safety Equipment
•
Chemical Production Machinery
•
Medical Equipment
•
Telecommunications Equipment and Services
•
Education and Training Services
•
Auto Parts and Service Equipment
•
Insurance Services
•
Air Conditioning and Refrigeration Equipment
•
Computers and Peripherals
•
Drugs and Pharmaceuticals
•
Mining Equipment
•
Aviation Services
•
Soybean Meal
•
Rice
•
Processed Fruits and Vegetables
178
•
Snack Foods (Excluding Nuts)
FINDINGS
The Saudi economy is dominated by the oil sector, which accounted for an average of 54% of
GDP over the last five years. Despite being the world‘s largest oil exporter, the
179
sizable population means that relative oil wealth per national is lower than in other GCC
countries
Regulatory tasks for aviation are allocated to the General Authority for Civil Aviation, which
on the one side is the regulatory agency for the aviation sector, and on the other side it
operates the 27 civil airports in the Kingdom.
The job market for the aviation industry is good and is looking good for the future. Salaries
for the pilots are up and steady. The airline industry is profiting along with the airline
manufacturing companies. With more and more people utilizing the airways to conduct
business and to travel, the future of the aviation industry will only improve
After several years of sagging performance, Saudi Arabia‘s aviation market reported its
strongest growth in passenger traffic in more than a decade in 2011, even against the
background of the Middle East‘s regional social unrest.
The Gulf region is emerging as an international air hub, with many air passengers transiting
through this region, rather than through Europe. Dubai is experiencing 15% growth in
passenger movement through the airport and cargo tonnage is rising 30% and coming to a
point where it can't take any more.
Saudi aviation sector has witnessed a phenomenal growth chart in the last decade. Today,
Saudi Arabia is the 19 th aviation market in the world and ranks 54 th in domestic
passenger volumes
Indian aviation sector has witnessed a phenomenal growth chart in the last decade. Today,
India is the 9th largest civil aviation market in the world and ranks fourth in domestic
passenger volumes
The Middle East has the least competitive airline industry of any region in the world, with 50
percent of routes served by only one or two carriers, according to a global analysis.
Airline competition has been increasing world-wide, but the Middle East continues to lag
behind, the report by aviation technology firm Amadeus says.
180
Only 10 percent of routes in the region are served by five or more operators, compared to a
global average of 18.2 percent.
Saudi Arabia is the 4th largest trading partner for India: The value of the two-way trade
between the two countries in 2011-12 exceeded US$ 36 billion. Saudi Arabia is the 14th
largest market in the world for Indian exports and is destination of more than 1.86% of
India‘s global exports.
CONCLUSION
181
Aviation industry since its inception to saturation in the global marketplace has essentially
remained one of the most thrust areas of economic catalyst for any government in the world.
The industry appears luxurious and churning out large revenues for the airlines, but the
average profit margin has been between 4-6% after 1980, though before this it was up to
or more than 10% in global market. True, total revenue collection for the government is
heavy, but proportionate cost of investment is very high. A little mismanagement in the
operation results in bankruptcy or closure of the company. But, the figure in the Middle East
market is all in the range of 12-17 % against 3-5 % of global growth rate.
In fact, the entire Middle East market especially UAE, Qatar is growing with five strong
airlines namely Emirates Airlines, Etihad Airways, Qatar Airways, Air Arabia, and
Flydubai of which the last three are from the network category while the last two LCCs. The
growth is attributed to oil based economy, increased trading and ever huge number of
working expatriates in this region. The
geodemographic factors, too favor the fate of the airlines in the region. LCCs too are
operating profitably in the region.
Most of the airlines in the region have positioned themselves distinctly and strongly in the
market. They have added value to the customers and enhanced brand equity over time,
though customers have made more price-prone deal especially during current economic
sump. Customer tend to be loyal to the airlines but often ticket booking is guided the
various factors like available routes and flights, seasons, company policy, and so on. The
consumer buying behavior is influenced by conformity of committed services, quality of
services, brand associating, and brand awareness, pricing, availability of flights to the
destination and so on.
182
A
GLOBAL / COUNTRY STUDY AND REPORT
ON
“ PHARMACEUTICAL INDUSTRY OF SAUDI ARABIA‖
Submitted to
Golden Jubilee Institute of Management & Technology,
Sidhpur
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ASMINISTRATION
In
Gujarat Technological University
UNDER THE GUIDANCE OF
Faculty Guide
Asst. Prof. ChiragSoni
Submitted by
Patel Yogesh
Parekh Pinkal
Parmar Mukesh
ChaudharyShailesh
Patel Nilesh
TrivediAmita
117170592014
117170592015
117170592016
117170592017
117170592018
117170592019
MBA SEMESTER IV
Golden Jubilee Institute of Management & Technology, Sidhpur
Affiliated to Gujarat Technological University
Ahmedabad
183
PREFACE
Modern Saudi Arabia was formed in 1932 when King Abdul Aziz bin Abdul
Rahman Al Saud, commonly referred to as Ibn Saud, united different regions of the Arabian
Peninsula into one nation. On 23 September 1932, Abdul Aziz was proclaimed King, and
since then all Saudi Arabia's rulers have been his descendants. During his rule, King Abdul
Aziz laid the foundations for the modernisation of his country.
He began to build its
infrastructure: first establishing roads, and basic communications systems, and later
introducing modern technology and improvements to education, health care, and agriculture.
The economy of SAUDI AREBIA is one of the most diversified in the Middle
East, with sectors such as Tourism, Metal, Agriculture, Financial, Pharmaceutical, Cosmetics
Industry and service at almost equal production level.
We are Thanks to Asst, Prof Chirag soni [Faculty Guide], for providing guidance
and directing us on this project.
184
ACKNOWLEDGEMENT
As the Students of Management, we take the opportunity to thank Gujarat Technological
University for introducing the course of Master‟ s of Business Administration, to make the
students more efficient and perfect manager of tomorrow. It gave us a real time Opportunity
and Experience, to gather the information and work on the Country of Saudi arebia, hence
preparing the Global Country Report.
We shall be failing in my duty if we do not acknowledge our Sincere Thanks to Asst, Prof
Chirag soni [Faculty Guide], for providing guidance and directing us on this project.
We also express my gratitude to all those people, who have provided us all the necessary
information throughout the infrastructure to carry out the project and people who were
directly and indirectly instrumental in enabling us to stay committed for the project.
185
INDEX
NO.
CHAPTER
PAGE
NO.
PREFACE
ACKNOWLEDGEMENT
PART I
1
ECONOMIC
OVERVIEW
OF
THE
SELECTED COUNTRY
1.1
Demographic Profile of the Country
1.2
Economic Overview of the Country
1.3
Overview of Industries Trade and Commerce
1.4
Overview Different economic sectors of
selected country
Overviews of Business and Trade at
International Level
Present Trade Relations and Business Volume
of different products with India / Gujarat
PESTEL Analysis
1.5
1.6
1.7
PART – II
2
2.1
2.2
2.3
PHARMACEUTICAL INDUSTRY SPECIFIC
STUDY
Introduction of the Pharmaceutical Industry and
its role in the economy of Saudi arebia country.
Structure, Functions and Business Activities of
Pharmaceutical Industry
Comparative Position of pharmaceutical
Industry Product with India and Gujarat
2.4
Present Position and Trend of Business (import /
export) with India / Gujarat during last 3 to 5
years
2.5
Policies and Norms of selected country for
selected Industry/company for import / export
including licensing / permission, taxation etc
2.6
Policies and Norms of India for Import or export
to the selected country including licensing /
permission, taxation etc
2.7
Present Trade barriers for import / Export of
selected goods(if any)
186
3
3.1
Potential for import / export in India / Gujarat
Market
3.2
Business Opportunities in future
Conclusions
Bibliography
187
Chapter 1
188
1.1HISTORY OF SAUDI ARABIA
Modern Saudi Arabia was formed in 1932 when King Abdul Aziz bin Abdul Rahman Al
Saud, commonly referred to as Ibn Saud, united different regions of the Arabian Peninsula
into one nation. On 23 September 1932, Abdul Aziz was proclaimed King, and since then all
Saudi Arabia's rulers have been his descendants. During his rule, King Abdul Aziz laid the
foundations for the modernisation of his country. He began to build its infrastructure: first
establishing roads, and basic communications systems, and later introducing modern
technology and improvements to education, health care, and agriculture.
King Abdul Aziz died in November 1953, and his eldest surviving son, Crown Prince Saud
bin Abdul Aziz, succeeded him. The new King‘s brother, Faisal bin Abdul Aziz, became
Crown Prince. King Saud established the Council of Ministers and the Ministries of Health,
Education and Commerce. In 1964, the Crown Prince succeeded to the throne as King Faisal
and, to deepen links between Islamic nations, he travelled throughout the Arab and Islamic
world.
King Faisal‘s half-brother‘s son, Faisal bin Musai‘d, assassinated him in 1975. King Faisal‘s
brother, Khalid bin Abdul Aziz, succeeded him and reigned until his own death, from a heart
attack, in 1982. King Khalid‘s brother, Fahd, who had become Crown Prince on King
Faisal‘s death, succeeded him. In 1986, King Fahd took the title ‗Custodian of the Two Holy
Mosques‘. Crown Prince Abdullah became King on 1 August 2005 after King Fahd‘s death.
Prince Sultan bin Abdul Aziz, half-brother of King Abdullah then became Crown Prince,
until his death on 22 October 2011. Prince Naif, another half-brother of King Abdullah (and
Minister of Interior), was appointed the new Crown Prince. However, he died in June. His
brother, Prince Salman bin Abdul Aziz is now Crown Prince (and Minister of Defence).
189
1.2 Country profiles compiled by BBC Monitoring
But the leadership's refusal to tolerate any kind of opposition may have encouraged the
growth of dissident groups such as Osama Bin Laden's al-Qaeda, which benefited from
popular resentment against the role of the US in the Middle East. Members of the large Shia
minority, who form a majority in oil-rich Eastern Province, have become increasingly vocal
in their demands for civil rights.
After the terrorist attacks on New York and Washington of 11 September 2001 - carried out
mainly by Saudi nationals - the Saudi authorities were further torn between their natural
instincts to step up internal security and pressure to allow a greater degree of democracy.
In 2003 suicide bombers suspected of having links with al-Qaeda killed 35 people - including
a number of foreigners - in the capital Riyadh. Some Saudis referred to the attacks as their
own 9/11. The targets of other militant attacks have included foreign workers. The security
forces have made thousands of arrests.
Demands for political reform have increased. Municipal elections in 2005 were a first,
limited exercise in democracy. But political parties are banned - the opposition is organised
from outside the country - and activists who publicly broach the subject of reform risk being
jailed.
Calls for social change are on the rise, too. Activists for women's rights have become more
vocal, focusing on practical campaigns such as the right to drive. Social media users are also
testing the limits of freedom of expression.
Saudi Arabia sits on more than 25% of the world's known oil reserves. It is capable of
producing more than 10 million barrels per day; that figure is set to rise
190
1.3 Map of Saudi Arabia
191
Chapter 2
192
2.1 Geography of Saudi Arabia
Location:
Middle East, bordering the Persian Gulf and the Red Sea, north of Yemen
Coordinates:
25 00 N, 45 00 E
Area:
total: 1,960,582 sq km
water: 0 sq km
land: 1,960,582 sq km
Area
comparative:
slightly more than one-fifth the size of the US
Land
total: 4,431 km
boundaries:
border countries: Iraq 814 km, Jordan 744 km, Kuwait 222 km, Oman 676
km, Qatar 60 km, UAE 457 km, Yemen 1,458 km
Coastline:
2,640 km
Maritime
contiguous zone: 18 NM
claims:
continental shelf: not specified
territorial sea: 12 NM
Climate:
harsh, dry desert with great temperature extremes
Terrain:
mostly uninhabited, sandy desert
Elevation
lowest point: Persian Gulf 0 m
extremes:
highest point: JabalSawda' 3,133 m
Natural
petroleum, natural gas, iron ore, gold, copper
resources:
193
Natural
hazards:
frequent sand and dust storms
Environment
desertification; depletion of underground water resources; the lack of
current issues: perennial rivers or permanent water bodies has prompted the development
of extensive seawater desalination facilities; coastal pollution from oil
spills
Geography -
extensive coastlines on Persian Gulf and Red Sea provide great leverage
note:
on shipping (especially crude oil) through Persian Gulf and Suez Canal
194
2.2Population of Saudi Arabia
Population:
28,146,656 (July 2008 est.)
Age structure:
0-14 years: 38.2% (male 5,261,530/female 5,059,041)
15-64 years: 59.4% (male 9,159,519/female 6,895,616)
65 years and over: 2.4% (male 342,020/female 302,005)
Median age:
21.4 years
Growth rate:
2.18%
Infant mortality:
12.81 deaths/1,000 live births
Life expectancy at total population: 75.67 years
birth:
male: 73.66 years
female: 77.78 years
Fertility rate:
4 children born/woman
Nationality:
noun: Saudi(s)
adjective: Saudi or Saudi Arabian
Ethnic groups:
Arab 90%, Afro-Asian 10%
Religions:
Muslim 100%
Languages:
Arabic
Literacy:
definition: age 15 and over can read and write
total population: 78.8%
male: 84.7%
female: 70.8%
195
Social Environment of Saudi Arabia
This project is study about the social environment of saudi Arabia.history of saudi arabia is
Modern Saudi Arabia was formed in 1932 when King Abdul Aziz bin Abdul Rahman Al
Saud, commonly referred to as Ibn Saud, united different regions of the Arabian Peninsula
into one nation. On 23 September 1932, Abdul Aziz was proclaimed King, and since then all
Saudi Arabia's rulers have been his descendants. During his rule, King Abdul Aziz laid the
foundations for the modernisation of his country. He began to build its infrastructure: first
establishing roads, and basic communications systems, and later introducing modern
technology and improvements to education, health care, and agriculture. . Prince Naif,
another half-brother of King Abdullah (and Minister of Interior), was appointed the new
Crown Prince. However, he died in June. His brother, Prince Salman bin Abdul Aziz is now
Crown Prince (and Minister of Defence).
Economic overview of the saudi arabia Natural hazards frequent and dust stoms environment
desertification depletion of underground waterresource the lack of current issue perennial
rivers or permanent water bodies has prompted the development of extensinsive seawater
desalination facilities coastal pollution from oil spills.saudi Arabia ,bahrain,
But the
leadership's refusal to tolerate any kind of opposition may have encouraged the growth of
dissident groups such as Osama Bin Laden's al-Qaeda, which benefited from popular
resentment against the role of the US in the Middle East. Members of the large Shia minority,
who form a majority in oil-rich Eastern Province, have become increasingly vocal in their
demands for civil rights.
After the terrorist attacks on New York and Washington of 11 September 2001 carried out mainly by Saudi nationals - the Saudi authorities were further torn between their
natural instincts to step up internal security and pressure to allow a greater degree of
democracy.
196
In 2003 suicide bombers suspected of having links with al-Qaeda killed 35 people including a number of foreigners - in the capital Riyadh. Some Saudis referred to the attacks
as their own 9/11. The targets of other militant attacks have included foreign workers. The
security forces have made thousands of arrests.
Relations with Neighbours & the International Community Saudi Arabia plays a
critical role in the region. It is an influential and moderate voice in the region, whose
leadership withArab Peace Initiative provided an important contribution to efforts to find a
just and lastreligious influence from Kandahar to Jakarta to East London.
Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates
established the GCC together in 1981. It remains a forum for economic and political policy
co-ordination. At the 32nd GCC Summit in December 2011, King Abdullah by called on the
GCC to move from a stage of cooperation to full unity ‗so that the GCC countries form a
single entity to achieve good and repel evil in response to the aspirations of the citizens of
GCC countries and the challenges they face‘. Saudi Arabia has also called for the GCC to
have an enhanced relationship with Jordan and Moroc.
King Abdullah‘s Beirut declaration of 2002, known as the Arab Peace Initiative (API)
in which Arab governments would offer "normal relations and the security of Israel in
exchange for a full Israeli withdrawal from all occupied Arab lands, recognition of an
independent Palestinian state with Jerusalem as its capital, and the return of Palestinian
refugees, was a landmark, and remains important to the search for peace. An Arab League
Summit in Riyadh endorsed the declaration in March 2007, and the Arab League reconfirmed it in 2008. In December 2008, the Arab League wrote to then President– elect
Obama reiterating its support for the API and urging Obama to engage in the MEPP. The
Saudis played an important role in bringing this about. King Abdullah also brokered the
Mecca Agreement in February 2007 that formed a Palestinian National Unity Government.
Saudi Arabia is committed to ensuring that the issue of Palestine remains a priority to the
international community.
No country has a more important stake in the stability and security of Yemen than
Saud Arabia. If Yemen continues on a path of instability, the threat of international terrorism
emanating from Yemen will grow. A lack of security would also impact on Yemen‘s
197
neighbours, with knock-on effects on the economic stability of the wider region. Saudi
Arabia‘s support will be crucial to helping Yemen meet the challenges it faces.
Saudi Arabia supports the political process in Iraq, and strongly supports national unity
there. It has a critical role to play in supporting Iraqi Prime Minister Maliki‘s broad-based
government, including through border security and the International Compact. Saudi Arabia
fully recognises that the success of the revised Baghdad Security Plan is critical not only to
Iraq‘s future stability but to that of the entire region. Furthermore, Saudi Arabia‘s Foreign
Minister, Prince Saud, declared that Saudi Arabia is committed to cutting Iraqi debt. In
February 2012, Saudi Arabia announced that its ambassador in neighbouring Jordan would
also serve as ambassador to Iraq. This is the first time that Saudi Arabia has had diplomatic
representation in Iraq since 2003.
Saudi Arabia‘s relationship with Iran is complex. Saudi Arabia‘s relations with Iran
have been strained since the Islamic Revolution in 1979. However, in recent years, Saudi
Arabia has publicly questioned the peaceful nature of Iran‘s nuclear enrichment program.
Indeed, Saudi Arabia‘s opposition to Iran‘s nuclear program has generated speculation that
the country might endorse military action against Iran should diplomatic approaches fail. In
June 2011, a senior Saudi official suggested that Saudi Arabia would pursue its own nuclear
weapons program if Iran developed a nuclear weapon. In October the United States disrupted
an alleged Iranian plot to target Saudi Arabia‘s Ambassador to the US; the Iranians deny any
involvement in the plot.
Saudi Arabia remains concerned about Lebanon‘s instability, with its risks to the whole
region, and has repeatedly called for a political solution to the country‘s problems. A
significant investor in the country, Saudi Arabia is the single largest donor to the Lebanon
reconstruction effort.
Saudi Arabia is one of the UK‘s most vital partners in its global counter-terrorism efforts.
The Saudi government stands firm against terrorism, and takes action against terrorists. The
Saudi Royal family were swift to condemn the terrorist attacks of 11 September 2001. Saudi
Arabia was one of the first countries to offer help to the UK after the 7 July 2005 attacks.
The two holy cities of Mecca and Medina give Saudi Arabia worldwide religious importance,
and the country is vital to world energy supplies. Saudi Arabia too has suffered from
terrorism, and al-Qa‘ida represents as much of a threat to Saudi Arabia as it does to the UK.
The UK welcomes Saudi Arabia‘s commitment to counter-terrorism co-operation, and works
198
closely with Saudi authorities to develop a level of co-operation that delivers mutual practical
benefits to both sides.
Saudi Arabia, as King Abdullah‘s title - Custodian of the Two Holy Mosques suggests, is home to the two most important sites in Islam: Mecca and Medina. Every year,
millions of Muslims travel to Saudi Arabia to perform the Hajj and Umrah pilgrimages. In
1999, the UK became the first predominantly Christian country to organise an official Hajj
delegation to assist the 20,000 British pilgrims. This delegation included members of the
Foreign and Commonwealth Office and volunteers from the Muslim community.
The British Museum has just finished showing their Hajj: Journey to the
Heart of Islam exhibition, which was visited by over 120,000 people. The museum is also
due to show an exhibition dedicated to the Horse, timed to coincide with the Olympic Games
and also conceived as a diamond jubilee gift to the Queen. Entitled: The Horse: Ancient
Arabia to the Modern World, this exhibition will trace the history of the horse and its
significance as an engine of human development. The exhibits will include objects from the
Museum‘s own collection, and also carvings of horses from a newly excavated site, in the
centre of Saudi Arabia, carbon-dated to c. 7000 BC.
There are a number of other cultural and educational links between the UK
and Saudi Arabia. The British Council has an important English language and vocational
training scheme in the country, and the number of Saudi students at UK universities
continues to grow. There are over 18,000 Saudi students studying degree and English courses
in the UK. The UK also takes part in the Saudi Arabian Painting and Patronage Programme,
whose purpose is to build bridges of artistic and educational understanding between the Arab
world and Europe and to establish a deeper understanding of each other's distinct and diverse
cultures and traditions.
199
Commerce Trade Official Leads Clean Energy Efficiency Trade Misison to
Saudi Arabia
RIYADH, Saudi Arabia – U.S. Commerce Department Assistant
Secretary for Manufacturing and Services Nicole Lamb-Hale will arrive in Riyadh tomorrow
to head the Commerce Department‘s latest trade mission to Saudi Arabia. Lamb-Hale is
leading a delegation of representatives from 13 U.S. businesses from the solar, green
building, smart grid and energy efficiency sectors seeking to help Saudi Arabia meet its
renewable energy and energy efficiency goals.
―I am pleased to lead these American companies on a trade mission to Saudi Arabia,‖
said Lamb-Hale. ―The United States supports Saudi Arabia‘s focus on advancing clean
energy and energy efficiency. We see great opportunities for increased Saudi-U.S.
commercial cooperation in achieving the goals set forth by the Saudi government.‖
The Saudi Arabian government is committed to reducing its reliance on petroleum for
power generation and pursuing the development of alternative energy sources and energy
efficiency as demand for power continually increases. More than $100 billion will be
invested during the next 10 years to develop clean, non-hydrocarbon sources, focused
primarily on nuclear and solar technologies.
This mission will help U.S. companies explore long-term business opportunities in Saudi
Arabia and enhance U.S.-Saudi commercial relations by providing participants with firsthand market information, and access to government decision makers. Additionally, one-onone meetings with potential agents, distributors, and partners will allow participating firms to
position themselves to enter or expand their presence in these sectors
The International Trade Administration‘s (ITA) U.S. and Foreign Commercial
Service, an arm of the U.S. Department of Commerce, has representation across the globe to
help businesses start exporting, increase their exports, and find business opportunities in
foreign countries.
Craig O‘Connor, Director of the Office of Renewable Energy and Environmental
Exports at the U.S. Ex-Im Bank and Colin McCormick, Senior Advisor for Research and
Development to the Under Secretary at the U.S. Department of Energy will also participate in
the trade mission.
200
Pestel analysis The modern Kingdom of Saudi Arabia, which was founded in 1932 by
Abdulaziz bin Abd al-Rahman Al Saud (Ibn Saud), is a monarchy. Saudi Arabia is a
hereditary monarchy.
Ibn Saud's son, King Abdullah bin Abdulaziz Al Saud has been the ruler since 2005,
though he had been regent from 1996, due to the illness of his brother King Fahad. The
King's heir apparent (as of June 2012) is Crown Prince Salman bin Abdulaziz al-Saud, who
also holds the title of Deputy Prime Minister, and who is a half-brother of the King.
The document known as the Basic Law of Governance, which articulates the
government's rights and responsibilities, was established by royal decree in 1992.
Saudi Arabia is a monarchy with a political system rooted in Islam‘s Sharia law. The
monarchy is directly descended from the founder of modern day Saudi Arabia.
King
Abdullah, the Head of State, is also the Prime Minister and nominates a Council of Ministers.
His half-brother, Prince Salman, is the Crown Prince, Deputy Prime Minister and Minister of
Defence. Other members of the King's close family hold important roles; these include
Prince Ahmed, Minister of Interior and Prince Muqrin, head of Saudi Arabia‘s external
intelligence agency.
Between 1992 and 1993, King Fahd introduced a number of political reforms,
including the establishment in 1993 of a Consultative Council, the Majlis Al-Shura. The
Council has 150 male members appointed by the King. In addition there are 12 female
advisers to the Council. The Council‘s role is advisory. It debates and votes on new political
legislation, but only the Council of Ministers can enact a law.
In January 2003, the then Crown Prince Abdullah set out proposals for "self-reform
and the promotion of political participation" in the Arab world. A few days later he received
a petition signed by 120 people which called for reforms, including: election of members to
the Shura council and regional assemblies; an independent judiciary; freedom of speech and
association; the development of civil society and increased human rights; a greater public role
for women; and a national forum for open discussion.
In October 2006, the King announced the creation of an Allegiance Commission.
Made up of senior members of the Al Saud family, the Commission governs the selection of
201
a new King or Crown Prince if either of their predecessors should die. It also provides for the
possibility of abdication in the event of medical incapacitation.
King Abdullah‘s most recent round of reforms took place in February 2009. These
reforms included: four new cabinet ministers; new judges; new heads of governmental bodies
including the Saudi Arabian Monetary Authority (SAMA, the central bank) and the religious
police; 79 new members of the Shura Council (the fledgling parliament); two senior military
appointments; and new religious figures. King Abdullah also appointed the first woman to
hold ministerial rank in Saudi Arabia. Dr Nora al Fayez is now Deputy Education Minister
for Girls‘ education. The King has pledged to appoint more women to the Shura Council in
2013.
Social environment of saudi arabia
In July 2006, estimates placed Saudi Arabia‘s
population at 27,019,731, with an annual growth rate of 2.18 percent. The population total
includes nearly 6 million non-nationals. Approximately 100,000 foreigners enter the country
each year, mostly to fill specific job openings. Immigrant workers come primarily from other
Arab and Muslim countries, including many from South Asia and the Philippines. Fewer than
100,000 Westerners work and live in Saudi Arabia. Because most of the terrain is unsuitable
for cultivation, the coastal areas and interior oases support the vast majority of the population.
Some cities have reported densities of 1,000 people per square kilometer. The Mecca region,
which also contains the major city of Jiddah, is the most populated area of the country, with
nearly 26 percent of the total population. Other population centers include Riyadh and the cl
Dammam, Khobar, and Dhahran. The least populated regions lie at the kingdom‘s periphery,
to the extreme north and south.
Saudi Arabia has an overwhelmingly young population. According to 2006 estimates,
38.2 percent of Saudis are under the age of 15, 59.4 percent are 15–64 years of age, and only
2.4 percent are 65 and older. The median age for males is 22.9, for females 19.4. The sex
ratio is 1.2 males/female. The birthrate and death rate are estimated to be 29.34 per 1,000 and
2.58 per 1,000, respectively. Saudi Arabia has a relatively low infant mortality rate, estimated
to be 13.7 deaths per 1,000 live births. It has a relatively high level of life expectancy: 73.66
years for males and 77.78 years for females, or 75.67 years overall. The country‘s fertility
rate is 4.1 children per woman, a significant drop in the past 20 years from 6.4 births per
woman in 1985.
202
Saudi Arabia‘s population is very homogeneous. The native population is 90 percent
Arab and 10 percent Afro-Asian. Arabic is the official language.
Islam is the official religion of Saudi Arabia. Islamic law forms the basis for the
country's legal code, and all citizens must be Muslim. Eighty-five percent of Saudis are Sunni
Muslims, most adhering to the Wahhabi sect. About 2 million Shia Muslims live in Saudi
Arabia, primarily in the east. The presence of religions besides Islam results almost
exclusively from the presence of foreign nationals, including a sizable number of Hindus and
Christians. The U.S. Conference of Catholic Bishops has estimated that between 500,000 and
1 million Catholics currently reside in Saudi Arabia. In recent years, the Saudi government
has stated a policy of allowing non-Muslim foreigners to practice their religion privately, but
no change in the law reflects this sentiment. Public worship of other religions is prohibited by
law and regulated and punished by the state's Committees for the Propagation of Virtue and
Prevention of Vice. Proselytizing by non-Muslims and by non-Sunni Muslims is strictly
prohibited. Conversion from Wahhabi Islam to another religion is a crime. The government
controls all mosques and is the direct employer of imams. It also operates centers designed to
facilitate the conversion of foreigners to Islam. Non-Sunni Muslims are largely eliminated
from consideration for government employment and educational opportunism.
The U.S. Department of State estimates the Saudi literacy rate to be 84.7 percent
for males and 77.8 percent for females. Saudi Arabia‘s nationwide public education system
includes eight public universities and more than 20,000 schools. Public education—from
elementary through high school—is a major government priority and is open and free to
every citizen. In 2005 the government devoted 25 percent of total expenditures to education.
Parents are not, however, required to send their children to school. Estimates from 2001
suggest that 59 percent of age-relevant children enroll in primary education. About 61 percent
of those eligible attend intermediate and secondary schools, according to 1996 data.
Education remains closely tied to Islamic teachings. All curricula must conform to Islamic
laws and the Quran, and traditional gender roles still limit the educational opportunities
available to females. The education of females has increased dramatically in recent years,
from 25 percent of all students in 1970 to 47.5 percent in 2001. However, classroom
instruction remains strictly segregated. Additionally, women can only attend six of the
nation‘s eight universities, and they are prohibited from studying certain subjects. Whereas
men may travel to foreign countries to pursure education,women are discouraged from doing
so and generally must be accompanied by a spouse or male relative.
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Health benefits for Saudi citizens have increased exponentially since the implementation
of the first five-year development plan in 1970. Today, according to the Saudi government, every
citizen has access to unlimited, free medical care. The government provides the bulk of financing to
build and operate hospitals throughout the country. As of 2006, the Saudi Ministry of Health
operated 62 percent of the country‘s hospitals and 53 percent of its nonurgent-care centers.
Expenditures for health and social services account for about 13 percent of the government‘s 2006
budget. Although spending has increased, management problems have hindered coordination among
the various state, private, and military health care providers.
Saudi Arabia has a two-tiered health care system. A series of clinics, many of them mobile units that
serve the country‘s remote rural towns, provide minor and preventative health care. Most of the
doctors in the country are not Saudi⎯only about 20 percent according to recent estimates.
Government officials expect this number to increase as education for doctors improves in the
country. Saudi Arabia‘s medical advances can be seen clearly in the increasing number of
specialized service providers. As recently as 1980, most Saudi hospitals provided only general
medical care, but in May 2006 Saudi Arabia terminated its long-standing practice of sending
patients to the United States for more complicated procedures. Government attention instead has
focused on continuing to improve Saudi facilities and expertise.
Statistics indicate a relatively high level of health in Saudi Arabia. According to 2002
estimates, there are 1.5 doctors and 2.3 hospital beds per 1,000 persons. Nearly the entire Saudi
population has access to sanitation, and 95 percent of Saudis have access to clean water. Similarly,
nearly 100 percent of the population has access to affordable essential drugs. The immunization rate
for children approaches 100 percent. For example, immunization against tuberculosis and measles
has increased to 94 percent of all one-year-olds. Of births occurring in 2002, 91 percent were
attended by a trained health professional.
The Saudi government does not release comprehensive health statistics, but United Nations
estimates on human immunodeficiency virus and acquired immune deficiency syndrome
(HIV/AIDS) for 2006 place the adult prevalence rate at less than 0.02 percent. Since 1985, Saudi
Arabia has nearly eradicated diphtheria, poliomyelitis, whooping cough, and measles. Tuberculosis
and hepatitis B have proved more difficult to eliminate. The health status of women and children has
204
attracted some concern from international organizations. Health workers report that physical spousal
abuse and violence against women and children appear to be common problems. A 2003 report by
the Saudi Ministry of Interior estimated that 21 percent of females suffered some form of abuse. To
address this problem, the Saudi government has now mandated that hospitals report any suspicions
of violence against women, domestic or otherwise, to law enforcement officials.
Among developing nations, as categorized by the United Nations in 2005, Saudi Arabia
ranks thirty-second out of 103 countries on the Human Poverty Index (an assessment of standard of
living), ahead of most of its Middle East neighbors, and seventy-seventh out of 177 nations on the
Human Development Indwelfare). Through its series of five-year development plans, Saudi Arabia
continues to try to transform oil wealth into broader economic prosperity. But despite high oil prices
and rising
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206
oil production, the average Saudi‘s standard of living has fallen, and unemployment, especially
among young adults, continues to rise. Moreover, the perception that oil revenues are not equitably
distributed throughout the population continues to create some social discontent.
Saudi Arabia‘s General Organization for Social Insurance, a semi-state body, was
established in 1969. A 9 percent payroll tax funds social insurance programs. Saudi businesses and
individuals are also responsible to the Ministry of Finance for the zakat (almsgiving), the Islamic
tithe of 2.5 percent of one‘s net worth. Old-age pensions are paid to retired workers at a rate of 2.5
percent of the last average salary. Men must be 60 years of age and women 55 in order to begin
receiving payments. Additionally, all Saudis are granted a plot of land and a small loan to build a
house.
Economic overview The petroleum sector accounts for roughly 45% of budget revenues,
55% of GDP, and 90% of export earnings. About 40% of GDP comes from the private sector.
Roughly five and a half million foreign workers play an important role in the Saudi economy, for
example, in the oil and service sectors. The government is encouraging private sector growth to
lessen the kingdom's dependence on oil and increase employment opportunities for the swelling
Saudi population. The government has begun to permit private sector and foreign investor
participation in the power generation and telecom sectors. As part of its effort to attract foreign
investment and diversify the economy, Saudi Arabia acceded to the WTO in 2005 after many years
of negotiations. With high oil revenues enabling the government to post large budget surpluses,
Riyadh has been able to substantially boost spending on job training and education, infrastructure
development, and government salaries.
Saudi Arabia is a vast country, covering an area of 2.15 million km2. It is known for its
arid desert and its various highlands. The prevailing climate is hot and dry, with rainfall scarce
except in the south-western and western coastal zones. The country has witnessed a massive
improvement in socioeconomic development in the past 30 years, with startling progress having
been made in health, education, housing and the environment. There is now an extensive network of
modern roads, highways, airports, seaports, power, desalination plants and huge industrial
complexes. Saudi Arabia has modern hospitals, schools, universities, recreational and tourist
facilities. The United Nations Development Programme (UNDP) annual global human development
report 2002 still classes Saudi Arabia among countries with medium-term development, ranking it
71 globally; however a recent joint Ministry of Economy and Planning and UNDP report suggests
207
that the country may soon be categorized as having high human development. Since 1970 a series of
5-year development plans have set national policy on economic and social affairs, and the current
plan covers the period up to 2005. The Ministry of Planning also has defined a 2020 vision paper to
guide development in Saudi Arabia, focusing on increasing jobs and per capita income, and
reducing poverty. Table 1 indicates progress in the past 10 years.
The industrial sector is the dominant source of wealth, creating 51% of GDP with most
of this from oil and gas mining; the service sector accounts for 43% of GDP and agriculture for 5%.
Saudi Arabia has the largest reserves of petroleum in the world, and is the largest exporter. In the
early 1980s the Government‘s budget went into major deficit, and since the 1990s the Government
has been working to bring this back into balance, and to encourage private economic activity. It cut
its foreign assistance, and has been looking to control its increasing domestic programmes,
including the social sector Saudi Arabia has a population of 22.6 million, of which about 6 million
are expatriate The population is overwhelmingly young with 45.7% female and 54.3% male due to
the high number of male expatriates working in the country.
Mortality fell rapidly in the period from 1970 to 1990, and continues to improve. In recent
decades there has been a gradual shift from rural to urban living, which now includes over 85% of
the population; the capital Riyadh has a population of 4.7 million.
There has been considerable progress by the Government in this area, with the establishment of a
Human Rights Society, under the Crown Prince, which includes prominent people from
Government, business, religious institutions and academia. An orientation workshop has taken place
with the assistance of the UN, and various programmes are underway to demonstrate best practice
and establish human rights institutions in the country.
The initial focus has been on prisons and responding to individual complaints. Municipal elections
are soon to be under way for the first time with the aim of local councils having a mixture of
appointed and elected representatives. Women, however, will not be included as candidates and will
not be eligible to vote at this stage.
The major improvements in health and human development have been in part accomplished
through major advances in the broader determinants of human development. School enrolment is
improving with 97.5% of males and 94.5% of females enrolling for primary education, and 92.8%
and 88.2% respectively enrolling in secondary education. The adult literacy rate is 88% for males
208
and 72% for females; youth illiteracy is 5% and 9% respectively. Average household income grew
rapidly between 1970 and 1990 as the benefits of the oil industry were widely spread by the
Government across the Saudi population. Over 95% of households have access to safe water, which
in some parts of the country, particularly the capital Riyadh, is supplied through desalination plants
along the coastline; figures for sanitation facilities suggest they are adequate across the population.
There has been an increase in life expectancy in recent years; the overallburden of disease
in Saudi Arabia has reduced markedly, with a large drop in mortality and morbidity from
communicable diseases and huge drops in maternal mortality. Communicable disease and vectorborne outbreaks still occur, but these are no longer the major cause of ill health in Saudi Arabia.
With increasing longevity and changes in lifestyle, there has been a consequent increase in patterns
of disease with a marked increase in illnesses related to noncommunicable diseases, in particular
cardiovascular disease and diabetes. Deaths from road traffic accidents have been increasing, and
are now the largest cause of death in adult males aged 16 to 36 years. These trends are expected to
continue. However, a major obstacle to assessing the national burden of disease is alack of reliable
data from community and non- Ministry of Health health facilities; addressing this constraint is
critically important for longterm planning by the Ministry of Health.
There has been an increase in life expectancy in recent years; the overallburden of disease in
Saudi Arabia has reduced markedly, with a large drop in mortality and morbidity from
communicable diseases and huge drops in maternal mortality. Communicable disease and vectorborne outbreaks still occur, but these are no longer the major cause of ill health in Saudi Arabia.
With increasing longevity and changes in lifestyle, there has been a consequent increase in patterns
of disease with a marked increase in illnesses related to noncommunicable diseases, in particular
cardiovascular disease and diabetes. Deaths from road traffic accidents have been increasing, and
are now the largest cause of death in adult males aged 16 to 36 years. These trends are expected to
continue. However, a major obstacle to assessing the national burden of disease is alack of reliable
data from community and non- Ministry of Health health facilities; addressing this constraint is
critically important for longterm planning by the Ministry of Health.
The true wealth of any nation is its people, for it is their ability to manage the country's existing
resources and to identify and develop new ones which determines the prosperity of the economy and the
health of society for present and future generations.
209
Mindful of the need to ensure that the Kingdom's population should be equal to the challenges
of the developmental process, the government has devoted vast resources to a program covering primary,
secondary and higher levels of education. All the Kingdom's Development Plans have taken into account the
educational aspirations of the Saudi people, providing free education to all. The educational system has been
continuously and systematically expanded to accommodate the ever-growing demand for educational
services. Through this investment, the Kingdom has been able to guarantee equality of opportunity for all and
to ensure that the Kingdom's need for an educated and trained national workforce to carry forward the
Kingdom's future development can be fulfilled
210
211
Chapter 1
1.1 Introduction about the pharmaceutical industry
This Pharmaceutical Country Profile provides data on existing socio-economic and
health-related conditions, resources, regulatory structures, processes and outcomes relating to the
pharmaceutical sector of Saudi Arabia. The aim of this document is to compile all relevant, existing
information on the pharmaceutical sector and make it available to the public in a user-friendly
format. In 2010, the country profiles project was piloted in 13 countries. During 2011, the World
Health Organization has supported all WHO Member States to develop similar comprehensive
pharmaceutical country profiles.
The Saudi pharmaceutical market is the largest in the GCC. The growing population and
its increasingly westernized lifestyle have driven up the level of chronic diseases in the Kingdom.
This, alongside the increased wealth of the nation, encourages not only the demand for
pharmaceuticals but the demand for patented products. However, the rather strict regulatory regime
and price control of the government favor local pharmaceutical manufacturers, thereby intensifying
competition.
Saudi Pharmaceutical Industries now manufactures high quality veterinary products and its
eminence is compared with European standards.This Pharmaceutical Country Profile provides data
on existing socio-economic and health-related conditions, resources, regulatory structures, processes
and outcomes relating to the pharmaceutical sector of Saudi Arabia. The aim of this document is to
compile all relevant, existing information on the pharmaceutical sector and make it available to the
public in a user-friendly format. In 2010, the country profiles project was piloted in 13 countries.
During 2011, the World Health Organization has supported all WHO Member States to
develop similar comprehensive pharmaceutical country profiles.
212
The information is categorized in 9 sections, namely: (1) Health and Demographic data, (2)
Health Services, (3) Policy Issues, (4) Medicines Trade and Production (5) Medicines Regulation,
(6) Medicines Financing, (7) Pharmaceutical procurement and distribution, (8) Selection and
rational use, and (9) Household data/access. The indicators have been divided into two categories,
namely "core" (most important) and "supplementary" (useful if available). This narrative profile is
based on data derived from both the core and supplementary indicators. The tables in the annexes
also present all data collected for each of
the indicators in the original survey form. For each piece of information, the year and source of the
data are indicated; these have been used to build the references in the profile and are also indicated
in the tables. If key national documents are available on-line, links have been provided to the source
documents so that users can easily access these documents.
The selection of indicators for the profiles has involved all technical units working in the
Essential Medicines Department of the World Health Organization (WHO),2 as well as experts from
WHO Regional and Country Offices, Harvard Medical School, Oswaldo Cruz Foundation (known
as Fiocruz), University of Utrecht, the Austrian Federal Institute for Health Care and representatives
from 13 pilot countries.
Data collection in all 193 member states has been conducted using a userfriendly
electronic questionnaire that included a comprehensive instruction manual and glossary. Countries
were requested not to conduct any additional surveys, but only to enter the results from previous
surveys and to provide centrally available information. To facilitate the work of national
counterparts, the questionnaires were pre-filled at WHO HQ using all publicly-available data and
before being sent out to each country by the WHO Regional Office.A coordinator was nominated
for each of the member states. The coordinator for Saudi Arabia
Was Prof. SalehBawazir.
The completed questionnaires were then used to generate individual country profiles. In
order to do this in a structured and efficient manner, a text template was developed. Experts from
member states took part in the development of the profile and, once the final document was ready,
an officer from the Saudi Food & Drug Authority certified the quality of the information and gave
formal permission to publish the profile on the WHO web site.
This profile will be regularly updated by the SFDA.
213
1.2 Its role in the economy of saudiarebia country
Today pharmaceuticals have become an indispensable part of health care system
around the globe. Historically pharmaceuticals have played a vital role in the human development
by improving the quality of life and reducing the time spent in the hospitals. Thanks to innovative
pharmaceutical industry that almost all epidemics and chronic diseases are curable today. Due to its
direct link with the welfare and well being of human beings pharmaceutical industry is of strategic
importance for the development of a healthy and productive nation. Today,pharmaceutical industry
is considered to be one of the largest and rapidly growing global industries. It is a major source of
employment generation and foreign exchange earnings for many countries around the globe.
However, despite all these extraordinary achievements it‘s a harsh reality that every
year millions of people die across the world, mostly in low income developing countries, due to
unavailability and inaccessibility of necessary medicines. According to the World Health
Organization (WHO), on average, 30% of the world population lacks access to life-saving
medicines; whereas, in some countries in Asia and Africa, the number may be as high as 50%(Roger
Bate, 2008).Many developing countries, including some OIC member countries, has insufficient or
no manufacturing capacities in the pharmaceutical industry. Local industry covers a tiny fraction of
domestic pharmaceutical demand and they rely heavily on imports and medicinal aid. In addition,
the share of medicines in ―Out-of-pocket‖ health payments (i.e. paid by the patient) is ranging
between 40 to 60% in these countries. Consequently, medicines are neither available nor accessible
to a large fraction of population and hundreds and thousands of people die of preventable and
treatable diseases. This short report is a humble attempt to investigate the availability of medicines
214
in OIC member countries by focusing on the production, consumption and trade patterns of
pharmaceuticals in these countries during the period 2005-2010.
1.3 Structure of the Pharmaceutical Industry
The growing pharmaceutical industry was originally dominated by smaller
companies, but this trend has changed. Today, pharmaceutical firms are typically extremely large to
more easily enable big expenditures for research and development. Most pharmaceutical companies'
revenues come from patented blockbuster drugs, whose cost to bring to market is very high -- as a
result, pharmaceutical firms use their patents to charge high prices.
1 Big Pharma: Rise of the Giants
The trend since the 1980s has been for consolidation among pharmaceutical companies,
using a variety of means such as corporate takeovers and buyouts, and business partnerships.
This has given rise to very large firms. The combined revenues of Novartis of Switzerland,
Pfizer of the U.S., and Bayer in Germany are more than $150 billion. The phrase Big Pharma
is often given to firms with earnings in excess of $3 billion or with research and
development expenses above $500 million.
2 Growth Patterns in the Industry
The growth of pharmaceutical companies in the past 15 years has been generally
outstanding. Up until 2009, pharmaceutical companies were thought to be recession-proof,
often growing despite losses in other industries (such as the tech bubble and the dot.com
bubble during the late 1990s and early 2000s). However, in 2009, IMS Health (a market
215
analysis firm for health care) lowered its prediction of growth in pharmaceutical sales to
from 2.5 percent to 3.5 percent, down from 4.5 percent to 5.5 percent, possibly indicating
that growth may slow in the coming years.
3 Blockbuster Drugs
A blockbuster drug is defined as a drug generating more than $1 billion a year, and
blockbuster drugs account for roughly one-third of the value in pharmaceutical sales. These
drugs include Lipitor and Celebrex by Pfizer and Prilosec and Nexium by AstraZeneca,
which combine for more than $19 billion in sales alone. Because of the immense cost of
bringing a new drug to market, these firms rely on the patents for these drugs to prevent the
production of generics and ensure high prices.
4 Patents, Generics and Blockbuster Drugs
The structure of the industry is currently designed so that pharmaceutical companies can
market their products to different nations at different prices. In the U.S., unsurprisingly,
people pay much higher prices for brand medication than do those in other countries. As a
result, America has seen an increase in the illegal smuggling of pills from Canada to the
United States. This is especially prevalent for on-brand, expensive drugs (such as Lipitor by
Pfizer, which can be 40 percent cheaper in Canada).
5 Considerations
Pharmaceutical companies may soon evolve in a different direction, thanks to developments
in stem-cell research and other biotechnology. Possibly in the future, Big Pharma will be less
concerned about the patents for their blockbuster drugs and more concerned about being able
to manufacture and produce individualized products for specific patients. This trend may
start sooner rather than later, considering that several blockbuster drug patents (such as
Nexium and Lipitor) are due to expire soon. Upon expiration, it is highly likely that generic
versions from places abroad (especially India) will undermine the profitability of these
blockbusters.
216
6 Industry Structure
The consolidation of pharmaceutical companies in the early 1980s gave birth to some of the
largest companies in the world, such as GlaxoSmithKline of the United Kingdom and
Novartis of Switzerland. These developments have created a global trend toward oligopoly
in the industry. The industry has also experienced considerable structural changes such as the
growth of the generic drugs market.
A National Essential Medicines List (NEML) exists. The NEML was lastly updated in 2011
and is publicly available. There are currently 183 medicines on the EML. Selection of
medicines for the NEML is undertaken through a written process. A mechanism aligning the
NEML with the Standard Treatment Guidelines (NSTGs) is in place.
National Standard Treatment Guidelines (NSTGs) for the most common illnesses are
produced/endorsed by the Ministry of Health (MOH) in Saudi Arabia. These were updated
on regular intervals There are many public or independently funded national Drug & Poison
Centres providing information on medicines to prescribers, dispensers and consumers20.
Public education campaigns on rational medicine use topics have been conducted in the last
two years. A survey on rational use of medicines has not been conducted in the previous two
years. There is no national programme or committee, involving government, civil society,
and professional bodies, to monitor and promote rational use of medicines.
A written National Strategy for containing antimicrobial resistance does not exist. Saudi
Arabia‘s Essential Medicines List (EML) includes formulations specifically for children.
Criteria for the selection of medicines to the EML are explicitly documented. A national
medicines formulary exists.
217
Activities and function
Section 1 - Health and Demographic Data
This section gives an overview of the demographics and health status of Saudi Arabia.
1.1 Demographics and Socioeconomic Indicators
The total population of Saudi Arabia in 2010 was 27,136,977 with an annual population growth
rate of 3.2%3. The annual GDP growth rate is 4.15 %3. The GDP per capita was US$ 20,327 (at
the current exchange ratei).31.97 % of the population is under 15 years of age, and 2.83 % of the
population is over 65 years of age. The urban population currently stands at 85% of the total
population. The fertility rate in Saudi Arabia is 2.98 births per woman. The adult literacy rate for
the population over 15 years is 88%.
1.2 Mortality and Causes of Death
The life expectancy at birth is 72.6 and 74.9 years for men and women respectively. The infant
mortality rate (i.e. children under 1 year) is 16.9/1,000 live births. For children under the age of 5,
the mortality rate is 19.5/1,000 live births. The maternal mortality rate is 1.4/10,000 live births.
Section 2 - Health Services
This section provides information regarding health expenditures and human resources for health
in Saudi Arabia. The contribution of the public and private sector to overall health expenditure is
218
shown and the specific information on pharmaceutical expenditure is also presented. Data on human
resources for health and for the pharmaceutical sector is provided as well.
2.1 Health Expenditures
In Saudi Arabia, the total annual expenditure on health (THE) in 2009 was 72.3 Billion Saudi Riyal
(SAR) (US$ 19.3 Billion)5. The total annual health expenditure was 3.6 % of the GDP. The total
annual expenditure on health per capita was 2,713 SAR (US$ 714).6 The general governmentii
health expenditure (GGHE) in 2009, as reflected in the national health accounts (NHA) was SAR
48.5 Billion (US$ 13 Billion). That is, 67 % of the total expenditure on health, with a total annual
per capita public expenditure on health of SAR 1,311 (US$ 478). The government annual
expenditure on health represents 6.5 % of the total government budget. Private health expenditure
covers the remaining 33 % of the total health expenditure Of the total population, 69 % is covered
by a public health service, public health insurance or social insurance, or other sickness funds and
31 % is covered by a private health insurance.7 Total pharmaceutical expenditure (TPE) in Saudi
Arabia in 2010 was 13.5 billion SAR (US$ 3.5 billion), which is a per capita pharmaceutical
expenditure of 500 SAR (US$ 132). The total pharmaceutical expenditure accounts for 2 % of the
GDP and makes up 18 % of the total health expenditure. Public expenditure on pharmaceuticals
represents 40 % of the total expenditure on pharmaceuticals, this converts into a per capita public
expenditure on pharmaceuticals of 200 SAR (US$ 53).
219
Chapter 2
220
Comparative Position of pharmaceutical
Industry
Pharmaceutical industry in india
The Pharmaceutical industry in India is the world's third-largest in terms of volume and
stands 14th in terms of value. According to Department of Pharmaceuticals, Ministry of Chemicals
and Fertilizers, the total turnover of India's pharmaceuticals industry between 2008 and September
2009 was US$21.04 billion. While the domestic market was worth US$12.26 billion. Sale of all
types of medicines in the country is expected to reach around US$19.22 billion by 2012.
Exports of pharmaceuticals products from India increased from US$6.23 billion in 2006-07
to US$8.7 billion in 2008-09 a combined annual growth rate of 21.25%. According to
PricewaterhouseCoopers (PWC) in 2010, India joined among the league of top 10 global
pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion. Some of the
major pharmaceutical firms includRanbaxy,Cipla,Sun, Cadila Healthcare and Piramal Healthcare.
221
The government started to encourage the growth of drug manufacturing by Indian companies
in the early 1960s, and with the Patents Act in 1970. However, economic liberalization in the 1990s
by the former Prime Minister P.V. NarasimhaRao and the then Finance Minister, Dr. Manmohan
Singh enabled the industry to become what it is today. This patent act removed
compositionpatents from food and drugs, and though it kept process patents, these were shortened
from a period of seven years to five years.
The lack of patent protection made the Indian market undesirable to the multinational
companies that had dominated the market, and while they streamed out. Indian companies carved a
niche in both the Indian and world markets with their expertise in reverse-engineering new
processes for manufacturing drugs at low costs. Although some of the larger companies have taken
baby steps towards drug innovation, the industry as a whole has been following this business model
until the present.
India's biopharmaceutical industry clocked a 17 percent growth with revenues of Rs.137
billion ($3 billion) in the 2009-10 financial year over the previous fiscal. Bio-pharma was the
biggest contributor generating 60 percent of the industry's growth at Rs.8,829 crore, followed by
bio-services at Rs.2,639 crore and bio-agri at Rs.1,936 crore.
Pharmaceutical industry today
The number of purely Indian pharma companies is fairly low. Indian pharma industry
is mainly operated as well as controlled by dominant foreign companies having subsidiaries in India
due to availability of cheap labour in India at lowest cost. In 2002, over 20,000 registered drug
manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of these
formulations were sold in India while over 60% of the bulk drugs were exported, mostly to the
United States and Russia. Most of the players in the market are small-to-medium enterprises; 250 of
the largest companies control 70% of the Indian market. Thanks to the 1970 Patent Act,
multinationals represent only 35% of the market, down from 70% thirty years ago.
Most pharma companies operating in India, even the multinationals, employ Indians
almost exclusively from the lowest ranks to high level management. Mirroring the social structure,
222
firms are very hierarchical. Homegrown pharmaceuticals, like many other businesses in India, are
often a mix of public and private enterprise. Although many of these companies are publicly owned,
leadership passes from father to son and the founding family holds a majority share.
In terms of the global market, India currently holds a modest 1-2% share, but it has been
growing at approximately 10% per year[27]. India gained its foothold on the global scene with its
innovatively engineered generic drugs and active pharmaceutical ingredients (API), and it is now
seeking to become a major player in outsourced clinical research as well as contract manufacturing
and research. There are 74 U.S. FDA-approved manufacturing facilities in India, more than in any
other country outside the U.S, and in 2005, almost 20% of all Abbreviated New Drug Applications
(ANDA) to the FDA are expected to be filed by Indian companies[21,27]. Growth in other fields
notwithstanding, generics are still a large part of the picture. London research company Global
Insight estimates that India‘s share of the global generics market will have risen from 4% to 33% by
2007[27]. The Indian pharmaceutical industry has become the third largest producer in the world
and is poised to grow into an industry of $ 20 billion in 2015 from the current turnover of $ 12
billion.
Comparison with the Saudi arabia
The Indian biotech sector parallels that of the U.S. in many ways. Both are filled with
small start-ups while the majority of the market is controlled by a few powerful companies. Both are
dependent upon government grants and venture capitalists for funding because neither will be
commercially viable for years. Pharmaceutical companies in both countries have recognized the
potential effect that biotechnology could have on their pipelines and have responded by either
investing in existing start-ups or venturing into the field themselves.[36] In both The India and the
U.S., as well as in much of the globe, biotech is seen as a hot field with a lot of growth potential.
223
224
Chapter 3
Pharmaceutical industry in Gujrat
State of Gujarat emerged as an independent state from the than Greater Bombay
state on Ist May, 1960. In the pre-independence era & until about emergence of pharmaceutical
industries in Gujarat, India was not self sufficient for medicines and was a net importer of the most
of bulk drugs & many formulations. In 1947 the year of Independence India's Pharmaceutical
production
was
to
the
tune
225
of
Rs.
100
million
only.
The synergistic efforts of Central & State Governments & Indian Pharmaceutical
Industry resulted in the increase of production of bulk drugs (API) and finished formulations
targeting
the
goal
of
self
reliance
in
pharmaceutical
sector.
Today, India is not only self reliant but is net exporter of pharmaceutical products &
about
95%
of
the
API
&
formulations
are
produced
locally.
Gujarat leads India in pharmaceuticals and enjoys the share between 35% and 46% of the national
share in pharmaceutical production over the last two decades. Ahmedabad and Vadodara are leaders
in the production of generics while Ankleshwar and Vapi produce much of India's bulk drugs.
The history of the pharmaceutical industry in Gujarat begins in 1907 when Alembic
Chemical Works Co Ltd was formed by taking over distilleries in Baroda (Vadodara) with a view to
manufacturing
alcohol
and
tinctures
primarily
for
pharmaceutical
products.
During the 1940s and 50s, companies like Sarabhai Chemicals, The Gujarat
Pharmaceutical and Chemical Works, Atul Products Ltd, Allied and Cadila Laboratories were
established in the post WW2 period, referred to globally as the 'therapeutic revolution'. An
important landmark in the industry's history was the establishment of LM College of Pharmacy at
Ahmedabad in 1947. This college has provided many entrepreneurs, technocrats and drug
controllers to the pharmaceutical industry in the state.
The pharmaceutical industry grew rapidly after Gujarat was declared a state with Dr
Jivraj Mehta as its first chief minister in 1960. The number of manufacturers in Gujarat grew from
117 in 1962 to more than 900 in 1985 with a major share in the country's pharmaceutical
production. The revisions in the Patent Act also benefited the domestic industry in India (see
foreword). Another development that impacted the pharmaceutical sector during this period was the
establishment of pharmaceutical machinery manufacturing unit, Cadmach in 1967 by Shri
Ramanbhai Patel with products catering to various needs of the pharma industry.
226
During the 1990s and 2000s, Gujarat's companies saw a quantum leap in production and
exports with a strong focus on regulated markets as they geared up for globalisation. The large
manufacturers successfully entered the capital markets to make the most of the stock market boom
to raise resources for increasing production and research facilities. During the last decade, Gujarat's
pharmaceutical companies like Sun Pharma, Zydus Cadila, Torrent and Dishman have been
expanding their global footprint through acquisitions, mergers and alliances with international
companies and setting up subsidiaries and marketing offices overseas. Gujarat's pharma companies
have also been increasingly working towards getting their facilities approved by USFDA and other
international regulatory bodies to augment their market presence across regulated and semiregulated
markets.
Gujarat's pharmaceutical industry is now ready for sustainable growth, major capacity
expansions and an increasingly important role in global consolidation process. In India, there is an
increasing spend on healthcare as the emerging economy creates higher incomes, improved health
insurance
penetration,
and
lifestyle-related
diseases.
On the international horizon, there are abundant opportunities for Gujarat's pharmaceutical
companies. The outsourcing of R&D with more and more products going off-patent and declining
R&D productivity in many countries offers considerable possibilities for india, a preferred offshoring destination for many countries, specially for companies involved in contract research,
manufacturing and clinical trials to leverage their potential. The growth of the generics sector, in
which Gujarat already has a substantial share of India's production and exports, also offers much
scope
of
sustainable
growth
and
production
expansion.
Gujarat's pharma majors have also started scaling up their R&D operations to tap the
huge potential of therapeutic categories that offer opportunities for those who take the lead in
becoming global, innovative research-based pharmaceutical companies.
The Gujarat Scenario
 Gujarat accounts for about 40% of pharmaceutical production.
227

Total 3507 manufacturing units engaged in manufacturing of Allopathic, Ayurvedic,
Homeopethic drugs & Cosmetics.
228
Chapter 4
1. Analysis Competitiveness Of Pharmaceutical Industry In Saudi
Arabia
229
The geographic scope of this paper is the Kingdom of Saudi Arabia. However, large
hospitals and institutions have access to medications through international brokers (Business
Monitor International, 2010) making the market open to international competition.
Many pharmaceutical companies in the Saudi Market are international companies (IMS
Health, 2010). Six out of the top ten pharmaceutical companies, as measured by their 2009 sales, in
the Saudi Market are international companies five of them are American (IMS Health, 2010).
This leads to broadening the competition scope to take a global level as will be discussed.
Also there is a very high impact of supra-state organizations like FDA and EMEA as Saudi Arabia
considers guidelines and warnings issued by them as a reference (Business Monitor International,
2010). For example approval or suspension of a medication by those authorities impacts the
business of the drug in the Saudi Market (ibid). So changes at the global level are reflected on the
market.
 Overview on the Saudi Pharmaceutical Market
The total market size was around US$ 2.65bn in 2008 and due to the country‘s wealth, novel
patented drugs and expensive ones are growing in demand (Business Monitor International, 2010).
One of the good tools to analyze the external factors affecting or might in the future affect the
industry is PESTLE analysis (Armstrong, 2006). It is an acronym for Political, economic
competitive, socio-cultural, technological, legal and ethical factors. Looking at the six dimensions,
offer a good insight for strategic analysis (ibid).
 Political Review (Insurance companies and price pressures)
Although the middle-east tends to be a politically unstable area, the political system in Saudi
Arabia is relatively stable (Business Monitor International, 2010). The political power lies in the
hand of the king who faces new challenges including pressures from the United Sates to
democratize the system (Shoult, 2006). Yet, with 25% of world‘s oil reserves in the country,
international powers, including the US, see stability of the kingdom in their favour (Business
Monitor International, 2010). Such political stability could represent a motive for international
230
pharmaceutical companies to invest in the kingdom. However political stability alone is not the only
factor to consider for investment decisions. Other dimensions in the following analysis will give a
more comprehensive view of the industry.
 Economic Competitive Review
With the discovery of oil reserves in Saudi Arabia in 1930s, the country turned into a
first-world economy (Shoult, 2006). Saudi Economy is ranked among the ―top ten most competitive
economies‖ (Saudi Arabian General Investment Authority). Saudi Pharmaceutical market is the
largest among the Gulf Cooperation Council countries with an estimated double digit annual growth
till 2019 (Business Monitor International, 2010). Such a high growth rate should represent an
attractive opportunity to foreign pharmaceutical companies especially at times of international slow
down. Some companies like J&J consider Saudi Arabia as one for the international emerging
markets along with Brazil, Russia, India and China that the company is willing to invest in to
expand its business (Al-Abd, 2009).
 Socio-Cultural Review
The Saudi pharmaceutical industry like many other industries is reliant to a great extent on
expatriate workers whether as pharmacists or physicians (Shoult, 2006). This increases bargaining
power of suppliers to residency visas to pharmaceutical companies as discussed below.
The Saudi culture is a very conservative one (ibid). Direct to the patient promotional
activities although legal, might be a very risky move especially in certain therapeutic areas like
women and men health. That could make the competition between pharmaceutical companies more
aggressive at the level of prescribing physicians. More details about this will be discussed under the
5 forces analysis below.
From my experience, when it comes to patients‘ support groups; most of them are relatively
newly established. Their role, so far, is limited to increasing the awareness about illnesses and trying
to minimize the stigma associated with some diseases like psychiatric illnesses and HIV. They don‘t
present a real threat for lobbying or exerting pressures on pharmaceutical companies. So most
231
companies perceive them as an opportunity to increase awareness about illnesses and grow the total
market size.
 Technological review
Most of the local Saudi companies don‘t have the know-how of manufacturing high
technological products like bio-technology products and anti-cancer therapy (Business Monitor
International, 2010). So the market of those therapeutic areas is almost totally controlled by
international companies (ibid). This should represent an opportunity for local companies as the
development of such capability could be a differentiating advantage versus all local Saudi
incumbents. Yet, developing such capabilities would require a very heavy initial investment
(Bogner, Thomas, & McGee, 1996). On average, it takes around US$ 700 million to develop a new
molecule and then around US$ 400 million for marketing activities (Leask& Parker, 2007). One of
the characteristics of the pharmaceutical industry is the slowness of diffusion of new technologies,
where around 17 years is required ―for the results of clinical trials to become standard clinical
practice‖ (Porter, 1985, p. 406). This may be due to the legal and ethical issues related to the
pharmaceutical industry, which brings us to the last element of PESTLE analysis.
 Legal and Ethical Factors
The pharmaceutical industry is recently under scrutiny like never before (Beller, 2008),
especially when it comes to relations with health care professionals. With the Foreign Corrupt
Practices Act in the United States and the very aggressive penalties on the giant company Pfizer, $
2.3 Billion by the FDA (The New York Times, 2009) most of the companies became very
conservative. International companies, especially American ones, find themselves forced to follow
Health Care Compliance Guidelines. This factor is not affecting local Saudi Companies, where such
regulations are not in place (Al-Abd, 2009). For example, it is very common for local Saudi
pharmaceutical companies to invite physicians and even purchasers for international trips with their
families in a practice that is not controlled or regulated by Saudi Health Authorities (ibid).
This PESTLE analysis represents the outline of the playing ground. Competitive force and
what is happening inside could be seen by the following 5 forces analysis.
232
Chapter 6
233
Five Forces Analysis
As per Porter, the health care industry is very complex, highly customized and, unlike
many other industries, consumers have limited information (Porter, 1985). Porter identified five
forces that can drive the competition in an industry (Porter, 1980). The following analysis will
briefly go through the impact of each force in the Saudi pharmaceutical market.
 Threat of New Entrant
New entrant into an industry exerts pressure on incumbents‘ prices and costs hence
represent a risk in eroding their profitability (Porter, 1985). The intensity of new entrants will
depend on the ease of entering the market and Porter identifies seven factors that might represent an
entry barrier (ibid).
I find at least four of them to be applicable in Saudi pharmaceutical market, the relative
high investment required to establish a new pharmaceutical company, government policies that
raised the cost required for registering new drugs (Al-Abd, 2009), the recent price cuts enforced by
Saudi Ministry of Health (Business Monitor International, 2010), incumbency advantage including
know-how for manufacturing and unequal access to distribution channels. For example, many
hospitals now have regulations that necessitate the removal of a drug from their formularies in order
to add a new one (Al-Abd, 2009). This makes doctors face tough decision upon requesting new
medications. All of these factors are in favor of incumbent companies and might represent entry
barriers. On the other hand the low switching cost is an opportunity for new entrants. From my
experience, shifting from a medication to an alternative or a generic doesn‘t cause any switching
costs.
234
Pharmaceutical companies in Saudi Arabia are not allowed to make special offers or
special discounts (Al-Abd, 2009). They also can‘t explicitly state the disadvantage of a competitor.
Such heavy regulation would minimize the impact of retaliation against a new entrant.
 The Power of Suppliers
In Saudi Arabia, foreign pharmaceutical companies don‘t have a legal entity as they must
work through local Saudi agents (Shoult, 2006). Such agents are responsible for the distribution and
act as a supplier of labor. My personal experience is that, it can be a source of competitive
advantage to companies as agents‘ access to residence visas depends on many factors including but
not limited to their personal network with the governmental officials. Therefore some companies‘
expansion plans might be put on hold due to deficiency in visas required for new workers
 The Power of Buyers
Key participants of the industry changed recently with the tendency of buyers to collate into
central buying centers like NUPCO, a newly established National Unified Procurement Company
for Medical Supplies for all Ministry of Health hospitals (NUPCO). The same applies for NationalGuard hospitals which decided to issue a unified tender for purchasing drugs (National Guard
Health Affairs). The author‘s experience shows that even private street pharmacies are dominated by
chain pharmacies with central purchasing centers. The declared reason behind such moves is usually
increasing efficiency (NUPCO) (National Guard Health Affairs). As per Porter‘s five forces for
industry analysis, the main reason might be the wish to increase their bargaining power against
pharmaceutical companies.
The availability of me too products and several generics to non-patent drugs in the Saudi
market (IMS Health, 2010) could turn many drugs into a commodity. As several alternatives
become available, the bargaining power of purchasers increases (Porter, On Competition, 1985).
This in turn could erode companies‘ profitability. Therefore most of the international companies
235
stop promoting their drugs once they lose their patents and shift their focus to new still patent
protected drugs (Al-Abd, 2009).
 The Threat of Substitutes
Porter defines a substitute as something that ―performs the same or a similar function as an
industry‘s product by a different means‖ (Porter, 1985, p. 17). With this definition in mind, a
substitute to a pharmaceutical drug could be a surgery or an alternative medicine. Alternative
medicine is common in Saudi Arabia to the extent that an official National Centre for Alternative
and Complementary Medicine was established in 2008 (Business Monitor International, 2010). Yet,
it would be difficult to quantify and measure this market and its impact on the Saudi Pharmaceutical
market due to the lack of reliable statistics and the poor control on traditional healers (Al-Rowais,
Al-Faris, Mohammad, Al-Rukban, &Abdulghani, 2010).
As key hospitals can purchase medications through international brokers, this exerts more
price pressures on local operating companies. Such international brokers might be considered as a
substitute to local pharmaceutical companies. Their impact might lead to forcing the local operating
companies to reduce their prices in order to match brokers‘ price which could lead to eroding
profitability.
 Rivalry among Existing Competitors
This force analyzes how competitors are ―jockeying for positions‖ (Porter, 1980, p. 17). It
might be the most important force in the Saudi Pharmaceutical Market. The Saudi Pharmaceutical
Market is fragmented among 271 companies (IMS Health, 2010). This might be one of the reasons
behind the high intensity of competition. The leading company, GLAXOSMITHKLINE has a
market share of only 9% followed by Pfizer 8% and then the local company SPIMACO 7% and the
rest of the market distributed among the remaining companies. Intensity of rivalry increases in cases
of ―Numerous or equally balanced competitors‖ (Porter, 1980, p. 18). Yet the relative high growth
rate in the market (IMS Health, 2010), could retain its attractiveness as possibility of reaching zero
sum competition looks remote. Porter considers the competition in the health care system as zero
sum (Porter, On Competition, 1985). This might be relevant only to the US market. The Saudi
236
Market is not yet mature given its high growth rates and the under awareness and under diagnosis in
many therapeutic areas like HIV and ADHD (Business Monitor International, 2010). It might be a
positive sum competition.
From the author‘s experience, pharmaceutical companies in the Saudi Market can be
classified into International companies with most of their products patents and local companies
producing mostly generics. Some of the International companies like GLAXOSMITHKLINE and
Pfizer work in different therapeutic areas and most of their products are patents so their main
strategy might be differentiation. There are other international companies that are focused in one
segment, therapeutic area, like Lundbeck in central nervous system and Novo Nordisk in Diabetes
(IMS Health, 2010). Such companies are mainly utilizing a niche or focusing strategy. Then there
are the Saudi companies producing generics and their main strategy could be cost leadership. The
existence of many generics, me too products, increases the intensity of competition due to the lack
of differentiation (Porter, 1980). Such competition is very clear as many buyers are relying on
tenders (Business Monitor International, 2010) rather than direct orders to utilize such competition
in their favor. Price war among generics‘ companies can be understood with such lack of
differentiation. This could be compounded with the high initial investment required as mentioned
earlier that might raise the exit barrier making companies more committed to the business.
When it comes to competition between international companies and local Saudi companies,
economies of scale are in favour of international companies as they produce and sell their products
worldwide while local Saudi companies usually don‘t have access to European or American markets
due to concerns on quality standards (Business Monitor International, 2010).
 Advice to a New Firm Entering the Market
For a new firm entering the market, it needs to carefully position itself. Comprehensive
understanding of the industry value chain will be important for the company to position itself
(Porter, 1985).
237
Chapter 7
238
If this new company were a local Saudi one then it should rely on cost leadership. For
example, the firm infra structure, like manufacturing facility, should be in a nearby location to the
main consumers like the Ministry of Health in order to minimize the shipping costs. IT
infrastructure and Human resources all should be designed with cost leadership in mind. Currently
most of the local companies purchase their row materials from India in order to reduce their costs.
If the new company were an international company, then it would be almost essential to
have patent and differentiated new molecule entities. Such patents would enable the new company
to avoid a price war with local generics‘ companies and being differentiated could help in
positioning its products against existing international companies. A deep and comprehensive
understanding of the Saudi Market and Saudi culture is also required. This level of understanding
would depend on the new company background and whether it has previous experience in the Saudi
Market, or not.
For the new company to secure its supply of labor and expatriate staff, they need to
develop a strategic partnership with a local Saudi vendor.
239
 Conclusion
As per Porter, the objective of industry analysis shouldn‘t be to ‖declare the industry
attractive or unattractive‖ (Porter, 1985, p. 5). It should be to understand the drivers of profitability
so that more informed decisions could be made (ibid).
 Future Changes
Shift to privatization and private market, shift toward generics.
If outsourcing the product from another company, logistics and registration is the barrier.
(You need to register the manufacturing facility which requires inspection by the Saudi FDA to the
site a process that takes around one year. The registration process of the drugs itself will take around
another one year. This will not limit the entry to the market but it slows down the new competition.
Saudi Arabia requires local laboratory testing.
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Chapter 8
Saudi Arabia and india business
Saudi Arabia and india business
New Delhi, May 9 (IANS) A high-level parliamentary delegation from Saudi
Arabia currently on a visit to India Wednesday met Vice President Hamid Ansari and Health
Minister GhulamNabi Azad and discussed trade and collaborative ties, particularly in the
pharmaceutical sector and sought a ―base‖ for it in their country to make ―affordable medicines‖.
241
The delegation led by Sheikh Abdullah Al-Sheikh, speaker of the Majlis Ash Shura
(Consultative Council) of Saudi Arabia, called on Azad to share Indian experience and innovations
in health care services.
The delegation that arrived here Monday for a three-day visit also discussed ways to
expand ties in the health sector.
Sheikh told Azad his country that imports about $5 billion worth of pharmaceuticals
was keen ―to extend the incentives given by their government to the Indian pharma industry and set
up base in Saudi Arabia with the objective of producing affordable medicines to meet local and
regional needs‖, according to a statement from the health ministry.
They met the vice president at his residence.
Ansari, who is also the chairman of the RajyaSabha, the upper house of Indian
parliament and has served as the Indian ambassador to Saudi Arabia when he was in the foreign
service, hosted a lunch for the guests as the two sides compared different parliamentary practices
and pledged to make India-Saudi ties stronger.
The trade ties between the two nations has seen three-fold increase in the last five years
with Saudi Arabia being the fourth largest trade partner of India. Bilateral trade between the two
countries was $25 billion in 2010-11.
The import of crude oil by India forms a major component of bilateral trade with Saudi
Arabia being Indi‘‘s largest supplier of crude oil. Almost one-fifth of India‘s crude oil needs are
fulfilled by Saudi Arabia.
Besides, Saudi Arabia is home to almost 1.8 million-strong Indians - the largest expatriate
community in the kingdom - including a huge number of doctors and nurses.
The delegation Tuesday met Prime Minister Manmohan Singh and LokSabha speaker
Meira Kumar in Parliament House. Meira Kumar took them around parliament and explained them
the functioning of Indian legislatures.
242
They also met RajyaSabha Deputy Chairman RajyaSabha and opposition leader
NejmaHeptullah of the BharatiyaJanata Party (BJP).Earlier they met Minister of State for External
Affairs E. Ahamed and his ministerial colleague PreneetKaur.Manmohan Singh visited the Shura
Consultative Council in 2010 and addressed it.
During the prime ministe‘s visit, India and Saudi Arabia signed 10 bilateral agreements
and issued a Riyadh Declaration for deepening their relationship.The delegation returns to Riyadh
Thursday.
The Indian pharmaceutical market is expected to touch US$ 74 billion sales by 2020 from
US$ 11 billion now, according to a PricewaterhouseCoopers (PwC) report. India's pharmaceutical
market grew at 15.7 per cent during December 2011, with growth in key therapy areas, including
anti-diabetics, derma and vitamins outperformed the market, according to data compiled by market
research firm All India Organisation of Chemists and Druggists (AIOCD).
India has every chance to capitalise the opportunity to become a pharmaceutical
Superpower in 2020 and a hub for all pharmaceutical manufacturing & research needs, according to
SubodhPriolkar, President, 63rd IPC, and regional Managing Director, Colorcon Asia.... Expressing
keenness to bolster the bilateral relations in the health sector, Saudi Arabia said it was willing to
extend incentives to Indian pharma companies to set up base there with the objective of producing
affordable medicines to meet the regional needs.
This was conveyed by Dr Abdullah Bin Mohammed bin Ibrahim Al Al-Sheikh, Speaker
of Majlis Ash Shura (Consultative Council) of the Kingdom of Saudi Arabia, when he called Union
Health and Family Welfare Minister GhulamNabi Azad in New Delhi. He is leading a Parliamentary
delegation from Saudi to strengthen the bilateral relations.
India on Monday urged Japan to remove all non-tariff barriers to enable the benefits under the
comprehensive economic partnership agreement (CEPA) to kick in and said Indian drug companies
are well positioned to meet the needs of the Japanese market.
Commerce, industry and textiles minister Anand Sharma told his Japanese counterpart
that India's share is less than 1% of the total Japanese market and Tokyo may examine the need to
243
expand the share of generic medicines, sources said. The minister also urged the Japanese delegation
to start negotiations on nursing and healthcare professional services soon as the move would benefit
both countries, the sources added.
Associated Chambers of Commerce and Industry (Assocham) has said it expects the
Indian pharmaceutical industry to reach $20 billion by 2015, making it one of the world's top 10
pharmaceuticals markets.
Also, India's clinical trials business is expected to reach approximately USD 1 billion by
2011, further solidifying the subcontinent as one of the world's preferred destinations for clinical
trials, Assocham added.
The Indian pharmaceutical industry, now over to Rs. 1,00,000 crores (US $ 20 billion)
industry, has shown tremendous progress in terms of infrastructure development, technology base
creation and a wide range of products. It has established its presence and determination to flourish in
the changing environment. The industry now produces bulk drugs belonging to all major therapeutic
groups requiring complicated manufacturing technologies. Formulations in various dosage forms are
being produced in GMP compliant facilities. Strong scientific and technical manpower and
pioneering work done in process development have made this possible. The country now ranks 3rd
worldwide by volume of production and 14th by value thereby accounting for around 10% of
world‘s production by volume and 1.5% by value. Globally, it ranks 4th in terms of generic
production and 17th in terms of export value of bulk actives and dosage forms. Indian exports are
destined to more than 200 countries around the globe including highly regulated markets of USA,
West Europe, Japan and Australia. By making right investment in creating Pharma Innovation Hub
in the country, the country can reap the benefits both social and economic which would also include
creation of additional high value research jobs.
The total employment is about 340,000 in the sector and an estimated 400,000 doctors
and 300,000 chemists are serving over 1 billion customers market. It is estimated that by the year
2010, the Indian pharmaceutical industry will have the potential to achieve over US$ 20.47 billion
production of formulations and bulk drugs.
244
245
Chapter 9
Policy and norms
9.1 Saudi Arabia Pharmaceuticals Regulatory Regime
 Registration of Pharmaceutical Companies is Now the Saudi Food and Drug Authority‘s
Responsibility
246
The Ministry of Health (MOH) was historically the primary pharmaceutical regulatory
authority in Saudi Arabia, which was responsible for registering all pharmaceutical companies.
However, the Saudi Food and Drug Authority (SFDA), established in March 2003, took over this
function in July 2009 pursuant to Royal Decree No. M/6 dated 25/1/1428 H (13/2/2007 G) and
appears now to be responsible for licensing pharmaceutical products and manufacturing facilities.
As the exact jurisdiction of the SFDA is still being developed, this article will largely refer to the
historical authority that was held by the MOH, and readers should seek guidance as to which
authorities now rest with the SFDA.
The registration process for pharmaceutical companies typically takes between six and
eighteen months to complete, although approval time has been decreasing steadily (e.g., in 1999, the
process typically took twenty months). Registrations must be renewed every five years. In 2004,
more than 200 international pharmaceutical companies were registered with the MOH. The fee for a
company to be registered as an importer has been SAR 1,000 ($268), but may be adjusted under the
SFDA. As indicated above, however, more than 82% of pharmaceuticals are produced outside of
Saudi Arabia, suggesting that numerous foreign companies have been successful in navigating.
 Registration process.
Registration of Pharmaceutical Products With the Saudi Arabian Ministry of Health The
MOH historically was in charge of approving all pharmaceutical products prior to sale and
distribution in Saudi Arabia, including drugs that have been approved by the U.S. Food and Drug
Administration (FDA) or the European Medicine Evaluation Agency. Consistent with Royal Decree
No. M/6, we understand SFDA will be taking over this function, although that has not yet occurred.
Industry sources often express frustration over the delays caused by Saudi re-evaluation of products
already approved abroad, which equates to approximately 50% of the total approval time for a new
product. The MOH historically reviewed the application, supported by certificates and other
documents duly legalized by a Saudi Arabian consulate in the applicant‘s country, and analyzed the
sample product to ensure that it corresponded to certain specifications modeled after the FDA‘s
Good Manufacturing Practice (GMP) guidelines. Standards for all products are formulated by the
Saudi Standards, Metrology and Quality Organization, commonly referred to as the Saudi Arabian
Standards Organization (SASO). The fee for the registration of a new product is SAR 200 ($54), one
247
of the lowest in the region. According to the Rules Registering Pharmaceutical Companies and their
Products,8 registering the companies is simply a ministerial process. However, the lengthy process
is in registering the pharmaceutical products. The MOH requires 5 complete details of the
ingredients of the medicines used and information on appropriate storage. The MOH is also
concerned with ensuring that information matches the labeling on the drugs and the accuracy of
translations along with accuracy of samples reviewed by the MOH. 9 The registration timeline
varies widely depending on the completeness of the information provided to the authorities in Saudi
Arabia and the current volume of pharmaceutical products being reviewed. In general, the process
takes between six and eighteen months to complete.
Overview of Wholesale and Retail Markets
All pharmacies and drug stores in Saudi Arabia must be established in accordance with the
Saudi Arabian Pharmaceutical Establishments and Synthetics Regulations. Under these regulations,
only Saudi Arabian nationals are permitted to own pharmacies and pharmaceutical establishments.
Thus, the wholesale and retail sector is closed to foreign pharmaceutical companies; however,
foreign companies can build manufacturing facilities to produce approved products. We also
understand that other GCC nationals may now invest in pharmacies in Saudi Arabia on a case-bycase basis. Because of the sensitivity of this sector, the MOH has not yet provided foreigners the
ability to be involved in wholesale or other medicine distribution.
Furthermore, the regulations set forth certain conditions that the pharmacy owner must
satisfy, including: (1) being licensed by the MOH to practice as a pharmacist; (2) employing a Saudi
national as manager; and (3) meeting the specifications for a pharmacy that were historically set out
by the MOH. The regulations also limit the number of pharmacies that can be owned by one
individual or company to not more than thirty. Currently, 100% foreign ownership is not permitted
even if each individual pharmacy is managed by a Saudi national. However, a number of GCCbased pharmaceutical groups have
increased their investments in pharmacies in Saudi Arabia recently. Dubai-based Abraaj Capital
purchased a minority stake in Saudi Tadawi Healthcare Company, the largest pharmacy chain in
Saudi Arabia and Ithmar Capital, also based in Dubai, invested in Pharma World Holdings, which
distributes medicine and is expected to soon establish See Article 1 of the Rules Registering the
Pharmaceutical Companies and Third Chapter of the Implementing Rules of the Pharmacists
248
Profession Regulation. operations in Saudi Arabia. Further, Planet Pharmacy, which is owned by
GCC nationals, has also recently invested in pharmacies in Saudi Arabia. Most foreign investors
enter the Saudi Arabian market to sell their products, including pharmaceutical products, through
joint ventures with local companies or by appointing local distributors. However, GCC regulations
stipulate that producers in GCC member states undergo an accelerated process to acquire approval
to export to Saudi Arabia.
This effectively gives regional producers preferential treatment for entry into the Saudi
market, particularly in the tendering system for public pharmaceutical drug purchases. Therefore,
non-GCC companies generally think that the Saudi Arabian regulatory system favors local and other
GCC-based manufacturers, who have a more efficient registration procedure. However, we note that
it is possible for non-GCC foreign parties to establish a corporate entity in a GCC member state, and
manufacture therein and obtain certain benefits for manufacturers in the GCC.
9.2 Free Trade Agreements
Free trade agreements (FTAs) are becoming increasingly important in ascertaining
access to certain GCC markets. For instance, negotiations between the GCC and Japan over an FTA
began in September 2006 and are ongoing. When finalized, this agreement could assist in
developing Saudi Arabia‘s non-oil industries, including pharmaceuticals, as Saudi Arabia is already
Japan‘s largest trading partner in the GCC region, accounting for 37.5% of total trade. In 2006, trade
between the GCC and Japan was $112 billion, a 26% increase from 2005. Trade volume between
the two partners is forecasted to double once the FTA is implemented.
According to official sources, the United States is looking into the possibility of signing
a FTA with Saudi Arabia. The United States has a number of regional FTAs, most notably with
Jordan, Bahrain, Morocco, and Israel, and a number of others are being negotiated. An FTA with the
United States could allow U.S. companies much easier access to the Saudi market, and could allow
greater production in Saudi Arabia for the United States and other foreign markets.
9.3 Effect of Saudi Arabia‟s Accession to the WTO on the Pharmaceuticals
Industry
249
In December 2005, Saudi Arabia became a member of the World Trade Organization
(WTO). Prior to its accession, the country significantly reformed its trade regime by revising
legislation in intellectual property protection, import licensing, customs valuation and fees, and
standards and technical regulations. Saudi Arabia has progressed by strengthening the protection of
intellectual property rights and increasing private sector cooperation. The WTO membership
requires Saudi Arabia to implement the Trade-Related Aspects of Intellectual Property Rights
(TRIPS) Agreement without any transition period. Saudi Arabia is now TRIPS-compliant. Over the
past six years, the following regulations have been implemented in Saudi Arabia:
(1) Trademarks Regulations (August 2002);
(2) Copyright Regulations (August 2003);
(3) Patents Regulations (July 2004);
(4) Borders Measures Regulations (July 2004); and
(5) Rules for the Protection of Trade Secrets (including protection for undisclosed
pharmaceutical data) (2005).
Full TRIPS compliance is expected to attract increased foreign investments in the sector
and promote licensing manufacturing agreements between multinational proprietary drug producers
and local manufacturers. This could subsequently reduce the country‘s drug import bill and improve
local access to new and advanced medicine. The Rules for the Protection of Trade Secrets is
particularly important, as it includes a provision for The local drug manufacturing industry
requested a ten-year ‗acclimatization period‘ in order to allow domestic firms to prepare for WTO
accession, but this request was not accepted. five-year data exclusivity. This guarantees, at least
theoretically, that the test data submitted to obtain marketing approval for pharmaceutical products
will be protected from unfair commercial use. Based on our discussions with foreign drug
companies, we believe full TRIPS compliance will encourage more foreign companies to pursue
production in Saudi Arabia.
9.4 GCC Patent Regulations
Patent protections are normally filed with the GCC Patent Office, located on the premises
of the GCC Secretariat General in Riyadh, Saudi Arabia. The GCC Patent Office started accessing
applications in October 1998 pursuant to the GCC Patent Regulations18 and the Statute of the GCC
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Patent Office, and issued its first set of patent certificates in October 2002. These certificates
provide the approved patents with the same level of protection that would have been afforded the
patents if registered in each of the GCC member states. Each such patent is valid in each GCC
member state on the same date the GCC Patent Office issues the patent, and no further processing of
an application is required at the state level. This is similar to the European Union process, which has
a similar process for central registration and the ability to obtain the same level of protection in each
jurisdiction as a patent registered in that jurisdiction. While the first set of patents took
approximately four years, we understand that the process is becoming more streamlined each year.
According to Article 2/1 of the GCC Patent Regulations, an invention is patentable if it: (1)
is new, (2) involves an innovative development that is industrially applicable, and (3) does not
violate the rules of Islamic law, public morality, or public order as applied in the GCC member
states. Such an invention may consist of a new product, industrial process, or manufacturing
method. Under Article 15 of the GCC Patent Regulations, an approved patent will be protected for
twenty years from its filing date.
The patent owner is required to actually use the patented invention in the GCC within
three years from the date the patent is granted. The Board of Directors of the GCC Patent Office
may grant a ―compulsory license‖ to a third party to use the patent if: (1) the patent owner fails to
use the patented invention within the period prescribed for its use in the GCC; (2) the third party has
attempted to obtain a license from the patent owner for a fair sum and over a reasonable period of
time; and (3) provided that the patent owner is adequately compensated. A legal advisor at the GCC
Patent Office has advised us previously that use of the patented invention in any of the six GCC
countries is sufficient to avoid imposition of a compulsory license.
The GCC Patent Office registers almost all patents in Saudi Arabia because of the lack
of patent examiners.
 Commercial Agency Law in Saudi Arabia
Unless the product is produced in Saudi Arabia, all foreign companies sell their products
through distributors/agents in Saudi Arabia. Commercial agency and distribution activities are
regulated in Saudi Arabia by the Commercial Agency Regulations and the Implementation Rules to
the Commercial Agency Regulations (together, the Commercial Agency Regulations). The
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Commercial Agency Regulations broadly define a ―commercial agency‖ to include anyone who
enters into an agreement with a foreign principal to undertake commercial activities, whether as an
agent or distributor or in any form of dealership or distribution, in exchange for profit, commission,
or facilities of Ministry of Commerce and Industry (MoCI) within three months of the effective date
of a commercial agency agreement. Registration of an agreement under the Commercial Agency
Regulations primarily benefits the Saudi Arabian agent, as it confirms that a commercial agency
relationship has been created and allows the local party to qualify for certain statutory protections
granted to registered commercial agents. The Commercial Agency Regulations provide that in the
event of a dispute arising under the commercial agency agreement, no further agency may be
registered with the MoCI unless the terminated agent provides his written consent to the new
agency, or unless the foreign principal or the new agent provides a copy of the competent court
decision evidencing the termination, expiration, or non-renewal of the old agency.
The onus for registrations falls on the Saudi Arabian agent; failure to register the
agreement is punishable by a fine against the Saudi Arabian agent (but not the foreign principal).
However, parties commonly do not register their agency or distribution agree unenforceable,
although a non-registered agent may find it difficult to obtain orders from government agencies, as
government agencies must purchase products from a registered agent whenever possible. This rule,
however, is not universally or consistently applied in Saudi Arabia.
Under the Implementation Rules, a commercial agency can be deregistered when the
Saudi Arabian agent ceases to do business, or when the commercial agency‘s term expires and has
not been renewed or extended. Furthermore, the relevant implementation rules provide that the
MoCI may strike the agency from the register within one month of verification of the facts requiring
―crossing off‖ of the commercial agency, with notice to be given to both parties by registered mail.
In practice, however, the MoCI does not unilaterally deregister such agencies, and in the event that
the Saudi Arabian agent objects to the administrative cancellation of the commercial agency, the
agent may lodge an appeal with the MoCI. If either party objects to the decision of the MoCI, such
party may bring a suit against the MoCI at the competent court.
Since 1992, the MoCI has implemented a specific procedure for resolving commercial
agency disputes. This procedure calls for the foreign principal and its Saudi Arabian agent to
mediate their dispute before a special committee consisting of the deputy minister of Commerce and
Industry for Technical Affairs, the secretary general of the Riyadh Chamber of Commerce &
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Industry, and the secretary general of the Jeddah Chamber of Commerce and Industry. In recent
years, a separate committee at each Chamber of Commerce and Industry has undertaken this
mediation in Saudi Arabia.
Such mediation is not mandatory, and any recommendations made by the mediators in
respect of parties that consent to the mediation procedure may not be imposed upon either party
against its will.
Healthcare Facilities
Saudi Arabia‘s population growth rate is the highest in the GCC. Public spending in Saudi
Arabia on healthcare currently is almost 11% of the national budget, making it second only to
education in terms of percentage of government spending. there has been a tremendous increase in
the demand for healthcare services and Hancock supra note 10 at 30.
medical awareness among Saudi Arabian citizens. Traditionally, patients in the GCC were often sent
overseas for treatment, but this is becoming increasingly unsustainable. Demand for hospital beds in
Saudi Arabia is predicted to increase dramatically. These factors have encouraged the Saudi Arabian
government to support investment in the healthcare sector and to attract national and foreign
entrepreneurs to invest in this field.
In its 2009 budget, Saudi Arabia allocated $14 billion to its healthcare and social services
sector, including the cost of building eighty-six hospitals with a total of 11,750 beds. The Saudi
Arabian government has recently improved the regulatory framework for the insurance sector,
including healthcare insurance, by introducing new laws that make it mandatory for companies (i.e.,
employers/sponsors) to provide health insurance coverage for their Saudi and expatriate employees
and their spouses and children if they live in Saudi Arabia.27 This reform is also expected to
increase the expenditure on and demand of Saudi Arabian residents for healthcare services.
While Saudi Arabia hopes to encourage more Saudi Arabian nationals to work in the
healthcare sector, the reality is that approximately 80% of physicians are foreigners, as well as
almost all nurses.28 Similar to other GCC jurisdictions, Saudi Arabia continues to invest in
educational facilities and in the training of doctors abroad to reduce dependency on foreign doctors
and other healthcare professionals.
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At present, foreign investors are permitted to invest only in hospitals, but not in other health
sectors (including local management thereof). Therefore, this section will focus on investment in
hospitals in Saudi Arabia, as opposed to other types of healthcare facilities, such as clinics or sameday surgery facilities. We note, however, that it is widely expected that foreign ownership of
hospitals and other healthcare facilities will be permitted in the various economic cities that are
being established in Saudi Arabia that will likely be regulated only by the Saudi Arabian General
Investment Authority (SAGIA) and not include MOH oversight.
Regulatory Regime of Private Healthcare Sector in Saudi Arabia
Overview of the Regulatory Framework Governing the Private Healthcare Sector in Saudi Arabia
The regulatory framework of the healthcare sector in Saudi Arabia is primarily contained in
the (1) Private Healthcare Institutions Regulations and the Implementing Rules (Regulations), (2)
Hospitals Regulations, and (3) Health Regulations and their Implementing Rules. Other regulations
that are relevant to the offering of healthcare services are the Protective Healthcare Measures of
Communicable Diseases Regulations and the Healthcare Profession Practice Regulations, which
regulate the qualifications, obligations, ethics, civil, and criminal liability of healthcare practitioners.
Private healthcare institutions are also required to comply with the circulars and directives
issued by the MOH and the General Directorate of Healthcare Affairs. In addition to the above,
foreign investors, if setting up a presence in Saudi Arabia, are specifically subject to the Foreign
Investment Regulations,35 Labor Regulations, and the Companies Regulations in relation to
operational and corporate matters of their investment vehicles.
Private Healthcare Institutions
Privately owned healthcare institutions, which offer treatment, diagnostic, laboratory,
rehabilitation, and nursing services (Private Healthcare Institutions), are classified under the
Regulations as one of the following:
(1) hospitals that are equipped to diagnose, treat, and admit patients on inpatient basis;
(2) general health centers prepared to diagnose and treat patients that offer at least
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three medical specializations;
The Private Healthcare Institutions Regulations issued pursuant to the Royal Decree no.
M/40 dated 3/11/1423 H. The Implementing Rules of the Private Healthcare Institutions Regulations
issued pursuant to the Ministerial Decision no. 12/1/45787 dated 16/4/1424 H.
The Hospitals Regulations issued pursuant to the Royal Decree no. 57/1/10 dated 30/7/1354
H. The Health Regulations and its Implementing Rules issued pursuant to the Royal Decree no.
M/11 dated 23/3/1423 H.
The Protective Healthcare Measures of Communicable Diseases Regulations issued pursuant
to the Royal Decree no. M/1 dated 5/1/1380 H. The Healthcare Profession Practice Regulations
issued pursuant to the Royal Decree no. M/59 dated 4/11/1426 H.
Foreign Investment Regulations issued pursuant to the Royal Decree no. M/1 dated 5/1/1421
H. Labor Regulations issued pursuant to the Royal Decree No. M/5 dated 23/8/1426 H.
(3) specialized healthcare centers that focus on one medical specialty or more;
(4) physician office (clinics) prepared for treatment and diagnosis of patients;
(5) radiology centers for diagnostic imaging and radiology treatment;
(6) medical laboratories;
(7) same-day surgical facilities (i.e., ambulatory surgery centers) that are licensed to admit patients
for minor and medium surgeries, provided that patients are discharged on the same day of
admission;
(8) supporting medical services facilities that provide complementary medical and technical services
and include: physical therapy centers, vision, nutrition centers, artificial limbs, or any other facilities
that are classified as a supporting medical facility by the MOH; and
(9) medical transport services that include transport and first-aid for patients before admission to
hospitals in accordance with the standards and requirements of the Saudi Red Crescent Society.
Investment in the Private Healthcare Sector by Foreign Entities
Foreign Investment in the Healthcare Sector of Saudi Arabia
Non-Saudi GCC nationals are permitted to conduct healthcare services in Saudi Arabia. As
per the WTO Schedule of Commitments, Saudi Arabia has not set any restrictions on hospital
service or other human health services. Saudi Arabia liberalized foreign investment in all economic
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sectors, except for the activities excluded by the Supreme Economic Council, which maintains a list
of excluded activities that are not open for foreign investment (Negative List). Healthcare activities
are not listed on the Negative List, with the exception of services provided by ―midwives, nurses,
physical therapy and quasi-doctor services.‖ Notwithstanding the WTO obligations of Saudi Arabia
and the official Negative List, the MOH has not provided licenses to foreign parties wishing to
invest in most healthcare sectors.
In addition, as a member of the GCC, Saudi Arabia gives preferential treatment in general to
GCC nationals in several aspects, including conducting economic activities in Saudi Arabia. GCC
nationals are afforded almost identical rights to Saudi Arabian the website for the Saudi
Commission for Health Specialties. the Implementing Rules of the Private Healthcare Institutions
Regulations. the Implementing Rules of the Private Healthcare Institutions Regulations,
Despite the foregoing, the Regulations have not been amended according to the international
commitments of Saudi Arabia, and the Regulations continue to require that Private Health
Institutions shall be wholly owned by Saudi nationals except for hospitals. However, the
Regulations provide for the possibility of ―non-Saudi ownership of private hospital, clinics centers
and one-day surgery facility,47 in remote (rural) areas stipulated by the following: (a) to be located
in remote areas decided by the Minster in the light of the severe needs and scarcity in the specialties
required to be licensed; (b) the specialized non-Saudi shall obtain the approval of the investment
authorities; (c) obtain a license for one facility only and (d) the non-Saudi practitioner, the owner of
the healthcare facility, shall supervise the facility on a full-time basis.‖ The MOH has taken the
position that foreigners, including GCC nationals, are permitted to set up hospitals in major cities
(Riyadh, Jeddah, Dammam, Al Khobar, Makkah, and Al Madina), if the hospitals have no fewer
than 150 beds, and in remote and rural areas, if the hospitals have no fewer than forty beds.
Therefore, investment in other types of healthcare facilities such as one-day surgical facilities and
clinical centers are not open for non- Saudi investors at present, but the MOH may grant, on
exceptional basis, an approval for a foreigner to set up a single clinic in a remote area.
Management and Staffing Rules
The nationalization labor requirements are strict in Saudi Arabia, as the government has
endeavored to decrease unemployment in the country. In general, the private sector in Saudi Arabia
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is required to comply with nationalization requirements as declared by the MOL from time to time.
The current nationalization requirement for the private sector, including hospitals, is to employ
Saudi Arabian nationals equivalent to at least 15% of the workforce for companies employing more
than fifty people, and 10% if the company employs fewer than fifty people. In addition, the MOL
creates a list that reserves certain. A non-Saudi physician practicing in a one-day surgery facility is
required to be a consultant holding a valid professional license and insurance against malpractice
valid for at least six months after termination of engagement as a consultant to the facility. The valid
professional license is often primarily based on the degree and credentials of such physician
obtained outside of Saudi Arabia, and such credentials shall be reviewed by the MOH.
Positions for Saudi nationals (e.g., security guards, receptionists, etc), which is frequently
amended from time to time. A hospital is required to recruit a certain number of resident doctors,
specialists, consultants, pharmacists, technicians, nurses, and medical staff, based on its size.The
Regulations require that hospitals appoint a locally qualified doctor who is a Saudi Arabian national
as a medical manager for the hospital, except for hospitals located in rural and remote areas.
Furthermore, hospitals and clinics are required to appoint a qualified Saudi national as an
administrative manager and a qualified Saudi pharmacist as a manager or deputy manager of the
hospital‘s pharmacy. In general, foreign companies that wish to provide management services must
do so from outside Saudi Arabia, and payments owed to the foreign company are subject to
withholding taxes that could be as high as 20% of amounts owed for provision of management from
outside Saudi Arabia. We believe, however, since management is not prohibited under the Negative
List, it is likely that such may be approved to be conducted in Saudi Arabia by foreign companies on
a case-by-case basis.
Licensing Formalities
The registration process and procedural steps for obtaining a sector-specific regulatory license
to set up a hospital in Saudi Arabia can be divided into three key steps: (1) obtaining MOH‘s
preliminary approval; (2) obtaining MoCI‘s approval; and (3) obtaining final approval from the
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General Directorate of Health Affairs. These three steps are further set out below. Pharmaceutical
companies are also required to obtain licenses from MOH and the MoCI.
Obtaining MOH‘s Preliminary Approval
Investors must first obtain a preliminary approval from the MOH. At this stage, the MOH
requires information about the applicant investors including, in the case of corporate investors, the
constitutive documents (i.e., the commercial registration and articles of association) of each
applicant. The MOH also requires information describing in brief the investment plan (including
number of hospitals and beds, proposed project sites, construction plan, management structure,
expertise of the involved parties, and the Implementing Rules of the Private Healthcare Institutions
Regulations, implementation plans). The MOH will review the application and may request further
documents or clarifications. This process will normally take one to two weeks from the date of
submitting the required documents.
Obtaining MoCI‘s Approval
After successfully obtaining the MOH‘s initial approval, a legal vehicle must be
incorporated in Saudi Arabia to conduct the intended licensed activities (e.g., developing and
operating hospitals). At this stage, the investors must obtain the necessary approvals from the MoCI.
If the corporate entity is going to be partially or wholly owned by non-GCC investors, a foreign
investment license must also be obtained from the SAGIA.
Ownership of Real Estate by Non-Saudi Investors
Owners of healthcare facilities are often interested in owning the underlying land but must
be cognizant of certain limitations under local regulations. A non-Saudi entity may not own real
estate in Saudi Arabia before it establishes a commercial presence in Saudi Arabia. The ownership
rules applicable to GCC nationals are regulated in Saudi Arabia by The Ownership of Real Estate by
GCC Nationals Regulations. Non-GCC Construction must be in compliance with the technical
specifications set out by The Ministry of Municipalities and Rural Affairs (MOMRA). Site and
construction specifications must also be in compliance with the Resolution No. 12/1/W/15/DF dated
8/8/1425 H published by the Civil Defense Council in respect of Hospitals Safety and Fire
Protection Regulations.
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The Regulations of the Ownership of Real Estate by GCC Nationals issued pursuant to the
Royal Decree No. M/55 dated 17/5/1415 and amended by the Royal Decree No. M/8 dated
15/12/1422.
In general, non-Saudi nationals or corporate entities that are licensed to conduct
professional or commercial activities in Saudi Arabia are permitted to own property in Saudi Arabia,
subject to the following requirements:
(1) The property is designated for the licensed economic activities;
(2) The zoning of the intended land matches the type of property in which such entity is permitted to
invest (e.g., a company licensed to invest in industrial property cannot purchase land zoned as
agricultural);
(3) The owner may not dispose of the property unless the company discontinues its business or
changes its location;
(4) The size of the property must be suitable for the objects of the company; and
(5) The total value of the land and the project must be SAR 30 million (approximately $8,000,000)
or more.
Property ownership by a company that is wholly or partially owned by non-Saudi nationals
within the boundaries of the holy cities of Mecca and Medina is not permitted. Individual foreigners
who hold residency permits (iqamas) in Saudi Arabia are permitted to acquire a residential property
for their personal accommodation upon the approval of the Saudi Arabian Ministry of Interior.
Overall market of Saudi Arabia
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SPIMACO – Largest Local Producer in The Saudi Market
Saudi Arabia accounts for about 65% of total pharmaceutical sales in the GCC region.
Moreover, 82% of the Kingdom‘s demand is met through imports, presenting a significant growth
opportunity for domestic pharmaceutical companies. However, low investment in research &
development due to the shortage of skilled personnel and the resultant lack of technical knowledge
and inadequate infrastructure has resulted in the underdevelopment of the domestic pharmaceutical
sector. Although greater R&D support will enable domestic companies to develop their own brands,
this will take considerable time to materialize, given the scale and funding constraints. As a result,
many local producers undertake the production of patented products by paying royalties to foreign
companies and by manufacturing generics. Adopting the same strategy, SPIMACO, apart from
manufacturing own products, produces patented products under agreement with patent holders.
The company commands the second largest market share of 9.4% in the Saudi Arabian
pharmaceutical market after GlaxoSmithKline (market share of 10.3%). The company also is the
largest player among domestic producers with around 39.4% market share. Sales within Saudi
Arabia account for 81.44% of SPIMACO‘s revenues, with other markets of the Middle East
contributing 10.03%. The company‘s ability to capitalize on the strong growth in the Saudi Arabian
pharmaceutical market, as well as its focus on expanding into GCC and other Middle East markets
and extending its product portfolio, helped SPIMACO record robust increase in revenues and
earnings during 2004-2009. The company‘s sales grew at a CAGR of 10.3% to SAR950.7mn, while
net profit recorded a CAGR of 18.8% to SAR154.8mn during 2004-2009. SPIMACO‘s strategy of
expanding into high growth markets is adding to revenues as highlighted by the 15.3% increase in
contribution from the North African market to 8.5% in 2009 from 7.4% in 2008. The Kingdom‘s
rapidly growing population and rising income levels are likely to propel demand for healthcare
services, and we expect SPIMACO, with its strong market position, to be in a better position to tap
the incremental demand.
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Chapter 10
SAUDI ARABIA
PHARMACEUTICAL
COUNTRY PROFILE
261
Saudi Arabia Pharmaceutical Country Profile
This Pharmaceutical Country Profile provides data on existing socio-economic and
health-related conditions, resources, regulatory structures, processes and outcomes relating to the
pharmaceutical sector of Saudi Arabia. The aim of this document is to compile all relevant, existing
information on the pharmaceutical sector and make it available to the public in a user-friendly
format. In 2010, the country profiles project was piloted in 13 countries. During 2011, the World
Health Organization has supported all WHO Member States to develop similar comprehensive
pharmaceutical country profiles.
The information is categorized in 9 sections, namely: (1) Health and Demographic data,
(2) Health Services, (3) Policy Issues, (4) Medicines Trade and Production (5) Medicines
Regulation, (6) Medicines Financing, (7) Pharmaceutical procurement and distribution, (8) Selection
and rational use, and (9) Household data/access. The indicators have been divided into two
categories, namely "core" (most important) and "supplementary" (useful if available). This narrative
profile is based on data derived from both the core and supplementary indicators. The tables in the
annexes also present all data collected for each of the indicators in the original survey form. For
each piece of information, the year and source of the data are indicated; these have been used to
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build the references in the profile and are also indicated in the tables. If key national documents are
available on-line, links have been provided to the source documents so that users can easily access
these documents.
The selection of indicators for the profiles has involved all technical units working in
the Essential Medicines Department of the World Health Organization (WHO), as well as experts
from WHO Regional and Country Offices, Harvard Medical School, Oswaldo Cruz Foundation
(known as Fiocruz), University of Utrecht, the Austrian Federal Institute for Health Care and
representatives from 13 pilot countries.
Data collection in all 193 member states has been conducted using a userfriendly
electronic questionnaire that included a comprehensive instruction manual and glossary. Countries
were requested not to conduct any additional surveys, but only to enter the results from previous
surveys and to provide centrally available information. To facilitate the work of national
counterparts, the questionnaires were pre-filled at WHO HQ using all publicly-available data and
before being sent out to each country by the WHO Regional Office. A coordinator was nominated
for each of the member states. The coordinator for Saudi Arabia was Prof. SalehBawazir.
The completed questionnaires were then used to generate individual country profiles. In
order to do this in a structured and efficient manner, a text template was developed. Experts from
member states took part in the development of the profile and, once the final document was ready,
an officer from the Saudi Food & Drug Authority certified the quality of the information and gave
formal permission to publish the profile on the WHO web site.
This profile will be regularly updated by the SFDA. Comments, suggestions or
corrections may be sent to:
Section 1 - Health and Demographic Data
This section gives an overview of the demographics and health status of Saudi Arabia.
1.1 Demographics and Socioeconomic Indicators
The total population of Saudi Arabia in 2010 was 27,136,977 with an annual population
growth rate of 3.2%3. The annual GDP growth rate is 4.15 %3. The GDP per capita was US$ 20,327
(at the current exchange ratei).31.97 % of the population is under 15 years of age, and 2.83 % of the
population is over 65 years of age. The urban population currently stands at 85% of the total
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population. The fertility rate in Saudi Arabia is 2.98 births per woman. The adult literacy rate for the
population over 15 years is 88%.
1.2 Mortality and Causes of Death
The life expectancy at birth is 72.6 and 74.9 years for men and women respectively. The
infant mortality rate (i.e. children under 1 year) is 16.9/1,000 live births. For children under the age
of 5, the mortality rate is 19.5/1,000 live births. The maternal mortality rate is 1.4/10,000 live births.
The top 10 diseases causing mortality in Saudi Arabia are (MOH, 2010):Disease
1 Accident, Injury, Poisoning, and External reason
2 Circulatory system diseases
3 Certain cases arising in the perinatal period
4 Respiratory diseases
5 Tumors
6 Infectious and parasitic diseases
7 Diseases of the genitourinary
8 Congenital malformations and chromosomal abnormalities
9 Endocrinology, Nutrition and Metabolism diseases
10 Gastro system disease
The adult mortality rate for both sexes between 15 and 60 years is 3.9 / 1,000 population, while the
neonatal mortality rate is 12 / 1,000 live births. The agestandardised mortality rate by noncommunicable diseases is 644 / 100,000. The mortality rate for tuberculosis is 0.9 / 100,000 for
tuberculosis and the mortality rate for Malaria is 0.2 / 100,0004.
Section 2 - Health Services
This section provides information regarding health expenditures and human resources for
health in Saudi Arabia. The contribution of the public and private sector to overall health
expenditure is shown and the specific information on pharmaceutical expenditure is also presented.
Data on human resources for health and for the pharmaceutical sector is provided as well.
2.1 Health Expenditures
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In Saudi Arabia, the total annual expenditure on health (THE) in 2009 was 72.3 Billion
Saudi Riyal (SAR) (US$ 19.3 Billion)5. The total annual health expenditure was 3.6 % of the GDP.
The total annual expenditure on health per capita was 2,713 SAR (US$ 714). The general
governmentiihealth expenditure (GGHE) in 2009, as reflected in the national health accounts (NHA)
was SAR 48.5 Billion (US$ 13 Billion). That is, 67 % of the total expenditure on health, with a total
annual per capita public expenditure on health of SAR 1,311 (US$ 478). The government annual
expenditure on health represents 6.5 % of the total government budget. Private health expenditure
covers the remaining 33 % of the total health expenditure. Of the total population, 69 % is covered
by a public health service, public health insurance or social insurance, or other sickness funds and
31 % is covered by a private health insurance.
Total pharmaceutical expenditure (TPE) in Saudi Arabia in 2010 was 13.5 billion
SAR (US$ 3.5 billion), which is a per capita pharmaceutical expenditure of 500 SAR (US$ 132).
The total pharmaceutical expenditure accounts for 2 % of the GDP and makes up 18 % of the total
health expenditure. Public expenditure on pharmaceuticals represents 40 % of the total expenditure
on pharmaceuticals (Figure 2), this converts into a per capita public expenditure on pharmaceuticals
of 200 SAR (US$ 53).
Total private expenditure on pharmaceuticals is 8.2 Billion SAR (US$ 2.1
billion).Private out-of-pocket expenditure as % of private health expenditure is 51.9 %.
2.2 Health Personnel and Infrastructure
The health workforce is described in the table below and in Figure 3. There are 14,928
(5.5 /10,000) licensed pharmacists, of which 3,537 (1.3 /10,000) work in the public sector. There are
66,014 (24.3/10,000) physicians and 129,792 (48/10,000) nursing and midwifery personnel in Saudi
Arabia. The ratio of doctors to pharmacists is 4.7:1 and the ratio of doctors to nurses and midwifery
personnel is 0.57:1.
Table 1: Human resources for health in Saudi Arabia (MOH, 2010)
Human Resource
Licensed pharmacists (all sectors)
14,928 (5.5 /10,000)
Pharmacists in the public sector
3,537 (1.3 /10,000)
Physicians (all sectors)
66,014 (24.3 /10,000)
Nursing and midwifery personnel (all sectors) 129,792 (48 /10,000)
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Figure 3: The density of the Health Workforce 2010 in Saudi Arabia (all sectors)
In Saudi Arabia, there is not a strategic plan for pharmaceutical human resource development in
place. The health workforce is described in the table below and in Table 2. There are 415 hospitals
and 21.4 /10,000 hospital beds in Saudi Arabia. There are 3,981 primary health care units and
centres and 6,147 licensed pharmacies.
Table 2: Health centre and hospital statistics (Ministry of Health, 2010)
Infrastructure
Hospitals
408
Hospital beds
21.4 /10,000
Primary health care units and centres
3,981
Licensed pharmacies
6,147
Section 3 - Policy Issues
This section addresses the main characteristics of the pharmaceutical policy in Saudi Arabia. The
many components of a national pharmaceutical policy are taken from the WHO publication ―How to
develop and implement national drug policy‖. Information about the capacity for manufacturing
medicines and the legal provisions governing patents is also provided.
3.1 Policy Framework
In Saudi Arabia, a National Health Policy (NHP) exists4. It was updated in 2009. An
associated National Health Policy implementation plan written in 2010 also exists. An official
National Medicines Policy document exists in Saudi Arabia. It was updated in 2004. A NMP
implementation plan also exists which was most recently updated in 2005. Policies addressing
pharmaceuticals exists, as detailed in Table 2. Pharmaceutical policy implementation is regularly
monitored/assessed by the Saudi Food & Drug Authority (SFDA).
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A policy is in place to manage and sanction conflict of interest issues in pharmaceutical
affairs. There is an associated formal code of conduct for public officials. A whistle-blowing
mechanism that allows individuals to raise concerns about wrongdoing occurring in the
pharmaceutical sector of Saudi Arabia exists. The Board of Grievances, an entity under the Ministry
of Justice, is the only formalised mechanism available to act on claims of public abuse of power.
Section 4 – Medicines Trade and Production
4.1 Intellectual Property Laws and Medicines
Saudi Arabia is a member of the World Trade Organization12. Legal provisions granting
patents to manufacturers exist. These cover pharmaceuticals, laboratory supplies, medical supplies
and medical equipment. Intellectual Property Rights are managed and enforced by King Abdulaziz
City for Science and Technology (KACST), National Legislation has been modified to implement
the TRIPS Agreement and contains TRIPS-specific flexibilities and safeguards13, presented in Table
4. Saudi Arabia is eligible for the transitional period to 2016.
Table 4: TRIPS flexibilities and safeguards are present in the national law
Flexibility and safeguards Included
Compulsory licensing provisions that can be applied for reasons of
public health
Yes
Bolarexceptions
Yes
Parallel importing provisions
Yes
There are legal provisions for data exclusivity for pharmaceuticals, patent term
extension and linkage between patent status and marketing authorization1. The country is engaged in
capacity-strengthening initiatives to manage and apply Intellectual Property Rights in order to
contribute to innovation and promote public health.
4.2 Manufacturing
There are 19 licensed pharmaceutical manufacturers in Saudi Arabia.
Manufacturing capabilities are presented in Table 5 below. 11
Table 5: Saudi Arabia manufacturing capabilities9
Manufacturing capabilities
Research and Development for discovering new active substances
No
Production of pharmaceutical starting materials (APIs )
No
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The production of formulations from pharmaceutical starting material
Yes
The repackaging of finished dosage forms
Yes
In 2011, domestic manufacturers held 20 % of the market share by value
produced. 4 multinational pharmaceutical companies currently manufacture medicines locally.
There are 19 manufacturers that are Good Manufacturing Practice (GMP) certified.
Section 5 – Medicines Regulation
This section details the pharmaceutical regulatory framework, resources, governing institutions and
practices in Saudi Arabia.
5.1 Regulatory Framework
In Saudi Arabia, there are legal provisions establishing the powers and responsibilities of the
Medicines Regulatory Authority (MRA). The MRA is a full autonomous agency with a number of
functions outlined in Table 6. The MRA (The Saudi Food & Drug Authority) has its own website,
for which the URL address is www.sfda.gov.sa.
Table 6: Functions of the national MRA
Function
Marketing authorisation / registration
Yes
Inspection
Yes
Import control
Yes
Licensing
Yes
Market control
Yes
Quality control
Yes
Medicines advertising and promotion
Yes
Clinical trials control
Yes
Pharmacovigilance
Yes
Other: health and herbal products, cosmetic products
Yes
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As of 2011, there were 230 permanent staff working for the SFDA. The SFDA receives
external technical assistance (from WHO, World Bank and other agencies and regulatory
authorities) to support its activities. The MRA is involved in harmonization/collaboration initiatives
such as the Global Cooperation Group (GCG) at the ICH. An assessment of the medicines
regulatory system has been conducted in the last five year. Funding for the MRA is provided
through the regular government budget. The Regulatory Authority retains revenues derived from
regulatory activities. This body utilizes a computerized information management system to store and
retrieve information on processes that include registrations, inspection etc.
5.2 Marketing Authorization (Registration)
In Saudi Arabia, legal provisions require marketing authorization (registration) for all
pharmaceutical products on the market9. Mutual recognitions mechanisms are not in place because
all products are independently evaluated by the SFDA. Explicit and publicly available criteria exist
for assessing applications for marketing authorization of pharmaceutical products9. In 2011, there
were 6,541 pharmaceutical products registered in Saudi Arabia.
5.3 Regulatory Inspection
In Saudi Arabia, legal provisions exist allowing for appointment of government
pharmaceutical inspectors 15 . Legal provisions exist permitting inspectors to inspect premises where
pharmaceutical activities are performed; such inspections are required by law and are a pre-requisite
for the licensing of public and private facilities15. Where inspections are legal requirements, these
are the same for public and private facilities15. Inspections are carried out on a number of entities,
outlined in Table 7.
Table 7: Local entities inspected for GMP compliance15
Entity Inspection
Local manufacturers
Yes
Private wholesalers
Yes
Retail distributors
Yes
Public pharmacies and stores
Yes
Pharmacies and dispensing points if health facilities
Yes
Frequency of inspections:
GMP inspection: Local every 2 years, international
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every 5 years. GSDP inspection:
every 4 months.
5.4 Import Control
Legal provisions exist requiring authorization to import medicines. Laws exist that allow
the sampling of imported products for testing. Legal provisions exist requiring importation of
medicines through authorized ports of entry. Regulations or laws exist to allow for inspection of
imported pharmaceutical products at authorized ports of entry.
5.5 Licensing
In Saudi Arabia, legal provisions exist requiring manufacturers to be licensed (Facilities and
Pharmaceutical Products Regulation, 2011)15. Legal provisions exist requiring manufacturers (both
domestic and international) to comply with Good Manufacturing Practices (GMP). Good
Manufacturing Practices are published by the government. Legal provisions exist requiring
importers, wholesalers and distributors to be licensed. Legal provisions exist requiring wholesalers
and distributors to comply with Good Distributing Practices.
Table 8: Legal provisions pertaining to licensing
Entity requiring licensing
Importers
Yes
Wholesalers
Yes
Distributors
Yes
Good Distribution Practice requirements are published by the government. Legal provisions
exist requiring pharmacists to be registered. Legal provisions exist requiring private and public
pharmacies to be licensed9. National Good Pharmacy Practice Guidelines are published by the
government.
5.6 Market Control and Quality Control
In Saudi Arabia, legal provisions exist for controlling the pharmaceutical market9. A
laboratory exists in Saudi Arabia for Quality Control testing9.The laboratory is a functional part of
the SFDA. Existing national laboratory facilities have not been accepted for collaboration with the
WHO pre-qualification. Medicines are tested for a number of reasons,
summarised in Table 9.
Table 9: Reason for medicines testing9
Medicines tested:
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For quality monitoring in the public sector
Yes
For quality monitoring in the private sector
Yes
When there are complaints or problem reports
Yes
For product registration
Yes
For public procurement prequalification
Yes
For public program products prior to acceptance and/or distribution Yes
Samples are collected by government inspectors for undertaking post-marketing
surveillance testing9. In the past 2 years, 9,680 samples were taken for quality control testing. Of the
samples tested, 198 (or 2 %) failed to meet the quality standards. The results are not publicly
available.
5.7 Medicines Advertising and Promotion
In Saudi Arabia, legal provisions exist to control the promotion and/or advertising of
prescription medicines. The Pharmaceutical product advertising section/ Licensing Department is
responsible for regulating promotion and/or advertising of medicines. Legal provisions prohibit
direct advertising of prescription medicines to the public and pre-approval for medicines
advertisements and promotional materials is required. Guidelines and Regulations exist for
advertising and promotion of non-prescription medicines. There is a national code of conduct
concerning advertising and promotion of medicines by marketing authorization holders.
The code of conduct applies to domestic manufacturers and multinational manufacturers,
for which adherence is not voluntary. The code contains a formal process for complaints and
sanctions. A list of the complaints and sanctions for the last two years is not publicly available.
5.8 Clinical Trials
In Saudi Arabia, legal provisions exist requiring authorization for conducting Clinical
Trials by the SFDA. There are additional laws requiring the agreement by an ethics committee or
institutional review board of the Clinical Trials to be performed. Clinical trials are required to be
entered into an international/national/regional registry, by law. Legal provisions exist for GMP
compliance of investigational products. Sponsor investigators are legally required to comply with
Good Clinical Practices (GCP). National GCP regulations are published by the Government. Legal
provisions permit the inspection of facilities where clinical trials are performed.
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5.9 Controlled Medicines
Saudi Arabia is a signatory to a number of international conventions, detailed in Table 10.
Table 10: International Conventions to which Saudi Arabia is a signatory
Convention Signatory
Single Convention on Narcotic Drugs, 1961
Yes
1972 Protocol amending the Single Convention on Narcotic Drugs, 1961 Yes
Convention on Psychotropic Substances 1971
Yes
United Nations Convention against the Illicit Traffic in Narcotic Drugs and
Psychotropic Substances, 1988
Yes
The legal provisions and regulations for the control of narcotic and psychotropic
substances, and precursors have been reviewed by a WHO International Expert or Partner
Organization to assess the balance between the prevention of abuse and access for medical need.17
These provisions were last reviewed in 2005. Figures regarding the annual consumption of certain
controlled substances in the country are outlined in Table 10S below.
Table 10S: Annual consumption of selected controlled substances in Saudi Arabia
(2009)
Morphine
0.7377
Fentanyl
0.0302
Pethidine
2.9942
Oxycodone
0.0276
Hydrocodone
0.0
Phenobarbital
4.3542
Methadone
0.0590
5.10 Pharmacovigilance
In Saudi Arabia, there are legal provisions in the Medicines Act that provide for
pharmacovigilance activities as part of the MRA mandate. Legal provisions also exist requiring the
Marketing Authorization holder to continuously monitor the safety of their products and report to
the MRA. Laws regarding the monitoring of Adverse Drug Reactions (ADR) exist in Saudi Arabia.
A national pharmacovigilancecentre linked to the MRA exists. The Pharmacovigilancecentre has 12
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full-time staff members. The centre has published an analysis report in the previous two years
(SFDA data) and it regularly publishes an ADR bulletin. An official standardized form for reporting
ADRs is used in Saudi Arabia. Information pertaining to ADRs is stored in a national ADR
database. The ADR database currently comprises 2,894 ADR reports, of which 2,664 have been
submitted in the past 2 years. These reports are also sent to the WHO collaborating centre in
Uppsala9. More than 1,935 ADR reports from the database have been forwarded to the WHO
collaborating centre
in the past 2 years. 60 % of the received cases were deemed serious; however, 40 % of the cases
were treated as non-serious. In addition, 84 % of incoming cases were submitted by healthcare
professionals; nevertheless, other remaining cases were delivered to the NPC by either drug
companies or public members.
There is a national ADR or pharmacovigilance advisory committee able to provide
technical assistance or causality assessment, risk assessment, risk management, case investigation
and, where necessary, crisis management including crisis communication in Saudi Arabia. A clear
communication strategy for routine communication and crises communication exists.
A number of steps are being considered in order to enhance pharmacovigilance system.
These include:
 Ramp up capabilities of Pharmacovigilance (PV) department.
 Better communicate with industry/healthcare professionals about
achievements and continue engaging stakeholders in PV reporting.
 Proactively monitor current developments and trends in drug safety
regulations.
 Detail guidelines with regards to violation of PV requirements.
 Establish PV inspection process and build up its capabilities.

Provide guidance and content based on medication errors reporting 11
Section 6 - Medicines Financing
In this section, information is provided on the medicines financing mechanism in Saudi
Arabia, including the medicines coverage through public and private health insurance, use of user
charges for medicines and the existence of public programmes providing free medicines. Policies
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and regulations affecting the pricing and availability of medicines (e.g. price control and taxes) are
also discussed.
6.1 Medicines Coverage and Exemptions
In Saudi Arabia, all citizens receive medicines free of charge in all governmental healthcare
facilities. Furthermore, the public health system or social health insurance schemes provide
medicines free of charge for particular conditions. Under Saudi law, Saudi citizens have the right to
free medicine. Workers in the private sector are required to receive basic healthcare coverage
through private sector insurance provided by their employers.
A public health service provides coverage for medicines that are on the Saudi National
Formulary for inpatients and outpatients. Under Saudi law, there is no limited for medicine benefit,
in other words, citizens have the right to access all kind of medicines. Private health insurance
schemes provide medicines coverage . They are required to provide at least partial coverage for
medicines that are on the Saudi National Formulary.
6.2 Patients Fees and Co-payments
Co-payments or fee requirements for consultations are not levied at the point of delivery.
Furthermore, there are no co-payments or fee requirements imposed for medicines.
6.3 Pricing Regulation for the Private Sectorvi
In Saudi Arabia, there are legal or regulatory provisions affecting pricing of
medicines. These provisions are aimed at the level of manufacturers, wholesalers and retailers. They
affect: Innovated Patented Products, Generic Products, Under License Locally Manufactured
Products, Products with Different Package Sizes or Strengths, Products that have Specific
Advantages, Fixed Combination Drug Product.9 The government runs an active national medicines
price monitoring system for retail prices. Regulations exist mandating that retail medicine price
information should be publicly accessible. The retail price is published on the SFDA website or the
price can be printed on the outer pack of the medicine.
6.6 Duties and Taxes on Pharmaceuticals (Market)
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Saudi Arabia does not impose duties on imported active pharmaceutical ingredients (APIs) and
duties on imported finished products are also not imposed. Value-added tax (VAT) or other taxes
are not imposed on finished pharmaceutical products. Provisions for tax exceptions or waivers for
pharmaceuticals and health products are in place19 . There are no taxes on pharmaceuticals.
Table 14S2: Duties and taxes applied to pharmaceuticals
%
Dutyviion imported active pharmaceutical ingredients, APIs (%) 0
Duty on imported finished products (%)
VAT on pharmaceutical products (%)
0
0
Section 7 - Pharmaceutical procurement and distribution in the public sector
This section provides a short overview on the procurement and distribution of
pharmaceuticals in the public sector of Saudi Arabia.
7.1 Public Sector Procurement
Public sector procurement in Saudi Arabia is both centralized and decentralized. Tenders
are developed per year by different governmental organization. In addition each organization has the
right to process direct purchase. The public sector procurement is centralized under the
responsibility of a procurement agency which is a part of the MOH /semi-autonomous.Public sector
request for tender documents are publicly available, but public sector tender awards are not publicly
available. Procurement is based on the prequalification of suppliers. There is a written public sector
procurement policy. This policy was approved in 2010. Legal provisions exist that give priority to
locally produced goods in public procurement.
The key functions of the procurement unit and those of the tender committee are clearly
separated. A process exists to ensure the quality of products that are publicly procured. The quality
assurance process includes the pre-qualification of products and suppliers. A list of pre-qualified
suppliers and products is available. A list of samples tested during the procurement process and the
results of quality testing are available. The tender methods employed in public sector procurement
include, national competitive tenders, international competitive tenders and direct purchasing.
7.2 Public Sector Distribution
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The government supply system department in Saudi Arabia has a Central Medical Store
(CMS) at National Level (also known as Medical Supply). There are national guidelines on Good
Distribution Practices (GDP). A licensing authority that issues GDP licenses exists9. The licensing
authority does accredit public distribution facilities. A list of GDP certified wholesalers and
distributors exists (SFDA, 2011) in the public sector. Routine procedure to track the expiry dates of
medicines at the CMS exist. The Public CMS and the second tier public warehouses are not ISO
certified. The CMS and the second tier public warehouses are not GDP certified by a licensing
authority.
7.3 Private Sector Distribution
Legal provisions exist for licensing wholesalers and distributors in the private sector. A list
of GDP certified wholesalers and distributors exists in the private sector.
Section 8 - Selection and rational use of medicines
This section outlines the structures and policies governing the selection of essential medicines and
promotion of rational drug in Saudi Arabia.
8.1 National Structures
A National Essential Medicines List (NEML) exists. The NEML was lastly updated in
2011 and is publicly available. There are currently 183 medicines on the EML. Selection of
medicines for the NEML is undertaken through a written process. A mechanism aligning the NEML
with the Standard Treatment Guidelines (NSTGs) is in place. National Standard Treatment
Guidelines (NSTGs) for the most common illnesses are produced/endorsed by the Ministry of
Health (MOH) in Saudi Arabia. These were updated on regular intervals. There are many public or
independently funded national Drug & Poison Centres providing information on medicines to
prescribers, dispensers and consumers. Public education campaigns on rational medicine use topics
have been conducted in the last two years. A survey on rational use of medicines has not been
conducted in the previous two years. There is no national programme or committee, involving
government, civil society, and professional bodies, to monitor and promote rational use of
medicines.
A written National Strategy for containing antimicrobial resistance does not exist. Saudi
Arabia‘s Essential Medicines List (EML) includes formulations specifically for children. Criteria for
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the selection of medicines to the EML are explicitly documented. A national medicines formulary
exists.
A funded national intersectoral task force to coordinate the promotion of the appropriate
use of antimicrobials and prevention of the spread of infection does not exist. A national reference
laboratory or other institution does not have responsibility for coordinating epidemiological
surveillance of antimicrobial resistance.
8.2 Prescribing
Legal provisions exist to govern the licensing and prescribing practices of prescribers.
Furthermore, legal provisions restricting dispensing by prescribers exist. Prescribers in the private
sector do not dispense medicines. There are MOH regulations requiring hospitals to organize and
develop Drug and Therapeutics Committees (DTCs).
Chapter 11
11.1 Barriers to Market Access and Protection of Intellectual Property
in Saudi Arabia
277
Despite the recent improvements in some areas of Saudi Arabia‘s intellectual
property(IP) regulatory regime, the Office of the United States Trade Representative‘s latest
‗Special 301‘ Watch List for 2009 still includes Saudi Arabia as one of thirty-three U.S. trading
partners on the lower-level Watch List. We understand from industry sources that the decision was
because of the continuation of significant barriers to market access. However, according to various
local press reports, Saudi Arabia continues to improve its efforts to protect IP.
The Shari‘ahand various regulations promulgated in Saudi Arabia recognize that IP should
be protected. The Shari‘ahconcept of property (mal) includes anything that exists, can be secured,
and may be of benefit at a particular time of need. For example, air is an element that cannot be
secured and thus cannot constitute property (mal). The usufruct of property is also considered mal
under the Shari‘ah. The relationship between an individual and property that is under his control to
the exclusion of others constitutes ownership (milk) under the Shari‘ah. A person may have physical
possession of property (milk al-yad), the right to dispose of property (milk al-tassarif), or proprietary
rights (milk al-raghabah). Intellectual property in the nature of copyright, trademark, patents, and
trade secrets fall within the proprietary rights category (milk al-raghabah). These property rights are
expressly recognized under Saudi Arabian law and are the subject of specific regulations that cover
trademarks, copyrights, and patents, described above.
The concept of IP slightly differs under the Shari’ahas compared with the laws of
Western jurisdictions. This has traditionally served as an impediment to those trying to enforce IP
rights in Saudi Arabia, particularly with respect to obtaining monetary damages for infringement of
those rights. In 1996, the Permanent Committee for Scientific Research and Fatwa, which was
chaired by the late Sheikh Abdulaziz A. Bin Baz, the Grand Mufti in Saudi Arabia, issued a decree
that condemned the copying of computer software if the owners of such software restricted the right
to do so. The Grand Mufti issued another decree in 2000 to the effect that the Shari’ahforbids
trading in counterfeit goods. These decrees significantly recognize IP rights as property rights (milk)
under the Shari’ahin Saudi Arabia.
Additionally, Article 18 of the Basic Law19 provides that Saudi Arabia safeguard the freedom and
ownership of private property. Under the Basic Law, private property maynot be expropriated
except in the public interest and then only upon payment of fair compensation. Article 5(5) of the
Implementing Rules of the Foreign Investment Regulations also provides that it is prohibited to
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confiscate an investment in Saudi Arabia by a licensed foreign company wholly or partially without
a court order or subjecting such investment to expropriation wholly or partially, except for the
public interest and upon payment of fair compensation.
11.2Barriers to Market Access
A number of barriers to market access by foreign investors exist in Saudi Arabia. Chief
among them are price controls, registration requirements, tendering procedures, and certain aspects
of agency/commercial law. Each of these barriers is discussed briefly below.
Price Controls
Historically, the MOH has strictly controlled the pricing system in Saudi Arabia.
Pharmaceutical products can be sold only after their prices have been approved by the MOH, which
endeavors to keep prices as low as possible. These controls are applicable to both the public and
private sectors, thus pricing applies to both sectors. Using a price reference system, the pricing
committee considers the manufacturers‘ wholesale and retail prices in the ―country of origin,‖
export (CIF) prices to Saudi Arabia, and CIF prices in thirty other countries (including other markets
in the region where prices are relatively low, such as Algeria and Egypt). The committee fixes the
lowest possible price for the product and controls any subsequent price increases. Generic drugs in
Saudi Arabia are priced as follows: the first generic product on the market is priced at 70% of the
price of the original product, and each next generic product is priced at 90% of the price of the
previously introduced generic. The current margins for imported drugs were introduced in 2004 and
were updated at the end of 2007. The revised price structure described in this paragraph took effect
in February 2008.
We understand that the Pharmaceutical Research and Manufacturers of America
(PhRMA) has voiced concern that price controls in Saudi Arabia act as a considerable barrier to
market access for its members. In the past, the MOH reviewed prices charged by domestic drug
producers every five years, compared with every four years for foreign importers. In government
tenders, a preference is normally granted to local or GCCbased companies over multinationals, in
the form of preferring local or GCC-based companies if the prices of such are not more than 10%
279
higher than that offered by multinationals. Industry observers expect this bias to continue. PhRMA
believes that government policy with regard to the lowering of drug prices is not adequately
transparent. PhRMA has also criticized the Saudi Arabian government‘s alleged policy of
―dollarization,‖ whereby Euro import prices are converted into U.S. Dollars, based on an arbitrary
exchange rate. PhRMA believes that this arbitrary exchange has led to losses of up to 20% for
PhRMA member companies due to the difference in value between Euro and the U.S. Dollar.
PhRMA has also noted that Saudi Arabia has increased the number of reference countries used for
pricing pharmaceutical products, and that Saudi Arabia‘s re-pricing criteria favor local producers
over foreign importers.
 GCC Regulatory Developments
The GCC is planning to consolidate its pharmaceutical regulations with the ultimate goal of
harmonizing prices and creating a central registration procedure. In 1999, the Gulf General
Committee for Drug Registration (GCC-DR) was established to unify the process for drug
registration. However, the GCC-DR still runs concurrently with domestic regulatory bodies.
Nevertheless, the GCC states already collectively purchase pharmaceuticals and vaccines through
the Secretariat-General of Health (SGH Tender), which is further discussed below.
In July 2005, the health ministers from the six GCC member states, including Saudi
Arabia, approved a mechanism for the unification of the price of pharmaceutical products in the
private sector market of each member state. The unified drug-pricing mechanism must still be
endorsed by the local authorities in each GCC member state. Industry observers believe that the
proposed move is likely to lead to stricter pricing restrictions across the GCC member states.
 Tendering Procedures
The Saudi Arabian government plays a prominent role in the purchase of
pharmaceuticals, negotiating with the leading drug companies to buy large quantities of product and
deciding upon the supply schedule. Prices are decided at the beginning of each year. The two
principal buyers of pharmaceutical products in Saudi Arabia are the MOH (which will likely be
280
replaced by the SFDA) and the SGH. GCC member countries, including Saudi Arabia, practice
collective purchasing of pharmaceuticals, vaccines, and other healthcare products through the SGH
Tender.
This process allows GCC countries to buy in bulk and benefit from significant cost
savings from multinational drug-makers. It has also enabled the consistent supply of specialty
products that were previously unavailable in GCC countries due to high prices and low demand. The
SGH Tender was valued at $665 million in 2006,21 according to official reports, an increase of $84.5
million over 2005 levels. The largest percentage of the SGH Tender (33%) was hospital supplies,
with oral hygiene (28%) ranking second, followed by vaccines (15%). Further growth is forecast in
future years, fueled by aging populations; a growing incidence of obesity, heart disease, diabetes,
and similar healthrelated conditions; and rising spending power. However, GCC governments hope
to move away from dependency on imports by developing GCC manufacturing capabilities, which
currently account for production of less than 10% of drug consumption in the region.
Companies that wish to participate in the SGH Tender must have already registered
products in at least three GCC member states or be directly registered with the GCCDR. Saudi
Arabia accounts for the largest share of the SGH Tender, followed by the United Arab Emir.
Conclusions
Several studies have been made on the sector and the main conclusions are still valid Pharmaceutical products that have to be imported with the objective of making available
these products at as low prices as possible in the domestic market
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 Continuing to maximize the domestic manufacture of pharmaceutical products that are
consumed domestically, but within the product positioning, selections and prioritizations
described above under the elements of the offensive economic policy. Under this approach it
will be better to import products that are required in small quantities rather than to arrange
for domestic manufacturers to have to manufacture small batches and hold low level stocks
 Focus the pricing regime on the Essential Drugs List and in particular on the products that
need to be imported
 Low competitiveness of pharmaceutical domestic manufacturing
 Lack of ability to increase exports in the short-term due to a combination of the domestic
pricing regime and lack of spare production capacity. In the medium to longer-term the
issues are not having the latest international accreditations for domestic manufacturing
facilities required to enter developed consumer markets with final dosage products
 Improving the regulatory framework, particularly in relation to Intellectual property
 Strengthening Research and Development
 Encouraging foreign direct investments
 Promoting the enhancement of the health insurance coverage
 Improving export performance.
Bibliography
282
Web site,
www.saudiarebia.com
www.pharmaindustrysaudiarebia.com
www.indainpharmaindustry.com
www.pharmaindustrygujarat.com
www.annualreportsaudiarebia.com
283
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EXECUTIVE SUMMARY
To realize the above long-term vision, seven general objectives have been formulated. These
objectives are concerned with promoting public services, achieving prosperity for the society,
raising productivity of all sectors and consequently raising the Gross Domestic Product. The
objectives also concentrate on supporting ICT industries, innovation, creativity, invention and
development so as to diversify income sources and achieve sustainable economic growth, create
high paying job opportunities, and raise efficiency of education and training systems through the
employment of ICT. Another aim of the objectives is to bridge digital divide by enabling all societal
sectors to reach and access ICT services easily within reasonable costs, in addition to enhancing
National Identity and patriotism and support of Arabic language and consolidation of civilization
mission of Islam.
The five-year plan recommends directions that will consequently lead to long-term vision, through
twenty-six particular objectives, sixty-two implementation policies, ninety-eight projects. Several of
the aforementioned are already in progress. The main feature of these aforementioned is their
comprehensive coverage of all aspects of ICT use such as e-government, e-commerce, teleporting,
and telemedicine, e-learning, digital Arabic and Islamic content. It also covers ICT industry,
research, development, innovation, international cooperation, technology transfer, bridging the
digital divide, provision and processing of information. These projects include general objectives for
specific indicators.
When the world seemed to be plunging into a major recession. Encouraging signs of recovery have
appeared in early 2010 in many countries across the world, spearheaded by emerging markets such
as China and India, which achieved healthy GDP growth rates in 2009. Information and
communication technologies (ICT) are an ever important enabler of renewed and sustainable growth
285
in such a context. Its unique function as a key element of infrastructure for efficient industries and a
critical productivity enhancer is crucial for sustaining recovery and laying the foundations for
economies that are competitive in the long term. Besides supporting economic sustainability, ICT
can play a leading role in fostering environmental and social sustainability both within its own
sector and as an industry-wide enabling infrastructure. Not only is the ICT industry increasingly
adopting measures and strategies to reduce the sector‘s energy footprint, but it is also developing
innovative solutions to diminish other sectors‘ energy consumption and improve overall
sustainability across industries. As far as social sustainability is concerned, ICT enables greater
access to basic services by all segments of society and improves the ways these basic services (e.g.,
education, finance, and healthcare) are provided to citizens. In addition, it offers to all of us
revolutionary and more comprehensive communication channels and innovative ways of interacting
and networking, thanks notably to Web 2.0 and mobile telephony applications. The Report series,
launched in 2001 and published annually since then, has been following ICT advances and reporting
on the changing state of the world‘s networked readiness for almost a decade now. It has contributed
to raising the awareness of multiple actors, including governments, businesses, and civil society,
about the importance of ICT for building competitive economies and durable prosperity. Leveraging
ICT has many benefits for the above three stakeholders and can significantly improve their
effectiveness of operations and quality of services. By identifying a number of enabling factors
underpinning networked readiness and monitoring the extent to which more than 130 economies
across the globe fare with respect to these factors over time, the Report has provided a very useful
tool for decision makers and other relevant stakeholders to track national progress vis-à-vis the past
as well as the rest of the world. It has also showcased best practices in networked readiness as well
as in-depth analyses on several issues relating to the ICT industry, furthering knowledge on the
subject and providing inspiring examples to follow for other countries.
Saudi Arabia is an important regional economic player with a high GDP. It is the major oil producer
and exporter in the world. In addition, it has embarked during the past decade on a plan to become a
local economic center and to diversify from almost fully petroleum based output to other economic
sectors and products.
286
Saudi Arabia‘s information and communication technology (ICT) market is one of the largest in the
Middle East and represents 68 percent of the total sector in the Arabian Gulf. Saudi Arabia‘s public
and private sectors rely heavily on the services and products of foreign companies, presenting
significant opportunities for U.S. companies. 67 million mobile subscriptions in 2011e with a
penetration rate of 195 percent. Mobile penetration rate forecasted to reach 214 percent by 2014. 7
percent annual growth expected in smart devices sales. Saudi Telecom Company, Etihad Etisalat
Company, and Zain Saudi Arabia have all successfully launched 4G Long-Term Evolution
technology
Petrochemicals are very important in our daily life. The scope of products manufactured from
petrochemicals is broad range from, insulators, cable wrap, fertilizers, plastic, and rubber to
everyday items like home furnishing, cloths and toys. The demand of petrochemical is increasing in
the last three decades as per Saudi Arabia General Investment Authority (SAGIA) annual report.
Petrochemical industry is one of the most important industries in Saudi Arabia. In 2005 SABIC
alone had recorded profits of 19.2 billion Saudi riyals (SABIC, 2005).
Solar energy can provide a very attractive way of tackling the energy-related and economic
challenges the Kingdom of Saudi Arabia is facing. Motivated by the need to diversify the
Kingdom‘s economy, as well as by the various perspectives being offered by the establishment of
the King Abdullah University of Science and Technology (KAUST), this study aims to provide a
comprehensive understanding of the opportunities solar energy offers to the Kingdom, especially
regarding solar manufacturing and research activities. This study may lay the foundation for making
the Kingdom a leading location for solar manufacturing as well as a leading solar research location
globally.
The study is the result of six-month collaboration by a project team formed by the following parties:
• National Industrial Clusters Development Program (NICDP), Consumer
Goods Cluster
o Focus on solar manufacturing activities
• King Abdullah University of Science and Technology (KAUST), Economic
Development
287
o Focus on solar research activities
• Apricum – The Cleantech Advisory (a Germany-based consultancy exclusively
Dedicated to the Cleantech industry)
o Advice and project management
The National Policy for Science and Technology, approved by the Council of Ministers in 1423 H
(2002 G), defined 11 programs for localization and development of strategic technologies that are
essential for the future development of the Kingdom of Saudi Arabia (KSA). This plan is for one of
these programs, the Water Technology Program.
The main motivation of the program is to promote and support Saudi economic, social, security,
developmental and other national interests through localizing (including initial transfer) and
developing properly selected strategic and advanced technologies in the water area.
The impetus for the water technology program stems from the specific needs of the Kingdom. The
Kingdom faces a number of water resources limitations. It also stems from the role that water plays
in the Kingdom's development plans, as well as the importance of water issues and policies
internationally.
This plan is based on input from the users and stakeholders of water technology in the Kingdom,
including government agencies, industry and universities that have a role in water technology. The
plan was derived from a process that:
Identified the key needs of the Kingdom for water technology research
Assessed the strengths, weaknesses, opportunities, and threats of the program.
Analyzed KSA water technology publications and patents and reviewed the works of some
international research institutes.
Defined a vision and mission for the Kingdom‘s water technology program.
Defined the key technologies and other program areas needed to address the Kingdom‘s
needs in water technology research.
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This process concluded that improved KSA water technologies are needed to:
Provide adequate water supplies for human, agricultural and industrial use.
Support national self-reliance in water-related research and development and reduce
dependence on foreign technology.
Improve the price/value efficiency of water production and treatment.
Develop a domestic water technology industry that will contribute to national economic
performance and will provide employment opportunities.
In addition to the technical needs, the planning process identified several areas where policies need
to be changed or barriers removed to facilitate development and localization of water technologies.
These include:
Policies to facilitate R&D collaboration between KACST, universities, government agencies
and industry.
Expanded human resources for water technology R&D.
Improved knowledge of international technology developments.
Expanded international collaboration, including cooperation between Saudi Arabia
government agencies, and world agencies.
Studies of the social aspects of water technology.
Small business contracting preferences to support innovative small companies.
The priorities for Saudi Arabia during the first five-year plan are to transfer, localize, and develop
the following environmental technologies:
1. Municipal solid waste remediation and restoration technologies.
2. Food contamination avoidance technologies.
3. Air pollution monitoring & assessment technologies.
4. Greenhouse gases avoidance, monitoring & assessment technologies.
5. Desertification monitoring & assessment technologies.
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Within each of these priority areas, KACST will work in concert with universities and industry to
develop the necessary network for research, development and innovation in this field. The ETP will
be directed by a program manager, who will be responsible for the overall execution of the plan.
The ETP Advisory Committee, with stakeholder membership, will oversee the implementation of
the plan. They will establish and review performance metrics and provide advice on the project
portfolio. The Advisory committee will advise the program manager and will also report to the
National S&T Plan Supervisory Committee, which will oversee all of the Strategic Technology
Programs.
This study was carried out in Jazan region in the Southwestern part of Saudi Arabia, bounded in the
south and east by the Republic of Yemen, Asir area in the north and the Red Sea in the west.
The study area is one of the richest regions of the Kingdom of Saudi Arabia with animal
biodiversity, where the region is characterized by the presence of a large group of wild animals that
belong to different animal families. This work is devoted to the study of the biodiversity and
geographical and ecological distribution of snakes found in the region.
The results showed that there are 36 species of eight families of snakes living in Jazan region;
family Typholopidae represented by two species, while families Leptotypholopidae, Boidae and
Atractaspididae represented by one species only respectively; whereas family Colubridae was the
most represented one having 12 species, and family Elapidae was represented by three species.
Family Viperidae was represented by six species and family Hydrophiidae represented by ten
species. Nevertheless, this work concentrated on terrestrial snakes.
This work was suggested to throw light on the biodiversity of snakes' fauna in Jazan region as an
important part of the ecosystem that has to be maintained. Since there are no enough studies on the
animal species in the region.
The study included also the discussion of snakes that were ecologically surveyed in the study area
according to: zoogeography and temporal distribution, mode of feeding, type of food and behavior.
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Despite the fact that these snakes may be harmful to human life in some cases, it may also be useful
to him in many aspects of life, the study showed the relationship between these snakes and human.
It also threw light on the economical, medical, and scientific importance of these snakes as well as
their importance for the process of environmental balance. The study presented some methods of the
conservation of these species as one of the natural resources that must be maintained for not being a
victim of extinction.
Nowadays, public health concern associated with microbial food safety has arisen. Numerous
epidemiological reports have implicated non-heat treated milk and raw-milk products as the major
factors responsible for illnesses caused by food-borne pathogen. Cross-contamination with
pathogenic microorganisms can gain access to milk either by faucal contamination or by direct
excretion from the udder into milk.
Camel meat and milk are the key foods in arid and semi-arid areas of the African and Asian
countries, especially in Saudi Arabia. Food Agriculture Organization has reported that more than 18
million camels around the world support the survival of millions of people. Camel milk not only
contains more nutrients compared to cow milk, but also it has therapeutic and antimicrobial agents.
Saudi Arabia produced over one percent of world stocks of camels (425,000 head). In regard to
camel milk production, Saudi is globally ranked at the seventh position (89,500 cubic meters).
In fact, most of camel milk is consumed in the raw state without any heat treatments or acid
fermentation and kept at high ambient temperature coupled with lack of refrigeration facilities
during milking and transporting. These conditions turn the milk to be unsafe, capable of causing
food-borne diseases and it even spoil fast.
In Qassim area, as in many regions around the kingdom, camel milk is produced in traditional way
by hand milking, handled and transported under low hygienic measures. However, there is no
reports documented any outbreak related to unpasteurized (raw) camel milk. Furthermore, there is a
limited data on the microbial assessment of raw camel milk. Furthermore, in view of its health
benefits, there is a fast growing demand for raw camel milk in Saudi Arabia and further it is
expected to be introduced as a new functional food in the European market. Therefore, there is a
291
high necessity to find out about the present hygienic situation regarding the raw camel milk in
Qassim area.
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293
Introduction of Shipping Sector in Saudi Arabia
The Kingdom of Saudi Arabia (KSA) is bordered by two major shipping lines: the Gulf,
which is an extension of the Indian Ocean, is used mainly for exporting oil and gas; and the
Red Sea, which links the Mediterranean Sea with the Indian Ocean through the Suez
Canal.
Saudi Arabia has 9 ports and the ports of Saudi had a Compounded Annual Growth Rate
(CAGR) of 9% in container traffic from 3 million Twenty Foot Equivalent Units1 (TEUs) in
2004 to 6 million TEUs in 2011. The Jeddah port alone accounted for 4 million TEUs of
container traffic in 2011 and is one of the top 50 container ports in the world with a ranking
of 27. According to foreign trade and container traffic data of 2006-2011, the container
traffic of Saudi Arabia is dependent on the value of trade that happens in the Kingdom.
Saudi‟ s trade is forecasted to increase from USD 472bn in 2011 to USD 579bn by 2015
and hence there will also be an increase in container traffic during that period. Apart from
the Millennium Seaport mega project in King Abdullah Economic City (KAEC) near Jeddah,
other projects in Saudi Arabia are the Jizan Economic City Seaport in Jizan and Dammam
port expansion.
There are no major free trade zones in Saudi Arabia except the Tusdeer Bonded and Reexport Zone. The development of the 4 Economic Cities is Saudi‟ s attempt to attract
Foreign Direct Investment (FDI) to diversify the economy. Hydrocarbon exports that
accounted for 90% of the total exports of Saudi in 2005 accounted for 87% of the total
exports in 2011. Thus, it is important for Saudi to invest in port developments, to handle the
increase in non-oil exports and to attract more FDI through the Economic Cities, Free
Trade Zones and Industrial Cities located adjacent to the ports.
The ports of Jeddah, Jizan and Yanbu have passenger terminals for hajj pilgrims. The
overall cargo and container volume was affected by the global crisis, but the volumes have
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not only recovered to the previous figures but have increased considerably and are
forecasted to increase further. Hence port developments are imminent for Saudi Arabia,
but the port developments are concentrated only in a few major ports and not in the smaller
ports. The investment opportunities available in the Saudi seaport infrastructure comprise
bidding for operator contracts and investing in the Economic Cities and Industrial Cities
located around the ports.
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 Role of Shipping Sector in Economy of Saudi Arabia
2012 Jeddah Islamic Port (JIP) total tonnage throughput growth forecast 12.5%, and to
average 3.9% per annum to 2016.
2012 Jeddah Islamic Port container throughput growth forecast 5.5%, and to average
4.0% per annum to 2016.
2012 total trade real growth forecast at 2.8%, and to average 2.7% over the
mediumterm.
Saudi Arabia‟ s Container volume decreased in 2009 by 5%, but increased by 20% in
2010 and 7% in 2011. The bulk cargo volume too decreased during 2009 by 5%. The bulk
cargo volume could not recover in 2010 and further decreased by 0.5% but increased by
4.5% in 2011. The general cargovolume was the most affected because of the global crisis
as it decreased by 42% in 2009 but volumes witnessed an increase of 60% from 2009 to
2011.
The year 2009 will go down as one of the worst ever experienced by the global shipping
industry. The global downturn that began in 2008 caused export volumes across the world,
particularly in China, to contract sharply, and demand for shipping slumped. Shipping
companies suffered US$1 billion losses or more in 2009. The collapse in demand was
exacerbated, ironically, by large numbers of new ship deliveries. At the height of the 2007
boom, just prior to the global downturn, the global shipping sector had placed some of the
biggest bets in the sector‘s history. These bets took the form of billions of dollars spent on
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a new generation of extra-large container vessels, which take anything from 18 months to
three years to build.
Nor was it just the huge container lines that suffered. Bulk dry carriers, accustomed to an
endless stream of orders to bring iron ore and steel from commodity-exporting countries to
feed China‘s massive building boom (the country was, before the downturn, committed to
building 200 new cities), were also faced with collapsing demand.
The bulk dry carrier sector has been affected by a massive expansion of capacity. After
decades of minimal new dry bulk carrier supply, fleet additions picked up strongly from
2004 to 2007 and the total bulk carrier fleet expanded rapidly. During 2004–08, the
average annual growth rate for the dry bulk fleet hovered around 7%, significantly above
the levels of previous decades. More recently, there has been a major step change in fleet
additions. In 2009, the total dry bulk fleet expanded by 10% year-on-year, or 42 million
deadweight tonnage (dwt), the strongest growth in the fleet‘s history, ending the year with
460 million dwt of capacity. On top of that, the fleet grew another 12% in 2010, adding a
further 55 million dwt, after accounting for cancellations, delays, and fleet scrappage.
Niche business sectors in shipping, which is rich in niche opportunities, fared better, but
they, too, are under pressure. Liquefied natural gas (LNG) carriers looked like an excellent
investment at the height of the boom in early 2007. The world was hungry for gas as a
cleaner alternative to oil, and a major global power production program based on newly
built gas-generation power plants fueled demand for security of supply.
In the first half of 2009, demand for LNG carriers fell but it recovered in the second half of
the year, and demand was boosted by the very cold weather seen in North America and
Europe during the winter of 2009–10. But by March 2010, there were reports that freight
rates for transporting spot cargoes of LNG had dropped by at least 20% since December
2009, as warmer weather crimped demand for the heating fuel. In April 2010, the Japanese
broker Nomura also said that ―while shipping rates have recovered from their 2009 lows,
―the sustainability of very large crude carrier (VLCC) and chemical tanker rates looks less
than clear, with vessel overhang risks remaining.‖
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For this sector, there is some long-term hope in that new gas-generation plants provide a
greener alternative, whatever the state of the economy. Moreover, several major LNG
projects that were due came on stream in 2009, have now materialized and are boosting
demand for LNG shipping. It also has to be remembered that, despite the drop that took
place in 2009, long-term charter rates had increased by about 17% between 2004 and
2010.
The main drama, though, is being played out in the container market. Containers were the
invention of the North Carolina entrepreneur Malcom McLean back in 1956, and they have
completely revolutionized the transport of goods and cargo worldwide. In fact, many credit
containerization for the globalization of trade, as containers make it very easy for many
manufacturers to ship their specific products as part of a large, general shipment. When
McLean invented the container, it cost almost US$6 a ton to hand-load a ton of cargo onto
or off a ship. Using containers, that price comes down to US16¢ (source: Wikipedia). The
container was a huge step beyond the previous best ―invention,‖ namely palleted goods in
break bulk cargoes.
The novel element in McLean‘s approach was the idea of a sealed, steel box that was
never opened in transit, and that could be speedily loaded, unloaded, and transshipped, or
switched from rail to ship to road freight. The transformation of the whole process of
shipping goods around the world was immense. Instead of having to unload ships by hand
(or, in more modern times, by cranes swinging pallets of goods onshore to be checked,
then warehoused until they could be freighted out), containerized goods take very little time
to shift from ship to shore, or vice versa, and there is no checking of goods because the
containers are sealed.
From there, the shipping industry slowly but surely moved in the direction of economies of
scale. The fixed overhead costs associated with shipping a container come down when the
number of containers being shipped goes up. When the world is booming, and the demand
for container shipments is huge, this approach provides a fast route to superior profits. The
largest of today‘s container ships are some 400 meters in length and 55 meters wide. They
can carry 13,000 containers, or 50% more containers than the biggest ships in 2003–04.
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Average global container freight rates saw a major rally in late 2009, according to Drewry‘s
Container Freight Rate Insight. After collapsing in the first half of 2009, the Drewry Global
Freight Rate Index increased by 18% between July and September, and rose by another
6% between September and November, from US$2,040 per 40-foot container to
US$2,160.
The upturn continued into 2010. The trade rebound, capacity cuts, and cooperation all
helped container lines to raise rates, after a series of price wars, allied to falling demand,
caused industry-wide losses in 2009. The Transpacific Stabilization Agreement, which
consists of a group of 15 lines including Nippon Yusen and K-Line, was formed to try to
present a united shippers view of appropriate pricing on some routes, in an attempt to
return routes to profitability. The TSA, for example, wants an US$800 per 40-foot container
rate increase on Asia–US West Coast routes in new contracts. China Cosco and China
Shipping Container Lines Co., the nation‘s two biggest container lines, both said in April
2010 that they expect the higher rates to be accepted. The increase will make the route
profitable again, said China Shipping Chairman, Li Shaode.
The upturn continued into 2010. Danish logistics operator DSV, for example, reported in
April 2010 that it saw maritime container volumes surge 19% in the first quarter of 2010,
and added that deep-sea freight rates had reached a peak on the Far East to Europe
trades, which accounts for half of its ocean business.
In March 2010, Li Shaode, chairman of China Shipping Container Lines, the country‘s
second-largest sea freight company, said that China‘s 2010 container shipping rates would
surpass the figure for 2009 because demand for transporting goods has exceeded current
capacity. Container volume shipped in the first two months of 2010 rose 30% on the same
period in 2009, Li said.
By July 2011 the picture for ship owners had changed dramatically. In its June 2011 Focus,
Drewrey highlighted both the Q2 2011 collapse of the freight market and its continuing
softness. ―The dry bulk freight market stayed near the dreadfully low levels witnessed in
May,‖ it said. Rates were under pressure across all classes except the Panamax segment,
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which saw some increases. Owners got some relief, however, from lower bunker fuel costs
as the price of fuel plunged over global fears over slower growth.
In August 2011, Safety4Sea, a pro bono site which comments on shipping trends, said that
the mood in the industry had once again darkened. ―Concerns in the nation‘s shipping
industry are rising as companies see no end in sight for their struggles. Where the industry
had been doing well through 2010 and the first quarter of 2011, on the back of lower oil
prices and the resumption of strong global demand, both those ―drivers‖ have now turned
negative. As a result, the big three shipping companies, Hanjin Shipping, Hyundai
Merchant Marine, and STX Pan Ocean, all reported losses for Q1 2011 and expected to
report further losses for Q2. All three companies cited the huge oversupply of ships as a
prime cause.
The Baltic Dry Index is an index of freight shipping maintained by the Baltic Exchange,
based in London. It provides a measure of the daily average cost of shipping bulk dry
commodities such as iron ore, coal, and grain. As global growth is the major driver of
increased shipping of bulk loads around the world, and as these contracts are struck
months in advance of the goods actually being shipped, the Baltic Dry Index offers a very
good window into whether the world‘s trade is contracting or expanding. In basic terms, the
higher the demand is for bulk freight around the world, the higher the index rises. If it falls
away, then that is a sign that trade will contract sharply some months hence. By April 2010,
the Baltic Dry Index had risen by 58.5% over the previous 12 months. It suffered a major
reversal in January 2011 but then picked up again in Q2.
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 Shipping structure of Saudi Arabia
The Saudi Arabian Department of Customs consists of five departments as following:
Automated Applications Development Department: responsible for conducting studies and
analysis on the possibility of automating customs and administrative procedures, design
programs and maintain them, and provide training to customs employees, brokers, and
shipping agents to run them.
Information Service Department: responsible for creation and administration of customs
data warehouses, downloading/uploading of customs data, verification of customs data
integrity, and preparation of data for use by different SADC departments.
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Technical Service Department: responsible for planning, execution, administration,
operation, performance improvement, and security of networks, be it WAN or LAN.
Statistical Analysis Department: responsible for preparing of statistical reports and
reviewing their data.
Support Service Department: responsible for coordination with concerned SADC
departments, following up contracts with the executing companies, development of
technical capabilities of SADCIC staff, and other administrative works.
All shipments crossing international borders must be cleared through Customs in the
destination country prior to being delivered to the recipient. Unless the sender specified a
broker, FedEx submits shipments to Customs and other regulatory agencies. It is the
sender's responsibility to provide the necessary and correct documentation. Shipments that
require more than the FedEx International Air Waybill and Commercial Invoice may require
more transit time. If shipments are held by Customs because of incorrect or missing
documentation we may first attempt to notify the recipient.
Saudi Arabia Import Clearance Process
When shipping to Saudi Arabia, clearance through Customs depends on whether you're
shipping:
Documents with no commercial value
Dutiable goods
For shipments where clearance is required, Saudi Arabia Customs Authority charges
duties and taxes for all shipments with a value above US $40. FedEx will charge the same
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to the shipper, recipient, or third party based on the option marked on the Air Waybill. The
delivery of shipment will be upon payment of the said duties, taxes, and related
surcharges.
Duty advancement fees are applicable for any dutiable shipment to be paid by consignee.
The duty advancement fee will be SAR 70/- or 2% of the advanced duties and taxes,
whichever is greater.
Import Prohibitions and Restrictions
Certain items are prohibited by Customs for import to Saudi Arabia. These items are in
addition to items forbidden by IATA. Senders are responsible for making sure that the
goods they are shipping are acceptable for shipment to Saudi Arabia. Any prohibited items
shipped to Saudi Arabia are subject to penalty imposed by the Customs authorities. Any
penalties and related charges will be charged to the shipper.
Required Documentation
Required documentation varies according to the following factors::
Whether you are shipping documents with no Declared value. These shipments
require only the fully completed FedEx International Air Waybill.
If you are shipping any item other than documents, a FedEx International Air Waybill
and a Commercial Invoice are required.
If you are shipping dutiable goods with a Declared value of more than $13,000, a
FedEx International Air Waybill, a Commercial Invoice, and a Certificate of Origin,
certified by the Saudi Arabian Consulate in the country of origin, are required.
Saudi Arabia Import Regulations
Take note of the following regulations when importing to Saudi Arabia.
The dimensional and weight maximums for import shipments:
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FedEx International Priority: 274 cm (108 in) L, 330 cm (130 in) L & G, 68 kg (150
lb)
An invoice is required for all shipments with a declared value.
A Certificate of Origin, certified by the Saudi Arabian Consulate in the country of
origin, is required for any shipment with the value of more than US $13,000.
 Business activity of shipping sector in saudi arabia
304
Growth of business activity in Saudi Arabia's non-oil private sector rose to a four-month
high in September because of an increase in new orders, while new orders shot up to a 15month high in the UAE, surveys showed.
The SABB HSBC Saudi Arabia Purchasing Managers' Index, which measures activity in
the manufacturing and services sectors, rose to 60.3 points in September against 58.3
points in August. The seasonally adjusted index remained well above the 50-point mark
separating growth from contraction.
"It's a positive reading that suggests the UAE is one of the few economies in the world
where private sector growth is accelerating rather than losing pace," said Simon Williams,
chief economist for the Middle East at HSBC.
New order growth in Saudi Arabia increased in September to 70.2 from 68.7. "Over 55
percent of the survey panel signalled an increase in total new business, reflecting reports
of improved inflows from both domestic and export clients," the survey said.
The index for new export orders gained sharply to a 14-month high. Employment rose to a
five-month high of 55.3 from 53.00, which was its lowest level in five months.
"Improved operating conditions and rising levels of outstanding business encouraged
companies to increase employment. Payroll numbers rose for the twelfth consecutive
month, with the pace of jobs growth the sharpest since April," the survey said.
Overall input price growth was strong while the output price index was only slightly above
50.0, however, suggesting the possibility of profit margins at some firms being squeezed.
Analysts predicted, in a Reuters poll conducted in September, that Saudi Arabia's gross
domestic product would expand 5.3 percent this year, after a revised 7.1 percent last year.
UAE firms saw output growth rise to 54.2 points in September from 53.8 in August.
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New orders jumped to 60.7 points, the highest level since June 2011, though growth in
new export orders edged up only slightly to 54.3 points, the survey also showed.
"I'm still concerned by the UAE's reliance on export demand, and by the rate of
employment growth which is still disappointingly slow," Williams said.
"But for now the economy is showing resilience and with new orders strengthening, there's
good reason to expect the UAE to maintain momentum into the year-end."
Employment growth across the UAE's non-oil private sector remained modest at 52.1
points in September, improving slightly from a four-month low of 52.0 in August.
Output price growth rebounded to marginally above the 50.0 mark in September, while
growth in input prices moderated to 54.6 from 55.2.
Consumer price inflation in the UAE, the world's No. 3 oil exporter, climbed to a one-year
high of 0.95 percent on an annual basis in August, according to government data.
In June, Minister of Economy Sultan bin Saeed al-Mansouri cut his forecast for the
country's gross domestic product growth this year. He predicted expansion of around 3
percent, down from 4.2 percent in 2011, because of global weakness.
Analysts polled by Reuters in September forecast the Opec member's GDP would expand
by 3.2 percent in 2012.
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Comparative Position of
Saudi Arabia with India
307
 Indian shipping Industry
Indian shipping Industry plays a crucial role in Indian economy. As 90% of the Nations
trade by volume is done via sea. India has been the largest merchant shipping fleet among
the developing nations. The Indian Shipping Industry supports transportation of national
and international cargoes and also provides various other facilities such as ship building,
ship repairing, lighthouse facilities, freight forwarding, etc. Indian Shipping Industry with
emergence of globalization and liberalization is firmly ready to acquire new dimensions in
terms of demand and infrastructural development.
Size of the Industry
515 vessels with a grt of 7.06 million
Geographical
distribution
The major ports are located at Calcutta/
Haldia, Chennai, Cochin, Ennore,
Jawaharlal Nehru Port at Nhava Sheva,
Kandla, Mormugao, Mumbai, New
Mangalore, Paradip, Tuticorin and
Vishakhapatnam.
Output per annum
42% of total Indian tonnage
Percentage in world
market
8% of entire world trade
 Top 10 shipping port in India
Hede Navigation Owner, Manager India Mumbai
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Poompuhar Shipping Owner, Manager India Chennai
Garware Offshore Services Ltd Owner, Manager India Mumbai
Varun Shipping Co Ltd Owner, Manager India Mumbai
Tolani Shipping Co Ltd Owner, Manager India Mumbai
Apeejay Shipping Ltd Owner, Manager India Kolkata
Essar Shipping Ports Owner, Manager India Mumbai
Oil & Natural Gas Corp Ltd Owner, Manager India Mumbai
Visakhapatnam Port Owner, Manager India Visakhapatnam
Chowgule Steamships Ltd Owner, Manager India Goa
 Current market situation in India
The Indian shipping industry plays an important role in the Indian economy with almost 90%
of the country‘s international trade conducted by the sea.
India has the among the developing countries and is ranked 15th in the world with a shipping
tonnage of around 11,5 million gross tonnage in 2011.
Today, India has around 1071 ships with 722 coastal and 349 overseas ships. Indian coastal
shipping is highly fragmented.
The top 9 companies account for nearly 70% of the total fleet by Dead Weight Tons and in
terms of number of ships, the top 9 companies only have a 20% share of the fleet. Many
companies own just 1 or 2 ships.
The Indian shipping industry consists of around 31 major shipping companies with Shipping
Corporation of India (SCI), the largest public sector enterprise being the largest in the
country.
 Key government players in the Indian shipping industry
309
Company name
Activities
Office location
Shipping
Corporation of
India (SCI)
Ship owners,
chartering,
offshore
Mumbai
Total turnover
in USD $
803 million
No. Of ships
85
 Key private players in the Indian shipping industry
Company name
Activities
Office location
The Great Eastern
Shipping
Company Limited
Varun Shipping
Ship owner,
chartering,
offshore
Ship owner,
chartering,
offshore
Ship owner,
chartering,
offshore
Ship owner,
chartering,
offshore
Mercator Lines
Limited
Essar Shipping
No. Of ships
Mumbai
Total turnover
in USD $
448 million
Mumbai
176 million
20
Mumbai
136 million
32
Mumbai
242 million
21
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37
 Saudi Arabia shipping industries
The National Shipping Company of Saudi Arabia (Bahri) was formed by a Royal Decree in
the year 1979 as a Public Company, 28% ownership held by the Public Investment Fund
"PIF" of the Saudi Government and the remaining is widely held in public shares by Saudi
Nationals.
The National Shipping Company of Saudi Arabia (Bahri) has grown from a small shipping
firm operating multipurpose vessels to become one of the biggest shipping conglomerates
in the world and occupies a pre-eminent position among its industry peers at national,
regional and international levels in all sectors of its business operations. It is the first
national carrier, having celebrated its Silver Jubilee in the year 2004 and continues to
successfully stride the triumphant march in 30 years of its existence and has generated a
strong
VIP
customer
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base.
During the course of its diversification, the Company's services have been expanded to
include transportation of General cargo, Crude Oil, Chemical, Liquefied Petroleum Gas
"LPG" and Dry Bulk. Having started off its operations for transporting general cargo and
containers initially, the company with its commendable track record, has established the
reputation of providing high standard of services to its customers in all sectors.
The National Shipping Company of Saudi Arabia (Bahri) owns and operates 17 Very
Large Crude Carriers (VLCCs), which are all of high international standards. In its desire
to expand further, Bahri entered into LPG transportation business by acquiring 30.3
percent share from Petredec Limited, which is the leading company in LPG transportation
in the world.
The company also owns 4 fully owned multipurpose vessels, deployed between Arabian
Gulf - Indian Subcontinent - Red Sea - Mediterranean - US / Saudi arabia East Coast route
on a regular frequency. The company also invested in on-land facilities by building a
container service yard at the Jeddah Islamic Port to facilitate container storage and
maintenance / repair services.
 Top 10 shipping port in Saudi Arabia
Petrostar Owner, Manager Saudi Arabia Jeddah
Algosaibi Diving & Marine Owner, Manager Saudi Arabia Dammam
Bakri International Energy Co Ship Broker Saudi Arabia Jeddah
Arabian Petroleum Owner, Manager Saudi Arabia Jeddah
Arabian Marine Operating Owner, Manager Saudi Arabia Jeddah
National Shipping Arabia Owner, Manager Saudi Arabia Riyadh
Key Communications Dev Marine Equipment Saudi Arabia Dammam
Al-Hejailan - Riyadh P&I, Insurance, Low Saudi Arabia Riyadh
Al-Hejailan - Jeddah P&I, Insurance, Low Saudi Arabia Jeddah
Arabian Inspection - Riyadh P&I, Insurance, Low Saudi Arabia Riyadh
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 Total revenues of Saudi Arabia shipping industries
(* in SAR "000")
Revenues*
Net Profit*
EPS (SAR)
EBITDA*
Dividends (SAR)
Current Assets*
Current Liabilities*
Total Assets*
Shareholders' Equity*
Cash Flow From Operations*
2012
2,464,628
503,993
1.60
1,030,301
1
,117,187
1,007,168
11,063,609
5,410,914
672,625
2011
1,991,084
287,768
0.91
745,739
0.50
1,042,280
944,248
10,623,211
5,062,623
398,319
2010
2,049,830
414,877
1.32
862,117
1
1,578,464
736,030
9,966,279
5,089,691
781,572
 SWOT analysis of Saudi Arabia and Indian shipping
industries
 Strengths of Indian shipping industries
India has access to two major shipping routes
More than 7500 km coastline including the island territories
Wide spread ports and workable merchant fleet
Fleet expansion by major domestic shipping companies
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Sustained rise in the volume of exports with revival growth in the manufacturing sector
Large number of Indian sea farers
More than 1 billion citizens to drive the import demand
 Strengths of Saudi Arabia shipping industries
Openness of the Economy
The Saudi economy is considered to be among the most open economies in the
Middle East due to heavy reliance on exported oil and imported consumer and
capital goods. Traditionally, the degree of openness is measured by the value of
traded goods and services (exports plus imports) as a percentage of GDP. The
average ratio for Saudi Arabia is relatively high and is higher than the world
average and for other countries in the region. High ratios reflect high dependency
on oil exports and capital goods imports.
Diversified Shipping Industry Operations
The shipping Industry enjoys a diversification in its services. NSCSA engages in
the shipping of crude oil, natural gas, LPG, petrochemicals and cargo
transportation. The company also provides liner services, freight forwarding
services, container services and ship management services. In the fiscal year
ended December 2007, 43.5% of the company's total revenue was generated by
the very large crude carriers (VLCCs) segment, 28.2% by Liner Service segment
and the remaining 28.4% by Petrochemical Carriers segment. The company,
through its subsidiary Mideast, has established a one-stop-shop service to its
clients. These services include: technical management, commercial management,
chartering & post fixtures, sale and purchase, technical and marine consultancy,
and insurance and claim handling. Moreover, the company has a strong fleet of
different types of vessels that include VLCCs, cargo vessels, chemical tankers and
container vessels. The company owns 13 VLCCs. The diversified operations with
strong fleet of vessels reduce the company‘s business risks and enable the
company to tap opportunities in new as well as existing markets.
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Online Tracking
NSCSA has been providing vital information on its web site to systematically guide
its customers to arrange shipments or track the arrival of their cargo without any
manual help through the following functions: service lines, North America line
schedule, cargo tracking, vessel tracking, tariff rate information, booking service
and vessels position. These facilities help the customers to select vessels, book
voyages, schedule their shipments, track their cargo and the vessel etc. Further,
the company's operations are supported by an extensive office and agent network
spread out in the Middle East, North America, Europe and the Far East. The
company's online tracking system and extensive agent structure helps the
company to serve its customers efficiently. 39
Oil demand
Even though oil shipping rates are expected to fall over the next two years, they
should not collapse and crude tanker operators should still enjoy good margins.
That could be attributed to the fact that oil is likely to remain the primary energy
source through at least the middle of this century.
 Weaknesses of Indian shipping industries
Due to underinvestment in the India‘s maritime sector has affected the development
of ports in the country
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Inefficient judiciary system slow development of new port infrastructure
High levels of bureaucracy preventing the government funding from developing the
new port projects in the country
Tax structure not allowing the Indian manufacturers to be competitive <Think this is
an argument Indian exporters are using in lobbying rather than being a fact>
 Weaknesses of Saudi Arabia shipping industries
Decline in Operating Income
The declining trend in the operating income and net profit of the company signifies
its decreasing profitability and the increasing operating expenses, which may
adversely affect the investors‘ confidence.
High Leverage
The increasing debt is a matter of concern, since financial leverage may put
pressure on bottom-line growth. Debt/equity ratio has increased from 52% in the
end of 2007 to 79% as of 31 December 2008.
316
 Opportunities of Indian shipping industries
Indian shipping companies having acquisitions with foreign shipping companies
More than US$4bn is expected to be invested in India's port sector.
New major container terminals being developed at the port of Chennai and Mumbai
Cargo volumes are expected to grow with an average of 16.5% year on year in the
coming 5-10 years.
 Opportunities of Saudi Arabia shipping industries
Fleet Expansion Program
Fleet augmentation plans were drawn up for the company's segments, and new
building orders placed as per the forecast requirements. In 2007, as part of
strategic expansion plan, NSCSA placed orders for a variety of new shipping
vessels. In total, NSCSA plans to acquire a fleet of 28 vessels by 2011. After
delivery of all the vessels, NSCSA will become market leader in this segment, and
will be well entrenched as a leading shipping company internationally.
NSCSA has entered into agreements to expand its fleet in the crude oil transport
sector. The company has achieved significant progress in building the VLCCs
contracted with Hyundai of South Korea. The company had also signed another
contract in March 2006 for building 6 additional VLCCs to be delivered during the
years 2008 and 2009.
The company also has a plan to expand its activities in transportation of
petrochemicals through the National Chemical Carriers Company Ltd. It is also
updating the fleet of petrochemicals‘ transport by raising its capacity to 1.37 million
317
deadweight tons served by 32 modern petrochemical tankers after delivering the 16
tankers that are being currently under construction according to contracts signed
with SLS SHIPBUILDING Company. The strategic plan of the company
recommends building four multiple-purpose vessels which shall be contracted for
during the remaining period of the plan. These new buildings will increase the fleet
of the company significantly, resulting in increased business activity and better and
timely service to its customers.
The Strategic Plan
The Five- Year Strategic Plan (2009-2013) called for entering into other
investments in the area of marine transportation and the other complementary
activities as well as utilizing the potential opportunities at the right time after
conducting the necessary studies and ascertaining the economic feasibility based
on a number of factors including the fair profit 40 return, the expected growth rate
for the specific business, in addition to the Company's ability to enter into such
activities in a vigorous way that suits its competitive strengths. Under this strategic
plan, the company will also implement growth-oriented initiatives in operational,
financial, administrative and technical areas. The company is making efforts to
provide the customer with an integrated service. The company took initiatives for
reengineering its capital structure so that funds are available for the planned fleet
expansion. NSCSA enjoys a broad customer base of leading client on the local and
global levels. With its global services covering the five continents, the company can
expand its operations as a part of its five year approved strategic plan.
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 Threats of Indian shipping industries
Major developments taking place in Sri Lanka's port sector may reduce demand for
transshipment services at Southern Indian ports.
A government tax on iron ore exports may lead to a fall in bulk shipments at major
export terminals.
India's ports have suffered from congestion during 2011, potentially slowing the
country's growth trajectory.
 Threats of Saudi Arabia shipping industries
Stringent Maritime Regulations
The company‘s operations are subject to various governmental regulations in the form of
numerous international conventions, national, state and local laws and national and
international regulations in force in the jurisdictions of the countries in which such tankers
operate. Some of these regulations include the U.S. Oil Pollution Act of 1990, the
International Convention on Civil Liability for Oil Pollution Damage of 1969, International
Convention for the Prevention of Pollution of the International Maritime Organization and
the International Convention for the Safety of Life at Sea of 1974. These regulations
impose strict liability over the tanker companies which cause damage to the environment
through discharge of oil. In addition, these regulations demand strict technical and
operational requirements for tankers which may be expensive to maintain. The companies
engaged in shipping activities are required to maintain high standards of safety and quality
of vessels to avoid any accidents and leakages.
The high standards are to be maintained in the crude and petrochemical carriers, which
result in higher maintenance costs. Further, these regulations and quality standards are
updated periodically, resulting in new set of standards. Meeting the constantly changing
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vessel specifications can be very expensive and can decrease the profit margins of the
company.
Volatility in Charter Rates
The charter rates in the crude oil shipping, petrochemical shipping and the cargo shipping
sectors have been historically volatile. These rates are affected by various factors like
fluctuations in the international demand for the products carried by these vessels, fuel
prices, political instability and fluctuations in crude oil production, availability of vessels,
trade restrictions imposed by international governing bodies and the restrictions imposed
by regional governments. In addition, there is a risk of cancellation of long term contracts
by the customers due to various reasons. The volatility in charter rates makes the
operations and profits of the company unreliable and necessitates good planning and
scheduling and long term contracts to maintain the profitability.
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321
Trade Relation between
Saudi Arabia and India
India and Saudi Arabia are old business partners. Our trade relations date back tens of
centuries. Today, the bilateral business ties are being steadily expanded and further
strengthened by continuous interaction and cooperation, including regular exchange of
business delegations. Besides being a major trade partner, India sees the Kingdom as an
important economic partner for investments, joint ventures, transfer of technology projects
and joint projects in third countries.
India-Saudi business relations are growing strongly reflecting the inherent strength and
complementary nature of the two economies. The various occasions for high-level dialogue
322
on business matters and regular exchange of delegations have established a sound basis
for a constructive, mutually beneficial relationship.
India-Saudi bilateral economic relations are on the upswing and with the privatization and
diversification of the Saudi economy underway in a big way, it offers innumerable
opportunities for Indian companies and investors.
India-Saudi economic relations have shown remarkable growth with bilateral trade
registering three-fold increase in the last five years. Saudi Arabia is the 4th largest trade
partner of India and the bilateral trade was USD 36 billion in 2011-12. The import of crude
oil by India forms a major component of bilateral trade with Saudi Arabia being India‘s
largest supplier of crude oil, accounting for almost one-fifth of its needs. Saudi Arabia is the
14th largest market in the world for Indian exports and is destination of more than 1.86% of
India‘s global exports. On the other hand, Saudi Arabia is the source of 6.35% of India‘s
global imports. For Saudi Arabia, India is the 5th largest market for its exports, accounting
for 7.80% of its global exports. In terms of imports by Saudi Arabia, India ranks 6th and is
source of around 4.9% of Saudi Arabia‘s total imports.
Top items of Exports from India:
Main Indian exports include Mineral Fuels, mineral oils and products thereof; cereals;
nuclear reactors, boilers; electrical machinery and equipment; Iron and steel; organic
chemicals; meat and edible meat offal; articles of Iron or steel; articles of apparel and
clothing accessories; etc.
Top items of Imports by India:
India‘s major imports from Saudi Arabia are Mineral Fuels, mineral oils and its products;
organic chemicals; plastic and its articles; inorganic chemicals; fertilizers; aluminum and its
articles; iron and steel; copper and its articles; miscellaneous chemical products; raw hides
and skins and leather; etc.
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Indian Companies in Saudi Arabia
1) Air India
2) Wipro ltd
3) Tata motors ltd
4) Tata consultancy services
5) Jet airways
6) State bank of India
India‘s exports to Saudi Arabia have nearly doubled in last four years, according to latest
data out from the Ministry of Commerce. The exports to Saudi Arabia have increased from
US $ 2590.77 million in 2006-07 to US$ 5,227.19 million in 2010-11. The total trade
between India and Saudi Arabia has increased from US $ 15,946.10 million in 2006-07 to
US $ 25,612.46 million in 2010-11.
Similarly, the imports from Saudi Arabia has increased substantially from US$ 13,355.33
million in 2006-07 to US$ 20,385.28 million in 2010-11 and the principle items of imports
are Petroleum (Crude & Products), Organic Chemicals, Artificial Resin, plastic, Material
etc. India imports almost 23% of its crude oil requirements from Saudi Arabia.
 Indian vegetable exports
0nions vegetable
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Table I: Onions Imported by S.Arabia Value in $'000
Exporters
2006
2007
2008
'World
29,672
25,354
34,912
'Egypt
10,610
11,667
18,388
Yemen
2,266
6,416
9,179
'India
5,322
3,775
4,964
2009
43,494
26,211
13,841
1,509
2010
35,581
17,241
10,316
4,682
2009
2,950
872
572
2010
3,639
1,799
771
Chillies vegetable
Table I: Chillies Imported by S.Arabia in US$'000
Exporters
2006
2007
'World
6,068
3,765
Syria
4,048
2,030
'India
366
661
2008
3,476
1,374
748
 Indian fruits export
Bananas
Table I: Bananas Imported by S.Arabia Value in US$'000
Exporters
2006
2007
2008
'World
50,996
58,651
81,120
Philippines
23,798
27,994
29,545
'Ecuador
15,098
16,689
34,388
Yemen
10,179
10,118
15,877
'India
754
935
1,075
2009
93,145
43,474
28,600
19,274
1,024
2010
113,621
66,328
28,319
17,559
1,073
Pineapples
Table I : Pineapples Imported by S.Arabia Value in $'000
Exporters
2006
2007
2008
'World
1,836
1,367
1,561
2009
1,823
2010
2,638
Thailand
925
349
369
391
430
'India
249
629
480
328
356
325
Mangoes
Table I: Mangoes Imported by S.Arabia Value in $000
Exporters
2006
2007
2008
'World
23,846
20,993
26,019
'Yemen
1,368
2,223
4,904
'Pakistan
5,492
6,228
7,159
'India
10,928
6,203
3,949
2009
29,015
6,627
9,023
5,292
2010
27,634
8,570
6,108
4,846
Grapes
Table I : Grapes Imported by S.Arabia Value in $'000
Exporters
2006
2007
2008
'World
18,319
13,179
11,722
'Chile
2,406
2,473
2,434
'South Africa
2,424
2,917
2,055
India
1,006
758
948
(Placeholder1)
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2009
17,882
5,783
2,506
1,355
2010
16,776
5,440
3,300
2,191
Trade Relation between Saudi
Arabia and Gujarat (India)
327
Gujarat can achieve 400 billion dollars worth of exports by 2020, said a study by the
Federation of Indian Export Organisations (FIEO), which was released as part of the
Vibrant Gujarat pre-events Tuesday.
The study, Export Competitiveness of Gujarat: Vision 2020, provides strategies
required to increase the share of Gujarat in the country‘s exports currently pegged at
24% (75 billion dollars) to 35% by 2020.―In India‘s total exports figures last year,
Gujarat contributed around 70% in the gems and jewellery sector, 30% in
pharmaceuticals, 20% in textiles, 12% in engineering and 18% in chemicals. Everything
is in double digits which gives us confidence that Gujarat can attain the vision of
achieving 400 billion dollars by 2020,‖ said FIEO president Rafeeque Ahmed.
―Growth is possible because of the variety of sectors are on the offing (in Gujarat).
Compared to other states where the percentage of exports from manufacturing is a
mere 20, in Gujarat, it is 80,‖ he said.
The study highlights the potential of exports for existing as well as new products,
including major markets and competitors in such markets. It predicts that Gujarat may
contribute over one third of the country‘s total export trade by 2020.
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 Macrocom Import- Export Private Limited, Ahmadabad,
Gujarat
"Macrocom Import-Export Pvt. Ltd." Manufactures and exports various engineering
goods for the plastic industry. Our expertise comes from over 20 years of industrial,
technical and professional experience. We manufacture and export Injection and Blow
Mould for household and industrial applications, and plastic production accessories
such as water cooler taps and handles (for bucket/drum/tubs, pail and crate) steel lock
rings for plastic and steel drums, clamps of different sizes and designs, rubber o-rings,
stainless steel inner for casseroles. We also export Color Master Batches.
Our central office is based in Ahmadabad in the state of Gujarat in India. We have
several factories located throughout the western part of India. We also have a regional
office and a warehouse in Mumbai, India. Our clientele is based across Saudi Arabia,
Middle East and Africa. Macrocom can be your reliable partner for manufacture and
exports of engineering goods for your plastic products. We are committed to making
quality products at competitive prices. With a team of talented engineers, we have the
expertise to make customized goods for your products and are very confident that we
can
meet
your
needs.
Under the leadership & vision of our mentor, 'Mr. Suresh D. Chavda', we have
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consolidated our position in the market. His brilliant managerial skills, vast industry
experience and zeal to maximize clients' satisfaction have helped us in reaching the
towering heights of success.
Company Profile
Basic Information
Business Type
Ownership & Capital
Year of Establishment
Ownership Type
Importer
Manufacturer
Exporter
2008
Private Limited Company
Trade & Market
Annual Turnover
Rs. 2 - 5 Crore ( or US$ 400 K - 1 Mn Approx.)
Team & Staff
Total Number of Employees
Upto 10 People
Company USP
Primary Competitive Advantage
Large
Product
Line
Provide
Customize
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Large
Production
Capacity
d Solutions
Packaging/Payment and Shipment Details
Payment Mode
Shipment Mode
Cash
Cheque
DD
Online
By Cargo
By Road
By Sea
Product profile
1) Rubber Production Accessories
Macrocom manufacturer and exports variety of rubber products for plastic packaging
and automotive industries. Rubber Production Accessories are O-Rings, Rubber
Gasket, Rubber Wheel For Trolley, Vented Valve for others. We manufacture rubber
products in various & design. Our Rubber Products are made from premium quality
rubbers: natural rubber, silicone, neoprene, EPDM, nitrite and polyurethane. Our
manufacturing process ensures rubber products are durable and dimensionally
accurate and conforms to various standards such as DIN, BS, ISO and ASTM.
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2) Blow Mould
We have the capability and expertise to provide custom-made injection and Blow Mould.
We use state-of-the art technology such as CNC and spark erosion and employ many inhouse engineers. Macrocom supplies these quality moulds at a cost-effective price, helping
you to be more industrially competitive. Please look at the various moulds and its end
products we have supplied over the years. To get more information on the moulds we can
have custom made for you.
3) Injection Mould
We have the capability and expertise to provide custom-made Injection Mould. We use
state-of-the art technology such as CNC and spark erosion and employ many in-house
332
engineers. Macrocom supplies these quality moulds at a cost-effective price, helping you to
be more industrially competitive. Please look at the various moulds and its end products
we have supplied over the years. To get more information on the moulds we can have
custom made for you.
4) Water Cooler Tap
Macrocom manufactures and exports taps for Water Cooler Tap. We manufacture plastic
taps of different designs including push - button type, pull type and rotational type in
various sizes and colors. We use quality raw materials (Polypropylene and ABS) and
precision dies to produce Taps of best quality and finish.
333
5) Galvanized Steel Lock Ring & Clamp
Macrocom's drum Galvanized Steel Lock Ring & Clamp are manufactured in different
sizes and thickness. We use quality steel along with precision dies to produce steel rings of
best quality. We also have the capability to manufacture many different designs of the Lock
or clamp to suit your drum steel ring. Our drum steel rings are available in 20-220 L sizes.
334
(Placeholder1)
 PARIMAL IMPORT & EXPORT ,RAJKOT,GUJARAT
Business Type
Export Percentage
Company Profile
Exporter , Manufacturer , Supplier, Trader
90%
335
Primary Competitive
Advantages
Qualitative products
Competitive pricing
On-time delivery of consignments
Transparent business dealing approach
Sales Volume
7 Crores
No of Staff
120
Year of Establishment
1960
No of Production Lines
1
Export Markets
Europe
Middle East
Far East
U.K.
Saudi Arabia
Production Type
Manual
Monthly Production Capacity
900 Tones
Product Range
Non-Woven Fabric Bag Making
Machinery
Non Woven Bag Making Machinery
Waste Tyre Recycling Machinery
Waste Tyre Oil Refining Machinery
Engineered Tyre Recycling Equipment
Pyrolysis Oil Plant and Machinery
Industrial Plastic Recycle Machinery
Handle Bag Attach Machinery
Plastic Recycling Machinery
Product of primal ltd
336
337
Policies and Norms of Saudi Arabia
for import and export
338
The documents required for all commercial shipments to the Kingdom of Saudi Arabia,
irrespective of value or mode of transportation, are: a commercial invoice, a certificate of
origin, a bill of lading (or an airway bill), a steamship or an airlines company certificate, an
insurance certificate (if goods are insured by the exporter) and a packing list. Depending
on the nature of goods being shipped, or upon certain requests from the Saudi importer or
in a letter of credit (L/C), or according to clauses in a contractual agreement, specific
additional documents may also be required (see "Special Documents" below).
(1) Notarized by a Notary Public.
(2) Sealed and certified by a local U.S. Chamber of Commerce.
(3) Sealed and certified by an approved U.S.-Arab Chamber of Commerce.
(4) Legalized by one of the Consulates General of Saudi Arabia in the U.S.
The Saudi Arabian Consulates legalize only one copy. Additional copies will be
legalized upon request. The Saudi Arabian Consulates will legalize the respective
documents for $8.50 per document or page (an original or a copy). All fees must be
submitted in the exact amount. No cash or personal checks will be accepted.
Payments should be made by a company’s check, a cashier's check, or a money
order payable to the Royal Embassy of Saudi Arabia, or to the relevant Saudi
Arabian Consulate. Companies’ checks, money orders or cashier's checks must be
signed.
Each document should be prepared in (at least) one original and one copy. The certifying
U.S.-Arab Chamber of Commerce will retain the copy. The original is legalized and
339
returned. All documents (originals or copies) should bear the handwritten signature of the
person issuing the document. Facsimile signatures are not accepted.
All documents sent in by mail must include a self-addressed stamped envelope. Saudi
Arabian Consulates will not return any documents without a self-addressed stamped
envelope. Documents presented by hand will only be released upon presentation of the
consular receipt.
 Description of Shipping Documents:
•
Commercial Invoice
All commercial invoices must be on the letterhead of the exporting company. All
commercial invoices must be on the letterhead of the exporting company. The invoice
should contain names and addresses of consignor and consignee, accurate description of
goods and components (trademarks, name of the vessel or airlines) and the date of sailing,
port of loading and port of discharge, net and gross weight, quantity, unit price and
extended price of each type of goods, total value of the shipment, contents of each
package and container, currency, number of L/C (if applicable) and freight and insurance.
As of 1/1/1417 H., corresponding to May 18, 1996, the Saudi customs authorities have
emphasized that commercial invoices issued by exporters should contain accurate
description of goods being exported to the Kingdom, for example:
A) For equipment:
- Line, number, and size of exported item.
- Model number.
- Trademarks.
- Manufacturer‘s complete name.
- Any other information helpful in identifying the exported equipment.
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B) For other exported products:
- Complete material description including type, size, weight, and percentage of its
components if possible.
- Complete name(s) of manufacturer(s) or producer(s).
- Trademarks.
- Any other information pertaining to the type of the exported item to the Kingdom of Saudi
Arabia.
In addition, all commercial invoices should be certified by a responsible official of the
exporting firm as follows:
•
Certificate of Origin:
This certificate must be issued by the manufacturer (or the exporting firm). In addition to
the name of the vessel (airlines) and the date of sailing, name(s), nationality(ies), and full
street address(es) of the manufacturer(s) of all items to be shipped to Saudi Arabia, and
components thereof, must be declared. Furthermore, the origin of each item or component
must be specified. A signed statement to the effect that the document is true and correct
must be given.
If the merchandise to be shipped to Saudi Arabia is not solely and exclusively originated in
the U.S., then a notarized "appended declaration to certificate of origin" (available at
any Saudi Consulate), must be attached to the certificate of origin.
In addition, the certificate of origin must include name and address of the Saudi importer,
description of the goods, and address of the shipping company.
•
The Bill of Lading (or Airway bill):
One non-negotiable copy of the bill of lading is to be presented to a Saudi Arabian
Consulate. The bill of lading should agree with the commercial invoice and show
341
description, value, net and gross weight of shipped goods. Likewise, volume and
measurement, marks, number of packages, name and address of consignee (Saudi
importer) and consignor, name and address of shipping company and/or shipping agent,
name of vessel and date of sailing, port of loading and port of discharge, etc., should be
mentioned. Marks and numbers should agree with those on invoice and containers.
•
Insurance Certificate:
This certificate (issued by an insurance company in at least one original) must contain the
following information: actual amount of insurance, description and value of insured goods,
name of vessel, port of loading and Saudi port of discharge, and name and address of
beneficiary. Moreover, the appended declaration to insurance policy (form of which is
available at any Saudi Arabian Consulate) should state that the insurance company has a
duly qualified and appointed agent or representative in the Kingdom of Saudi Arabia, giving
his name and full address.
Note: If the shipment is insured by an insurance company in Saudi Arabia, the exporter, on
his letterhead, must state the name and address of said company.
•
Packing List:
This includes names and addresses of consignor and consignee, description and value of
the exported goods, net and total weight, number of packages and their contents, number
of containers and contents, numbers of seals, and number of L/C (if applicable).
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343
Policies and Norms of India for
import and export
1. Foreign Trade Policy
India‘s Foreign Trade Policy (FTP) originally introduced to regulate and control trade,
particularly imports, in order to preserve the country‘s foreign exchange, is now designed
to serve as a trade promotion mechanism. The objective of FTP is to accelerate India‘s
global merchandise trade- to double our percentage share in 5 years- and to act as an
effective instrument of economic growth. The process of liberalisation of FTP started in
April 1992, and become an ongoing process towards removal of restrictions and achieving
simplification. As an export promotion tool, FTP provides for various incentive schemes for
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exports: duty-free import of raw materials required for export production, import, on
concessional duty, of capital goods and plant & machinery required for export production,
and special schemes for EOU, SEZ and areas having potential for export of
agri/horticultural products. A special Agriculture & Village Industries Scheme (Vishesh
Krishi Gram Udyog Yojana) has been introduced under the FTP to facilitate export of fruits,
vegetables, flowers, minor forest produce, dairy, poultry, value added products and Gram
Udyog products.
DGFT, functioning under the Ministry of Commerce and Industries, Government of India,
regulates the country‘s export-import trade, and formulates the related policies and
procedures. In its role as facilitator of foreign trade, the office of DGFT has simplified a
number of procedures such as the procedure for registration of IEC code. Online access,
through internet, has been introduced for activities such as viewing IEC status and
submission of documents (electronic filing). Schemes such as Duty Drawback, Duty
Entitled Pass Book, and Standard Input Output Norms for availing incentives, have been
simplified to make them more user-friendly.
2. Foreign Exchange Regulations
Reserve Bank of India (RBI) is vested inter alia with the task of monitoring India‘s foreign
exchange inflow and outflow. Prior to the economic liberalization process which
commenced in the 1990‘s, foreign exchange was a scarce commodity and its release was
governed by the Foreign Exchange Regulation Act (FERA). With liberalization of the FTP,
RBI‘s role has evolved into that of a facilitator. FERA has been replaced by the Foreign
Exchange Management Act (FEMA) with the objective of facilitating external trade and
payments, and for orderly development and maintenance of foreign exchange market in
India. Commercial banks through notified Authorized Dealers (ADs) and financial
institutions have been given greater flexibility in meeting the foreign exchange
requirements of exporters. Based on the FTP, ADs have been given increased autonomy
to extend facilities to exporters, and need to seek RBI‘s prior permission in very select
cases. ADs are authorized to receive advance payment for exports, change of buyer,
reduction in value, write-off of unrealized export bills and permit Exchange Earners‘
345
Foreign Currency Account (EEFC), in which prescribed percentage of export earnings can
be credited. Reflecting the liberalized environment and the comfortable position of India‘s
foreign exchange reserves, RBI‘s Exchange Control Department has been renamed as
Foreign Exchange Department. ADs now handle the export transactions in conformity with
the FTP announced by DGFT and the directions issued by RBI from time to time.
3. Export Procedure & Documentation
Setting up an export business requires basic documentation such as a Permanent Account
Number (PAN card), Importer Exporter Code (IEC) from DGFT office and opening a bank
account. Other key factors include knowledge of trading systems, FTP and Industrial
Policy, access to market information (for which internet is a good source), ensuring product
quality and compliance with export procedures & documentation.
The Ministry of Commerce, through the Director General of Foreign Trade (DGFT),
controls the Foreign Trade Policy (FTP), while the Ministry of Finance, through the Reserve
Bank of India (RBI) and the Indian Customs, controls the physical movement of goods and
services and the transactions of foreign exchange (both inflow & outflow) from the country.
Receipts of proceeds of exports by way of foreign exchange and payment for imports to
foreign suppliers by way of foreign exchange are to be routed through normal banking
channels only
Some Common Terms used in International Trade
• EXW (Ex Works) at a named point of origin (e.g., ex-factory, ex-mill, ex-warehouse).
Price quoted applies only at the point of origin. All other charges are for the account
of the buyer.
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• FCA (Free Carrier) to a named place. Price envisages seller's responsibility for cost
of loading goods at the named shipping point.
• FAS (Free alongside ship) at a named domestic port of export. Price includes
charges for delivery of the goods alongside a vessel at the port. The seller handles
the costs of unloading and wharfage; all other costs viz. loading, ocean
transportation, and insurance are left to the buyer.
• FOB (Free on Board) at a named port of export. Price covers all costs up to and
including delivery of goods aboard an overseas vessel.
• CIF (Cost, Insurance, Freight) to a named overseas port of import. Price of goods
includes insurance, all transportation and miscellaneous charges upto the point of
debarkation from the vessel (used for ocean shipments only).
• CFR (Cost and Freight) to a named overseas port of import. Price of goods includes
costs as above except insurance (used for ocean shipments only).
•
CPT (carriage paid to) and CIP (carriage and insurance paid) to a named place
of destination. Used in place of CIF and CFR respectively, (used for shipment by
modes other than water).
• Payment Terms: The common payment terms in export are:
� Advance payment (Payment by Buyer before shipment of goods);
� Documents against payment (Delivery of shipping documents to Buyer against
payment);
� Documents against acceptance (Delivery of shipping documents to Buyer
against acceptance by Buyer/its bankers to effect payment on the agreed date);
Letter of Credit (an arrangement whereby a bank {the Issuing Bank} acting on the
instructions of a customer {the buyer} is to make a payment to the beneficiary {the
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seller} or is to accept bills of exchange (drafts) drawn by the Beneficiary {the seller}. It
is, in short, an undertaking or a guarantee by a bank of payment to the beneficiary
should certain conditions be met).
Insurance: Export shipments are usually insured against loss, damage and delay in
transit, by cargo insurance. For international shipments, the carrier's liability is
frequently limited by international agreements. Cargo insurance may be made by either
the buyer or the seller, depending on the terms of sale.
1. Documentation
Risks are inherent in both domestic trade and international trade, but the degree of risk is
higher in international trade. Hence, proper documentation mitigates the risk in
international trade. Documentation must be precise. Slight discrepancies or omissions may
prevent merchandise from being exported, result in exporting firms not getting paid, or
even result in the seizure of the exporter's goods by local or foreign government customs.
Collection documents are subject to precise time limits and may not be honoured by a
bank, if out of date. Much of the documentation is routine for the freight forwarders or
customs brokers acting on the firm's behalf, but the exporter is ultimately responsible for
the accuracy of the documentation. It is said that ―International Trade is a sale of
documents‖. It is very important to clearly understand the documents involved in the
transaction to avoid the risk factors and adhere to the legal obligations.
The entire documentation in export trade can be basically divided into two categories:
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Export Documents
Pre-shipment Documents
Post-shipment Documents
Pre-shipment documents are those that an exporter has to generate, authenticate and
submit to the concerned authorities and departments to get the necessary clearances, prior
to the actual shipment of the cargo, so that the cargo can be shipped out with valid
documents. The pre-shipment documents are generally prepared when the product is
ready for export and prior to shipment.
The standard pre-shipment documents include:
• Customs Invoice
• Packing List
• G R Form (original and duplicate)
• ARE-1 Form (original and duplicate)
• Copy Of Export order
• Letter Of Credit
• Shipping Bill (entire set)
• Export Licence(for notified items)
• Certificate Of Origin
• Certificate Of Inspection
• Any Other Documents (as required in L/C or by Customs)
The post-shipment documents comprise the certified copies of some of the main pre-shipment
documents and certain additional documents to be generated and compiled by the exporter so that
the proof of shipments can be properly presented to the negotiating bank for collecting the
payments through L/C or for presentation to the foreign buyer for collection of payment
through the nominated bank.
The standard pre-shipment documents include
• Custom attested invoice
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• Custom attested packing list
• Copy of Export Order / Copy Of LC
• Commercial Invoice
• Consular Invoice (If Specified)
• Bill of Lading / Air Way Bill
• Certificate of Origin
• Certificate of Inspection (If Specified)
• Bill of Exchange (Draft)
• G R Form (Duplicate)
• Any other document specified in Export Order / LC
4. Customs Formalities
Central Board of Excise and Customs (CBEC) is assigned a number of tasks, some of
which are:
•
Collection of customs duties on imports and exports as per basic Customs laws
(Customs Act, 1962 and Customs Tariff Act, 1975);
•
Enforcement of the various provisions of the Customs Act governing imports and
exports of cargo, baggage, postal articles and arrival & departure of vessels, air
craft‘s etc.;
•
Discharge of various agency functions and enforcing various prohibitions and
restrictions on imports and exports under the Customs Act and other allied
enactments;
•
Prevention of smuggling including introduction of narcotics drug trafficking; and
•
e) International passenger processing.
350
CBEC Mission is to achieve excellence in the formulation and implementation of Customs
and Excise initiatives aimed at:
 realizing the revenues in a fair, equitable and efficient manner;
 administering the Government's economic, tariff and trade policies with a practical
and pragmatic approach;
 facilitating trade and industry by streamlining and simplifying Customs and Excise
processes and helping Indian business to enhance its competitiveness;
 creating a climate for voluntary compliance by providing guidance and building
mutual trust;
 Combating revenue evasion, commercial frauds and social menace in an effective
manner.
Some of the important documents, procedures and terms are briefly described below:
Customs Invoice: is a regulatory document for export, to be prepared in prescribed
format.
Customs Packing List: is also a regulatory document for export, to be prepared in
prescribed format.
G R Forms: Wherever manual-shipping bill is in force, GR form in the prescribed format is
a mandatory document. These forms are available from RBI or Authorised Dealers of
Commercial Banks. Under the EDI scheme, the foreign exchange copy of the shipping bill
performs the role of GR forms. In addition, a self declaration form has to be submitted by
the exporter to the bank. Both these documents perform the function of GR Form.
ARE-1 Form: It is a very important regulatory document prescribed by CBEC for the
Exemption/ Drawback of excise duty. Exporters are exempted from the payment of excise
duty, and the exemption can be availed by two methods. Exporter can pay the excise duty,
export the cargo and draw back the duty paid earlier. Alternatively, the exporter can export
351
the cargo under Bond i.e. without payment of Excise duty. In either case, the ARE-1 form
formalities have to be completed by the exporter as a pre-shipment Document. ARE-1 is to
be filled in and submitted to the Excise department at least 24 hrs in advance along with
request for inspection, sealing and certification by the department. If the export is done by
paying duty, then the specified copies of ARE-1 can be used for Draw Back. In case of
EPCG, it is used for completing the export obligation given under Bond to the Government,
and for discharging the Bond on such completion.
Custodian: The goods imported into India and exported out of India are allowed through
designated Sea Ports/ Land Custom Stations/ Airports. The goods so imported/ exported
are initially deposited in the custody of Custodian such as:
• Port authorities for goods imported through sea;
• Custodians for goods imported by airo Airport Authority of India
o Air India or STC etc
• For places other than points of landingo Inland Container Depot (ICD)
o Container Freight Station (CFS)
5. Export Factoring and Forfeiting
Global Trade Finance Private Limited (GTF), a Joint Venture, promoted by Exim with
WestLB, Germany (since replaced by FIM Bank, Malta and Bank of Maharashtra) and IFC
(World Bank), commenced business in September 2001. GTF's objective is to promote
market driven export-financing solutions for small and medium sized Indian exporters
operating in an increasingly competitive world trade environment. GTF offers, for the first
time in India, structured foreign trade financing products such as forfaiting and factoring.
Factoring is a continuous arrangement between a factoring concern and the seller of goods
and services (on credit) whereby the factor purchases the accounts receivable for
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immediate cash and also provides other services such as sales ledger maintenance,
collection and credit protection.
GTF offers various products such as:
DOMESTIC
1. Domestic Factoring
2. Reverse Factoring
3. Channel Financing
EXPORTS
1. Export Factoring ¾ with credit protection ¾ with insurance cover ¾ with recourse
2. Forfeiting
IMPORTS
1. Import Factoring
GTF has launched a new initiative to enable online sanction of Factoring facilities for
registered SSI export oriented units.
6. Export Credit Insurance
Risks such as non-payment, country, geographical, loss in transit and war are inherent in
foreign trade. Export Credit Guarantee Corporation of India Ltd (ECGC) offers policies to
protect exporters from non-payment risks of buyer/country and guarantees to banks
against non-payment by the borrower. Export credit insurance assesses the buyer and the
country risks, enabling it to devise various insurance schemes. ECGC offers different
policies tailored to the specific needs of the exporter against various risks which include:
1. Standard Policy
2. Export Turnover Policy
3. Specific Shipments Policy
4. Exports (specific buyer) Policy
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5. Buyer Exposure Policy
6. Consignment Exports Policy
7. Software Projects/ IT-enabled Services Policy
8. Small Exporters Policy
PRESENT TRADE
BARRIERS FOR IMPORTEXPORT
354
Tariffs
A tariff is a tax imposed by the local government on goods and services coming into a country. They
increase the price of the goods being imported. Tariffs were created by the government to protect
local businesses from low-priced competitive products.
Currency Fluctuation
Every county has its own currency and its patrons know how to use it but everything you know
about your own currency changes when you are dealing with another country.
The rate given by one country for another countries currency is called the currency exchange rate.
The daily exchange rate for the rest of the world is made according to the rates used when two banks
trade between different countries.
Rates of currency are always fluctuating and that can be a major barrier to trade because the buyer
could end up paying way more than intended.
When a country‘s currency is devalued in relation to another countries currency it means the country
with the lower value can sell more because the other country saves money. However, it discourages
the devalued country from buying the goods and services from the country with the higher currency
value because they would pay more for less.
Investment Regulations
355
Investors are non Canadians who must comply with the provision of the investment Saudi arabia
Act, which requires them to file a notification when they commence a new business activity in Saudi
arabia or each time they acquire control of an existing Canadian business. The investment will be
reviewed if both the investor and the vendor are from a country that is not a World Trade
organization member and if the value of the business being acquired in Saudi arabia is over 5
million. If the investor‘s country is a WTO any direct investment in excess of 223 million is
reviewable.
Environmental Restrictions
A large portion of Saudi arabia‘s economy depends on its natural resources. Foreign insects and
diseases could destroy entire industries and seriously harm the Canadian economy. Restrictions are
now placed on imports to protect Canadian crops from contamination. The Canadian law requires
that all food, plants, fish, animals, and their products that are brought into Saudi Arabia must
comply with Canadian standards.
Saudi Arabia is a signatory to the convention on International trade in endangered species of wild
fauna and flora. This agreement is against the trade on 30 000 wild animals and plant species.
In other words products that do not meet Canadian environmental standards are not allowed to enter
Saudi Arabia.
Foreign Relations and Trade Sanctions
Saudi Arabia uses trade sanctions to influence polices or actions of other nations. Also attempts to
stop human right violations by imposing sanctions instead of using force. Saudi Arabia tends to join
with other nations who share the same views to implement sanctions jointly.
The United Nations Act incorporates into Canadian law the decisions are passed by the United
Nations Security Council. The United Nations Security Council imposes a legal obligation on Saudi
Arabia to uphold the decisions enacted by the United Nations Act.
Saudi Arabia has authority which it can impose sanctions in relation to a foreign state, either as
implementing a decision, resolution or recommendation of a international or organization of states
or association of states.
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Export and Import Permits Act allows goods to be traded with regulations ( area control list, export
control list and the import control list ) Area control list is a list of restricted countries, special
permit is needed for Saudi arabia to trade to a country on this list. Export control is a list that
consists of restricted goods. Import control is a list of goods that are not permitted into Saudi arabia.
Import control list is not used to impose sanctions onto a foreign state. But there are some
exceptional circumstances.
Safety regulations
The government regulates and administers commerce and trade in specified goods under the
fallowing acts
*Food and drug act
*Meat inspection act
*Health of animals act
*Hazardous Products act
All of the acts affect both domestic and foreign imports. Each of these acts sets up many regulations.
These regulations could act as barriers to trade for foreign exporters who may need to make costly
changes in their manufacturing procedures to conform to Canadian standards.
Immigration Policies
Since the first settlers arrived in New France in the early 1600s, Saudi arabia has been a nation that
depended on immigrants to grow the country and its economy. The Canadian economy benefits
from their skills and financial investments. The immigrants maintain Saudi arabia‘s population as
well as create a demand for imports –this encourages trade and makes Saudi arabia more culturally
diverse.
Visitors
Saudi arabia welcomes visitors. People coming to Saudi arabia spend money on goods, services, or
products they purchase to take home. Many international companies wish to transfer key managers
357
and specialists to Saudi arabia for a period of time. They must apply for a work permit and if the
work permit is granted these individuals may later apply for Permanent Resident Status in Saudi
arabia.
Immigrants
People wishing to relocate from their home country to Saudi arabia must have a Canadian
Immigrant Visa. Immigrants with a Canadian Immigrant Visa are allowed to work or live anywhere
in Saudi arabia. After having the Visa for three years they can apply for Canadian citizenship and
they can sponsor a family member for Canadian Permanent Resident Status.
There are two ways to qualify for Canadian Permanent Resident Status: as an Independent
Immigrant or as a member of the Family Class. Independent Immigrants are divided into two
categories: Skilled Worker Category and Business Category.
Refugees
Refugees are peoples who have fled their country to escape persecution or war. The persecution
could be physical violence, harassment, wrongful arrest or threats to their lives. Other reasons they
might be persecuted could be for reasons of race, religion, gender, nationality, political opinion, or
membership in a particular social group. Refugees cannot rely on their own government to provide
them with legal or physical protection. They have to try and find safety in other countries.
―Asylum‖ is somewhere one can go to find safety. Individuals who flee to Saudi arabia have their
refugee claims heard before they are granted refugee status. In 2001, approximately 11 000 refugees
were granted asylum in Saudi arabia.
When refugees are in Saudi arabia they are allowed to fully participate in Canadian
society. When they come over they can seek work and go to school without hassle.
358
Potential for import and
export in Indian market
359
India is the third largest salt producing country in the world (after the US and China) with
an annual production of about 15.7 million MT in the 2004.Gujarat, Tamil Nadu and
Rajasthan produce about 97% of the total salt produced in the country and cater to the
requirement of all the salt deficit and non-salt producing states. The privet sector
contributes about 2-3%.
Indian salt industry has been unsuccessful on the export front although salt from India is
probably the cheapest in FOB terms compared to other large exporters. India has not been
able to export to its full potential largely on account of poor and inconsistent quality, high
trade and logistics costs and infrastructural bottlenecks. The above factors result in an
increase in the CIF value of Indian salt.
360
Gujarat‘s salt industry needs to focus on export markets to fully exploit the inherent
potential of the state to produce salt based on its long coast line and ideal climatic
conditions. High production vis-à-vis domestic demand, highly price competitive domestic
market, buoyant demand for salt form Asia and the Middle East and under-utilization of salt
washing capacities in India are some of the key factors that necessitate Gujarat to focus on
exports.
India is the seventh largest country in the world in terms of its land mass, number ten in the
world for the size of its economy by GDP, and the fourth largest international economy in
purchasing power equivalence. This means that in Indian Import market has a huge
potential. This potential provides huge opportunities for global suppliers / exporters as well
as Indian buyers / importers.
India's total external trade (both export and import) in the year 2008-09 has increased to
Rs.20, 72,438 crore. From Rs.91,893 crore in 1990-91. India‘s economy has grown by
about 7.5% yearly since 2000, and that rate is predicted to increase. In 2008-09 total
Indian imports was Rs.13, 05,503.
Asia and ASEAN accounted for 61.7 per cent of India's total imports during the period
followed by Europe (18.7 per cent) and America (10.1 per cent). Among individual
countries the share of China stood highest at (10.7 per cent) followed by Saudi Arabia (7.1
percent), UAE (6.4 percent) and USA (6.0 percent), Iran (4.3 percent), Switzerland (4.2 per
cent), Germany (3.6 per cent), Kuwait (3.4 percent), Nigeria (3.2 percent), and Iraq (2.8
percent).
In India importing goods is a very competitive business. Daily new businesses are entering
into the import market making it increasingly difficult for the existing players to be at
equivalence. Augment in import also bring in new and better source of global suppliers.
The list of items imported in India is:
Civilian aircraft
Diamonds
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Chemical fertilizers
Telecommunications equipment
Organic chemicals
Other petroleum products
Computer accessories
Jewelry
Medical equipment
Industrial machines
Military vehicles
Military clothing & footwear
Beverages and tobacco
Collectibles (e.g. artwork, antiques, stamps)
Engines for military aircraft
Export Genius is Market Research Company of Foreign Trade. We provide International
Import Export Data and Business Intelligence Report of 190 Countries. Our Report is
based on operational document which is required in Import and export Business such as
Bill of lading, shipping bill and Import bills. We track each container as reported by customs
and tell you who is importing, who is exporting, at what price, how much quantity and from
where. Our Business Intelligence Report will take your business to New Heights. So grow
your business by:
Tracking your competitor Shipment
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Find New Sourcing of your products
Find Potential and Untapped markets
India is a big, colorful, vibrant country with a rich tapestry of cultural diversity and history. It
is also a country of contradictions.
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Temple elephants, ancient monuments and tribal customs co-exist with state-of-the-art
industries in a country that generates atomic energy and boasts of being one the world's
top ten industrialized nations.
India is one of the world's fastest growing economies and with this growth enormous
exporting opportunities have emerged over the past few years.
There is growing support for continued economic reform in its political and business circles.
The Australian/Indian bilateral trade relationship has, at its core, the vision to strengthen
trade and investment links between our two countries.
Ian Bennett, Senior Manager, International Trade at Australian Business explains,
"Promising exporting opportunities exist for Australian companies due to a number of
factors. Over the past four years the Indian government has slashed custom duties
dramatically. Peak rates of import duties have been reduced to 20 percent from 40 percent
and further reductions in duties are promised by the government in the near future.
"Also, their Foreign Direct Investment policy is being continuously revamped by the Indian
Government to encourage foreign investments, which are now allowed freely in almost all
sectors including services. The Indian Government is offering attractive incentives for
developing, maintaining and operating infrastructure facilities; and significant tax
exemptions have also been established."
India's economy has a current growth outlook that overshadows most Asian markets.
These facts present an extremely attractive scenario of an export market with broadranging opportunities for Australian exporters.
Export opportunities of significance
Australian Business International Growth Specialist's man on the ground in India, S P
Joshi, advises that Australian businesses are in a good position to supply some of India's
fastest growing sectors.
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He identifies sectors of significant potential as: Biotechnology & Pharmaceuticals;
Chemicals; Communications; Creative Industries & Media; Education & Training;
Environment; Financial Services; Fire, Police & Security; Healthcare and Medical;
Metallurgical Process Plant; Mining; Ports & Logistics; and Power.
Potential for exporting Australian commodities also exist in the IT industry, which it is
predicted to be worth $US 77 billion by 2008, and the manufacturing textile and retail
industries.
Retail/franchising opportunities are experiencing revolutionary growth. Over 200 shopping
malls are planned over the next 18 months, an initiative which is supported by the Central
and State governments. This is the fastest growing mall development in the world.
Franchising, a popular form of retailing, has been growing at a rapid rate with chain stores
multiplying rapidly, opening up opportunities for exporters of a wide range and variety of
consumer products.
Now that restrictions for importing processed foods into India have been lifted, this too is
an area with potential and already some Australian companies have made inroads in this
area.
Bennett further comments: "Australian Business is currently working with increasing
numbers of companies who are interested in the opportunities available in India. These
companies come from a large range of industry sectors including engineering, mining
equipment and services, health and medical products and retail franchises. There has also
been some interest from companies who need assistance with joint venture operations
based in India".
Challenges
There is little doubt that exciting exporting opportunities exist in India, but Bennett warns
that with the many opportunities come certain challenges for would-be exporters.
364
For instance major changes to Australia's export processes and export reporting systems
were introduced in September 2004. These changes affect legislation and business
processes. Also a new export reporting system, the Integrated Cargo System (ICS), has
been recently introduced.
A professional helping hand
Understanding these changes and having the insights to be able to determine critical
things such as whether your product(s) are exportable; whether it is the right time for your
business to export; whether your company has sound marketing knowledge to be able to
develop a product overseas; and the pitfalls of hooking up with the wrong distributors are
just some of the issues that require considerable experience and expertise in export
management and strategic planning.
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Potential for import and
Export in Gujarat market
366
1) Infrastructure
Ports
Loading capacities at Indian ports is a major issue – the feasibility of the port authorities
investing in and owning these facilities needs to be explored. Besides, ports with good
infrastructure near salt producing regions are required. Gujarat Maritime Board may
explore the possibility of developing the existing ports / new ports / jetties by
themselves or on Public Private Partnership (PPP) basis in the areas having salt
export potential. Adequate area for stacking at ports is required, especially during peak
season.
Roads
The quality of roads needs improvement. Currently transportation by trailers is not allowed,
wherein around 50 MT can be transported. The restriction that a truck cannot carry more
than 9 MT of salt should be removed.
Railways
Non-availability of railway wagons is a perennial issue. The quota system for rail
transportation of salt should be removed.
Others
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Setting up washeries for a cluster of small manufacturers needs to be explored and the
state government should provide incentives for installation of salt washeries. Irregular /
poor quality electricity is a major problem. Production norms for salt per acre of land should
be fixed by the Salt Commissioner and monitored rigorously, so that production increases
and salt lands leased out are not kept idle. More salt lands should be allotted for captive
salt works to be started by industry.
Quality
Up-gradation of the eight testing laboratories in Gujarat and the three mobile laboratories is
required.
Policy
The current lease period of 10 years should be increased substantially – for big salt works
the lease could be perpetual or around 30 years (depending on the feasibility). A model
needs to be worked out wherein the lease period is proportional to the size of the salt work
and the minimum export promised by the producer in that period. The requirement of CRZ
environment clearance. Environment clearance should also be allowed for a larger part of
land (say 5,000 – 10,000 acres) for a cluster of salt manufacturers.
2) Zone Specific
Bhavnagar – Amreli Zone
Pipavav port is the only one in this region from where substantial amount of salt can be
exported. However, the Pipavav port is around 130 km from Bhavnagar (the production
centre of this region) and hence it is unviable to send the salt to Pipavav port from
Bhavnagar when the international prices go below a certain level. Therefore, the port in
Bhavnagar needs to be strengthened and the draft increased to achieve good loading rate.
The possibility of a new jetty may also be explored so that higher loading rate can be
achieved in this region. The problems relating to roads and railways are as mentioned in
the previous section.
Jamnagar Zone
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Lack of a port in Jamnagar and lack of proper facilities in Rozy and Bedi ports are the
major issues. Transportation to Kandla for exports increases costs by around Rs. 400/MT.
There is an urgent requirement of dredging in these ports to enable movement of bigger
barges so that better loading rates can be achieved. Alternatively the export of salt from
this region from the Vadinar jetty owned by Kandla port trust can be explored.
The New Ruling by Honorable Supreme Court requires the salt works on the forest land to
provide NPV for development cost of forest land elsewhere. This cost works out to be Rs.
5.8 to 9 lakh per hectare. This would make most of the salt works in Jamnagar region
unviable.
Maliya Zone
This zone does not have any port facility to export salt. The only port in this zone, Navalakhi is used
for importing coal. Some measures should be taken to make it possible for the white cargo to be
exported from the new jetty. A small jetty to facilitate loading of salt in 500 MT capacity barges can
be constructed in Surajbari creek and about 10 acres of land is earmarked for dumping salt and
setting up a washery. It is estimated that this project may cost about Rs.7-8 crore.
Mundra Zone
Kutch region has access to two major ports of Mundra and Kandla. The problem they face
is high berthing delays and lack of adequate storage space at these ports. Besides this the
warfage charges at the private ports are very high. Even private jetty owners need
permission from Gujarat Maritime Board for work on jetties, regularization of facilities etc.
This needs to be re-considered.
369
370
Future business
opportunities in Saudi
Arabia
Saudi Arabia has a vast number of competitive advantages in many strategic sectors at
regional and global levels, which yield significantly higher returns on investment. Of course,
it is no surprise that Saudi Arabia is ranked first with regards to prices of energy provided
371
for investment projects. As such, Saudi Arabia continues to be a natural choice for
investors in all energy intensive industries. But the competitive advantages in today‘s Saudi
Arabia run much deeper than just energy. It‘s about creating a world-class business
environment that combines an ease of conducting business with low costs. It‘s about
unfettered access to regional markets and financial services. Above all, it‘s about our
country‘s vision, and our shared commitment, to seeing your business thrive.
As the world‘s fastest reforming economy, the momentum behind this economic
transformation is undeniable. It is therefore no surprise that, in just three years, Saudi
Arabia has risen from 76th to 23rd position in the World Bank‘s Ease of Doing Business
Index and is currently number one in the Middle East. Financially speaking, investment in
Saudi Arabia realizes high profit ratios for local, foreign and shared projects, with low risk
exposures, and a simple form of taxes and property registration fees.
The Kingdom currently occupies the fifth rank regarding tax liabilities and fourth in property
registration costs, according to business performance reports 2006/ 2007 issued by the
International Bank. Thus, under such a pro-business environment, firms in Saudi Arabia
thrive. According to a comprehensive study published by Arab Forbes Magazine‘s in late
2006 assessing the performance of (1616) joint-stock companies in the Arab world, the first
three positions were Saudi companies. Out of the top 50 companies, 22 were Saudi
companies when applying a number of rigorous standards such as operational efficiency,
market value, sales, revenues, dividends, return on equity, return on two last year assets
(2004 - 2005), and company expected growth.
In the banking sector, the ten Saudi banks are among the best banks in terms of
profitability and growth potential in the Arab World. These Saudi banks comfortably rest
within the list of biggest 1000 banks of the world, according to the Financial Times 2006.
Also the 3 biggest banks in the Arab world are Saudi, ensuring comprehensive financial
support for your business from every angle. Monetarily speaking, the Saudi Riyal is one of
the most stable currencies in the world, and offers great competitive advantages in the
region. There has been no significant change in its exchange value during the last 3
decades. There are no restrictions on foreign currency exchange and outgoing money
transfers. Inflation rates in Saudi Arabia are very low and the Kingdom is endeavoring to
372
sign bilateral agreements with an increasing number of countries regarding investment
encouragement,
protection
and
arrangement
of
taxation
issues.
A report issued by Milken International Corporation in Feb. 2007, noted all of the above
points in bestowing upon the Kingdom of Saudi Arabia the first rank worldwide with respect
to total economic environment classification (i.e. environment capability for project
management and financing). Milken Corporation focused on Saudi Arabia‘s low and stable
interest rates, low inflation and low taxes, compared with international standards.
The majority of Saudi Arabia population is young, with 45% of the country under 15 years
of age. Recognizing this as the country‘s greatest potential asset, the Government has
spent billions of dollars towards actively improving the human resources development
pattern to better provide for the economic boom set to continue in Saudi Arabia for the near
future.
All of this provides investors with more opportunities to select the highest caliber labor for
their projects. Recently, the government launched the Human Resources Development
Fund to train and recruit Saudis and provide many incentives for companies that employ
nationals through the provision of aids and support for activities related to qualifying,
training and recruitment of labor, contribution in the private sector Saudi laborers‘
qualification and training costs, and even covering a percentage of the salary of Saudi
labor employed by the private sector. What does this all mean for your business? More
productivity. Expanded output. Higher Profitability. And above all: boundless potential in
the world‘s fastest reforming business climate.
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 Scope in future industry
2. Leading Sectors for Exports and Investment in Saudi Arabia
Saudi Arabia seeks to attract capital-intensive and highly automated industries. Other
important characteristics are that the projects incorporate technology transfer, import
substitution, and transfer of management expertise. According to the U.S. Department of
Commerce‘s Saudi Arabia Country Commercial Guide for fiscal year 2005, the top sectors
for U.S. investment and exports in the Kingdom are
1. Electrical Power Systems
Saudi Arabia has one of the highest per capita power consumption rates in the world,
and demand continues to grow at a rapid pace. The Saudi Government plans to invest
$30 billion to increase electrical capacity by 20,000MW by 2010. Private investors are
also expected to participate in this growth. In the area of power transmission, the
Saudi Government approved the formation of the Gulf Interconnection Authority (GCIA)
in 2001, which will connect the power grids of the GCC states. The project took a
major step forward in 2004 when a funding plan was approved.
2. Water Resources Equipment
Saudi Arabia is the largest producer of desalinated water in the world. Desalination
meets approximately 70 percent of Saudi Arabia‘s present drinking water needs. The
country‘s 30 desalination plants produce more than600 million gallons of water per day
(over 1 billion cubic meters per year). Per capita water consumption in Saudi Arabia is
among the highest in the world. Industry sources expect desalination to remain a major
industry in Saudi Arabia for quite some time. The Saudi Government plans to build 16
desalination facilities worth $14 billion over the next17 years.
374
3. Oil and Gas Equipment and Services
Saudi Aramco, the largest oil company in the world, continued its exploration and
production activities throughout 2002 and 2003. Large-scale projects worth hundreds of
millions of dollars were completed to sustain the company‘s crude oil production capacity
of 10 million barrels per day. The company‘s management continues to invest in new
production programs to secure cost-effective supplies of crude oil for the future.
4. Security and Safety Equipment
Imports of industrial security equipment into Saudi Arabia in 2002 totaled $164 million, a
13 percent increase from 2001. Heightened security concerns are likely to ensure the
continued increase in security imports by approximately 11 percent per year over the next
few years.
While physical security projects are ongoing in oil companies, industrial
facilities and airports, the major focus is now on personal protection. Many facilities are
examining and improving road blockers, tire killers, x-ray equipment and personnel
protection items
5. Chemical Production Machinery
The Saudi Arabian Basic Industries Corporation (SABIC), one of the world‘s largest
petrochemical companies, underwent major restructuring measures to increase efficiency
and improve customer service. The overall petrochemicals market in Saudi Arabia is
expanding because of an increasing number of private joint ventures that are expected to
come on stream over the next three years. U.S. manufacturers/suppliers of industrial
equipment to the petrochemical industry may find excellent opportunities evolving from
new projects undertaken by SABIC and private sector entities in the Saudi market. Joint
ventures will continue to be a viable strategy for Saudi Arabia‘s petrochemical industry.
6. Medical Equipment
Saudi Arabia‘s medical equipment market is large and growing. Saudi Arabia accounts for
375
65 percent of total imports to the GCC countries.
This growth is influenced by an
increasing number of hospitals and clinics, as well as hospital expansions and upgrades,
and the constant need for advanced equipment for both diagnostic and therapeutic
applications. The Ministry of Health is the largest provider of health care services in
Saudi Arabia, and the government allocated $4 billion for the health care sector in 2003.
7. Telecommunications Equipment and Services
Telecommunications services remain one of the most dynamic sectors in Saudi Arabia.
Since its privatization in 1998, the Saudi Telecom Company (STC) has been carrying out
major telecommunications\projects throughout the country.
New telecommunications
regulations will facilitate the deregulation of this industry and ultimately create a second
telecom operator. Opportunities for U.S. firms exist in the broadband sector where STC
has ambitious plans to expand and upgrade its telecommunications services based on the
latest broadband technologies. These services include fast Internet services and digital
subscriber lines (DSL).
8. Education and Training Services
The Saudi Government recently passed a law allowing foreign educational institutions to
set up schools and colleges in the country. In 2002, the Saudi Government issued 19
licenses for international schools, and also approved the establishment of 36 colleges.
Training needs are becoming increasingly important as more high school and university
graduates enter the labor market. Industry sources expect training requirements to grow
5 percent per year over the next three years. Among the factors contributing to this rapid
increase is the Saudi Government plan to replace 60 percent of the estimated six million
expatriate workers with Saudi nationals by 2005.
9. Auto Parts and Service Equipment
Saudi Arabia remains one of the largest import markets for motor vehicles, auto parts
and service equipment in the Middle East. Saudi Arabia has an extensive road network,
a population of over 24 million and an estimated 8.2 million registered vehicles. Most
376
Saudi households have at least two vehicles, one of which normally accommodates a
large family. Vans and carryalls are popular with Saudi families, as are four-wheel drive
recreational vehicles. Declining per capita income and the high cost of new cars have
increased the demand for used vehicles. The market for auto parts has also grown
dramatically, and industry sources believe that the Saudi market for automotive aftermarket parts is expected to continue to grow by approximately 4.6 percent per year. As
more car makers, models and advanced technology are introduced, the Saudi spare
parts market will also evolve.
10. Insurance Services
New health insurance and automobile insurance requirements in Saudi Arabia represent
favorable opportunities for U.S. firms. According to local insurance experts, the health
insurance market in Saudi Arabia is expected to grow to $40 billion over the next five
years. There are over 70 foreign companies selling insurance in Saudi Arabia and in
2001, these companies generated an annual turnover of $800million.
Several
international companies have entered into negotiations with Saudi partners to open offices
in the Kingdom. In July 2003, the Saudi Cabinet issued a new cooperative health
insurance law. The law has been implemented gradually and will eventually require all
employers to pay for insurance coverage of foreign workers and dependent family
members.
11. Air Conditioning and Refrigeration Equipment
Saudi Arabia remains one of the fastest growing markets for air conditioning and
refrigeration equipment.
American and Japanese manufacturers have traditionally
controlled the market, although Korean brands, especially the split system, are gaining
ground. After a relatively flat year, the market is expected to pick up again in 2004,
reaching the $1 billion mark. U.S. suppliers dominate the packaged and central units,
which are usually associated with large construction projects.
Local manufacturing
consists mainly of window-type units, which has the highest turnover in the Saudi market.
In the refrigeration sector, there is ample and continuous need for cold storage facilities,
both stationary and mobile.
377
12. Computers and Peripherals
The information technology (IT) market is expected to see an average growth rate of 8.3
percent in the 2002-2005 periods. Total IT spending in Saudi Arabia is about $3 billion a
year and represents 50 percent of total GCC spending. The hardware market constitutes
the largest percentage of IT expenditures in Saudi Arabia. PC shipments dominated the
hardware market, representing 78 percent of total hardware shipments during the first
quarter of 2003, while laptops accounted for 19 percent of PC shipments. Good growth is
expected in notebook sales with easier Internet access through wireless hot-spot
connections. Some vendors report that there is growing demand for Gigabit Ethernet
solutions, while enterprises with multiple affiliates or
Groups are investing in metropolitan area networks (MANs), migrating to 10 Gigabit
Ethernet. Wireless is extremely popular in Saudi Arabia since fiber is proving to be
costly.
13. Franchising
The Saudi franchise market is still lucrative and remains untapped in many sectors.
There are already a large number of U.S. fast food restaurants in the country, but a
relatively young population is always seeking new and trendy brand
14. Drugs and Pharmaceuticals
The latest figures indicate that Saudi Arabia spends more than $1 billion a year on drugs
and pharmaceuticals. The Saudi public sector represents 40 percent of the demand for
pharmaceuticals, while private hospitals and households account for the balance. The
share of local manufacturers has grown in recent years from 20 percent in 2001 to more
than 25 percent in 2002, when it reached a three- year high of $339 million. Saudi Arabia
has more than 4,600 registered drugs, both generic and patented. Many of the generic
drugs are manufactured locally under license. There are around 200 local pharmaceutical
companies registered with the Saudi Ministry of Health. U.S. firms could find their best
opportunities in joint ventures with local partners or licensing arrangements, in addition to
the supply of raw material to the local pharmaceutical industry.
378
15. Mining Equipment
The Saudi Government is committed to the development of the mining industry and
places major emphasis on the need to implement programs of mineral exploration and
mining development. The government is encouraging the private sector to take the lead
in partnership with international companies to satisfy local mineral demand and increase
mineral exports. The Saudi Government expects the minerals sector to become a major
export revenue generator.
Conclusion
According to foreign trade and container traffic data of 2006-2011, the container traffic of
Saudi Arabia is dependent on the value of trade that happens in the Kingdom. Saudi‘s
trade is forecasted to increase from USD 472bn in 2011 to USD 579bn by 2015 and hence
there will also be an increase in container traffic during that period. Apart from the
Millennium Seaport mega project in King Abdullah Economic City (KAEC) near Jeddah,
other projects in Saudi Arabia are the Jizan Economic City Seaport in Jizan and Dammam
port expansion.
There are no major free trade zones in Saudi Arabia except the Tusdeer Bonded and Reexport Zone. The development of the 4 Economic Cities is Saudi‘s attempt to attract
Foreign Direct Investment (FDI) to diversify the economy. Hydrocarbon exports that
accounted for 90% of the total exports of Saudi in 2005 accounted for 87% of the total
exports in 2011. Thus, it is important for Saudi to invest in port developments, to handle the
increase in non-oil exports and to attract more FDI through the Economic Cities, Free
Trade Zones and Industrial Cities located adjacent to the ports. Saudi Arabia‘s Container
volume decreased in 2009 by 5%, but increased by 20% in 2010 and 7% in 2011. The bulk
cargo volume too decreased during 2009 by 5%. The bulk cargo volume could not recover
in 2010 and further decreased by 0.5% but increased by 4.5% in 2011. The general cargo
volume was the most affected because of the global crisis as it decreased by 42% in 2009
379
but volumes witnessed an increase of 60% from 2009 to 2011. The ports of Jeddah, Jizan
and Yanbu have passenger terminals for hajj pilgrims.
The overall cargo and container volume was affected by the global crisis, but the volumes
have not only recovered to the previous figures but have increased considerably and are
forecasted to increase further. Hence port developments are imminent for Saudi Arabia,
but the port developments are concentrated only in a few major ports and not in the smaller
ports.
The investment opportunities available in the Saudi seaport infrastructure comprise bidding
for operator contracts and investing in the Economic Cities and Industrial Cities located
around the ports.
Suggestion
The timing for private investment in Saudi Arabia has never been better or more
welcomed. Maritime Saudi Arabia will bring together international ports and the maritime
community to discuss exciting developments and opportunities for investment in the region.
• Saudi ports and logistics development strategies
• Special economic zones and their impact on transportation
• Foreign investment and privatization opportunities
• Financial crisis and its impact on the shipping industry
• Transporting Oil & Gas and offshore marine a future outlook
• Marine Passenger Transportation in Saudi Arabia
380
Bibliography
http://www.gujagro.org/pdf/guidelines.pdf
http://www.gujexim.com/tradeleads_agro.htm
http://www.gujagro.org/pdf/guidelines.pdf
http://www.gujagro.org/pdf/Agri.pdf
http://www.ustr.gov/sites/default/files/India_0.pdf
http://www.financialexpress.com/news/india-s-agricultural-exports-see-121-jump-on-guargum-ricediet/1028928/0
381
http://www.financialexpress.com/news/india-s-agricultural-exports-see-121-jump-on-guargum-ricediet/1028928/0
http://agritech.tnau.ac.in/agricultural_engineering/greenhouse.pdf
http://www.nationmaster.com/country/sa-saudi-arabia/agr-agriculture
http://www.daringopinion.com/Saudi-Arabia--Desert-Agriculture%3A-From-Dust-to-Dust.php
http://www.india-exports.com/agro.html
http://www.india-exports.com/agro.html
https://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html#2032
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382
A
Global / Country Study and Report
On
“AGRICULTURE SECTOR IN SAUDI ARABIA”
Submitted To:
Gujarat Technological University
IN PARTIAL FULLFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
Under the Guide:
Asst.Prof. Vishal Patel
Submitted By:
Enrolment No.
(1) Patel Jaydeep K.
117170592027
(2) Solanki Bhavansinh C.
117170592028
(3) Kumbhariya Jitendra H.
117170592029
(4) Majithiya Dhara
117170592030
(5) Patel Ankit S.
117170592031
(6) Bharsadiya Manisha .v
117170592032
(7) Raval Sweta
117170592033
Institute Name:
Golden Jubilee Institute of Management & Technology Sidhpur
Affiliated
Gujarat Technological University Ahmadabad
TABLE OF CONTENT
NO
CHAPTER
383
PAGE.N
O
Chapter-1
Agriculture in Saudi Arabia
1.1
History
1.2
Traditional Agriculture
1.3
Modern Agriculture
Chapter-2
Agriculture Sectors in Saudi Arabia
2.1
Best Prospects / Services
2.1.2
Corn
2.1.2
Soybean Meal
2.1.3
Rice
2.1.4
Processed Fruits & Vegetables
2.1.5
Snack Foods
India‟s Exported Agriculture Products
Chapter-3
3.1
Export Promotion of Important Agriculture and Processed
food products
3.1.1
Basmati Rice
3.1.2
Pulses
3.1.3
Sugar
3.1.4
Vegetables & Processed Products
3.1.5
Fruit & Fruit products
3.1.6
Oil seeds & Products
3.1.7
Flowers
3.1.8
Meat & Poultry Products
3.1.9
Milk & Dairy Products
3.1.10
Organic Products
384
Chapter-4
Agriculture Products Exports in India
Chapter-5
Indian Agro Products
5.1
History
5.2
Overview Of Indian
5.3
Agriculture Market History
Chapter-6
India‟s Economic Relation With Saudi Arabia
Chapter-7
Doing Business In Saudi Arabia
7.1
Best Prospects For Agriculture Goods & Services
7.1.1
Corn
7.1.2
Soybean Meal
7.1.3
Rice
7.1.4
Processed Fruits & Vegetables
7.1.5
Snack Foods Excluding Nuts
385
Chapter-1
Agriculture in Saudi Arabia
386
Agricultural fields in the Wadi As-Sirhan Basin of Saudi Arabia as seen from the International in 2012.
Over the past three decades, the agricultural development in the Kingdom of Saudi Arabia has drastically
improved. Although Saudi Arabia is widely thought of as a desert, it has regions where the climate has
favored agriculture. The government in particular has aided with this process by converting large areas of
desert into agricultural fields.By implementing major irrigation projects and adopting large scale
mechanization, this has progressed in developing agriculture in Saudi Arabia, adding previously barren
areas to the stock of cultivatable land.
Today, agriculture in Saudi Arabia is focused on the export of wheat, dates, dairy products, eggs, fish,
poultry, fruits, vegetables and flowers to markets around the world. The government of the nation is heavily
involved in the agriculture industry, and the ministry of agriculture is primarily responsible for the
agricultural policies in the nation. The private sector as well plays a role in the nation, as the government
offers long-term interest free loans, along with low-cost water, fuel, electricity and duty-free imports of raw
materials and machinery.
1.1 History
During the 1970s and 1980s, the government undertook a massive restructuring of agriculture in Saudi
Arabia. The stated objectives were food security through self-sufficiency and improvement of rural incomes.
Although successful in raising domestic output of several important crops and foodstuffs through the
introduction of modern agricultural techniques, the agricultural development program has not entirely
achieved these objectives. In regard to self-sufficiency, the kingdom produced a limited surplus, sufficient
to export some quantities of food. However, if the entire production process were considered, the import
of fertilizers, equipment, and labor have made the Kingdom even more dependent on foreign inputs to bring
food to the average Saudi household.
Two patterns of income distribution emerged: traditional agricultural regions did not benefit from the
development program, and the government's financial support led to the establishment of large-scale
agricultural production units. Some of these were managed and operated by foreign entities and owned by
wealthy individuals and large businesses. From an environmental viewpoint, the program had a less than
satisfactory impact. Not only has it caused a serious drain on the kingdom's water resources, drawing mainly
from non-renewable aquifers, but it has also required the use of massive amounts of chemical fertilizers to
387
boost yields. In 1992 Saudi agricultural strategy was only sustainable as long as the government maintained a
high level of direct and indirect subsidies, a drain on its budget and external accounts.
The contribution of agriculture to the Gross Domestic Product (GDP) in 1984 was 3.3%. In 2001, it increased
to 5.1%, but it was due to decline in oil revenues.
1.2 Traditional agriculture and pastoral Nomad-ism
In the past, the bulk of agricultural production was concentrated in a few limited areas. The produce was
largely retained by these communities although some surplus was sold to the cities. Nomads played a crucial
role in this regard, shipping foods and other goods between the widely dispersed agricultural areas. Livestock
rearing was shared between the sedentary communities and nomads, who also used it to supplement their
precarious livelihoods.
The water supply in Saudi Arabia, and specifically the lack of water has always been the major constraint on
agriculture and the determining factor on where cultivation occurred. The kingdom has no lakes or rivers.
Rainfall is slight and irregular over most of the country. Only in the southwest, in the mountains of 'Asir,
close to the Yemen border and accounting for three percent of the land area, was rainfall sufficient to support
regular crops. This region plus the southern Tihamah coastal plains sustained subsistence farming. Cropping
in the rest of the country was scattered and dependent on irrigation. Along the western coast and in the
western highlands, groundwater from wells and springs provided adequate water for self-supporting farms
and, to some extent, for commercial production. Moving east, in the central and northern parts of the
interior, Najd and An Nafud, some groundwater allowed limited farming. The Eastern Province supported the
most extensive plantation economy. The major oasis centered around Al Qatif, which enjoyed high water
tables, natural springs, and relatively good soils.
Historically, the limited arable land and the near absence of grassland forced those raising livestock into a
nomadic pattern to take advantage of what forage was available. Only in summer, the year's driest time, did
the nomad keep his animals around an oasis or well for water and forage. The Bedouin developed special
skills knowing where rain had fallen and forage was available to feed their animals and where they could find
water en route to various forage areas.
Traditionally, Bedouin were not self-sufficient but needed some food and materials from agricultural
settlements. The near constant movement required to feed their animals limited other activities, such
as weaving. The settled farmers and traders needed the nomads to tend camels. Nomads would graze and
breed animals belonging to sedentary farmers in return for portions of the farmers' produce. Bedouin groups
contracted to provide protection to the agricultural and market areas they frequented in return for such
388
provisions as dates, cloth, and equipment. Bedouin further supplemented their income by taxing caravans for
passage and protection through their territory.
Bedouin themselves needed protection. Operating in small independent groups of a few households, they
were vulnerable to raids by other nomads and therefore formed larger groups, such as tribes. The tribe was
responsible for avenging attacks on any of its members. Tribes established territories that they defended
vigorously. Within the tribal area, wells and springs were found and developed. Generally, the developers of
a water source, such as a well, retained rights to it unless they abandoned it. This system created problems for
nomads because many years might elapse between visits to a well they had dug. If people from another tribe
just used the well, the first tribe could frequently establish that the well was in territory where they had
primary rights; but if another tribe improved the well, primary rights became difficult to establish. By the
early twentieth century, control over land, water rights, and intertribal and intratribal relationships were
highly developed and complex.
1.3 Modern agriculture
Nomadic pastoralism declined as a result of several political and economic forces. Sedentarization was a
means of imposing political control over various tribal groupings in the Arabian Peninsula. New legal
structures such as the 1968 Public Lands Distribution Ordinance created novel land relations and spurred the
dissolution of the Bedouin way of life. The establishment of an activist modern state provided incentives for
large numbers of Saudi citizens to enter the regular, wage-based, or urban commercial employment.
Moreover, modern technology and new transport networks undermined the primitive services that the
Bedouin offered the rest of the economy.
Until the 1970s, sedentary agriculture saw few changes and declined in the face of foreign imports, urban
drift, and lack of investment. The use of modern inputs remained relatively limited. Introduction of
mechanical pumping in certain areas led to a modest level of commercial production, usually in locations
close to urban centers. Nevertheless, regional distribution of agricultural activity remained relatively
unchanged, as did the average holding size and patterns of cultivation.
During the late 1970s and early 1980s, the government undertook a multifaceted program to modernize and
commercialize agriculture, in order to improve the nation's agricultural industry. Indirect support involved
substantial expenditures on infrastructure, which included electricity supply, irrigation, drainage, secondary
389
road systems, and other transportation facilities for distributing and marketing produce. Land distribution was
also an integral part of the program. The 1968 Public Lands Distribution Ordinance allocated 5 to 100
hectares of fallow land to individuals at no cost, up to 400 hectares to companies and organizations, and a
limit of 4,000 hectares for special projects. The beneficiaries were required to develop a minimum of 25
percent of the land within a set period of time (usually two to five years); thereafter, full ownership was
transferred. In FY 1989, the total area distributed stood at more than 1.5 million hectares. Of this total area
7,273 special agricultural projects accounted for just less than 860,000 hectares, or 56.5 percent; 67,686
individuals received just less than 400,000 hectares or 26.3 percent; 17 agricultural companies received
slightly over 260,000 hectares, or 17.2 percent. Judging from these statistics, the average fallow land plot
given to individuals was 5.9 hectares, 118 hectares to projects, and 15,375 hectares to companies, the latter
being well over the limit of 400 hectares specified in the original plans.
The government also mobilized substantial financial resources to support the raising of crops
and livestock during the 1970s and 1980s. The main institutions involved were the Ministry of Agriculture
and Water, the Saudi Arabian Agricultural Bank (SAAB) and the Grain Silos and Flour Mills Organization
(GSFMO). SAAB provided interest-free loans to farmers; during FY 1989, for example, 26.6 percent of loans
were for well drilling and casing, 23 percent for agricultural projects, and the balance for the purchase
of farm machinery, pumps, and irrigation equipment. SAAB also provided subsidies for buying other capital
inputs.
GSFMO implemented the official procurement program, purchasing locally produced wheat and barley at
guaranteed prices for domestic sales and exports. The procurement price was steadily reduced during the
1980s because of massive overproduction and for budgetary reasons, but it was substantially higher than
international prices. By the late 1980s, the procurement price for wheat, for example, was three times the
international price. Although quantity restrictions were implemented to limit procurement, pressures from a
growing farm lobby led to ceiling-price waivers. Moreover, the government encountered considerable fraud
with imports being passed off as domestic production. To control this situation, the government has granted
import monopolies for some agricultural products to the GSFMO, while procurement and import subsidies on
certain crops have been shifted to encourage a more diversified production program. Finally, agricultural and
water authorities provided massive subsidies in the form of low-cost desalinated water, and electric
companies were required to supply power at reduced charges.
The program prompted a huge response from the private sector, with average annual growth rates well above
those programmed. These growth rates were underpinned by a rapid increase in land brought under
cultivation and agricultural production. Private investments went mainly into expanding the area planted for
wheat. Between 1983 and 1990, the average annual increase of new land brought under wheat cultivation
390
rose by 14 percent. A 35 percent increase in yields per ton during this period further boosted wheat output;
total production rose from 1.4 million tons per year in FY 1983 to 3.5 million tons in FY 1989. To put the
sheer volume in perspective, exports were lifted to the point where Saudi Arabia was the sixth largest wheat
exporter in the early 1990s.
Other food grains also benefited from private investment. For example, output growth rates for sorghum and
barley accelerated even faster than wheat during the 1980s, although the overall amount produced was much
smaller. During the 1980s, farmers also experimented with new varieties of vegetables and fruits but with
only modest success. More traditional crops, like onions and dates, did not fare as well and their output
declined or remained flat.
In the 1970s, increasing incomes in urban areas stimulated the demand for meat and dairy products, but by
the early 1980s government programs were only partially successful in increasing domestic production.
Bedouin continued to raise a large number of sheep and goats. Payments for increased flocks, however, had
not resulted in a proportionate increase of animals for slaughter. Some commercial feedlots for sheep
and cattle had been established as well as a few modern ranches, but by the early 1980s much of the meat
consumed was imported. Although the meat supply was still largely imported in the early 1990s, domestic
production of meat had grown by 33 percent between 1984 and 1990, from 101,000 tons to 134,000 tons.
This increase, however, masked the dominant role of traditional farms in supplying meat. Although new
projects accounted for some of the rapid growth during the 1980s, a sharp decline of roughly 74 percent in
beef stock production by specialized projects during 1989 resulted in only a 15 percent fall in meat output.
This reversal also highlighted the problems in introducing modern commercial livestock-rearing techniques
to the Kingdom
391
Chapter-2
Agricultural Sectors in Saudi Arabia
Saudi Arabia is the largest agricultural, fish and forestry products importer among members of the Gulf
Cooperation Council (GCC) countries. The potential for agricultural production is limited in Saudi Arabia
due to the lack of arable land and renewable water resource. Hence, imports of food will continue to be
strong and will grow proportionally with the population.
In 2008, Saudi Arabia‘s total agricultural, fish and forest product imports were valued at approximately $8
billion. High-value products accounted for 50% of total imports, while intermediate agricultural products
were estimated at more than $1 billion. U.S. agricultural exports to Saudi Arabia for January-October 2009
decreased 28 percent over a year earlier to about $581 million, with consumer-oriented food products imports
declining by five percent to $198 million. According to trade source, most of the decline in the value of the
U.S. agricultural exports to Saudi Arabia was caused as a result of decline in the prices of imported products
compared to 2008 and 2007.
The vast majority of food products are subject to a 5% import duty. Selected processed food products,
however, are assessed higher import duties. In order to protect local food processors and production from
competitively priced imports, the Kingdom ties import duties to the level of local production of similar
products. As a general rule, a maximum import tariff rate of 40% is applied when local production of a food
or agricultural product exceeds a self-sufficiency level. Currently, a 40% import duty rate applies to fresh,
dried and processed dates.
392
In March 2008, the Saudi government exempted wheat, wheat flour and other grains from import duties and
reduced duties levied on 75 other foodstuffs to 5% beginning on April 1, 2008. The aim was to alleviate the
impact of the rising cost of living in Saudi Arabia. Major foodstuffs that benefit from the reduced 5% import
tariff include chilled and frozen poultry and their products, eggs (fresh, dried and powdered), cheese, cheese
cream, vegetable oils, pasta, canned meat, fruit and vegetable juices, mineral and ordinary water, long life
milk, corn flakes, peas, beans, peanut butter, yeast, and baking powder. The government will review the list
in April 2011.
In January 2009, Saudi Arabia issued a revised animal feed subsidy list that consists of 17 energy and protein
rich animal feed ingredients. Under the revised program, the government will provide rebates that range from
$26 (rice hulls) to $101 (soybean meal) per metric ton, depending on the type of imported feed. The rebate
will be paid directly to the local importer. The revised list added two new feed items-Rhodes grass and Sudan
grass-to the subsidy list. In November 2009, the Saudi Arabia government removed the $267 per metric ton
subsidy on imported rice which it decreed in December 2007. The government removed the import subsidy
because of significant reductions in the prices of imported rice due mainly to bumper harvest in several rice
producing countries.
For religious reasons, Saudi Arabia bans imports of alcoholic beverages, live swine, pork and food
ingredients or additives that contain pork products, including pork fat and gelatin. Meat and poultry
shipments must be accompanied by a ―Halal‖ slaughter certificate issued by an Islamic center in the country
of origin. Additional statements on the health certificate accompanying poultry and livestock meat shipments
must indicate that the animals slaughtered for export to the Kingdom were not fed with feed containing
protein, fat or remnants of animal origin and were not treated with any growth hormones. The most important
regulatory, non-tariff barriers that U.S. food product exporters encounter in Saudi Arabia include: biotech
labeling, production & expiration date regulations, Arabic labeling requirements, a declaration that animals
slaughtered and exported to Saudi Arabia were not fed with feed containing protein, fat or remnants of animal
origin, and a Halal Slaughtering certificate for both livestock and poultry meat.
Saudi Arabia is the most influential member of the Gulf Cooperation Council (GCC), which includes five
other countries in the Arabian Peninsula: United Arab Emirates, Kuwait, Bahrain, Oman, and Qatar. As a
group, the GCC is striving to create a common set of food standards. The Saudi Arabian Standards
Organization (SASO) is a dominant standard setting agency in the GCC countries. Currently, SASO is the
only Saudi organization responsible for setting national standards for commodities and products,
393
measurements, testing methods, meteorological symbols and terminology, commodity definitions, safety
measures, and environmental testing. Since its establishment in 1972, SASO has issued more than 800
production and testing standards for food products and is presently working on new standards. Saudi
standards are typically based on Codex Alimentarius regulations and to some extent on European and U.S.
standards, but are modified to reflect local conditions.
While standards are set by SASO, Saudi Food and Drug Authority (SFDA) tests imported processed and
packaged food items at various ports of entry. The standard setting responsibilities will move to the SFDA in
the next few months.
Leading U.S. agricultural exports include rice, yellow corn, soybean meal, planting seeds, crude and semirefined corn oil, hardwood lumber, sweeteners, tree nuts (mainly almonds), snack foods, fresh apples and
pears, processed fruit and vegetables, dairy products, red meat, fruit and vegetable juices, fresh fruit, and a
wide array of other high-value consumer-oriented products. Saudi Arabia‘s positive biotech labeling
requirement, production date stamp requirement, Arabic labeling, Halal slaughtering requirement, and
additional manufacturer statement for imported livestock and poultry meat remain major concerns for U.S.
foodstuff exporters.
2.1 Best Prospects/Services
2.1.1 Corn
Yellow corn is used principally in poultry feed and to a lesser extent in livestock rations. The Saudi
government has continued financing the establishment of new poultry farms in various regions of the country.
Existing large to medium sized poultry producers have been expanding in recent years, increasing the
country‘s self-sufficiency levels to about 55% in 2008. Saudi Arabia imports about 2 million metric tons of
yellow corn annually and its value is projected to reach $470.million by the end of 2009. Argentine remains
the largest yellow corn supplier to Saudi Arabia followed by the U.S. and Brazil.
U.S. feed corn exports to Saudi Arabia for the months of January-October 2009 decreased by 51 percent over
the same period in 2008 ($70 million vs. $141 million). The higher U.S. corn prices compared to Latin
American prices are the main reason for the decline of U.S. corn export to Saudi Arabia in 2009. The sharp
decline in the world feed corn prices, which started at the end of 2008, has helped the Saudi government
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reduce its feed corn import subsidy from $266.67 per metric ton in March 2008 to $60.26 in January 2009.
The rebate is paid directly to importers.
2.1.2 SOYBEAN MEAL
Soybean meal is used principally in poultry feed and to a lesser extent in livestock rations. The continued
expansion in local poultry production has increased the demand for soybean meal by more than 5 percent per
annum in recent years. In the past few years, a huge price difference between Latin American and U.S.
soybean meal has made imports from the United States less competitive and drastically reduced U.S. market
share in Saudi Arabia. According to a recent U.S. Customs data, U.S. soybean meal exports to Saudi Arabia
declined by 44 percent for January-October 2009 over the same period last year ($44 million vs. $79 million).
The increases in the total values of soybean imports in 2007 and 2008 reflect the drastically increased world
soybean meal prices which reached $650 per metric ton in early 2008. The prices stared to decline in late
2008 reaching $500 per metric ton at the end of November 2009. The continued decrease in the world
soybean meal prices has helped the Saudi government reduce its soybean import subsidy from $396 per
metric ton in March 2008 to $101 in January 2009. The rebate is paid directly to importers. Currently, Saudi
Arabia imports about 800,000 metric tons of soybean meal per year.
2.1.3 RICE
Saudi Arabia imports more than one million metric tons of rice annually. With 60 percent market share,
Indian remained the dominant rice supplier to Saudi Arabia, followed by Pakistan, United States and
Thailand. In 2008, the value of the United States rice exports to Saudi Arabia reached $117 million, an
increase of 47 percent compared to 2007. According to a recent U.S. Customs data, U.S. rice exports to Saudi
Arabia increased by 10 percent in January-October 2009 compared to the same period last year ($109 million
vs. $99 million). Local rice importers attribute the sharp increase in U.S. exports in recent years to a decrease
in exportable rice from India and U.S. price competitiveness compared to other Asian rice exporters. The
higher values of total rice imports in 2007 and 2008 reflect the sharp increase in the world prices for rice
during that period. In November 2009, the Saudi government removed the $267 per metric ton subsidy on
imported rice which it decreed in December 2007. The Saudi government lifted the import subsidy due to
reduced world rice prices compared to 2007 and early 2008.
2.1.4 PROCESSED FRUITS AND VEGETABLES
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The Saudi market for processed fruits and vegetables is huge. The growth of supermarket and hypermarket
food sales is helping to broaden the market for this sector and good market growth is expected to continue in
the next few years as supermarkets and hypermarkets open more outlets in major cities of the Kingdom.
Local production of canned fruit and vegetables has been increasing in recent years but it depends almost
entirely on imported ingredients, some of which are sourced from the United States. The majority of the
processed fruit and vegetables that are labeled, ―manufactured in Saudi Arabia‖ are products that are actually
re-packed in the Kingdom. The insufficient local fruit and vegetable output and the high costs related to
importing them for use in local processing suggest that a significant demand for processed fruits and
vegetables will continue to be met by imports. Dates processing and packaging account for about 60% of the
total domestic processed fruit production. U.S. processed fruit and vegetables exports to Saudi Arabia
decreased by 10 percent in January-October 2009 compared to the same period in 2008 ($33 million vs. $37
million).
2.1.5 SNACK FOODS
The latest official figures indicate that more than 60% of the Saudi population is in their teens, representing a
major consumer of snack foods. Local snack food production has drastically increased in the past few years,
accounting for about 50% of local consumption in 2007. There is a general decline in the importation of corn
and wheat-based snacks. Candies and chocolates are also being locally manufactured on a large scale.
Exporters may also look into supplying raw materials for the fast growing snack industry. U.S. snack food
exports to Saudi Arabia for the months of January-October 2009 increased by 68 percent over the same
period in 2008 ($27 million vs. $15 million). Snack food products that cater to Saudi consumers‘ preferences,
which tend to favor sweeter items, generally find better market reception.
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Chapter 3
India‟s Exported Agriculture Products:
India has mainly an agriculture based economy. Majority of the population is dependent upon agriculture and
allied activities. Their livelihood standards have been the prime concern for the policy makers. The
Committee being sensitive to this reality and trying to explore ways for improving the lot of this vast majority
decided to take up the subject 'Export Promotion of Agricultural and Processed Food Products' with a view
that the increase in exports of agricultural and processed food products shall be an effective mechanism to
enable the farming community get remunerative price for their produce. If the entire chain of agro exports of
the country attains an emphatic momentum then the country will be hugely benefited in terms of foreign
trade, generation of more revenue and ultimately the welfare of farmers, who would then be able to get a
level playing field in the economy as they are the ones who despite being the fulcrum to the whole process
remain at the margins when accrued benefits are distributed.
India is the world‘s largest producer of several commodities because of its Favorable agro-climatic conditions
and rich natural resource base. It is the biggest producer of coconuts, mangoes, bananas, milk & dairy
products, cashew nuts, pulses, ginger, turmeric and black pepper. It is also the second largest producer of
rice, wheat, sugar, cotton, fruits and vegetables. Being a critical sector of the economy, agriculture does
provide direct employment to about 60 per cent of the working population in the country and also forms the
basis of vital industries including textile, jute, and sugar industries. Agriculture contributes about 31 per cent
to the GDP and about 25 per cent of India‘s exports are agricultural products.
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Although India exports several agricultural products to around eighty countries All over the world, the
country‘s share in the global trade of agricultural and Processed products are just about 1.6 per cent. About
fifteen countries including Saudi Arabia, United Arab Emirates, United Kingdom, Bangladesh, South Africa,
etc. account for more than 63 per cent of the country‘s export of fruits, vegetables and other agricultural
products. Such a situation demands that appropriate strategies be evolved to penetrate further the hitherto
largely untouched markets and also explore new destinations with deeper trade relations.
The major schemes pertaining to promotion of the export of agricultural and Processed food products that are
presently being implemented in the country are Either product specific or market specific. Product specific
schemes are: Vishesh Krishi and Gram Udyog Yojana, also called VKGUY; and the Focus Products Scheme,
also called FPS. Market specific scheme is Focus Market Scheme or FMS. There is also another scheme
called Market Linked Focus Product Scheme (MLFPS) which is a mix between product specific and market
specific schemes. In addition to the above, in order to provide incentives to service-oriented exports there is a
scheme called Served from India Scheme (SFIS) which gives benefit in respect of certain specified service
sectors. Further, Status Holders in respect of some sectors are given an additional benefit under Status
Holders Incentive Scrip (SHIS) scheme. Finally, under Agri Infrastructure Incentive Scrip (AIIS) benefit
(inclusive of VKGUY benefit) is given to Status Holders. SHIS and AIIS are for import of specified capital
goods to improve the production capability and are updated from time to time.
3.1 Export Promotion of Important Agricultural and Processed Food Products
India has the rare distinction and advantage of having various climatic conditions from tropical, subtropical to
dry, arid and extremely cold regions.
Depending on this climatic condition innumerable agricultural and forest products are grown in different
states of India. The Committee felt that in order to promote the export of agricultural and processed food
products the Government has to be selective and judiciously invest in certain products which have high
export potential and promotion of which will certainly help augment the income and living standards of our
farmers. The problems and prospects associated with the production, procurement and export of cereals are
completely different from other agricultural products. Accordingly, the Committee took up this subject
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separately and presented a separate thereon- ―98th Report on Export of Food grains- Premium Non-Basmati
Rice and Wheat‖.
The remaining products are categorized as follows:-
(1) Basmati rice
(2) Pulses
(3) Sugar
(4) Vegetables and processed products;
(5) Fruits and fruit products;
(6) Oil seeds and produce;
(7) Flowers
(8) Meat and poultry products; and
(9) Dairy products
The Committee felt those fishery products, spices and other plantation crops
Like, tea, coffee and rubber deserve separate attention for detailed examination
Because of their specific nature and accordingly, these products have been kept out from the purview of the
present report. The products pertaining to above categories were examined in detail during the evidences and
study visits of the Committee and the following recommendations are made thereon:-
3.1.1 Basmati rice
The Committee notes that Basmati rice, aromatic premium rice mainly Grown in Punjab, Haryana and parts
of Uttar Pradesh is one of the main constituent of APEDA‘s export basket and has been mainly responsible
for growth in exports from the APEDA basket during the last decade. India exports more than two million
MT of Basmati rice to over 100 countries of the world with Middle East being its biggest export market.
Basmati is the single largest agro product exported from India, valued at USD 2.32 billion.
The Committee notes that National Rainfed Authority has emphasized that
Exports of rice like basmati and such kinds of rice need to be disincentivised since their production are
extremely water intensive and their export is effectively exporting water itself. However, the premium
basmati commands in the domestic as well as international markets has been the reason for many farmers of
Punjab and Haryana shifting to rice cultivation which has at the same time resulted into depletion of ground
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water. The Committee notes that the basmati area in Punjab and Haryana has witnessed an increase, with area
in Punjab increasing by three to five per cent. In Haryana, basmati crop is sown over 60 per cent of the total
cropped area under paddy.
3.1.2 Pulses
The Committee visited a pulse processing unit namely M/s Dal Parivar at
Jalgaon, Maharashtra which imports whole pulses, processes and exports the same, after making necessary
value addition. The Committee noted that the plant has adopted fully automatic system for processing of
pulses and the plant complies with the requisite quality and hygienic standards of the developed countries.
The Committee was informed that because of the ban on export of pulses, the plant had to be closed and has
incurred huge loss. It was pointed out to the Committee that the same kinds of units are allowed to operate
and export processed pulses from SEZs.
Therefore, it was requested that since the unit was also a cent per cent export unit, in the present scenario, at
least they should be allowed to export 50% of the total processed dal and to divert the rest 50% to the
domestic market. It was also pointed out that if timely decision is not taken, the country would largely lose in
the world pulses export market before other competing countries. There are over 10,000 such mills in the
country operating out of SEZs. Most of them are small or medium scale mills. Currently, they carry huge idle
capacity and their investment has become unproductive.
3.1.3 Sugar
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The Committee heard the views of the representatives of Indian Sugar Exim Corporation Ltd. (ISEC) on
14th February, 2011 and was inter alia informed that sugar is not a direct agricultural produce but a value
added product. The sugar industry faces problems due to high transportation cost, non-extension of benefits
under VKGUY and duty credit scrip to sugar industry. Main beneficiaries who get these benefits are the
merchant exporters and status holders. The Committee was requested that benefits under the VKGUY and
DEPB Schemes be extended to sugar as it is a value added product from the agriculture produce and also for
the extension of DEPB Scheme upto June, 2014. The benefits under Advance License Scheme (ALS) for
import of sugar be also be extended to sugar industry.
3.1.4 Vegetable and Processed Products
The Committee during all the evidences taken for examination of the subject
And the study visits to different parts of the country observed that along with the traditional vegetables many
different up-market non-conventional vegetables like high breed potatoes, gherkins, jalapeno, baby corn, and
broccoli are also being produced in the countries which have got high export potential. The major
development that has taken place in the country is with regard to contract farming and the successful
adoption of these western varieties in Indian climate. The Committee also visited two important plants
pertaining to processing of gherkins and potatoes in the State of Karnataka and Gujarat respectively.
The Committee visited an export oriented unit at Bangalore namely, M/s.
Global Green Company Ltd. at Bangalore. It is the largest processor of gherkins and exporter from India and
the 3rd largest gherkin processor in the world. The unit grows gherkins from the seeds imported from
Germany, processes and exports the same to Europe and Russia. The unit has a state-of-the-art system for
processing of the products. It has a high standard of cleanliness and it also conforms to the requisite global
parameters of quality and standards. The Committee interacted with the workers and management on several
issues.
The Committee also had the opportunity to visit McCain Foods India Pvt. Ltd. at Mehsana in Gujarat.
The factory processes potatoes and produces international quality French fries. It was informed that India is
the third largest producer of potatoes with the production of 31million metric tons. However, the potatoes
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generally grown in India are hardly of processed quality. Certain constraints like short growing seasons,
outdated farming and irrigation practices, low suitability of traditional cold storages for storing processed
quality potatoes, low solids, high sugar and small size have been afflicting production ventures in India. The
firm has imported 13 potato varieties and through various trials have zeroed in on Shepody and Kennebac
varieties which were being grown in north Gujarat and the company is running the world's highest potato
seed programmed for these varieties in Lahoul-Spiti Valley in
Himachal Pradesh.
The plant in Gujarat has the capacity to process 40,000 tones of potatoes Every year. It has a capability to
produce 20,000 metric tons of finished products and has been producing French fries, coated wedges, hash
brown patties, mashed products, flakes etc.
The company has introduced breakthrough in production of processed varieties of potatoes, transforming
storage practices with high temperature CIPC stores, transforming irrigation practices through drip and
sprinkler and introducing
Good growing practices like paired row, pre-chatting, cut-seed planting and system based fertilizer
application. The company sources its raw material through contract farming with 500 farmers whereby 50 per
cent of the production enjoys assured price and remaining depends on the market factors.
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3.1.5 Fruits and Fruit Products
The Committee was informed that APEDA and the Ministry of Agriculture have undertaken constant efforts
for increasing the mango exports from the country. Negotiations with Australia were on for the last 10 years
but the venture was given a nod by the Australian authorities only after they surveyed and audited the
production area in Uttar Pradesh and accepted this part of the country as a pest-free zone. Also, Uttar Pradesh
has been declared as Pest Free Area (PFA) by the Ministry of Agriculture. The team visited the production
area and analyzed the processing capability of modern pack houses at Saharanpur, Lucknow and Vashi, Navi
Mumbai.
They also audited the Hot Water DIP Treatment Facility (HWDT) at Lucknow and Saharanpur; and Vapour
Heat Treatment Facility (VHT) at Saharanpur, Vashi and Navi Mumbai. The team was satisfied with HWDT
at Lucknow and VHT at Saharanpur and Vashi. Mangoes will be subjected to either HWDT or VHT before
exporting them to Australia. As a result, India will now be exporting mangoes to Australia .The first mango
samples were flagged off to Australia in the month of June and were highly appreciated by the importers.
The Committee during its visit to Surat heard the views of Desai Fruits and
Vegetables who are a major player in that region with regard to export of Banana. The Committee was
informed by them that Banana holds immense potential for export promotion. The Committee was apprised
about the difficulties faced by the farmers to get improved plants through tissue culture and to overcome
other field inputs and infrastructural handicaps
3.1.6 Oil Seeds and Produce
The Committee heard the views of the representatives of the Indian Oilseeds
And Produce Export Promotion Council (IOPEPC) on 31st October, 2011 at
Ahmadabad, Gujarat and was inter alia informed that India is known for quality
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Oilseeds in world market. As per the Foreign Trade Policy (FTP), the products under the purview of IOPEPC
are ―Oilseeds and oils, other than deoiled cake, rice bran oil, soya oil, soya deoiled cake and the products
other than those dealt by shellac and forest product export promotion council‖. The Committee was informed
that sesame seeds and niger seeds have been classified as oilseeds globally.
The Committee was informed that the current domestic prices of premium edible oils are ruling much lower
now and with good stock of oil seeds and good crop expected this year; the prices are expected to ease
further. Besides, sufficient availability of edible oil is also being ensured by allowing duty free import of crud
vegetable oil while import of refined oil attracts a duty of only 7.5 %. This clearly shows that export of
premium edible oils can easily be substituted by higher volume imports of oils of mass consumption.
Therefore, the export of premium oils such as Mustard Oil, Safflower Oil, Sesame Oil, Refined Sunflower
Oil, Refined Rice bran Oil and Groundnut Oil would fetch a much higher premium and has got high export
potential.
3.1.7 Flowers
India's varied agro-climatic conditions are highly favorable for the growth of large number of horticultural
crops including flowers. The country has made significant progress in the production of flowers.
The Committee visited M/s Essar Agrotech Ltd. at Pune, which is one of the largest cut flower growers and
exporters particularly, for roses in the country. The Committee noted that the Company, which started its
business in 1993 on an area of 2.5 acres of land, has grown its turnover to Rs. 14.00 crore from Rs. 3.00 crore
at inception. The reasons behind its success has been emphasis on growing of top grafted, healthy and disease
free rose plants and has acquired the capacity of growing 2 million plants which are ready for planting in 28
days. The unit also grows 2 million cuttings annually of carnation varieties from Barberet and Blanc, Spain to
meet its huge demand of flowers abroad. The unit is making optimum utilization of water as it has the unique
water harvesting system. The Committee interacted with the workers and management on several issues. The
Committee observed that the Company is paying heavy royalty towards import of the foreign breed roses and
other flowers. The Committee wanted to know as to why they are not growing / exporting indigenous breed
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plants. To this the representatives of M/s Essar Agrotech Ltd. informed that foreign roses are preferred over
indigenous breeds in view of their exportability as they have thicker petals, longer stem length and more
longevity.
Whereas, Indian roses are tenderer, possess more fragrance and well known for its perfumery potential.
The Committee also visited export oriented horticulture units at Navsari,
Gujarat on 4th November, 2011. The Committee was happy to note that those units were successfully
exporting flowers, i.e. gerbera, Dutch roses and exotic leave mostly to Japan.
3.1.8 Meat and Poultry products
Another milestone achievement for APEDA has been the rise in meat exports.
The exports of frozen meat have been rising steadily during the last few years because of various safety
measures initiated by APEDA. From Rs 3,279 crore of meat export achieved during 2006-07, the exports
have risen to Rs 6,285 crore during the last fiscal.
The total value of meat imported into India during the period January, 2010 to
June, 2011 is Rs. 9.80 Crore (Provisional). The total value of meat exported from India during the period
April, 2010 to January, 2011 is Rs. 7090.51 Crore.
5.57 The total processing capacity in India is over 1 million tons per annum, of which 40-50 percent is
utilized. India exports more than 500,000 tons of meat, mostly buffalo meat. Indian buffalo meat is
witnessing strong demand in international markets due to its lean character and near organic nature. Unlike
cow slaughter, there is no social taboo in killing buffalo for meat. Goat and lamb meat are relatively small
segments where local demand is outstripping supply. The production levels in these two categories have been
almost constant at 950,000 tons with annual exports of less than 10,000 tons.
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3.1.9 Milk and Dairy Products
India is the largest producer of milk in the world and 21st amongst the milk processors in the world. Milk is
the largest crop in India in value terms above Rs 3 lakh crores and the Milk group contributes highest to the
total output of the agriculture sector surpassing the output value of wheat, rice, and oilseeds. Milk directly
affects livelihood of country‘s almost all farmers including landless and marginal farmers. Further most of
the dairy business in the organized sector is in the hands of the cooperatives which are owned by farmers
themselves.
The Committee, however, feels that milk production and dairy sector has not got the desired support. The
Committee is of the considered view that dairy should be considered as agriculture and should be treated as
priority sector for lending purpose by bank which will allow the flow of funds at cheaper cost to the farmers
as well as dairy sector of the country. This would help in larger cattle purchase which will result in higher
milk availability, as well as better processing. Similarly the income generated out of dairy business should be
considered as agriculture income and it should be exempted from income tax.
The Committee notes that 92.8 per cent of India's milk is coming from 14 states and most of the liquid milk
demands is being met by milk co-operatives. The demand for milk has been projected at 220 million tones
milk by 2021. The sector, however, faces various constraints like increase in inputs cost, price fluctuation,
small animal holdings, tropical climate, cattle and buffalo feeding with crop residue, little mechanization,
inadequacy of top quality bull, low level of artificial insemination, scarcity of feed etc. Further, a supply and
demand pattern in India is not seasonally compatible. It was informed that private sector capacity has
increased in last ten years to the level attained by the co-operatives sector during last 35 years.
The Committee visited the cheese production unit of M/s Parag Milk Foods
Pvt. Ltd., the largest cheese plant in Asia. The Committee was informed that under the brand name of
Gowardhan, Go Cheese is made from hundred percent pure cow‘s milk. This milk is procured from one of
the best Milk Shed areas in Western India renowned for the quality of its cow milk. Dairy farmers here use
the best farm management practices and the cows are fed with good quality fodder with a carefully crafted
feed programme, which results in production of good quality milk perfect for making perfect Cheese. It is
India‘s largest cow farm, housing 2500 cows. This world-class facility is one of the first in India to be
equipped with a Rotary Milking Parlor supplied by Westphalia, Germany. With the help of this special
equipment, the milking process could be fully mechanized leading to maximizing hygiene and, more
importantly, the quality of the milk. This plant meticulously follows specialized farming, nurturing, breeding
and milking practices. ‗Go Cheese‘ is Asia‘s largest cheese plant, with a capacity of over 40 tons per day.
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This modern facility with state of- the-art technology produces superior quality Cheddar, Mozzarella and
Processed cheeses according to international specifications. Committee also had interaction with the workers
and management of the units.
The Committee visited the plant of Gujarat Co-operative Milk Marketing
Federation (GCMMF) at Anand and interacted with its Chairman and the Managing Director. It was
submitted before the Committee that there is huge opportunity for milk processing in the country and the
dairy sector in India has grown at a compound annual rate of 4.3% per annum. The GCMMF under its brand
AMUL has large processing facilities of 98.3 million liter milk per day and it produces 75 lakh liters of pouch
milk every day. The Committee was highly appreciative of the pioneering efforts of this co-operative in the
while Revolution of India.
3.1.10 Organic Products
Rganic products are much in demand both in the domestic market as well as in the international market.
Owing to this demand, organic products command
Premium prices in the market and enjoy huge export potential. India is bestowed with lot of potential to
produce all varieties of organic products due to its various agro climatic regions. The exports of organic
products registered a 30 per cent increase in 2007-08 with export realization at $100.4 million.
The Committee notes that in 2004-05, the total area covered under organic farming in the country was about
45,000 hectares which today has increased to about ten lakh hectares. The Committee learns that many States
like Sikkim, Uttarakhand and some others have declared that they would go hundred per cent organic. The
country ranks 33rd in terms of total land under organic cultivation and 88th position for agriculture land
under organic crops to total farming area. A large part of our production of fruits and vegetables are by
default organic.
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Chapter-4
Agricultural Products exports in India:
India is the world's largest producer across a range of commodities due to its
favourable agro-climatic conditions and rich natural resource base. India is the
world‘s biggest producer of coconuts, mangoes, bananas, milk and dairy products,
cashew nuts, pulses, ginger, turmeric and black pepper. It is also the second largest
producer of rice, wheat, sugar, cotton, fruits and vegetables. Being a critical sector of
the economy, agriculture does provide direct employment to about 60 percent of
working population in the country and also forms the basis of vital industries
including the textile, jute, and sugar industries. Agriculture and allied sector
contribute about 17 percent to GDP and about 25 percent of India's cumulative
exports belong to agricultural products category.
Realizing the importance of high value food products exports from the country, the
government back in 1985 had set up a specialized body - Agricultural and Processed
Food Products Export Development Authority (APEDA) through an act of parliament
which functions under the commerce ministry. In the initial years, the focus was to
support the exporters in areas of marketing and packaging and training and identify
key thrust areas for exports. Some of the key areas identified were meat, fruits and
vegetables, basmati rice, guargum etc.
Since mid 1990s, with WTO regime and globalization, issues such phytosanitary or
sanitary norms, market access, non-tariff barrier become quite prevalent in the global
trade. Besides, Hazard Analysis Critical Control Point (HCCP) also became quite
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prevalent in global market which concerns food safety. The government had to scale
up its operations for meeting the stringent quality standards of the food products from
the importing countries. ―From undertaking feasibility studies to setting up industries
which adhere to international standards spanning 14 products categories which
include fruits and vegetables, dairy and poultry products, floriculture and cereals, the
government had been playing a key role in pushing up exports,‖ Asit Tripathy,
Chairman, APEDA said.
From a small beginning of the exports worth of only Rs 582 crore during 1986 - 87,
country‘s agricultural and processed food exports from APEDA basket has grown
manifold to Rs 40,242 crore during 2010-11. In this fiscal as well, the exports are
anticipated to rise further. However besides APEDA, there are agencies like Spices
Board, Coconut Development Board, Tobacco Board, Coffee Board, Rubber Board
also contributing substantially to country‘s agricultural exports.
Basmati : the key driver
One of the key factors in growth in exports from the APEDA basket during last one
decade is Basmati rice, aromatic premium rice mainly grown in Punjab, Haryana and
parts of Uttar Pradesh. Due to huge success mainly because of initiative taken by the
government for brand promotion of Basmati in key markets such as Gulf countries
mainly Saudi Arabia and Iran, Europe and United States, the volume of exports of
Basmati rice have gone up to 2 million tone during 20010-11 from a level of half
million tone a decade back. In value terms, the basmati rice exports have gone up to
Rs 10,578 crore during 2010-11 from Rs 2,792 crore achieved during 2006-7. Till
India imposed restriction on non-basmati rice exports in 2008, the annual exports
earnings from this segment of exports was close to Rs 8000 crore. Substantial
financial resources are allocated annually for protection and promotion of Basmati
rice as geographical indication in India and abroad. A world wide watch agency had
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been appointed to monitor the trade mark registers across the globe for any third party
attempted registration of the name – Basmati.
Traceability
With most of the importing countries following stringent sanitary and phytosanitary
regulations and quality standards, APEDA initiated Grape net in 2006-07 as a first of
its initiative in the country in the fresh fruits sector which replaced the earlier system
of monitoring pesticide residue which was supported by all the stake holders. This
software system integrated all stakeholders in the supply chain of grapes export, such
as farmers, horticulture department, testing laboratories etc. With the success of
Grape net, similar steps were taken in monitoring pesticide residue in grapes,
pomegranates, groundnuts and organic products.
With the demand for more stringent certification growing in Europe and other
importing countries, the government is setting up a traceability system for all
horticulture products exported from India. The traceability system for grapes,
pomegranates, groundnut and organic products would be integrated into the new
system.
For promoting high value mango exports to United States and Europe, an irradiation
facility at Bhabha Atomic Research Centre (BARC) at Lasalgaon, Nashik was set up
with the assistance of Apeda. Lasalgaon facility can handle 500 tones of mangoes
annually. All these measures have resulted in Indian mangoes commanding better
price in last few years.
For boosting agricultural products exports further, the government‘s thrust is on Good
Agricultural Practice (GAP) standard for ensuring that Indian food products are
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accepted by consumers across the supermarket in Europe, USA and other developing
countries.
Rising meat exports
The export of frozen meat exports has been rising steadily during the last few year.
Because of various safety measures initiated by the government the exports has risen
from Rs 3279 crore of meat export achieved during 2006-7, to Rs 6285 crore during
last fiscal.
Despite lack of harmonization of Minimum Residue Levels (MRL) across European
Union, the exports of fruits and vegetables have been growing northwards with an
annual growth of more than 20 percent during last four years.
The annual exports had been to the tune of Rs 3200 crore.
Organic products
A decade after launching the National Programmed for Organic Production
(NPOP) to export green products from India, a comprehensive web-based traceability
software named ‗Trace Net‘ to trace operations from farms to consumers online had
been launched last year. ‗Trace Net‘ software is expected to boost the existing
certification system for the export of organic products.
The system would help us in maintaining authentic and updated production,
certification and export data of organic products online. The European Commission
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and the US, key export destinations for country‘s organic product, recognise NPOP
standards, due to stringent standards in place.
India is the first Asian country to get recognition from EU and Switzerland for
equivalence and by US for conformity assessment.
All these measures would certainly help India achieving exports of organic food
worth $1 billion in the next five years with its produce receiving wide acceptance in
many mature markets of the US and Europe.
Opportunity for expansion
With substantial rise in exports of agricultural products during last five years, the
government is aiming at increasing exports to reach close to Rs 1 lakh crore during
next five years. In the last five years, APEDA monitored exports in the developed
world rose by 35 percent, which were growing at 20 percent before 2003-2004 and if
such momentum is maintained there would be significant rise in total volume of
exports when APEDA turns 30 during next five years.
Although India exports products from the APEDA basket to 80 countries, the
country's, share in the global trade of agri processed products is only about 1.6
percent. Only about 15 countries including Saudi Arabia, United Arab Emirates,
United Kingdom, Bangladesh, South Africa etc accounts for more than 63 percent of
the country's export of fruits, vegetables and other agri products. This calls for
significant market expansion drive from the export promotion body.
Spices
Besides the exports from the APEDA basket, spices exports have registered
substantial growth during the last five years, registering an annual average growth
rate of 21 percent in value and 8 percent in volume. During the year
412
2010-11, spices export from India has registered an all time high both in terms of
quantity and value. Most of the spices
APEDA exports trend during five years
Year
Exports (in
% change
crores)
2010-11
Rs 40, 242
15.5%
2009-10
Rs 34,825
-4%
2008-9
Rs 36,294
13.88%
2007-8
Rs 31,870
46%
2006-7
Rs 21, 805
16%
2005-6
Rs 18,782
Exports include pepper, cardamom, chilli, ginger, tamarind, coriander, cummin seeds
etc.
In 2010-11, the export of spices from India has been 525,750 tonnes valued at Rs
6840 crores as against 502,750 tonnes valued Rs.5560.50 crore in 2009-10,
registering an increase of 5 percent in volume. India commands a formidable position
in the World Spice Trade with 48 percent share in volume and 44 percent in value.
Coffee
According to Coffee Board officials, the exports are recording encouraging in the
recent years. Between 2006-07 and 2010-11, coffee exports recorded a growth of 2.27
percent per annum in volume terms. Also, export earnings registered a higher growth
413
rate of 10.62 percent. Unit value realisation (R/kg) also showed an 8.1 percent growth
rate per annum during the period. Coffee exports reached highest-ever figure during
2010-11, both in volume terms. (2,94,362 tonne) and value terms (Rs 3,305.32 crore).
The current year is also seeing a promising growth where export permits for the
period from April to November have touched 228,578 tonne valued at Rs 3139.58
crore.
Tobacco
Tobacco‘s contributions to the national economy is staggering as the government
earned central excise revenue by selling cigarettes to the tune of Rs 13,500 crore and
foreign exchange of Rs 4,163 crore from exports of tobacco and tobacco products
during 2010-11.
414
Chapter-5
Indian Agro Products
Agricultural sector is the mainstay of the rural Indian economy around, which the socio-economic privileges
and deprivations revolve, and any change in its structure is expected to have a corresponding impact on the
existing pattern of social equality. The growth of India‘s agriculture sector during the 50 years of
independence remains impressive at 2.7 % per annum. About two-third of this production growth is aided by
gains in crop productivity. The need based strategies adopted since independence and intensified after mid –
sixties primarily focused on feeding the growing population and making the country
Self reliant in food production.
Indian agriculture has attained an impressive growth in the production of food grains that has increased
around four times during the planned area of development from 51 million tons in 1950-51 to 199.1 million
tonnes in 1997-98. The growth has been really striking since sixties after the production and wide spread
usage of high yielding varieties of seed, fertilization, pesticides,
Especially in assured irrigated areas.
5.1History
Over the 10,000 years since agriculture began to be developed, peoples across the world have discovered the
food value of wild plants and animals and domesticated and bred them. Primary importance of these are
cereals such as rice, wheat, barley, corn, and rye; sugarcane and sugar beets; meat animals such as sheep,
cattle, goats, and pigs or swine; poultry such as chickens, ducks, and turkeys; and products like milk, cheese,
eggs, nuts, and oils. Fruits, vegetables, and olives are also an important category of agriculture products; feed
grains for
Animals include field corn, soybeans, and sorghum.
415
Modern agriculture in India primarily depends on engineering and technology and on the physical and
biological sciences. Irrigation, drainage, conservation and sanitation, each of these stages are essential in
successful farming, and require specialized knowledge and expert skills of agricultural engineers.
Mechanization, the spectacular characteristic of late 19th and 20th-century agriculture, has eased much of the
backbreaking toil of the farmers. More importantly, mechanization has considerably increased the farm
efficiency and productivity.
5.2 Overview of Indian Agriculture Market History
In several agricultural sectors, India is the world‘s leading or one of the largest producers. For example, the
country
is
second
largest
milk
producing
country
in the world. The agricultural sector in the country is known for its high degree of product diversity. The
complementary nature of a number of important Indian agricultural products, in comparison to those
produced in west and other countries provide India considerable export opportunities to these markets. At
present, the Indian agriculture industry is on the brink of a revolution, which will modernize the entire food
chain, as the total food production in the country
Is likely to double in next ten years.
According to recent studies, the total turnover of Indian food market is approximately Rs.250000 cores (US $
69.4 billion), out of which, the share of value-added food products is around Rs.80000 cores (US $ 22.2
billion). The Government of India has also sanctioned proposals for joint ventures, foreign collaborations,
industrial licenses and 100% export oriented units conceiving of an investment of Rs.19100 crores (US $ 4.80
billion) out of which foreign
Investment is over Rs.9100 crores (US $ 18.2 billion)
The Indian agricultural food industry also assumes significance owing to country's sizable agrarian economy
that accounts for over 35% of GDP and employs around 65 % of the population. Both in terms of number of
joint- ventures / foreign collaborations and foreign investment, the consumer food segment has the top
priority. The other salient features of the Indian agro industry, which have the capacity to lure foreigners with
assuring benefits are the aqua culture, deep sea fishing, milk and milk products, meat and poultry segments.
Exports of Agricultural products (2004-05)
416
Major
Export
Major destinations for export of Indian agricultural products (2006-07), include -
Product
Major Markets
Floriculture
USA, Japan, UK, Netherlands & Germany
Fruits & Vegetable Seeds
Pakistan, Bangladesh, USA, Japan & Netherlands
Fresh Onions
Bangladesh, Malaysia, Sri Lanka, UAE, Pakistan & Nepal
Other Fresh Vegetables
UAE, Bangladesh, Pakistan, Nepal & Sri Lanka
417
Market‟s
Walnuts
Spain, Egypt, Germany, UK & Netherlands
Fresh Mangoes
UAE, Bangladesh, UK, Saudi Arabia & Nepal
Fresh Grapes
Netherlands, UK, UAE, Bangladesh, Belgium
Other Fresh Fruits
Bangladesh, UAE, Netherlands, Nepal, Saudi Arabia
Dried & Preserved Vegetables
Russia, France, USA, Germany & Spain
Mango Pulp
Saudi Arabia, Netherlands, UAE, Yamen, Arab Republic &
Kuwait
Pickles & Chutneys
Russia, USA, Belgium, Netherlands & France
Other Processed Fruits
USA, Netherlands, UK, UAE & Saudi Arabia
Buffalo Meat
Malaysia, Philippines, Saudi Arabia, Jordan & Angola
Sheep / Goat Meat
Saudi Arabia, UAE, Qatar, Oman & Kuwait
Poultry Products
UAE, Kuwait, Oman, Germany & Japan
Dairy Products
Bangladesh, Algeria, UAE, Yamen, Arab Republic & Egypt
Animal Casings
Germany, Portugal, France, Spain & Italy
Processed Meat
Seychelles, UAE, Hong Kong, Germany & USA
Groundnuts
Indonesia, Malaysia, Philippines, UK & Singapore
Guar Gum
USA, China, Germany, Italy & Netherlands
Jaggery & Confectionery
Portugal, USA, Bangladesh, Pakistan & Nepal
Cocoa Products
Nepal, Netherlands, Malaysia, Yamen Arab Republic & UAE
Cereal Preparations
USA, UK, Nepal, Sri Lanka & UAE
Alcoholic Beverages
Jamaica, Thailand, UAE, Angola & Bhutan
Miscellaneous Preparations
UAE, Iran, USA, UK & Indonesia
Milled Products
USA, UK, Indonesia, Maldives & UAE
Basmati Rice
Saudi Arabia, Kuwait, UK, UAE & Yamen Arab Rep.
Non Basmati Rice
Nigeria, Bangladesh, South Africa, UAE & Ivory Coast
Wheat
Bangladesh, Philippines, UAE, Sudan & Myanmar
Other Cereals
Bangladesh, Sri Lanka, Sudan, Benin, Thailand
Natural Honey
USA, Germany, Saudi Arabia, UK & UAE
Pulses
Bangladesh, Sri Lanka, Pakistan, UAE & Nepal
Product-wise
Export
Data
418
(2002-03
to
2006-07)
Future
Forecasts
According to experts, India has to play a bigger role in the global markets in agriculture products in the
future. The country is expected to strengthen its position among the world‘s leading exporters of rice.
Presently it is the 2nd largest rice producer after China and the 3rd largest net-exporter after Thailand
And Vietnam
However, recent reports states that agriculture plays an important, though declining role in Indian economy.
Its contribution in overall GDP fell from 30 % in the early nineties, to below 17.5 % in 2006. The country is a
world leader in specialist products, such as buffalo milk, spices and bananas, mangoes, chickpeas etc., which
are considered as important in the Indian diet and are also exported. India is the 5th largest cultivator of
biotech crops across the world, ahead of China. In the year 2006, around 3.8 million hectares of land were
cultivated with genetically modified crops, by about 2.3 million farmers. The primary GM crop is Bt Cotton
that was introduced in 2002. The future growth in agriculture sector must come from –
Advanced technologies that are not only "cost effective" but also "in conformity" with natural
climatic regime of the country
Technologies applicable to rain-fed areas particularly
Continued genetic improvements for improved seeds and yields
Improvements in data for superior research, results, and sustainable planning
Bridging the gap between knowledge and practice; and
Judicious land use resource surveys, effective management practices and sustainable use of natural
resources.
Chapter-6
India‟s Economic Relations with Saudi Arabia
419
Saudi Arabia is India‘s second largest trading partner in the GCC region, having a share of 14. 6 percent in
the year, 2004-05. Main Indian exports to Saudi Arabia are basmati/non-basmati rice, manmade yarn, fabrics,
made-ups, RMG cotton yarn, primary and semi-finished iron and steel, chemicals, plastic & linoleum
products, machinery and instruments.
India‘s major export items to Saudi Arabia (US $ million)
commodity
2000/01 2001/02 2002/03 2003/04 2004/05
Basmati rice
RMG cotton incl.
accessories
Manmade yarn fabrics
madeups
Non-basmati rice
Manufactures of metals
Non-ferrous metals
Machinery & instruments
Plastic & linoleum
products
Meat & preparations
240.9
73.3
222.8
80.2
218.0
89.5
233.0
115.5
349.6
100.7
43.0
48.9
72.7
106.1
99.1
46.2
38.0
13.9
27.9
18.1
39.2
47.7
38.7
34.1
26.0
9.5
43.5
42.4
44.7
27.2
36.7
57.2
27.0
58.8
27.9
67.3
62.5
61.8
60.1
48.6
7.1
0.2
0.9
12.1
39.1
Transport equipment
5.7
4.6
6.5
16.5
31.9
RMG manmade fibres
26.4
22.6
24.4
29.0
31.1
India‟s major imports from Saudi Arabia are organic and inorganic chemicals, artificial resins and
plastic materials
420
India‘s major import items from Saudi Arabia (US $ million)
commodity
2000/01
2001/02
2002/03
2003/04
2004/05
Organic chemicals
Inorganic chemicals
Artificial resins, plastic
materials
Metaliferrous ores &
metal scrap
Leather
Gold & silver
Fertiliser manufactured
Pulp & waste paper
Sulphur & unroasted
iron pyrites
Manufactures of metals
128.4
115.0
28.8
122.2
42.1
41.3
117.5
47.6
48.7
202.7
49.0
53.6
364.3
90.0
67.3
10.3
23.3
22.3
30.6
54.9
5.3
5.2
3.4
10.6
20.0
11.8
12.7
1.9
6.0
9.3
13.1
17.0
1.7
9.4
6.7
20.5
15.9
10.9
9.4
30.8
29.5
15.2
12.6
10.2
0.6
0.2
0.2
0.5
6.3
Chapter-7
Doing Business In Saudi Arabia:
421
Saudi Arabia is the largest agricultural, fish and forestry products importer among members of the Gulf
Cooperation Council (GCC) countries. The potential for agricultural production is limited in Saudi Arabia
due to the lack of arable land and renewable water resource. Hence, imports of food will continue to be
strong and will grow proportionally with the population.
In 2008, Saudi Arabia‘s total agricultural, fish and forest product imports were valued at approximately $8
billion. High-value products accounted for 50% of total imports, while intermediate agricultural products
were estimated at more than $1 billion. U.S. agricultural exports to Saudi Arabia for January-October 2009
decreased 28 percent over a year earlier to about $581 million, with consumer-oriented food products imports
declining by five percent to $198 million. According to trade source, most of the decline in the value of the
U.S. agricultural exports to Saudi Arabia was caused as a result of decline in the prices of imported products
compared to 2008 and 2007.
The vast majority of food products are subject to a 5% import duty. Selected processed food products,
however, are assessed higher import duties. In order to protect local food processors and production from
competitively priced imports, the Kingdom ties import duties to the level of local production of similar
products. As a general rule, a maximum import tariff rate of 40% is applied when local production of a food
or agricultural product exceeds a self-sufficiency level. Currently, a 40% import duty rate applies to fresh,
dried and processed dates.
In March 2008, the Saudi government exempted wheat, wheat flour and other grains from import duties and
reduced duties levied on 75 other foodstuffs to 5% beginning on April 1, 2008. The aim was to alleviate the
impact of the rising cost of living in Saudi Arabia. Major foodstuffs that benefit from the reduced 5% import
tariff include chilled and frozen poultry and their products, eggs (fresh, dried and powdered), cheese, cheese
cream, vegetable oils, pasta, canned meat, fruit and vegetable juices, mineral and ordinary water, long life
milk, corn flakes, peas, beans, peanut butter, yeast, and baking powder. The government will review the list
in April 2011.
In January 2009, Saudi Arabia issued a revised animal feed subsidy list that consists of 17 energy and protein
rich animal feed ingredients. Under the revised program, the government will provide rebates that range from
$26 (rice hulls) to $101 (soybean meal) per metric ton, depending on the type of imported feed. The rebate
will be paid directly to the local importer. The revised list added two new feed items-Rhodes grass and Sudan
grass-to the subsidy list.
422
In November 2009, the Saudi Arabia government removed the $267 per metric ton subsidy on imported rice
which it decreed in December 2007. The government removed the import subsidy because of significant
reductions in the prices of imported rice due mainly to bumper harvest in several rice producing countries.
For religious reasons, Saudi Arabia bans imports of alcoholic beverages, live swine,
pork and food ingredients or additives that contain pork products, including pork fat
and gelatin. Meat and poultry shipments must be accompanied by a ―Halal‖ slaughter
certificate issued by an Islamic center in the country of origin. Additional statements
on the health certificate accompanying poultry and livestock meat shipments must
indicate that the animals slaughtered for export to the Kingdom were not fed with
feed containing protein, fat or remnants of animal origin and were not treated with
any growth hormones. The most important regulatory, non-tariff barriers that U.S.
food product exporters encounter in Saudi Arabia include: biotech labeling,
production & expiration date regulations, Arabic labeling requirements, a declaration
that animals slaughtered and exported to Saudi Arabia were not fed with feed
containing protein, fat or remnants of animal origin, and a Halal Slaughtering
certificate for both livestock and poultry meat.
Saudi Arabia is the most influential member of the Gulf Cooperation Council (GCC), which includes five
other countries in the Arabian Peninsula: United Arab Emirates, Kuwait, Bahrain, Oman, and Qatar. As a
group, the GCC is striving to create a common set of food standards. The Saudi Arabian Standards
Organization (SASO) is a dominant standard setting agency in the GCC countries. Currently, SASO is the
only Saudi organization responsible for setting national standards for commodities and products,
measurements, testing methods, meteorological symbols and terminology, commodity definitions, safety
measures, and environmental testing. Since its establishment in 1972, SASO has issued more than 800
production and testing standards for food products and is presently working on new standards. Saudi
standards are typically based on Codex Alimentarius regulations and to some extent on European and U.S.
standards, but are modified to reflect local conditions.
While standards are set by SASO, Saudi Food and Drug Authority (SFDA) tests imported processed and
packaged food items at various ports of entry. The standard setting responsibilities will move to the SFDA in
the next few months.
423
Leading U.S. agricultural exports include rice, yellow corn, soybean meal, planting seeds, crude and semirefined corn oil, hardwood lumber, sweeteners, tree nuts (mainly almonds), snack foods, fresh apples and
pears, processed fruit and vegetables, dairy products, red meat, fruit and vegetable juices, fresh fruit, and a
wide array of other high-value consumer-oriented products.
Saudi Arabia‘s positive biotech labeling requirement, production date stamp requirement, Arabic labeling,
Halal slaughtering requirement, and additional manufacturer statement for imported livestock and poultry
meat remain major concerns for U.S. foodstuff exporters.
For religious reasons, the Kingdom requires that the manufacturer of meat must declare that the slaughtered
animals have not been fed with feed containing protein, fat or remnants of animal origin. Detailed
information on the aforementioned requirements can be obtained by contacting the USDA‘s Foreign
Agricultural Service (FAS) in Riyadh at the following coordinates:
7.1 Best Prospects for Agricultural Goods and Services (Values in Millions U.S. Dollars)
7.1.1 CORN
Yellow corn is used principally in poultry feed and to a lesser extent in livestock rations. The Saudi
government has continued financing the establishment of new poultry farms in various regions of the country.
Existing large to medium sized poultry producers have been expanding in recent years, increasing the
country‘s self-sufficiency levels to about 55% in 2008. Saudi Arabia imports about 2 million metric tons of
yellow corn annually and its value is projected to reach $470.million by the end of 2009. Argentine remains
the largest yellow corn supplier to Saudi Arabia followed by the U.S. and Brazil.
U.S. feed corn exports to Saudi Arabia for the months of January-October 2009 decreased by 51 percent over
the same period in 2008 ($70 million vs. $141 million). The higher U.S. corn prices compared to Latin
American prices are the main reason for the decline of U.S. corn export to Saudi Arabia in 2009. The sharp
decline in the world feed corn prices, which started at the end of 2008, has helped the Saudi government
reduce its feed corn import subsidy from $266.67 per metric ton in March 2008 to $60.26 in January 2009.
The rebate is paid directly to importers.
Year/Description
2007
Total Consumption
2008
2009
706
604
474
Total Local Production
6
4
4
Total Exports
0
0
0
Total Imports
694
600
470
424
Imports from the U.S.
180
141
80
Source: Trade estimates and U.S. Customs Official Data
Value: In millions of U.S. dollars
7.1.2 SOYBEAN MEAL
Soybean meal is used principally in poultry feed and to a lesser extent in livestock rations. The continued
expansion in local poultry production has increased the demand for soybean meal by more than 5 percent per
annum in recent years. In the past few years, a huge price difference between Latin American and U.S.
soybean meal has made imports from the United States less competitive and drastically reduced U.S. market
share in Saudi Arabia. According to a recent U.S. Customs data, U.S. soybean meal exports to Saudi Arabia
declined by 44 percent for January-October 2009 over the same period last year ($44 million vs. $79 million).
The increases in the total values of soybean imports in 2007 and 2008 reflect the drastically increased world
soybean meal prices which reached $650 per metric ton in early 2008. The prices stared to decline in late
2008 reaching $500 per metric ton at the end of November 2009. The continued decrease in the world
soybean meal prices has helped the Saudi government reduce its soybean import subsidy from $396 per
metric ton in March 2008 to $101 in January 2009. The rebate is paid directly to importers. Currently, Saudi
Arabia imports about 800,000 metric tons of soybean meal per year
Year/Description
2007
2008
2009
Total Consumption
520
480
400
Total Local Production
0
0
0
Total Exports
0
0
0
Total Imports
520
480
400
Imports from the U.S.
50
84
55
Source: Trade estimates and U.S. Customs official data
Value: In millions of U.S. dollars
7.1.3 RICE:
Saudi Arabia imports more than one million metric tons of rice annually. With 60 percent market share,
Indian remained the dominant rice supplier to Saudi Arabia, followed by Pakistan, United States and
Thailand. In 2008, the value of the United States rice exports to Saudi Arabia reached $117 million, an
increase of 47 percent compared to 2007. According to a recent U.S. Customs data, U.S. rice exports to Saudi
425
Arabia increased by 10 percent in January-October 2009 compared to the same period last year ($109 million
vs. $99 million). Local rice importers attribute the sharp increase in U.S. exports in recent years to a decrease
in exportable rice from India and U.S. price competitiveness compared to other Asian rice exporters. The
higher values of total rice imports in 2007 and 2008 reflect the sharp increase in the world prices for rice
during that period. In November 2009, the Saudi government removed the $267 per metric ton subsidy on
imported rice which it decreed in December 2007. The Saudi government lifted the import subsidy due to
reduced world rice prices compared to 2007 and early 2008.
Year/Description
2007
2008
2009
Total Consumption
750
700
620
Total Local Production
0
0
0
Total Exports
0
0
0
Total Imports
800
670
800
Imports from the U.S.
80
117
130
Source: Trade estimates and U.S. Customs official data
Value: In millions of U.S. dollars
7.1.4 PROCESSED FRUITS AND VEGETABLES:
The Saudi market for processed fruits and vegetables is huge. The growth of supermarket and hypermarket
food sales is helping to broaden the market for this sector and good market growth is expected to continue in
the next few years as supermarkets and hypermarkets open more outlets in major cities of the Kingdom.
Local production of canned fruit and vegetables has been increasing in recent years but it depends almost
entirely on imported ingredients, some of which are sourced from the United States. The majority of the
processed fruit and vegetables that are labeled, ―manufactured in Saudi Arabia‖ are products that are actually
re-packed in the Kingdom. The insufficient local fruit and vegetable output and the high costs related to
importing them for use in local processing suggest that a significant demand for processed fruits and
vegetables will continue to be met by imports. Dates processing and packaging account for about 60% of the
total domestic processed fruit production. U.S. processed fruit and vegetables exports to Saudi Arabia
decreased by 10 percent in January-October 2009 compared to the same period in 2008 ($33 million vs. $37
million).
426
Year/Description
2007
2008
2009
Total Consumption
595
615
640
Total Local Production
240
250
255
Total Exports
5
5
5
Total Imports
360
370
390
Imports from the U.S.
26
44
38
Source: Trade estimates and U.S. Customs official data
Value: In millions of U.S. dollars
7.1.5 SNACK FOODS (EXCLUDING NUTS):
The latest official figures indicate that more than 60% of the Saudi population is in their teens, representing a
major consumer of snack foods. Local snack food production has drastically increased in the past few years,
accounting for about 50% of local consumption in 2007. There is a general decline in the importation of corn
and wheat-based snacks. Candies and chocolates are also being locally manufactured on a large scale.
Exporters may also look into supplying raw materials for the fast growing snack industry. U.S. snack food
exports to Saudi Arabia for the months of January-October 2009 increased by 68 percent over the same
period in 2008 ($27 million vs. $15 million). Snack food products that cater to Saudi consumers‘ preferences,
which tend to favor sweeter items, generally find better market reception.
Year/Description
2007
2008
2009
Total Consumption
457
475
494
Total Local Production
226
235
244
Total Exports
5
5
5
Total Imports
236
245
255
Imports from the U.S.
17
18
30
Value: In millions of U.S. dollars
Source: Trade estimates and U.S. Customs official data
427
A
GLOBAL / COUNTRY STUDY AND REPORT
ON
“Power Sector Of Saudi Arabia”
Submitted to:
(Golden Jubilee Institute of Management & Technology)
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
428
MASTER OF BUSINESS ASMINISTRATION
In
Gujarat Technological University
UNDER THE GUIDANCE OF
Prof. Chirag Soni
Submitted by:
Patel Bhavesh
117170592034
Dubaliya Riyajhusen
117170592035
Pathan Mohammad
117170592036
Chaudhry Seema
117170592037
Modi Jaimini
117170592038
Kaldar Juned
117170592039
Pal Ramesh
117170592040
Batch: 2011-13,
MBA SEMESTER III/IV
(Golden Jubilee Institute of Management Of Technology)
MBA PROGRAMME
Affiliated to Gujarat Technological University
Ahmedabad
May, 2013
STUDENTS DECLARARTION
429
We, __________________________________, hereby declare that the report for Global/ Country
Study Report entitled ― political analysis ― in (Saudi Arabia) is a result of our own work and our
indebtedness to other work publications, references, if any, have been duly acknowledged.
Place :
(Signature)
Date :
Patel Bhavesh
Dubaliya Riyajhusen
Pathan Mohammad
Chaudhry Seema
Pal Ramesh
Kaldar Juned
Modi Jaimini
------------------------------------------------------
430
PREFACE
More than 1400 years have passed since the revelation of Islam, during which it has established a
magnificent civilization that for many years brought happiness to mankind.
For a number of reasons however, this civilization has seemingly dwindled. Some seem to think it
has perished, died, and become a never to be repeated relic of history; they consider the natural
alternative and successor to this to be Western civilization, with its materialist global ideology.
However, this is a fallacy as the fact remains that Islam has maintained all its pillars and therefore
remains, theoretically, robust and dynamic enough to contend with and relate to reality.
The Saudi state, established in the mid 12th Hijri century and continuing till the present day, is an
extant proof of this. This state has maintained its pillars and principles whilst concurrently
deploying all measures and processes relevant to contemporary civilization.
We present this model to the reader not as a nostalgic link to history, but rather because its origins
and principles stem from the timeless Islamic shari’ah, whose relevance never depletes. As Leopold
Weiss (Muhammad Asad, said: ―The rules of this shari’ah were formulated in a way that no rule
would contradict with the original nature of man and the significant requirements of human
community at all places and times.‖1
It is a model that is built upon this classic and enduring system and which adds to that a unique
variety of contemporary modernity that influences and interacts with reality and benefits from all
that is modern, positive and beneficial, without adopting westernization or integration with the
other.
It is a model that exerts all efforts in realizing Islam and reviving its principles and civilization
without claiming perfection or infallibility.
431
Sufficient proof for the rectitude and suitability of this model is the fact that it is a beacon of light in
an era of diversity and challenge replete with secularism, atheism and materialist conflict.
Despite the practicality and applicability of Islam, it is true that there will always be shortcomings
between its theory and application. This is such because man is, by his very nature, erroneous and
has limited capabilities, even if he combined his efforts. Notwithstanding this, we present the
Islamic system as that which is the finest and most suitable.
We hope that the reader would join us, with objectivity and sincerity, in searching for the truth and
reality, wherever and whatever it is, and regardless of whether it has an increasing number of
opponents or competing viewpoints. Such a search, we wish, would be an optimistic one and not a
pessimistic one that prejudges the Islamic civilization as one of aggression and evil, as portrayed by
Samuel Huntington in his book The Clash of Civilizations.
The fact that the Islamic governmental model, like other models, has substance and profile, is best
demonstrated when we present it, as we are doing in this work, in comparison and contrast to
comparative jurisprudence. The substance is the bases, principles, values and legislation upon which
the system stands, which are found within the pages of this study, and which remain constant despite
the ever changing condition of people and their customs.
The profile consists of the patterns, mechanisms and means of which the system consists of, such as:
relations between authorities, administrative practices, shoura (consultation) and so forth, and these
are subject to change, according to welfare and situation.
We hope, dear reader, that this brief study about the system of governance in Islam and its modern
application in the Kingdom of Saudi Arabia, will be of interest to you.
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ACKNOWLEDGEMENT
The successful completion of a project requires active participation of many people from the time of
inception of an idea to its implementation, many brain works together and that only provides fruitful
results.
Nothing in the world can be done without guidance of experienced people and I am very lucky
to have many people around me to support me to carrying out this project efficiently. There are
many people who have directly or indirectly supported me in accomplishing this project
successfully. To name a few I would like to begin with my college and faculty members.
Asst.Prof.Patel Vishal who has always guided me during my entire project preparation,
Asst.Prof.Soni Chirag (Faculty members of G.J.I.M.T MBA COLLEGE) and all other faculty
members who have always helped me in preparing a report.
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I am also thankful to all those respondents who have helped me by providing their valuable time
by filling my questionnaires and provided me their views and ideas which were of great help for me
in preparing this project report.
And the most precious part of my life, my Parents & Family Members who have showered their
love and support which can be never repaid in any form but can be commemorate without them this
achievement could not have been achieved. I would like to thank my friends who have given good
support right from the first day of preparing this report.
I also like to thank all those people who have knowingly and unknowingly contributed in one way
or other in making this Project a more completely one with their valuable tips and suggestion.
I hope that the information incorporated in this project report would be appreciated as I have put
in may be efforts in leaving no stone unturned as I consider it to be true, fair and relevant in its
content and context to the best of my knowledge and ability.
EXECUTIVE SUMMARY
Literally, Islam means submission, peace and salvation. The Islamic religion is the absolute
submission to God according to the heavenly revelations.
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Thus all Prophets, peace be upon them, came with the same essentials of belief: belief in God‘s
Existence and Unity, final destruction, Resurrection and Judgment etc., as well as common pillars
such as worshipping God, paying zakat and abiding by noble values.
Each prophet hood differed in terms of details of rules and duties. Islam, which was revealed to
Prophet Muhammad, is the most comprehensive of all these forms.
This was clearly stated in the Holy Qur‘an: ―This day have I perfected your religion for you.
Completed My favor upon you, and have chosen for you Islam as your religion.‖
Once a Jewish man read this verse and then came to the second Muslim Caliph, Umar bin AlKhattab, and said to him: ―O the ruler of the believers! There is a verse in your Holy Book which is
read by all you (Muslims), and which, had it been revealed to us, we would have taken the day (on
which it was revealed) as one of celebration.‖ Umar asked: ―Which verse is that?‖ The man replied:
―This day have I perfected your religion for you.‖ Umar then said: ―I swear by God that I know the
day and the hour it was revealed to Prophet Muhammad. It was on a Friday and on the night of
‗Arafat (i.e. the Day of Hajj).‖2
From the attributes of perfection that this unique religion has, is that it is one of absolute
comprehensiveness: comprehensiveness of time (from its revelation to Prophet
Muhammad, peace be upon him, until the Day of Judgment), comprehensiveness of place (its
applicability in any place on earth), comprehensiveness of its human application (on body, brain,
psyche and soul) and comprehensiveness on life‘s affairs (in terms of the religion and of the
secular).
Hence we can say that Islam is a combined set of rules and legislation. There is the system of faith
and ideology, the system of worship, and the system of people‘s mutual dealings, in addition to
other systems such as that of ethics, sociology, politics, management etc. All this serves to confirm
Islam as a comprehensive, integrated way of life.
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Many orientalists have acknowledged this fact. Here are some examples:
1- Dr. Fitzgerald: ―Islam is not a religion only, it is a political system too.‖
2- Dr. Schacht: ―Islam means more than a religion; it also represents legal and political theories and
to sum up, it is a comprehensive system of culture that covers religion and state together.‖
3- Sir Thomas Arnold: ―The Prophet (Muhammad) has been a religious leader as well as the leader
of state.‖
4- Gibb: ―And hence it appeared clearly that Islam is not mere individual religious rituals; it requires
the establishment of an independent society with a special way of ruling with its own rules and
laws.‖3
Our study will solely deal with one of these systems, namely that of government and politics. Before
discussing this topic, we ask some preliminary questions:
What is the reality of this system?
What form does it take, and is there any relationship or resemblance between it and other
contemporary political systems?
What are the fundamentals it stands upon?
What are the goals and objectives that this system works to achieve?
How has this system emerged?
Is it merely theories, or has it realistic application?
What are the authorities of the state and what is the relationship between these authorities?
What is the relationship between the ruler and his subjects, and what are the rights and duties of
both?
Is there any jurisdiction over the state‘s policy, and how?
How is freedom understood, and what are its limits?
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What is the position of woman in Islamic policy making?
This study attempts to answer all these questions in light of the texts of the Islamic shari’ah and its
contemporary application in the governmental system of the Kingdom of Saudi Arabia.
TABLE OF CONTENTS
Chapter
Sub.
No.
Chapter
Particulars
I.
Preface
II.
Acknowledgement
III.
Executive Summary
PART-I
1.
Country Profile: Saudi Arabia
I
Formal Name
II
Short form
III
Terms For Citizen
IV
capital
V
Major Cities
VI
independence
VII
Public Holidays
VIII
Flag
XI
Historical Background
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2.
Geography
I
Location
II
Size
III
Land Boundaries
IV
Dispute Territories
V
Length of Loastline
VI
Maritime Claims
VII
Topography
VIII
Principal Rivers
XI
Climate
X
Natural Resources
IX
Land Size
IIX
Environmental Factors
IIIX
Time Horizon
3.
4.
Society
I
Population
II
Demography
III
Ethnic Group and languages
IV
Religion
V
Education and Literacy
VI
Health
VII
Welfare
Analysis of Major Trading Patners
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PART-II
1.
2.
Saudi Arabia power sector
I
Power sector
II
opportunities
III
Major projects
IV
Characteristics of Market
V
Table1: Status of Power Sector
VI
India Power Sector
VII
Gujarat Power Sector
VIII
Business opportunities
Conclusion
3.
Annexure
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PART – I
ECONOMIC OF THE SAUDI ARABIA
COUNTRY PROFILE: SAUDI ARABIA
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Formal Name: Kingdom of Saudi Arabia (Al Mamlakah al Arabiyah as Suudiyah).
Short Form: Saudi Arabia.
Term for Citizen(s): Saudi Arabian(s) or Saudi(s).
Capital: Riyadh (estimated population 3.6 million).
Major Cities: Population estimates for 2006 show continued growth for Saudi Arabia‘s major
urban areas: Jiddah (2.9 million), Mecca (1.6 million), Ad Dammam/Khobar/Dhahran (1.6 million),
and Medina (854,500). Mecca and Medina have religious significance that far outweighs their
respective populations.
Independence: Following Ottoman dominance, Egypt controlled Arabia from 1818 to 1824. For the
remainder of the nineteenth century, Egypt, Britain, and the Ottomans vied for control of the region.
On September 23, 1932, Abd al Aziz ibn Abd ar-Rahman Al Saud established the Kingdom of Saudi
Arabia. Unification brought together competing tribes into a modern state, covering an area
approximating present boundaries.
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Public Holidays: In accordance with Wahhabi theology, Eid al Fitr and Eid al Adha are Saudi
Arabia's only national holidays. Both holidays are dependent on the Islamic lunar calendar, and thus
the dates of celebration vary from year to year. In recent years, Shia Muslims have been allowed to
celebrate the holiday of Ashura in select cities of Eastern Province and in the south. Ashura is not,
however, a national holiday. Saudis commemorate September 23 as their Independence Day.
Flag: The Saudi flag features white lettering on a green background. The Arabic text reads: ―There
is no god but God: Muhammad is the Messenger of God.‖ Below the letters, also in white, is a
sword
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HISTORICAL BACKGROUND
Pre-Islamic Period: By 1000 B.C., southern Arabia had evolved significantly as a result of steady
contact with the outside world via the trade routes that spanned the region. Exports in frankincense
and myrrh brought wealth and global connections to present-day Bahrain, Yemen, Oman, and
southern Saudi Arabia. While the Persians and Romans fought to control the Near East, Arab
society benefited from the exchange of ideas that came with the camel caravans. Multiple religions
were present in the region, including Christianity, Judaism, and various polytheistic paganisms.
Early Islam: The birth of the Prophet Muhammad in A.D. 570 forever shaped Saudi Arabia. Today,
many Arabs refer to the era before the introduction and spread of Islam as ―the time of ignorance.‖
Muhammad was born in the city of Mecca into the prominent Quraysh tribe. His life and ministry
did much to unify Arabia. Until the seventh century, the peninsula‘s tribes fought a destructive
series of wars for control of the region. The situation had changed dramatically by the time of
Muhammad‘s death in A.D. 632. Muhammad, as well as his political successor Abu Bakr, enjoyed
the loyalty of almost all of Arabia. Although the Prophet did not appoint a spiritual successor, the
institution of the caliphate emerged and expanded the Islamic empire.
For the first 30 years following the Prophet‘s death, caliphs ruled the Islamic world from Yathrib,
today known as Medina. Responding to threats from the Byzantine and Persian empires, the caliphs
demanded allegiance from the Arab tribes. In a relatively short span of time, the Islamic empire
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expanded northward into present-day Spain, Pakistan, and the Middle East. However, maintaining
unity proved to be a continual challenge. Following the death of the third caliph, Uthman, in 656,
splits appeared in the burgeoning Islamic empire. The Umayyads (661–750) established a hereditary
line of caliphs centered in Damascus. The Abbasids, claiming a different hereditary line, overthrew
the Umayyads in 750 and moved the caliphate to Baghdad. Although the spiritual significance of
Mecca and Medina remained constant, the political importance of Arabia in the Islamic world
waned.
The Al Saud and Wahhabi Islam: The Al Saud family emerged as the dominant factor in Saudi
Arabia‘s history. The clan‘s origins can be traced to Najd, near Riyadh, beginning in about 1500. As
a small town developed, the Al Saud came to be recognized as its leaders, and the clan‘s power and
influence grew. The rise of the Al Saud coincided with that of the Muslim scholar Muhammad ibn
Abd al Wahhab (1703–87), who wrote and preached against leaders and traditions that he deemed
contradictory to the idea of a unitary god. Unlike other religious leaders who preached unitarianism,
Muhammad ibn Abd al Wahhab demanded that political power be used to implement his theology.
In 1744 Muhammad ibn Abd al Wahhab found a political partner in Muhammad ibn Saud, and the
two swore a traditional oath to work together in order to establish a state ruled according to Islamic
principles. The alliance was based on Muhammad ibn Abd al Wahhab‘s claim of religious
legitimacy and Muhammad ibn Saud‘s readiness to undertake jihad in defense of such principles. By
1765, Muhammad ibn Saud‘s forces had established Wahhabism and with it Al Saud political
authority over most of Najd.
After Muhammad ibn Saud died in 1765, his son, Abd al Aziz, continued the Wahhabi advance. In
1802 the Al Saud–Wahhabi armies sacked Karbala, including the Shia shrine commemorating
Husayn, the martyred grandson of the Prophet Muhammad whom Shia Muslims regard as their
spiritual forefather. In 1803 Wahhabi forces moved on to Mecca and Medina. With the assault on
the Hijaz, the region of pilgrimage, the Al Saud invited conflict with much of the rest of the Islamic
world. Recognizing the symbolic importance of the region, the Ottoman sultan ordered the recapture
of the Hijaz, and in 1812 and 1813 Egyptian forces, fighting on behalf of the sultan, regained control
of Mecca and Medina. Meanwhile, Muhammad ibn Abd al Wahhab had died in 1792, and Abd al
Aziz died shortly before the capture of Mecca.
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Nineteenth-Century Arabia: Following a six-year period of Egyptian interference, the Al Saud
regained political control of the Najd region in 1824 under Turki ibn Abd Allah, who rebuilt Riyadh
and established it as the new center of Al Saud power. Although they did not control a centralized
state, the Al Saud successfully controlled military resources, collected tribute, and resisted Egyptian
attempts to regain a foothold in the region. From 1830 to 1891, the Al Saud maintained power and
protected Arabia‘s autonomy by playing the British and Ottomans against each other. External
threats were largely kept at bay, but internal strife plagued the Al Saud throughout much of the
century. After the assassination of Turki in 1834, the family devolved into a series of competing
factions. The infighting and constant civil war ultimately led to the decline of the Al Saud and the
rise of the rival Al Rashid family; the Al Saud were driven out of Riyadh and forced to take refuge
in Kuwait.
Establishing a Modern State: Abd al Aziz laid the groundwork for the modern state of Saudi
Arabia while exiled in Kuwait. In 1902 he led a small force in a raid against the Al Rashid garrison
in Riyadh, successfully gaining a foothold in Najd. From there, he cultivated his Wahhabi
connections, establishing himself as the Al Saud leader and as a Wahhabi imam. During the next 25
years, Abd al Aziz gradually extended his authority. This slow process culminated in the conquest
of the Hijaz in 1924. Thus, after nearly 40 years the Al Saud again controlled Islam‘s most holy
land.
Unlike most other Arab countries, Saudi Arabia existed independent of Western control. That
autonomy had been achieved in large part because of the military strength of the radical Ikhwan
forces, desert warriors organized by Abd al Aziz and dedicated to promoting Wahhabi Islam. With
victory achieved, the Ikhwan expected a strictly Wahhabi state. Ultimately, however, Abd al Aziz
moved to rein in the Ikhwan. He assembled a diverse and committed political coalition and was able
to maintain a delicate political balance between religion and modernization. The Kingdom of Saudi
Arabia became an official state in 1932 and subsequently faced severe economic constriction in the
1930s. Fortunately, however, following the worldwide depression, geologists made a discovery that
significantly buoyed the region‘s economic outlook—enormous and easy-to-access deposits of oil.
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Abd al Aziz‟s Successors: Following Abd al Aziz‘s death in 1953, Saud succeeded his father as
king in a reign largely characterized by wasteful state expenditures and the polarization of wealth. In
1964 the royal family and ulama, responding to public discontent, deposed Saud and appointed his
half-brother Faisal as king. King Faisal aggressively pursued modernization, introduced Western
technology, and increased public education. His reign (1964−75) witnessed increasing diplomatic
complexity both within the Arab world and beyond its borders. When conflict broke out in the
Middle East, Saudi Arabia remained on the periphery. In 1967 Saudi Arabia claimed neutrality
during the Six-Day War between Arab and Israeli forces. During the 1973 Arab-Israeli conflict,
Saudi Arabia again decided not to participate militarily, but it did join the Arab oil boycott of the
United States.
External conflicts were coupled with internal threats. In 1975 Faisal fell victim to an assassination
plot carried out by one of his nephews. The assassin was only one member of a larger group of
discontented royal family members. Although ultimately it was determined that the assassin acted
alone, the threat of internal strife loomed over the kingdom, now led by Faisal‘s half-brother Khalid.
In 1979 internal revolt once again reared up in Saudi Arabia, as 500 dissidents seized the Grand
Mosque in Mecca, claiming that Saudi Arabia had abandoned its traditionalist roots in favor of
Western corruption. After two weeks of careful planning, the Saudi military overtook the dissidents,
and all of the surviving male radicals were beheaded. Far from discounting the dissidents, however,
King Khalid made some effort to address their grievances.
Khalid‘s half-brother, Crown Prince Fahd, ascended the throne following Khalid‘s death after a
short illness in June 1982. The crash of oil prices in 1986 brought economic challenges to the entire
Middle East region. Saudi Arabia functioned as a stabilizing force in the region throughout the
turbulent 1980s. King Fahd played an important role in bringing about a cease-fire between Iraq and
Iran in August 1988. He also supported the formation and strengthening of the Gulf Cooperation
Council (GCC), an alliance of the six Persian Gulf states of the Arabian Peninsula, with
headquarters in Riyadh. The Gulf War in 1991 changed regional diplomatic relationships
significantly. Faced with the threat of Iraqi imperialism following Iraq‘s invasion of Kuwait, Saudi
Arabia requested the assistance of the United States and a multinational coalition to defend the
Saudi border, and King Fahd played a pivotal role in bringing together Western allies with GCC and
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other Islamic states. Throughout the 1990s, Saudi Arabia‘s diplomatic and economic relationship
with the United States remained strong. But, while proving advantageous to Saudi Arabia‘s global
position, it aroused criticism in the Arab world and exposed Saudi Arabia to the ire of radical
Islamists. Nevertheless, widespread oil prosperity defused many regional tensions.
King Fahd, who had proved to be an effective leader capable of instituting liberal reforms and
strengthening bonds among Arab countries, suffered a massive stroke in 1995. He survived, but with
limited capacities. His half-brother, Crown Prince Abd Allah (Abdullah), served as the de facto ruler
of Saudi Arabia until formally becoming king upon King Fahd‘s death on August 1, 2005. King Abd
Allah has served effectively in the face of continuing external and internal challenges, including
terrorism, Islamic extremism, regional instability, and burgeoning domestic unrest. In particular, the
attacks on the United States on September 11, 2001, brought unwanted attention to the Saudi
connection to terrorism, given that 15 of the 19 hijackers were Saudis. The Saudi government has,
for the most part, cooperated with the United States in fighting the spread of terrorism and Islamic
extremism in the region. Its traditional ties to the United States have grown closer as a result of
increased U.S. emphasis on security over political reform in Saudi Arabia since the September 11
attacks.
Democratic Reforms: Since 1995, Saudi Arabia has made subtle changes in its governance
structure. Concerns over balancing the various factions of the royal family led to the creation of new
advisory groups and a slight diffusion of power. In 2003 the government announced a
reorganization of the Council of Ministers and then plans to create municipal councils and to hold
democratic elections. Originally scheduled for October 2004, the first stage of the municipal
elections finally took place February 10, 2005. In general, the candidates exhibited far more
enthusiasm than the voters. More than 1,800 candidates sought election to 592 seats, but only about
25 percent of eligible male voters (and possibly as few as 15–20 percent) cast votes. While some
observers viewed the elections as a mark of progress, critics concluded that the poor turnout
reflected a general dissatisfaction with the limited extent of the legislative reforms.
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GEOGRAPHY
Location: Saudi Arabia is located in the Middle East, occupying about 80 percent of the Arabian
Peninsula.
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Size: Saudi Arabia has a land area of 1,960,582 square kilometers according to U.S. government
statistics. Saudi figures, however, denote a land area of 2,250,000 square kilometers. Either way,
Saudi Arabia is approximately one-fifth the size of the United States.
Land Boundaries: Saudi Arabia has a total of 4,431 kilometers of borders with Yemen (1,458
kilometers), Iraq (814 kilometers), Jordan (744 kilometers), Oman (676 kilometers), the United
Arab Emirates (457 kilometers), Kuwait (222 kilometers), and Qatar (60 kilometers).
Disputed Territory: Only portions of the border with Yemen, demarcated in 1934, are clearly
defined. The discovery of new oil repositories in the 1990s led to border disputes between Saudi
Arabia and both Yemen and Jordan, some of which were resolved in the early 1990s. Additionally,
Saudi Arabia and Kuwait share two Divided Zones, one administered by each country, along their
short border. The zones contain about 5 billion barrels of proven oil reserves. Saudi Arabia and
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Kuwait have allowed foreign countries to operate oil fields in the zones while taking an equal share
of the revenues.
Length of Coastline: Saudi Arabia has 2,640 kilometers of coastline—nearly 1,800 kilometers
along the Gulf of Aqaba and the Red Sea and the remainder along the Persian Gulf.
Maritime Claims: Saudi Arabia claims a territorial sea of 12 nautical miles and a contiguous zone
of 18 nautical miles, as well as some small islands, seabed, and subsoils beyond the 12-nautical-mile
limit.
Topography: The Arabian Peninsula is an ancient massif whose geologic structure developed
concurrently with the Alps. Geologic movements caused the entire mass to tilt eastward and the
western and southern edges to tilt upward. In the valley created by the fault, called the Great Rift,
the Red Sea formed. On the Arabian Peninsula, the eastern line of the Great Rift fault is visible in
the high escarpment that parallels the Red Sea between the Gulf of Aqaba and the Gulf of Aden.
The eastern slope of the escarpment descends gradually. A second, lower escarpment, the Jabal
Tuwayq, runs north to south through the area of Riyadh. In the south, a coastal plain rises gradually
from the sea to the mountains. The southern region boasts the country‘s highest mountain ranges,
reaching about 3,000 meters. The central plateau, Najd, extends east to the Jabal Tuwayq and
slightly beyond. A long, narrow strip of desert separates Najd from eastern Arabia, which slopes
eastward to the sandy coast along the Persian Gulf. North of Najd, a larger desert isolates the heart
of the peninsula from the steppes of northern Arabia. South of Najd lies one of the largest sand
deserts in the world, the Rub al Khali. Extensive coral reefs buttress much of Saudi Arabia‘s
coastline, making natural ports rare.
Principal Rivers: Saudi Arabia has no permanent rivers or lakes. However, in eastern Arabia,
artesian wells and springs provide valuable water resources. Additionally, in many areas of northern
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and eastern Arabia significant underground aquifers lie beneath the desert. The largest contains
more water than the entire Persian Gulf.
Climate: The climate in Saudi Arabia differs greatly between the country‘s two distinct regions: the
coast and the interior. High humidity coupled with more moderate temperatures is prevalent along
the coast, whereas aridity and extreme temperatures characterize the interior. Temperatures along
the coast rarely exceed 38° C. In the interior, mostly desert, the average daytime temperature in the
summer is 45° C, but it is not uncommon for temperatures to reach 54° C. The capital, Riyadh, has
an average temperature of 42° C in July and 14° C in January. Temperatures rarely drop below
freezing. Most of Saudi Arabia receives only infrequent rainfall. However, the southwestern
province of Asir experiences monsoons between May and October, bringing an average of 300
millimeters of precipitation.
Natural Resources: Saudi Arabia‘s vast oil resources have shaped the kingdom‘s development. The
country also has large natural gas reserves, as well as deposits of bauxite, coal, copper, gold, iron,
phosphates, platinum, silver, tungsten, uranium, and zinc. Non-mineral resources include limestone,
glass sand, and stone.
Land Use: Most of Saudi Arabia consists of arid or semi-arid land. Uninhabitable desert covers
nearly half the country. According to 2005 statistics, only 1.67 percent of Saudi land is classified as
arable, and only 0.09 percent of the country‘s land is planted to permanent crops. Irrigated land
totaled an estimated 16,200 square kilometers in 1998. In the more temperate regions of the
kingdom, adequate forage exists to support cattle grazing.
Environmental Factors: Saudi Arabia faces numerous environmental challenges. The country has
very little arable land. Water scarcity is a constant concern, as are the related issues of
desertification and creeping sands. The region‘s dryness results in frequent dust and sand storms that
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can cripple transportation. The lack of perennial rivers or permanent bodies of water poses a
continual challenge, as does the depletion of underground water resources. Additionally, coastal oil
spills, though infrequent, contribute to pollution.
Time Zone: Saudi Arabia operates on Greenwich Mean Time plus 3 hours.
SOCIETY
Population: In July 2006, estimates placed Saudi Arabia‘s population at 27,019,731, with an annual
growth rate of 2.18 percent. The population total includes nearly 6 million non-nationals.
Approximately 100,000 foreigners enter the country each year, mostly to fill specific job openings.
Immigrant workers come primarily from other Arab and Muslim countries, including many from
South Asia and the Philippines. Fewer than 100,000 Westerners work and live in Saudi Arabia.
Because most of the terrain is unsuitable for cultivation, the coastal areas and interior oases support
the vast majority of the population. Some cities have reported densities of 1,000 people per square
kilometer. The Mecca region, which also contains the major city of Jiddah, is the most populated
area of the country, with nearly 26 percent of the total population. Other population centers include
Riyadh and the clustered Eastern Province cities of Ad Dammam, Khobar, and Dhahran. The least
populated regions lie at the kingdom‘s periphery, to the extreme north and south.
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Demography: Saudi Arabia has an overwhelmingly young population. According to 2006
estimates, 38.2 percent of Saudis are under the age of 15, 59.4 percent are 15–64 years of age, and
only 2.4 percent are 65 and older. The median age for males is 22.9, for females 19.4.
The sex ratio is 1.2 males/female. The birthrate and death rate are estimated to be 29.34 per 1,000
and 2.58 per 1,000, respectively. Saudi Arabia has a relatively low infant mortality rate, estimated to
be 13.7 deaths per 1,000 live births. It has a relatively high level of life expectancy: 73.66 years for
males and 77.78 years for females, or 75.67 years overall. The country‘s fertility rate is 4.1 children
per woman, a significant drop in the past 20 years from 6.4 births per woman in 1985.
Ethnic Groups and Languages: Saudi Arabia‘s population is very homogeneous. The native
population is 90 percent Arab and 10 percent Afro-Asian. Arabic is the official language.
Religion: Islam is the official religion of Saudi Arabia. Islamic law forms the basis for the country's
legal code, and all citizens must be Muslim. Eighty-five percent of Saudis are Sunni Muslims, most
adhering to
the Wahhabi sect. About 2 million Shia Muslims live in Saudi Arabia, primarily in the east. The
presence of religions besides Islam results almost exclusively from the presence of foreign nationals,
including a sizable number of Hindus and Christians. The U.S. Conference of Catholic Bishops has
estimated that between 500,000 and 1 million Catholics currently reside in Saudi Arabia. In recent
years, the Saudi government has stated a policy of allowing non-Muslim foreigners to practice their
religion privately, but no change in the law reflects this sentiment.
Public worship of other religions is prohibited by law and regulated and punished by the state's
Committees for the Propagation of Virtue and Prevention of Vice. Proselytizing by non-Muslims
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and by non-Sunni Muslims is strictly prohibited. Conversion from Wahhabi Islam to another
religion is a crime. The government controls all mosques and is the direct employer of imams. It
also operates centers designed to facilitate the conversion of foreigners to Islam. Non-Sunni
Muslims are largely eliminated from consideration for government employment and educational
opportunities.
Education and Literacy: The U.S. Department of State estimates the Saudi literacy rate to be 84.7
percent for males and 77.8 percent for females. Saudi Arabia‘s nationwide public education system
includes eight public universities and more than 20,000 schools. Public education—from elementary
through high school—is a major government priority and is open and free to every citizen. In 2005
the government devoted 25 percent of total expenditures to education. Parents are not, however,
required to send their children to school. Estimates from 2001 suggest that 59 percent of agerelevant children enroll in primary education. About 61 percent of those eligible attend intermediate
and secondary schools.
According to 1996 data. Education remains closely tied to Islamic teachings. All curricula must
conform to Islamic laws and the Quran, and traditional gender roles still limit the educational
opportunities available to females. The education of females has increased dramatically in recent
years, from 25 percent of all students in 1970 to 47.5 percent in 2001. However, classroom
instruction remains strictly segregated. Additionally, women can only attend six of the nation‘s eight
universities, and they are prohibited from studying certain subjects. Whereas men may travel to
foreign countries to pursue education, women are discouraged from doing so and generally must be
accompanied by a spouse or male relative.
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Health: Health benefits for Saudi citizens have increased exponentially since the implementation of
the first five-year development plan in 1970. Today, according to the Saudi government, every
citizen has access to unlimited, free medical care.
The government provides the bulk of financing to build and operate hospitals throughout the
country. As of 2006, the Saudi Ministry of Health operated 62 percent of the country‘s hospitals and
53 percent of its nonurgent-care centers. Expenditures for health and social services account for
about 13 percent of the government‘s 2006 budget. Although spending has increased, management
problems have hindered coordination among the various state, private, and military health care
providers.
Saudi Arabia has a two-tiered health care system. A series of clinics, many of them mobile units that
serve the country‘s remote rural towns, provide minor and preventative health care. Most of the
doctors in the country are not Saudi⎯only about 20 percent according to recent estimates.
Government officials expect this number to increase as education for doctors improves in the
country.
Saudi Arabia‘s medical advances can be seen clearly in the increasing number of specialized
service providers. As recently as 1980, most Saudi hospitals provided only general medical care, but
in May 2006 Saudi Arabia terminated its long-standing practice of sending patients to the United
States for more complicated procedures. Government attention instead has focused on continuing to
improve Saudi facilities and expertise.
Statistics indicate a relatively high level of health in Saudi Arabia. According to 2002 estimates,
there are 1.5 doctors and 2.3 hospital beds per 1,000 persons. Nearly the entire Saudi population has
access to sanitation, and 95 percent of Saudis have access to clean water. Similarly, nearly 100
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percent of the population has access to affordable essential drugs. The immunization rate for
children approaches 100 percent. For example, immunization against tuberculosis and measles has
increased to 94 percent of all one-year-olds. Of births occurring in 2002, 91 percent were attended
by a trained health professional.
Welfare: Among developing nations, as categorized by the United Nations in 2005, Saudi Arabia
ranks thirty-second out of 103 countries on the Human Poverty Index (an assessment of standard of
living), ahead of most of its Middle East neighbors, and seventy-seventh out of 177 nations on the
Human Development Index (a comparative measure of well-being and child welfare).
Through its series of five-year development plans, Saudi Arabia continues to try to transform oil
wealth into broader economic prosperity. But despite high oil prices and rising oil production, the
average Saudi‘s standard of living has fallen, and unemployment, especially among young adults,
continues to rise. Moreover, the perception that oil revenues are not equitably distributed throughout
the population continues to create some social discontent.
Saudi Arabia‘s General Organization for Social Insurance, a semi-state body, was established in
1969. A 9 percent payroll tax funds social insurance programs. Saudi businesses and individuals are
also responsible to the Ministry of Finance for the zakat (almsgiving), the Islamic tithe of 2.5
percent of one‘s net worth. Old-age pensions are paid to retired workers at a rate of 2.5 percent of
the last average salary. Men must be 60 years of age and women 55 in order to begin receiving
payments. Additionally, all Saudis are granted a plot of land and a small loan to build a house.
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Introduction of Major Trading Patners
Introduction
International trade has been playing a major role in the world economy. Over the past decade, world
trade has almost doubled from $7 trillion to more than $13 trillion (IMF, 2004). As a consequence
of this, nations have been impacted to large extent by international business in recent times than in
the past. Global linkages have made possible investment strategies and marketing alternatives that
offer tremendous opportunities for international business. While trade is important for economic
growth, this has been receiving negative publicity as it is thought to bring harm to the environment
(Asafu-Adjaye, 2004).
Further, when governments consider development of their nations, it is not only restricted to
economic growth, but also protection of environmental quality and improvement of life styles, being
457
the other focal areas. With environmental degradation and unequal distribution of wealth, efforts of
nations have been to reconcile international trade so as to achieve sustainable development.
Trade liberalisation and strengthening of world trade rules may be seen as a means of achieving
sustained economic growth, yet there could be other negative impacts to developing nations as well.
This is where the challenge lies to developing nations. Since the early 1990s, a number of empirical
studies suggests that an inverted U-shaped relationship exists between pollution levels and economic
development (see Grossman and Krueger, 1991; Shafik and Bandyopadhyay, 1992; Seldon and
Song, 1994).
The findings of these studies conclude that pollution levels are lower in the initial stages of low
economic growth. As the levels of economic development progress, pollution levels increase until a
certain point. At this point, higher level of economic development leads to structural changes and
technological improvements, which leads to a decline in pollution levels. This paper reviews the
economic structure of Saudi Arabia, which is one of the fastest growing nations in the region.
However, it has been only since 2000 that the Kingdom has made efforts to become globally
integrated, the strategy for this has been to promote privatisation, create jobs for Saudi nationals,
and boost investment. Much of the private sector development has been on major infrastructure
projects and capital markets activity, while the consumer goods industry is dependant on exports.
Exports of goods and services have continued to the largest component of GDP, accounting for over
40% of GDP every year. With exports to Saudi Arabia being considered an appropriate entry
alternative, the main aim of this paper is to synthesise guidelines for exports to Saudi Arabia. The
paper also discusses on key strategies for the exporters to enter
Saudi market and sustain business. The paper concludes by highlighting important considerations in
exporting goods and services to Saudi Arabia.Sustaining trade with Saudi Arabia.
Exporting
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Companies consider entering international markets when their domestic market is saturated,
irrelevant, or less profitable, more opportunities are found in the overseas markets. Exporting is the
simplest mode of internationalisation, especially for entrepreneurial and small businesses.
Figure 1 presents an evolutionary model of the internationalisation process, with a particular focus
on exporting (Czinkota and Ronkainen, 2000). The model demonstrates the interaction between
different components and shows how a company gradually grows into becoming a full participant in
the global arena. With the help of this model, an exporter‘s stage in the export development process
and the changes needed to attain continued progress can be determined.
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A model of the export development process Source: Adapted from Czinkota and Ronkainen (2000)
However, sometimes a company lacks either sufficient capital or human resources for direct
exporting or alternatively, may consider this strategy as inappropriate. In such cases, there are
alternative methods of entering the global marketplace.
The main options include use of licensing, franchising (Robinson, 1984), and utilisation of the
services of global market intermediaries (Harrell and Kiefer, 1993). These alternatives are open to
and used by all types of companies, large and small. They offer flexibility in the foreign market
approach, depending on the needs of the company and the circumstances in the market.
While a large multinational corporation may use the same strategy to rapidly enter foreign markets
to take advantage of new conditions and foreclose some opportunities to its competition, a small
exporting company, for example, may choose to use licensing to benefit from a foreign business
concept or to expand without much capital investment.
Similarly, a new-to-export company may use intermediaries because of a lack of in-house expertise
with exporting (Harrell and Kiefer, 1993). 80 M. Sadiq Sohail and M.A. Burney Economic
integration of regions is another factor that plays a decisive role in a company‘s decision to enter the
global arena. Economic blocs, like European Union creates its own power and procedures (Rajan,
1997) presenting both opportunities and potential problems for exporters.
This may have an impact on a company‘s entry mode by favouring direct investment because one of
the basic tenets of integration is to generate favourable conditions for local production and intraregional trade. By design, larger markets are created with potentially more opportunities. Because of
harmonization efforts, regulations may be standardised, thus positively affecting exporters.
460
An exporter needs to consider yet another important factor in making assessments and decisions
about entering into an export market (Harrell and Kiefer, 1993; Rajan, 1997). The first task is to
envision the outcomes of its entry into new horizons.
Dynamics of the target markets and changes in the competitive landscape can be dramatic if
opportunities can be exploited in relatively homogenous demand conditions. This could be the case,
for example, for industrial goods, consumer durables, such as cameras and watches, as well as
professional services.
Second, the exporter will have to take into consideration varying degrees of readiness within the
markets themselves, that is, governments and other stakeholders, such as labour unions and other
pressure groups, who may oppose liberalisation of competition in all market segments.
An understanding of the internationalisation stages together with the behaviour of risk and
profitability helps a company to overcome the seemingly prohibitive cost of going global.
Companies must be aware that any negative developments are only short term and should realise
that in general, export success requires a company to be risk taker, and having a satisfactory export
performance takes time (Miller et al., 1993).
Price controls
The government maintains price controls for basic utilities, energy, and many agricultural products.
The effect of these subsidised prices is that petroleum products, including many petrochemicals, are
sold in Saudi Arabia at prices that effectively eliminate competing imports.
However, agricultural subsidies were dramatically curtailed in the early 1990s and have been
reduced in the two most recent budgets. This is in line with the government's deficit reduction plans
(Azzam, 2004; Saudi Arabian Monetary Agency,2004).
Tax system
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While there is no tax on personal income, tax on business incomes ranges from 25% on profits of
<$26,667 to a maximum rate of 45% for profits of more than $266,667.
Some foreign investors avoid taxation, either in part or totally, by taking advantage of various
investment incentives, such as 10-year tax holidays for investments in approved projects meeting
specified requirements.
The market structure
Saudi Arabia is at the heart of the second fastest growing market (at an average 17–25% pa). Saudi
Arabia is a key member of the Gulf Cooperation Council (GCC), the most powerful of any trade
groups in the Middle East. In the trade arena, GCC‘s objective is to achieve free trade arrangements
with the European and Asian nations besides unification of trade policies and importation systems.
Member countries have not finalised some of the practical details, such as the mechanism for
revenue distribution after tariffs are collected at the first GCC point of entry. Nonetheless, the GCC
is moving forward with its plan for greater economic integration and with ambitious plans that
include establishing of a monetary union in 2005, a common market in 2007, and a unified currency
based on the dollar by 2010.
The per capita income of its six member states in 2002 (that is, Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia, and the United Arab Emirates) was $10,183 with Saudi Arabia‘s per capita income
being about $8,027 (Central Department of Statistics, 2003).
Saudi Arabia‘s population is growing between 3.3–3.5%, poised to reach 25.3 millionin 2005, and
further up to 29.2 million by the year 2010. The average annual real GDP growth is projected at
3.5–4.0% by 2006 and the purchasing power at $11,700 (EIU, 2004).
About 70% of the population is under the age of 30. Modern technological influences such as
computers, mobiles, digital products, video games and the internet are all contributing to broadening
the buying habits of these young people.
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Table 1 presents the market size and growth patterns in Saudi Arabia. The size of the Saudi market
is US$ 189 billion constituting 0.58 of the world GDP. The market is very open with an openness
factor of –100 largely because of the dependence on imported goods and services.
With sound market infrastructure and economic freedom, the market opportunities rating has been
rising reaching 6.21 on 10-point scale.Because Saudi Arabia‘s industrial base is insufficient to meet
most of its market needs and demand, it relies heavily on imports.
The main export opportunities to Saudi Arabia include electrical equipment and machinery, building
materials, food products, oil, gas, petrochemical equipment and supplies and desalination equipment
and supplies, consumer goods, computer hardware and software, education (the large youth
population generates a large demand for education services and products), healthcare products, and
communications equipment. Emerging sectors include leisure, home entertainment, education,
training, and electronic publishing (Azzam, 2002; Branch, 2000).
While Saudi Arabia is a very attractive market with actual returns exceeding projected returns, it has
not been an easy market to penetrate. Branch (2000) observes that the Saudi consumer market is a
developed one, with a generally sophisticated and well-off consumer base, good quality, and welldesigned products. It is a market that is steady within the local cultural bounds, and increasingly
becoming modernised.
Because of the sheer size of the market and the wealth of urban middle class, foreign companies
have found an attraction to the Saudi market and have been pouring goods and services worth
billions into Saudi Arabia over the last few decades. Yet, many exporting companies have been
disappointed because of the narrow nature of their offerings and a far fiercer competition than
initially anticipated. Exporters are advised to broaden the range of products offerings.
WTO Accession
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Accession to the World Trade Organization (WTO) has been a fundamental component of long-term
Saudi economic reform programme. In compliance with WTO regulations, Saudi Arabia has been
working towards removing protectionist barriers – placing ceilings on tariffs; further opening key
services sectors to foreign participation, and improving intellectual property rights protection.
These changes provide immense opportunities even to exporters as such measures will result in an
open, transparent, and rules based trade regime. Saudi Arabia made substantial progress towards
accession to the WTO and the outlook for membership in 2005 is promising.
WTO membership will bolster reform by increasing competition, transparency, and diversification.
Foreign oil companies have been permitted to explore in Saudi Arabia since the nationalisation of
the oil giant, Aramco. Bilateral market access agreements have been signed with virtually all
interested trading partners except the USA.
Foreign trade
According to International Monetary Fund statistics, Saudi Arabia is the only Middle
Eastern trading country among the top 30 leading trading countries of the world. It ranks eighteenth
in the world with $93 billion exports in merchandise trade and 32 with $37 billion in import of
goods and services.
Exports
Crude oil, refined products, and natural gas liquids account for the bulk of Saudi exports
(accounting for 88% of the total exports). Nevertheless, the percentage of crude oil and petroleum
product exports fell slightly during the 1980s as a result of the growth in petrochemical and other
chemical exports.
These products have come mainly from SABIC companies. After declining to their lowest levels in
the 1970s and 1980s, following the oil price crash of 1986, exports had steadily recovered by 1992,
both as a result of improved oil prices and Saudi Arabia‘s global market share of world oil supplies.
464
Moreover, as SABIC created a new petrochemical capacity, non-oil exports rose as well. The
direction of exports has been influenced by Saudi Arabia‘s oil customers (Al-Qahtany, 2001).
Imports
Saudi‘s import levels have closely followed overseas oil earnings and government expenditures.
Machinery, appliances, and electrical equipment constituted the largest import category. Although in
line with lower domestic investment, these items fell in terms of total share.
In 1990, this category accounted for 16% of imports but by 2002 it had risen to 55.3%. Foodstuffs
have been the second largest category: in 1990 these items made up 14% and rose only slightly to
16% in 2002. During the 1980s, chemical products, jewellery and metals, and other transport items
exhibited the largest growth in imports. Chemical products, the third largest imported category since
1990, constituted around 13% of imports. Table 2 presents Saudi Arabia‘s top commodity imports
over the 5-year period between 1998 and 2002.
The principal source of imports was Western Europe, which maintained its share at 44% for most of
the 1980s. The USA supplied 17% of Saudi Arabia‘s imports, whereas Japan's share was 15%,
having decreased from around 20% in the mid-1980s. Saudi Arabia brought only 3–4% of imported
goods from the rest of the Middle East (Azzam, 2002). Table 3 shows Saudi Arabia‘s top trading
partners in imports and exports during year 2000.
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Exports to Saudi Arabia
While imports of consumer goods into Saudi Arabia are duty-free, some Saudi industries are
protected by the imposition of 20% import duties on certain commodities. Other items carry duties
of 5% of the total cost, which includes insurance and freight.
Another point worth mentioning is the policy followed by Saudi Government to assist Saudi
nationals. In accordance with the government directives, all purchases are to be made from a Saudi
importer.
This too can be made only if the product is not made locally. Where there is a need for import of
products, because of the deficiency in local production, imports are subjected to tariffs. For
example, aluminium or wooden frames, which are also produced locally, are assessed at an import
tariff of 20%.
As for clearances, goods are usually cleared quickly through customs at Saudi seaports. Original
export documents should be stamped and attested by Saudi consular authorities in the country of
origin. This will make clearing customs far easier.
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Major Trading Exporters & Importers
West Asia and North Africa
Iran
Iraq
Israel
Jordan
Oman
Qatar
Syria
467
Turkey
Yemen
Asia
o Pakistan
o Japan
o Malaysia
o China
o India
o Thailand
United States
Europe
West Asia and North Africa
Both Egypt and Saudi Arabia enjoy very distinguished status and huge potential on the Arab,
Muslim and international levels. This position has provided the two countries with key influential
capabilities in their foreign relations.
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On the Arab level, the historical expertise stresses that Cairo and Riyadh are the two poles of
relations and interacts in the Arab regional system. They shoulder a big responsibility to realize the
Arab solidarity and achieve the aspired goals for Arab nations from Atlantic Ocean to Gulf.
The strong Egyptian-Saudi relations serve all Arab countries, as shown by War of October 1973.The
two countries adopt similar stands concerning many issues and crises on the international, Arab and
Muslim fronts, including as the Arab-Israeli conflict and Palestinian cause.
This similarity reflects common principles and strong relations between the two countries.
Iran
Saudi Arabia-Iran relations have been mixed. Both Saudi Arabia and Iran have aspiration for
Islamic leadership and both the countries possess different vision of regional order.
Iran, which after the Islamic Revolution strictly followed an anti-US policy, always deemed Saudi
Arabia as an agent of the US in the Persian Gulf region that speaks for the US interests.
Saudi Arabia's concerns about Iran on the other side are mainly associated to its plans of expanding
influence to other parts of the Persian Gulf region, especially in post-Saddam Iraq, and the quest to
build its own nuclear arsenal.
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The difference of political ideologies and governance also divided both the countries. For Iran, it is
said that there is no place for monarchical regimes in Islam, like the ones seen in Saudi Arabia and
also in some other Arab countries.
Energy difference is a third source of tension between Saudi Arabia and Iran. Whereas Saudi
Arabia, compared to Iran's smaller oil reserves and larger population, can afford to take a long-term
view of the global oil market and has an incentive to moderate prices, Iran is compelled to focus on
high prices in the short terms.
Iraq
Postwar Saudi policy focused on ways to contain potential Iraqi threats to the kingdom and the
region. One elements of Riyadh's containment policy included support for Iraqi opposition forces
that advocated the overthrow of Saddam Hussein's government. In the past, backing for such groups
had been discreet, but in early 1992 the Saudi's invited several Iraqi opposition leaders to Riyadh to
attend a well-publicised conference. To further demonstrate Saudi dissatisfaction with the regime in
Baghdad, Crown Prince Abdallah permitted the media to videotape his meeting with some of the
opponents of Saddam Hussein.
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Main Trading partners
Main customers
Main suppliers
United States
United States
Japan
Japan
South Korea
England
France
Germany
Italy
Switzerland
Singapore
Italy
Japan and the United States are at the same time, the main customers and main suppliers of Saudi
Arabia.
FOREIGN TRADE CONTROL :
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In the field of foreign trade, Saudi Arabia adopted a relatively liberal policy both at imports and
exports levels.
Imports regulations :
For the last few years, imports regulations have been marked by a considerable relaxation. The main
provisions in this area may be summed up as follows : The list of products prohibited for imports is
limited to goods : alcoholic drinks, drugs, pork meat. The imports of some products such as arms
and ammunition, and pharmaceutical products is submitted to the authorization of the competent
Ministry. Finally, cinematographic productions and publications must be submitted to the prior
censure of the Ministry of Information.
Exports regulations :
Exports customs formalities and procedures are relatively very simplified, especially in view of the
nature of exported products.
Other formalities and documents :
* Any goods forwarded to Saudi Arabia must be coupled with a sales invoice, written in Arabic or
English and as well as with a certificate attesting goods origin ;
* In fields of agri-food industries and environment protection, goods must be conform with the
standards established by the Saudi Arabian Standards Organization (SASO).
* As concerns food products, sanitary and analysis certificates are often compulsory.
FOREIGN TRADE FINANCIAL OPERATIONS :
Banking system :
The main institutions in this field may be divided into four categories :
Saudi Monetary Agency (SAMA) which plays the role of the Central Bank ;
472
Commercial banks entirely Saudis, such as National Commercial Bank, Riyadh Bank and Al Rajhi
Banking Investment Corporation ;
9 Commercial Banks in joint venture with foreign banks but with Saudi Majority holding;
And finally, specialized financial institutions whose main role is to grant long term credit.
Exchange system :
Exchange operations are free in Saudi Arabia, Saudi Riyal is entirely convertible.
Methods and means for international payment :
Saudis foreign trade operators resort to most of the means used at international level : documentary
credit, documentary remittance, international transfer (Swift) ; however the irrevocable and
confirmed documentary credit is the most currently used means.
CUSTOMS TAXATION :
Saudi Arabia has assessed out its customs tariff on the basis of the General Products Nomenclature
(GPN), stemming from the International Convention on the harmonized goods description and
codification system.
Applicable duties and taxes :
Most of imported goods are subjected to a customs duty of 12% on CIF value ; notably in the event
of : bakery goods, canned food, clothing and household equipment, cosmetics and perfumery and
vehicles and their spare parts ;
Yet, customs duties of 20% are applied to imported products similar to those manufactured locally
as frozen chicken, furniture, plastic articles, electric cables etc...
473
Yet, it should be noted that some imported essential products benefit from total exemption from
customs duties ; such as sugar, meat, rice and pharmaceutical products.
Special provisions :
Goods from the Gulf Cooperation Council Countries (G.C.C) are in principle duty free.
Likewise, some tariff conventions between Saudi Arabia and some Islamic Countries provide for
total or partial exemption from duties and taxes.
FOREIGN TRADE LOGISTIC :
International Transports :
Air transports have experienced a quick expansion for the last twenty years. Saudi Arabia is
endowed with three international airports :
King Khalid of Riyadh ;
King Abdul Aziz of Jeddah ;
Dhahran Airport.
It is also provided with twenty airports for local transports.
The National air Company Saudi Arabian Airlines ensures regular flights : on the one hand between
this country and the main international airports of Europe, Africa, Asia and America. Yet, it should
also be noted
that Saudi Arabia is also served by other air companies such as Air France, Lufthansa, British
Airways and Swiss Air.
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* The total length of the road network was estimated at about 128,000 Km in 1992. Road public
transports are ensured by Saudi Public Transport Company (SAPTCO). Saudi Arabia is also
provided with a railway network managed by the Saudi Railways organization.
* In the area of maritime transport, the country is endowed with six major ports :
On the Gulf : Dammann, Ras Tanura and Jubail
On the Red sea : Jeddah, Yanbu, Jizan and Dhuba.
Dhuba port is specialized in goods traffic from the Near-East and North Africa. While Yanbu and
Jubail ports are rather specialized is Saudi products exports.
Telecommunications :
Saudi Arabia is endowed with a relatively developed telecommunications network. Automatic
telephone and telegraphic services extend over the whole Saudi territory.
At international level, the country is directly linked to most foreign countries, thanks notably to
three satellites which complete the Saudi telecommunications network :
Intelsat, for international communications, ;
Immarsat, for communications through telex and telephone ;
Arabsat for Inter-Arab telecommunications network.
Distribution System :
The Saudi distribution system is actually experiencing an important change especially in view of the
quick increase of west like commercial centres and supermarkets.
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CONCLUSION
Comparison between the Two Systems
After examining the characteristics of the Islamic political system and its implementation in the
Saudi Arabian model, the reader may ask about the difference between the Islamic system and the
modern democratic system prevalent in the West. Are they in accord, or do they differ? And if so,
then what are the causes of this difference, and what is its extent?
This is indeed a very important matter as the two systems have historical depths that have cast their
shadows on the modern era.
Comparison between two matters normally requires presenting them in a balanced way so as to
demonstrate their similarities and differences, but we will ignore this premise due to the assumption
that the reader is well aware of one aspect of the comparison, namely the democratic system, due to
his living under such a system.
The other aspect of the comparison, namely the Islamic system, is rarely heard of by readers, and
this is the reason behind the compilation of this brief study.
Despite the assumption of clarity of vision with regards to democracy, the following remarks are
stated, prior to beginning the comparison.
1- If democracy means ‗people power‘, then this is not what exists in practice in the sense of people
governing themselves, for in such a case the same people would concurrently be rulers and the
ruled, which is unimaginable, even in an ancient democracy.
476
To avoid such idealism, it can be asserted that what is meant is therefore ‗majority rule‘ or
‗parliamentary democracy,‘ or it might be said that it refers to equality before the law.
2- Democracy in the words of Jamil Salibia is, ―An ideal system which people may dream of, but is
not to be seen in reality in any form. Any political system that considers the will of the people as a
source of the governing authority is a democratic one. But in reality, the will of the people is the will
of the majority and here, of course, there is a domination of one class over another.‖
3- Hence, we find several interpretations for democracy among legalists, researchers and politicians.
a- One interpretation is that it is ―The sovereignty of the people.‖
b- Another is that it is ―Equality‖
c- A third is that it is the ―Capability of the people to change their governors and their laws through
free voting and via their representatives.‖
4- Some think that the concept of democracy is one that is evolving and subject to change, and that
every period of time and every culture has its democracy.
5- A vital question is: Is democracy a doctrine that has a philosophy regarding man, life, and the
universe, or is it mere mechanisms, programs and regulations for this life only?
Some people deem democracy as a philosophical doctrine and not merely a political system, while
others say that it is a political system that may be followed by a social system. The following lines
are an attempt to further clarify this.
6- The democratic system is based on three principles:
The first: People‘s sovereignty (People as a source of power).
The second: Equality and justice.
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The third: Personal freedom. Some add to this:
1- Supremacy of the Constitution.
2- Multi-party system.
3- Separation of powers.
Comparison:
Based upon the aforementioned facts, it is clear that the two systems have aspects of similarity as
well as of difference.
First: Similarities
1- Honoring the human and preserving his rights.
2- Establishing the principles of justice and equality before the law and in criminal penalties. This is
also clear from both systems, though they do differ in the definition of some forms of justice and
equality.
3- Freedom and choice in appointing rulers, whether through elections or via selection from a group
or of the most suitable candidate, and then giving him pledge of allegiance. All these ways and other
similar ones give a wide option for selection.
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4- Political participation, through paying a pledge of allegiance, contribution and giving sincere
advice. This is a phenomenon in the Islamic system, but the democratic system applies the same
thing, albeit in a different manner.
5- Superiority of the Constitution. As mentioned previously, this is one of the principles of
democracy and also of the Islamic system. However, the source of the constitution in the former is
the human being whilst in the latter it is God, represented by His revelation. Moreover, in Islam, and
contrary to the democratic system, this source cannot be altered, abrogated, or discarded.
6- Separation of Powers. Though this is one of the principles of democracy, it is not censured in the
Islamic system provided that there is cooperation between authorities.
This is stated in article of the Saudi Basic Law of Governance, ―Authorities in the State shall
consist of:
The Judicial Authority
The Executive Authority
The Regulatory Authority
And these authorities shall cooperate in the discharge of their functions.‖
Second: Differences
1- With respect to the relationship between religion and the universe.
The Islamic system sees no contradiction between the two. Religion is a comprehensive system of
life and the universe is the arena for applying this system, so they are integrated into one system.
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The Holy Qur‘an states: ―Our Lord! Give in this world [that which is] good and in the Hereafter
[that which is] good and protect us from the punishment of the Fire.‖ (2: 201). The verse combines
the good of this world with that of the Hereafter.
The democratic system presumes a contradiction between the two and thus determines to separate
them, except in the personal and private life of man.
If it was attempted to find a reason why Western man or society has distanced the religion applied
by the church from public and personal life, it may be the case that the cause is the ‗church religion‘
being distorted and exploited to such an extent that it no longer is a valid and viable system for life.
The Islamic religion, on the other hand, maintains its validity with complete vitality, dynamism and
integrity, and no Muslim would feel the slightest inconsistency between the rules of his religion and
the demands of his life.
Hence, it is no surprise to see the close link or integration between religion and this life in the Basic
Law of Governance. See articles (7, 8, 9, 13, 23, 48).
If it is asked if this separation between religion and worldly life is a characteristic associated with
democracy or something causal, then the answer would be that it appears not to be a characteristic or
a feature of democracy itself but it is rather something causal that arises due to the illusory
contradiction between religion and worldly life.
Therefore, the West can adopt religion, but only in matters that do not contradict the principles of
democracy.
480
2- With respect to People‟s sovereignty:
This principle is deep-rooted in the democratic system to the extent that people become the source
of authority (legislature, executive and judiciary). In the Islamic system, the matter is not dissimilar
with respect to executive and the judiciary, as they are human endeavors. The difference, however,
between the democratic system and the Islamic one is the fundamental source of the executive and
the judiciary. In democracy, legislation is man-made, while in Islam it is based on divine legislation
(or revelation) and then on ijtihad (derivation of rules from revelation), and the law in such a way
that does not contradict revelation.
Thus, the significant difference in sovereignty here lies in the framework of the legislative authority.
If democracy grants this sovereignty to the people or their representatives and allows them to
prepare all legislation without exception, Islam totally differs in this matter as its principle is: ―The
Command is for none but God.‖ (12:40) and ―Surely, His is the Creation and Commandment.‖
(7:54).
The Muslim nation, with its individuals and states, believes in this principle and applies it in life.
The Islamic legislation represented by the Holy Qur‘an and the sunnah of Prophet Muhammad,
peace be upon him, has been preserved and has endured throughout the centuries.
While discussing authorities, it was mentioned that the legislative or regulatory authority in Saudi
Arabia is exercised through two channels:
The first: the technical channel, represented by shari’ah scholars who exert their efforts in studying
problematic issues or developments and issue verdicts derived from Islamic legislation. This
channel still provides different opinions, researches and fatwa (Islamic legal opinion).
The second: the regulatory channel, represented by the Shoura Council and the Council of
Ministers. This channel studies and ratifies laws according to the general rules of the shari’ah.
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Accordingly, there is a fundamental and invariable legislation that should not be violated by any
party, whoever they may be.
Beyond this, there is free space that accepts interpretative judgments, organization and codification.
3- Individual freedom: This is a non-disputable, democratic principle.
In the freedoms chapter, light was shed on the concept and types of freedom, and due to their
importance, two types of freedom were stressed upon, namely, freedom of faith and political
freedom.
Individual freedom has huge significance and is the backbone of the democratic system, to the
extent that it is said that democracy is an individual doctrine that grants the individual a wide area of
movement that extends until it clashes with the freedoms of others, where it necessarily comes to a
halt.
This doctrine is what entrenches and consolidates capitalist principles such that capitalists become
influential decision-makers, despite their small number. They are the only ones to actually benefit
from this freedom while the majority remains unprivileged and has no role except vacant voting in
elections whose results have already been directed towards the support and strengthening of the
position of these same capitalists, as well as strengthening their principles and whims.
Due to the sacredness of this principle among supporters of democracy, individual rights precede
those of the nation as a whole and the state, in their view, is necessarily evil and therefore must be
restrained from intervening in the affairs of individuals‘.
As for individual freedom from an Islamic perspective, Islam, which is a balanced way of life,
establishes a balance in its view of the individual and the community. Each has full rights, and just
as the individual has his legal and social position, so too has the community. Just as the individual
deserves rights, the community too has rights over its members. It is therefore necessary that there
482
should be controls over freedom, otherwise anarchy would prevail, the weak would be humiliated
and injustice would be prevalent.
Finally, if this is the reality of the similarities and differences in terms of the relationship between
the two systems, can it be said that this relationship is one of similarity and rapprochement, with
each system being able to benefit the other, or is are they disconnected from their origins, with
absolutely no similarity between them and the other?
There is doubt that the answer to this is not a simple one due to the difference in fundamentals of
both systems.
The Islamic system is founded on belief in the unseen and with a divine, preserved and a
comprehensive shari’ah with firmly established fundamentals, as expounded upon earlier.
The democratic system on the other hand emanates from materialistic thought and a mixture of
different philosophies, mainly:
1. The ancient Roman legacy.
2. The distorted, deformed legacy of the church.
3. Modern philosophical thought based on man-made doctrine.
4. Modern urban materialism with all its luxuries and technologies.
All this casts doubts on the possibility of an intellectual exchange between the two systems.
However, in spite of all this we, from an Islamic perspective, believe that we can benefit from the
democratic system in its political and administrative aspects that are related to human knowledge
and experiences. Its philosophical aspects, however, are subject to reservation as they are
inconsistent with the philosophy of Islam.
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PART – II
POWER SECTOR OF SAUDIA ARABIA
Power Sector
Overview
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In spite of the global financial crisis and recession, Saudi Arabia is still considered one of the largest
potential markets in the Middle East. Over the past year, the Saudi economy has witnessed a period
of relatively high growth and economic progress.
This has been based on a strong oil sector, and record oil revenues, allowing the Kingdom to
increase public spending on infrastructure and welfare to match the increasing needs of the Saudi
population. In turn the non-oil private sector is feeding off this upturn in public spending.
The Government budget for 2010 was signed off with increased spending compared with the 2009
budget. Saudi economy is poised to grow by three to four percent in 2010.
General highlights
Saudi Arabia holds 25% of the world‘s proven oil reserves. Saudi Aramco, the world‘s largest fully
integrated oil company, has now embarked on a massive US$ 50 billion expansion of its capabilities
over the next 5 years, in order to meet the global increase in oil demand.
The first target is to increase production capacity from 10 million bpd to 12.5 million bpd over by
2009. This increase in production is being coupled with an increase in exploration. Saudi Arabia has
only fully explored 25% of its potential oil producing area. The aim of the latest round of
exploration is, by 2010, to increase the proven oil reserves by a further 200 billion barrels from 260
billion barrels to 460 billion barrels.
In regard to power, Saudi Arabia has one of the highest per capita electricity consumption rates in
the world (average 5000 kWh/month). The country needs to expand its power capacity and network
to support the Government‘s ambitious industrialisation plans.
Since 1990, total electricity capacity has been increasing at a slower rate than consumption and peak
load, mainly because of the need to maintain a reserve capacity of 17% during peak periods.
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The Saudi population of about 24 million is growing at a rate of 3.4 percent. The number of
subscribers to electricity services has increased from 3.5 million in 2000 to over 5.42 million at the
end of 2008.
In addition to the growing population, Saudi Arabia needs to expand its power capacity and network
to support the Kingdom‘s ambitious industrialisation plan. The Ministry of Water and Electricity‘s
25 year 1995-2020 electrification plan calls for US $ 117 billion in capital investment to increase
total capacity from about 17,000 Mw per year at the beginning of the plan to 67,000 Mw by the year
2020.
Additionally, the power network has not developed evenly throughout the Kingdom, and there are
still some rural areas which are not connected to the power network.
Many power projects have been launched to achieve the desired expansion, including the upgrading
of existing power plants and the building of new power facilities. This tremendous growth potential
makes the country one of the world‘s most attractive markets for power generation as well as for
transmission and distribution equipment.
Besides power generation, Saudi Arabia requires additional investment in power transmission.
Currently only two of the country‘s four power regions are connected. Creating a unified grid could
require over 20,000 miles of additional power transmission lines.
Also on the transmission side, Saudi Arabia and the other five GCC states began to link the
electrical power networks; The first phase of the $7 billion power grid, which links Saudi Arabia to
Bahrain, Kuwait and Qatar through 800 kilometers of transmission lines was commissioned in 2008,
and the first phase was completed at a cost of $1.095 billion.
In the second phase, the United Arab Emirates and Oman will hook up to the grid next year. The
resulting two mega grids will be joined in the final phase, slated for operation in 2011. The power
grid is expected to boost the electricity network and reduce the cost of power generation in GCC
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states drastically. Within GCC, Saudi Arabia accounts for about 48% of the total power generation
in the region.
Saudi Arabia is embarking on a large number of new mega projects that the four major economic
cities in Rabigh, Hail, Madinah and Jezan, herald a new era of regional development at which more
electric power is required. Also, the Kingdom‘s mining sector gears up for major investment as
nearly $12 billion will be invested in projects in the next four to five years.
OPPORTUNITIES
General
The Saudi import market for power generation equipment is valued at US$ 1 billion a year, and the
expected annual growth rate 7 percent. Saudi power companies periodically issue tenders for
supplying their power plants with electrical and mechanical parts.
Equipment tenders have recently included gas turbines, various filters for gas turbines, blades and
accessories for gas turbines heat exchangers, boilers and alternators.
Private sector finance, operation and management of the Saudi utilities are essential if the Kingdom
is to meet rising demand for electricity and water. SEC & SWCC said that close to $60 billion worth
of investment was needed from both private and public sectors if shortage were to be avoided.
The giant Ras Tanura refinery upgrade and integrated petrochemical complex will contain a power
element. This Aramco project will have a WSPP (Water, Steam & Power Project).
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Opportunities also exist for British power-equipment manufacturers who are seeking joint venture
arrangements with Saudi partners.
The major local power-equipment manufacturers in the Kingdom are either licensees of European
and American manufacturers, or joint venture partners of these international manufacturers. Various
components, including wiring devices, switches and insulators are imported for assembling in Saudi
Arabia.
Opportunities in Power Generation:
There are unprecedented opportunities in the power generation field. Following is a summary of the
proposed investment opportunities:
List of power generation products and materials required by the Saudi market:
• Gas & Steam Turbines
• Boilers and Heat Exchangers
• Heat Recovery systems
• Speciality Valves
• Electrical Heat Tracing
• Engine Generator Sets Low Speed to High speed
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• Air Compressors
• DCS System
• Transmitters and Transducers
• Gauges (Magnetic, acoustic type for Level
• Flow meters for Fluid or Gas
• Treatment Plants (Sewage, oil and water)
• Incinerators
• Frequency Controllers
• Industrial API Pump Skids, and Motors
• Fuel Oil Handling Facilities
• MV and HV Capacitor Banks
Opportunities in Power Transmission:
IT - related technology, smart meters and sensors
Sequence of Event Recorders Systems
Vocational trainers and training programmes for technicians in transmission and distribution
of power. SEC has a large modern training facility in Eastern Province, and in some special
cases is prepared to send students overseas.
Opportunities in Power Distribution:
Best opportunities for UK companies are in the following areas:
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To go into joint venture or take advantage of the foreign investment scheme and manufacture
products and accessories locally.
Supply of 250,000 digital meters (smart meters) per annum, required for new connections by
SEC up to year 2007. Additional 4.5 million meters are required in the future when replacing
the existing revolving meters.
Automation Technology Systems.
Opportunities in other products and materials that could be used in both generation and
transmission are:
Power Transformers for various high voltage levels (132kV up to 400KV)
Distribution Transformers for various Medium voltage levels (4.16kV up to 33KV)
Relay and Control Panels
Annunciation System
Fault Recorders
High Voltage XLPE or oil Filed Cables, Cable Sealing Ends and Accessories
Batteries , UPS and Charger Systems
HV Instrument Transformers such as CTs, PTs and CVT
High Voltage Circuit Breakers and Disconnect Isolators
Surge Arrestors
HV Connectors & Insulators
Meters (Power or Energy meters for Electrical , Flow meters for Fluid or Gas)
MV and HV Capacitor Banks
Fuses
Emergency Lighting Systems
Inspection Equipment
Testing Equipment
Analyzing Equipment
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Major Projects
The Saudi Electricity Company (SEC) is proposing to expand two of its power generating
sites, adding 2000 MW to its generating capacity. The award of the fist contract for the fifth
stage expansion of the Rabigh power plant will add 1000 MW of crude oil fired capacity at
the site. The National Contracting Co submitted the lowest bid of $802 million.
Meanwhile, three contractors are believed to be preparing bids to convert its yet-to-be
completed Qurayyah Power Plant to combined cycle. A contract for the first 1800MW opencycle stage of this plant was awarded to Bemco in 2008 in a deal worth $570 million. The
second stage will add a further 1000MW
GE Energy has signed contracts totalling more than $500 million to supply gas turbines and
generators for power plant projects owned by SEC.
The upgrade of Central Province PP8 plant from 1850 MW to 2330 MW will include
performance monitoring solutions from Invensys Process Systems. The equipment will
control the four new GE gas turbines that will make up the extension. PP8 is one of two
plants that supply Riyadh, the capital.
KEC International has won a turnkey order worth close to $121 million from SEC for the
construction of a 380kV overhead transmission line, which will have a total length of 268
km.
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SEC signed a SR444 million deal with Alfanar Construction, an integral part of Alfanar
Group, for a new 380kV substation to distribute electricity to new facilities located in
Makkah in the Western Province.
Shoaiba III IWPP Status: On 1 November 2008, commissioning started for the desalination
plant. The initial commercial operation (including first Power
Unit and associated 4 Desalination Units) is expected in February 2009. The overall
completion was done in August 2009. In December 2005, the EPC contract was awarded to
the JV of Siemens and Doosan Heavy Industries. In June 2005, the BOO contract was
awarded to the consortium of Acwapower, Malakoff Berhad, Khazanah Nasional and
Tenaga Nasional Berhad.
Shuqaiq II IWPP Status: Execution of the project is in progress. The first power generation
unit is expected to be operational by the end of April 2010. The project is expected to be
completed in late 2010.
Marafiq Jubail IWPP: The Jubail IWPP of SR 12.8 billion is the world‘s largest combinedcycle power and water plant. In April 2009, the project was completed. It was previously
expected to be completed in March 2010. The Marafiq Jubail IWPP has a capacity of 2,750
MW combined cycle power station and a large water desalination facility of 800,000 cubic
metres per day.
Marafiq Yanbu IWPP: Marafiq Yanbu IWPP would produce 1700 MW of electricity and
150,000 cubic meter potable water per day. Feasibility study of the Yanbu IWPP was
completed early 2008 and bidding process was completed in 2009. Yanbu IWPP is expected
to be commissioned in mid-2013.
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CHARACTERISTICS OF MARKET
1. Forecasts of the Saudi Arabian Eighth Development Plan 2011-2012
The following main objectives are likely to be achieved during the Eighth Plan period:
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a. Achieving full electricity service coverage in the Kingdom by providing service to 1,126
villages and hamlets and adding 1,163,200 new customers during the Eighth Plan period.
b. Increasing the power generation capacity by 10,996 MW in addition to 1,330 MW from
desalination plants. Private investors will be allowed to provide the additional generation
capacity particularly establishment of new power generation plants on a "Build-OperateOwn" (BOO) basis.
c. Linking the electricity network of the Central region with the network of the Western region
and linking the latter with the Southern region.
d. Continuing with the process of restructuring and privatisation and creating an independent
company during the Plan period to own and operate the national transmission network.
e. Linking the electricity networks of the Kingdom and the GCC countries to support exchange
of electricity and load sharing.
f.
Studying the feasibility of exporting electricity by the Kingdom on a commercial basis.
2. Future Vision
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The program of developing the electricity sector towards the planned model is
comprised of three stages:
Transitional Stage
It will take two years to complete this stage which includes finalisation of the regulatory
framework, identifying licensing methods and procedures, setting service standards, studying
the feasibility of separating transmission facilities from generation facilities.
Also by transforming the former into an autonomous company, operating distribution and
generation facilities on a commercial basis and establishing a framework that allows the
involvement of the private sector in the power generation projects as independent producers
of both water and power.
b. Intermediate Stage
This stage will take 3-5 years during which the separations of transmission facilities have
been completed.
The stage encompasses distribution of the generation activities of the Saudi Electricity
Company among a number of independent companies, thereby enhancing competition and
facilitating entry of private companies into the field of generation.
The stage also covers provision of an operator for the transmission system that will also be
the sole buyer of the electricity power produced and transmitted by the main network.
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c. Final Stage (Competition)
This stage will be reached after completion of the two previous stages (more than five years).
The generation, transmission and distribution companies of the electricity sector are
expected to be in a normal operational situation during this stage.
Furthermore, electricity prices are expected to be set on an economic basis to cover the
whole cost of service and ensure a reasonable return on investment.
Moreover, the industrial and other major customers will have the opportunity to choose the
service supplier in the context of an advanced (competitive) market environment of
wholesale operations based on transparent rules and measures.
3. Saudi Electricity Company (SEC):
The Saudi Electricity Company (SEC) is a joint stock company, incorporated by Royal
Decree in April 2000 and merging all the power utilities and the projects of the Electricity
Corporation into one entity.
SEC objectives include generation, transmission and distribution of power; and purchase,
sale and provision of power services in the Kingdom.
SEC also imports and exports power across borders, and carry out and support research for
service enhancement, power conservation, performance upgrade, environment protection and
cost-reduction. The Saudi Government owns 74.31% of the total shares, private sector
18.76% and Saudi Aramco 6.93%.
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The table below shades some lights on the major figures on SEC.
Description
Power Generation
Capacities (MW)
2011
2012
Change
25,790
39,242
52%
Transmission Networks 29,631
Length (ckm)
39,793
34%
Distribution Networks
Length and Electric
Power Connections to
Customers (ckm)
226,664
345,420
52%
Number of Customers
3,622,391
5,420,810
50%
A. Generation
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Most of the steam and gas turbines presently operating in the Kingdom come from Mitsubishi,
Siemens, GE and Alstom. GE is market leader on gas turbines and Mitsubishi on steam. UK
companies still supply parts and provide repair/maintenance and consulting services.
Desalination makes a significant contribution to Saudi Arabia‘s overall power generation. The
Saline Water Conversion Corporation (SWCC) is a Saudi government corporation responsible for
desalinating seawater, in order to augment the supply of potable water. SWCC is also the second
largest electric power producer in the Kingdom and they operate around 27 desalination plants on
the Red Sea and the Arabian Gulf, nine of which are dual system, generating 8% of the total
Capacity.
According to the government‘s 25-year electricity plan, the growth in electricity demand between
1995 and 2020 will average 4.5 percent. Usage/demand for power is also high due to the Kingdom‘s
low tariff rates.
Generation is well on the way to privatisation. Permits for power generation in the private sector
have already been issued to various companies. Marafiq is planning to build its first Independent
Water & Power Projects (IWPP) at Al Jubail site. Saudi Aramco already built four Independent
Power Projects (IPPs) with a total output capacity of 800 MW (main projects executed by the UK
based International Power). Other private petrochemical and mining companies also have plans to
build IPPs.
B. Transmission
There was a plan to privatise the SEC transmission network last year, but the execution was delayed
further. The growth of daily peak load of national network this year was 4.4% (the highest power
transmission load ever recorded was 31,240 MW in summer 2007).
SEC‘s future projection is to add 2000 MW annually for the coming 20 years at an average cost of
$100 billion (average EPC cost is $500 million per 1 GW). The Transmission Network Lengths
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(110KV – 380KV) increased from 36,652 circuit KM in 2006 to 37,891 circuit KM in 2007
(average growth 3.6%).
There is no single interconnected power system within the country, except the two large systems in
Eastern and Central Provinces, which are interconnected at 380 KV. The remaining regions have
their own local transmission networks.
However, operation of small stand-alone electric networks is still a practice in many parts of the
country. The power transmission voltage is at 380, 230, 132, 115 and 110 kV.
C. Distribution & Customer Services
UK products relating to power distribution used to dominate the market but have faced growing
competition over the last ten years. SEC was using British standards but is now adopting
international standards.
Most of the major distribution materials and accessories such as switchgears, circuit breakers and
transformers are now manufactured in Saudi Arabia.
High voltage distribution networks operate at 69, 34.5, 33, and 13.8 kV. Electricity is delivered to
household and small consumers at 127, 220 and 380 Volts.
The following tables show the average growth rates in various segments within the distribution and
customer service:
D. Electricity efficiency and saving efforts
The Ministry of Water and Electricity has adopted a strategy to cope with the increase in power
demand and to assure reliable electricity supply. They are aiming at the expansion of generation
capacity and the reduction of peak demand.
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The strategy includes setting up limits on maximum power delivered to large electricity consumers,
demand-side management actions and the rationalisation of the use of electricity.
―Energy Conservation and Load Management Committee‖ had been established at the Ministry of
Water and Electricity. The Committee tasks include:
- Create awareness on energy conservation among the public
- Prompt energy conservation and load management
- Advice the Government on action required
- Co-ordinate implementation of projects in energy conservation and management
TABLE 1
STATUS OF POWER SECTOR REFORM IN EACH GCC COUNTRY
GCC
Country
Degree of Unbundling
Reform Efforts
Kuwait
Unbundling
Not Planned
No Reform Plans
Bahrain
Under Consideration
Plans to Privatize
Sector
Saudi
Arabia
Partial Unbundling
(Management Level
Reform currently
under Progress
Qatar
Separate G (QEWC)
T&D (Kahramaa)
Privatization of
Kahramaa under study
UAE
No Unbundling
Separate G, T & D for Abu
Dhabi
Reform in Abu Dhabi
No Reform Plans in
other Emirates
Oman
Separate
G,T & D Companies
Laws in place to
facilitate Reform
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INDIA – POWER SECTOR
1.
Introduction
Large number of power projects (XI and XII five year plans) is under construction to overcome the
power shortages and meet the growing energy requirements in the country.
However, the sectorhas been encountering problems on account of inadequate / depleting
conventional fuel resources, slippages in capacity addition, transmission / open access constraints
and high Aggregate Technical & Commercial (AT & C) losses in the country.
Since the formulation of Electricity Act 2003, Government of India (GoI) has been taking several
initiatives and announced various regulations to strengthen the sector.
Significant GoI / regulatory initiatives in recent times have been those pertaining to Mega / Ultra
Mega Power Generation projects revised tariff regulations for existing central government projects,
competitive bidding for all future power generation projects, tariff norms for renewable energy /
introduction of Renewable Energy Certificates, new transmission pricing grid code, power market
regulations, Re- structured Accelerated Power Development Reform Programme (APDRP2),
National Electricity Fund, etc.
2.
Projected demand, XII plan capacity additions and projected investment
According to 17th Electric Power Survey (2007), the energy requirement in the country is projected
to grow at a CAGR of 7.5% during 12th plan period reaching from 9,68,658 Giga Watt hour (Gwh)
in FY 2012 to 13,92,065 Gwh by FY2017, while peak load requirement is projected to grow from
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1,57,324 MW in FY2012 to 2,23,660 MW in FY 2017 at a CAGR of 7.4%. The regionwise
projection in energy and peak load requirement during the period FY2012 to FY2022 is shown in
Annexure II.
• Ministry of Power and Central Electricity Authority (CEA) have projected a total investment
requirement of Rs. 11,35,142 crore for the power sector during the 12th Plan period, which also
includes investment for generation capacity addition of about 1,00,000 MW. (Existing capacity is
1,64,508 MW).
• According to Crisil report (June 2010), about 82,000 MW of generation capacity at an investment
of Rs. 5,10,000 crore is likely to be added in the next five years i.e. during FY2011 to FY2015. The
Central (with NTPC having the major share), State and Private sectors are estimated to add about
21,500 MW, 15,000 MW and 45,500 MW respectively during the next five years. Further, about
12,900 MW of captive generation capacity at an investment of Rs. 75,000 crore is expected to be
implemented by several players. The investments in transmission and distribution segment are
projected at Rs. 3,44,000 crore during the above period.
• According to Crisil report (June 2010), out of the 82,000 MW capacity (scheduled for
commissioning over the next five years), more than 90% of the projects have received
environmental /forest clearances, acquired land, achieved financial closures and placed
equipment orders. About 80% of the above projects have either signed PPAs or earmarked a
portion of their total power for merchant sales.
India – Power Sector Present status and recent government / regulatory
announcements
A)
Present status:
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Installed capacity
As on August 31, 2010 the installed generation capacity in the country constituted 1,64,508 MW, of
which thermal capacity (coal, gas & diesel) is 1,06,432 MW followed by hydel capacity at 37,086
MW, renewable energy (wind, small hydro, solar, bio mass, etc) at 16,429 MW and nuclear energy
at
4,560 MW. In addition to the total installed capacity as mentioned above, the captive generating
capacity to the grid is 19,509 MW. The share of Central, State and private sector in the total
installed
capacity is 31%, 49% and 20% respectively.
Demand – supply gap
The domestic energy requirement for the financial year 2010 was 8,30,594 million units (mkwh)
while the energy generated was only 7,46,644 million units (mkwh) creating a gap of 83950 million
units (mkwh).
During FY 2010 overall energy deficit in the country was 10.1% while peak deficit stood at 12.7%
with shortage of 15,157 MW. During the period April – July 2010, the domestic energy requirement
and availability were 2,91,214 MU and 2,58,972 MU respectively leading to energy deficit of 11.1%
while the peak deficit stood at – 13.8%.
B) Recent Government initiatives
R – APDRP
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GOl has approved the ―Re – structured Accelerated Power Development Reform Programme‖ for
XI
plan as a Central Sector Scheme Projects under the scheme shall be taken up in Two Parts. Part A
shall include the projects for establishment of baseline data of IT applications for energy accounting
auditing & IT based consumer service centers. Part B shall include regular distribution strengthening
projects. The focus of the programme is on actual, demonstrable performance in terms of AT & C
loss reduction.
National Electricity Fund
The Planning commission has proposed setting up a National Electricity Fund with a corpus of
Rs.100000 – 150000 crore with State run power Finance Corporation and Rural Electrification
Corporation would be the nodal agencies to finance development of power transmission and
distribution network by state utilities so as to reduce T & D losses. The proposed fund aims lines
and using new technology to reduce transmission and distribution losses to 15% by FY 2012.
GUJARAT – POWER SECTOR
505
Introduction
Almost everybody had lost faith when it came to make a transformation of an entity, which was in
deep trouble over last seven years. In spite of all the travails, the entity was not anything to write off
so easily. The investments were not just peanuts to forget fast! The lives that were depended upon it
couldn‘t just be ignored.
The entity had been illuminating each and every house and industrial establishment in the entire
state of Gujarat except Ahmedabad and Surat. It had been virtually giving a lifeline to nearly 40
million customers by of generating, transmitting and distributing electricity! Not a small market to
cater to under any scale.
The entity was none other than Gujarat Electricity Board (GEB), an organization consisting of
nearly 50000 employees and bearing investments of billions of Rupees. GEB ran into huge losses
over almost seven years denting the image of public sector in Gujarat.
No rays of hope were seen until the financial year 2000-01, when an initiative by the Government of
Gujarat led by visionary politicians, proficient administrators and diligent employees took everyone
by surprise.
A major reformation were which included unheard of strategies and tactics to unbundled the board,
renegotiation of power purchase agreements (PPA), reduction of interest rates on loans, curbing of
power theft and reduction of huge transmission and distribution (T&D) losses without
experimenting with the quality of fuel.
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HISTORY OF GEB
Gujarat Electricity Board (GEB) was established along with the formation of Gujarat State in the
year 1960 under Section 5 of the Electricity (Supply) Act 1948. Commencing with generation
capacity of 315 MW and a consumer base of 1.40 million consumers, GEB today is the lifeline of
over 7.3 million consumers across the State of Gujarat.
During 1970s and 80s, the major thrust was on the supply of electricity in the rural areas. It was
largely due to GEB‘s unwavering focus on rural electrification that Gujarat became the first state to
achieve the landmark of ‗100% Electrification of Villages‘. As per the 1991 Census, 17,940 out of
18,028 villages have been electrified – which is notified as close to 100%.
GEB continues to focus on its key objectives concerning generation, transmission and equitable
distribution of power to achieve an all-round economic growth of the State. Till date it has installed
1, 72,662 (as on 31-03-2003) transformer centers and since four decades its per capita consumption
has increased from 48 KWH (In 1960) to 932 KWH (as on 31-03-2003).
For the development of rural areas throughout state, GEB‘s holistic Rural Electrification Programme
covers electrification of new villages, conversion of electrified villages from conventional method to
Solar System and supply power to pump sets, Petaparas (Hamlets) and Harijan Bastis by availing
finance mainly from REC., New Delhi and State Government.
GEB stands committed to build Gujarat as the largest power hub of the nation. With equal emphasis
on serving both- the urban as well as the rural populace, it ensures a harmonious and a balanced
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growth of the economy by achieving its twin goals of social up-liftment of people as well as
economic regeneration in the State.
OPERATIONS OF GEB
Generation
GEB and GSECL, a company owned by GEB, contributes to 57% of the total installed capacity of
the state grid. The remaining 43% comprises of Central Sector, Ahmedabad Electricity Company
and Independent Power Producers.
Transmission
The state grid comprises of 400 KV, 220 KV, 132 KV and 66 KV transmission and subtransmission lines.
The transmission department constructs, operates and maintains transmission lines and substations
for transmission of bulk power generated at various generating stations as well as the state's share of
power received from the central government's generating plants and IPP to various parts of the state
through this network.
The network is managed by 10 transmission circle offices and 59 division offices (TR Division - 47
+ Construction Division - 12)
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Distribution
The distribution of power to the end user is one of the most critical functions of GEB.
Electricity is distributed to 8 million consumers through 1,45,000 Circuit Kilometer (ckm) of HT
lines, 2,06,000 ckm of LT lines and with the help of 2,30,000 transformers.
The distribution department is responsible for supply of power to residential areas, commercial
complexes, streetlights, water works, agriculture and irrigation sector as well as various industries.
The consumer grievances cell functions under the distribution department. This cell resolves
complaints of consumers and provides guidance as and when required.
RURAL ELECTRIFICATION
Rural electrification has remained the major constraint for overall rural development of India in
general. However, Gujarat has spent a good quantum of efforts to tide over the problem of sluggish
rural electrification. Actually, rural electrification refers to the process of electrification of rural
hamlets, agriculture wells/tube wells, Schedule Caste and Dalit localities.
The programme of rural electrification is by and large carried out by the respective state electricity
board, notwithstanding financial supports, being provided by Rural Electrification Corporation Ltd.
– a central government company under Ministry of Power mandated to provide financial support for
rural electrification throughout India.
In Gujarat, according to Census, 2001 total number of villages in Gujarat are 18544. In FY 2005, the
total number of villages electrified stood at 17940. It clearly demonstrates that 96.74 % villages are
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completely electrified. (See Figure - 17) The remaining 604 villages are non feasible on account of
either going submergence under various dam projects, or having no population at present or lying
under thick and reserved forest area declared by the Central Government.
However, rural electrification doesn‘t mean merely providing power lines to the rural dwellings. It
invariably includes continuous power supply at the required voltage and frequency since the quality
of villager‘s life could be 50 affected due to non availability of power supply in rural areas.
In order to provide continuous three phase power supply to rural areas for development of rural
population and increase in their standards of living, Government of Gujarat has introduced a unique
scheme named ―JYOTI GRAM YOJANA‖(JGY)36. This has affected the villages in development
of Education, Industries, Business, and Health Services etc.
All round development of State can be achieved by providing 24 Hrs. power to rural areas. Thus,
JGY scheme envisioned making the life of millions of village people happier, progressive and
prosperous by ensuring quality power supply.
Under Jyotigram Yojana nearly 12,500 villages of Gujarat have been covered. The main feature of
JGY is the segregation of agricultural load from existing rural feeders which were provided power
supply to both – agricultural area and rural hamlets.
Now, these feeders are supposed to facilitate electricity supply to only agricultural area. New
feeders have been laid down to cater loads of villages. In those villages nearly 31,589 kms of 11 KV
network was laid down and 6124 transformers centers were erected.
In common parlance, such wide network and large number of transformers have been set up to
install separate distribution line of 11 KV catering the power supply requirements of only rural
areas.
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In addition, in order to maintain support to such distribution lines, 3429 Kms. Of LT (Low Tension)
network was laid down. Total cost of the whole project was Rs. 681.34 Crores.
FINANCIAL RESTRUCTURING
Government of Gujarat has successfully attempted the financial restructuring plan. It has passed the
Gujarat Electricity Industry (Reorganization and Regulation) Act, 2003 to reorganize the board into
seven entities as mentioned earlier.
Subsequently, on December 31, 2004, the Government of Gujarat vide its notification has notified
st
the provisional opening balance sheets of the successor (unbundled) entities as on 1 April, 2004.
st
All unbundled entities have also started functioning independently with effect from 1 April, 2005.
In order to ensure the optimum functioning of the independent entities, government of Gujarat
(GoG) has prepared the Financial Restructuring Plan (FRP).
According to this plan, GoG has taken over the debt payment liability of Gujarat Electricity Board
(GEB). It has settled all the dues payable to Central Public Sector Units (CPSUs) by to 30.09.2001
and in lieu issued Bonds to various CPSUs.
This payment to CPSUs, since then has been regularly made through Letter of Credit (L/C) without
having any further bumps on the road resulting in zero outstanding dues payable to any of CPSUs.
BUSINESS OPPORTUNITIES
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 Material and Equipment supply.
 As an EPC contractor.
 Local manufacturing .
 Participate in IPP projects .
 Opportunity in consultation and engineering.
 Invest in future energy retail.
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CONCLUSION
 Providing Financial Option for Highly Capital Intensive Generation Projects .
 Helping To Re-Direct Available Funds To T&D (Monopoly Activities)
 Reallocation Expenditure From CAPEX To OPEX.

Avoiding Mismatch Between Medium Term Financing and Long Life PP Projects.
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ANNEXURE
Part I
Finance Market overview In Saudi
Overview
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In the years before the crisis, the authorities strengthened the balance
sheet of the government and enhanced the financial sector‘s resilience. The available fiscal
space allowed the authorities to substantially reduce the impact of the crisis. The initial
effect of the recent political instability in the region has also been contained.
The authorities have made progress in implementing the 2004 FSAP recommendations.
In particular, they have taken numerous and substantial steps to strengthen
the regulation and supervision of banks and securities activities.
The banking sector as a whole is well capitalized and appears able to withstand severe
temporary shocks, but could be vulnerable to a large and prolonged oil price decline.
The aggregate solvency ratio remains above 8 percent for almost all of
the individual shocks considered. However, the system could be vulnerable to a prolonged
and deep oil price decline, especially if it were accompanied by a slowdown in domestic
economic activity. Although this would leave the banking system insolvent, the cost of
recapitalization would be modest in macroeconomic terms.
Substantial reform is underway to promote mortgage and small- and medium-scale
enterprise (SME) lending.
The objective is to expand mortgage and SME lending to meet
key housing and employment challenges, while maintaining financial stability
While bank supervision and regulation are highly effective, the legal framework is not
fully up to date.
Revisions to the Banking Control Law (BCL) are needed, mainly to provide bank
supervisors in SAMA with the formal independence envisaged in international
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standards. However, in practice, the existing law has not been an impediment to effective
supervision. The authorities considered that in their institutional context, amending the law
would be difficult.
Progress is being made to expand housing finance and SME lending, but care must be
taken to ensure sound and fair lending practices.
Recommendations in the housing field include prudent mortgage lending regulations, a
housing market observatory that includes a housing price index, consumer protection
norms, steps to improve loan origination and loan
recovery in mortgages provided by public agencies, and sound long-term funding
arrangements. Strong supervision of SME lending will be crucial.
Strengthening the institutional investor base would contribute to the further
development of capital markets.
Provided that effective prudential regulations are in place,
foreign institutional investors could make important contributions to price discovery and
market development. The role of the two large pension funds in capital market
development could be enhanced through further disclosure of their investment policies.
Moreover, a case can be made for additional outsourcing of portfolio management to
efficient private investment managers operating with clear mandates.
Most of the recommendations in this report could be implemented over a horizon of a year
or two.
Some, notably those that require the amendment of a law may take longer.
The development of a more formal macroprudential framework may also require more
time, as the understanding of these issues is still evolving. It will be crucial to maintain the
ability of SAMA to play its role in ensuring the sound and efficient operation of the financial
system
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The most recent phase of political reform in Saudi Arabia ended in 2005;
accordingly, little took place on this front between February 2009 and January 2011. Municipal
elections originally planned for 2009 have been repeatedly postponed. As there is little organized
political opposition to the al-Saud, this status quo could persist for many years to come. Nor have
major new economic reforms emerged, although some loose ends have been tied up with respect to
existing reform initiatives, such as adjusting customs and product standardization procedures to
meet WTO requirements, or gradually strengthening the stock market regulator created in 2004. The
primary economic initiatives have taken the form of large projects and new, project-oriented enclave
institutions such as the King Abdullah City for Atomic and Renewable Energy, created in 2010.
Despite the global economic crisis, the kingdom achieved reasonable economic
growth rates during the period under review, but only by means of a significant fiscal expansion that
could lead to budget deficits in the long run. In 2009, the country attracted considerable amounts of
foreign direct investment, but most of this was limited to large, often state-supported projects in a
small number of fields such as heavy industry and real estate.
The most significant reform efforts during the last two years have arguably focused on
educational and judicial issues. In both areas, King Abdullah has started ambitious
modernization programs. It is too early to judge results, however, as the reforms will
require the revamping of complex and slow-moving bureaucratic apparatuses, a process
which even under the best of circumstances will take several years. The creation of the
King Abdullah University of Science and Technology, which draws on foreign faculty and
students and allows gender mixing on its campus, is emblematic of the king‘s ambition to
engage in sociocultural modernization through a limited number of flagship projects.
The Capital Market Authority (CMA) has made significant progress in
establishing its supervision credentials, including issuing implementing regulations. The
CMA has also entered into information sharing arrangements with other regulators in the
region, and is a party to the International Organization of Securities Commissions (IOSCO)
Multilateral Memorandum of Understanding (MMOU) Concerning Consultation and
Cooperation and the Exchange of Information. However, no information sharing
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arrangement exists with the Saudi Arabian Monetary Agency (SAMA). Even so,
refinements can be made to processes, the Capital Market Law (CML), and the Committee
for the Resolution of Securities Disputes (CRSD).
.
There are some transparency and procedural improvements that need to be
made relating to how the CMA funds its operations, disciplines, and communicates with
members and balances its potential conflicts of interest.
Unpublished, but mandatory regulatory instructions issued by the CMA Board to
regulated entities need to be publicly available and revised, and Board-imposed
disciplinary sanctions need to be overlaid with procedural fairness provisions.
The CMA Board should reconsider its current publications policy so as to
ensure that the appropriate transparency and regulatory effect is achieved in respect of
regulated entities‘
noncompliance.
Saudi Capital Market
Fairly recent history. Saudi Arabia‘s capital market traces its roots back to the
mid-1930s. However, for the better part of its history, the market was informal and
unorganized, with the bulk of the development occurring in the recent decades. Since most
entities in the Kingdom are government- or family-owned organizations, finance was never
a challenge, given the national account surpluses and the willingness of banks to lend.
Bank financing and lines of credit dominated financing channels for both government- and
family-owned corporates. As a result, the capital market was never truly considered an
alternate mode of financing. However, the oil price shocks of 1973 and 1981 highlighted
the need to diversify the Kingdom‘s oil-dependent economy and develop an industrial
base. To finance industrial development in the Kingdom, the government continued to rely
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on specialized credit institutions such as Saudi Industrial Development Bank (SIDB)
instead of developing the capital market as an alternative channel for financing.
Growing industrialization: The Naissance of capital Markets in KSA
Industrialization in the KSA gathered momentum after 1984, with the fifth
development plan emphasizing the need to establish an industrial-based economy. The
private sector assumed a greater role as the government recognized that it would need the
backing of private companies for non-oil industrial development. However, financing
industrial investment through specialized credit institutions such as SIDB proved
insufficient as rapid industrialization entailed significant investment in such industrial
projects. This highlighted the growing need for efficient mobilization of domestic savings
through capital markets to finance industrial growth. Hence, the Kingdom set up a
Ministerial Committee in 1984 to formalize and regulate trading on stock exchanges.
Furthermore, in order to increase the breadth and depth of the market, in 1997, KSA
allowed foreign investors to invest in stock markets through mutual funds. However,
development of the capital market in terms of technological infrastructure continued to lag
behind due to the absence of a formal trading platform and unregulated broker trading.
Significant Capital Market Development in Current Decade
Since 2001, capital markets have evolved in terms of product sophistication
and improved regulatory as well as technical infrastructure. Establishment of Capital
Markets Authority (CMA) as an independent market regulator in 2003 and opening up of
the market to foreigners in 2008 proved significant milestones in shaping the regulatory
infrastructure of the Kingdom‘s capital market. CMA, as an independent market watchdog,
boosted investor confidence in the Kingdom‘s capital market, leading to significant surge in
stock market activity. CMA‘s focus on market liberalization also paved the way for foreign
independent asset management companies and non-banking investment houses to enter
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in the Kingdom‘s capital market. This, in turn, has led to the introduction of innovative
products such Exchange Traded Funds (ETFs), and corporate finance products in the
country‘s capital market.
Despite Banks Dominating, Equities Emerging as Alternate Mode of Financing
Historically banks have been the prime source of financing in Saudi Arabia;
it still caters to 82.0% of the Kingdom‘s total funding requirement. However, since 2001,
the equity market has progressively evolved as an alternative mode of financing. SMEs
and private sector entities keen on raising capital have increasingly preferred the equity
market, as many of these companies do not enjoy the leverage of easy financing from
banks given their relatively smaller size and risk profiles. The growing popularity of equity
financing can be gauged from the fact that the total amount raised through the equity route
increased to SAR65.6bn in 2008 from SAR10.1bn in 2001. Given the Kingdom‘s equity
market is still underpenetrated relative to global standards, equity is likely to continue play
a major role in rationing the Kingdom‘s growing financing requirement. The recent plausible
efforts to push liberalization, especially the partial opening up of the market to foreigners, is
a keystep promoting development of equity market in the country.
Sukuk Fast Emerging as an Attractive Long-Term Source of Financing
Over the last five years, Sukuks have gained significant popularity in the
Kingdom. This is attributable to near absence of long-term financing tool and growing
proportion of longer duration capital projects launched in the country. Further, the product
also draws a larger acceptance due to it‘s compliance with Shariah principles, a key
distinguishing feature. Saudi Arabia has hence emerged as the second largest Sukuk
market in the GCC after the UAE. However, with regard to the acceptance of Sukuk as a
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long-term mode of financing, KSA still trails Malaysia, the largest Sukuk market in the
world. This is largely due to structural issues such as lack of robust regulatory framework,
thin secondary trading and differences in Shariah interpretation. In our view, Saudi
authorities need to take collaborative measures to overcome these shortcomings and
facilitate development of a robust Sukuk market in the Kingdom.
Other Complex Capital Market Tools Set to Enter KSA Market
Besides traditional modes of financing such as equity and debt (Sukuk), the
complex and sophisticated capital market products such as ETFs, equity swaps and REITs
(conventional and Islamic) also hold strong promise in the Kingdom. The launch of these
products is not only likely to broaden the availability of financing products in country but
also help the Kingdom‘s capital market to integrate itself with global markets. However,
authorities need to overcome several roadblocks to ensure the viability of these products in
the Kingdom. This includes increasing investor .
Liberalization Efforts Picked Up, Benefiting the Market
Saudi Arabia‘s capital markets have largely benefited from the country‘s efforts
to liberalize since 2003. This improved variables such as market capitalization, volume and
value traded. However, Saudi Arabia remains the least open GCC market, given the limits
on foreign participation - value of trade by foreign investors in Saudi Arabia was equivalent
to just 3.8% of total value traded in 2008 compared to 30–40% in GCC countries. In this
regard, the new law passed in August 2008 was a significant step forward. This law
allowed foreigners to buy shares listed on KSA bourses by entering into swap agreements
with authorized persons, thereby encouraging foreign participation in the Saudi capital market.
KSA has the Potential to Become Regional Financial Hub
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Saudi Arabia‘s economy is fundamentally strong as reflected in the
Kingdom‘s oil-generated surpluses and low borrowings. The massive fiscal surpluses
amassed over the last five years have helped government pursue aggressive and countercyclical fiscal policies to shore up economic activity, and this stance is likely to continue
into next year. Also, private sector corporates in KSA are likely to resume their expansion
plans which were stalled during the economic slump. Recovery in private sector spending
in line with likely improvement in business confidence is expected to cause a surge in the
Kingdom‘s financing requirement during the period 2010- 2012. Also, domestic savings in
the Kingdom is expected to pick up as the economy recovers and income levels improve.
This, in turn, would encourage individuals to channelize their savings in capital market. To
meet the growing financing need and to provide the different investment avenues to the
investors, Saudi Arabia needs to develop full spectrum of capital market products. While
the steps have already been taken to develop different capital market tools Kingdom needs
to address certain product specific challenges.
Policy Reforms, the Need of the Hour
Though KSA has the potential to become the regional financial hub,
enhancement of regulations and corporate governance practices is critical for realizing the
country‘s potential. CMA should focus on broadening the range of listed instruments such
as derivatives, swap agreements and structured credit products like mortgage-linked notes
to increase the breadth and depth of the market. CMA also needs to focus on
allowinggreater direct foreign participation to better integrate market with world market.
The Saudi Arabian economy has been experiencing a rapid growth in recent
years fuelled by rising oil revenues due to high oil prices. Saudi Arabia owns a quarter of
the proven world oil reserves. However, Saudi real GDP growth was 0.6 percent in 2009
compared with 4.4 percent for 2008 underpinned by record high oil prices in the latter year.
Not surprisingly, the commodity and consumption base of the Saudi economy is subject to
the volatility of the Kingdom‟ s main source of income which is oil (SAMA Report, 2010).
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The strategic national economic objective of the Saudi Arabian government
is to diversify the economy away from dependency on the hydrocarbon sector into other
sectors such as investment and financial services and non-oil manufacturing. The Saudi
capital market is increasingly performing an important function in financial intermediation to
create channels of investments. With the supportive and prudent regulatory environment
provided by SAMA for the banking industry, the Saudi financial
industry has been flourishing for the last few decades and has managed to relatively avoid
many of the crises hitting the global financial industry. This is partly due to the cautiou
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1.1 History
During the 1970s and 1980s, the government undertook a massive restructuring of
agriculture in Saudi Arabia. The stated objectives were food security through selfsufficiency and improvement of rural incomes. Although successful in raising domestic
output of several important crops and foodstuffs through the introduction of modern
agricultural techniques, the agricultural development program has not entirely achieved
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these objectives. In regard to self-sufficiency, the kingdom produced a limited surplus,
sufficient to export some quantities of food. However, if the entire production process were
considered, the import of fertilizers, equipment, and labor have made the Kingdom even
more dependent on foreign inputs to bring food to the average Saudi household.
Two patterns of income distribution emerged: traditional agricultural regions did not benefit
from the development program, and the government's financial support led to the
establishment of large-scale agricultural production units. Some of these were managed
and operated by foreign entities and owned by wealthy individuals and large businesses.
From an environmental viewpoint, the program had a less than satisfactory impact. Not
only has it caused a serious drain on the kingdom's water resources, drawing mainly from
non-renewable aquifers, but it has also required the use of massive amounts of chemical
fertilizers to boost yields. In 1992 Saudi agricultural strategy was only sustainable as long
as the government maintained a high level of direct and indirect subsidies, a drain on its
budget and external accounts
Saudi Arabia‘s agricultural development over the last three decades has been astonishing.
Large areas of desert have been turned into agricultural fields – a major accomplishment in
a country that receives an average of about four inches of rain a year, one of the lowest
rates in the world.
Today, Saudi Arabia exports wheat, dates, dairy products, eggs, fish, poultry, fruits,
vegetables and flowers to markets around the world. Dates, once a staple of the Saudi
diet, are now mainly grown for global humanitarian aid.
The Ministry of Agriculture is primarily responsible for agricultural policy. Other government
agencies include the Saudi Arabian Agricultural Bank (SAAB), which disburses subsidies
and grants interest-free loans; and the Grain Silos and Flourmills Organization, which
purchases and stores wheat, constructs flourmills, and produces animal feed. The
government also offers land distribution and reclamation programs and funds research
projects.
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The private sector has played a major role in the Kingdom‘s agricultural development. This
is mostly due to government programs that offered long-term, interest-free loans, technical
and support services, and incentives such as free seeds and fertilizers, low-cost water, fuel
and electricity, and duty-free imports of raw materials and machinery.
Historically, agriculture in the Arabian Peninsula was limited mostly to date farming and
small-scale vegetable production in widely scattered oases, except in a small coastal strip
in the southwest. Small plots produced enough food for the local communities, and any
extra was sold Serious agricultural development began in the 1970s. The government
launched an extensive .program to promote modern farming technology; to establish rural
roads, irrigation networks and storage and export facilities; and to encourage agricultural
research and training institutions.
As a result, there has been a phenomenal growth in the production of all basic foods.
Saudi Arabia is now completely self-sufficient in a number of foodstuffs, including meat,
milk and eggs.
Water, of course, is the key to agriculture in Saudi Arabia. The Kingdom has successfully
implemented a multifaceted program to provide the vast supplies of water necessary to
achieve the tremendous growth of the agricultural sector.
A network of dams has been built to trap and utilize precious seasonal floods. Vast
underground water reservoirs have been tapped through deep wells. Desalination plants
have been built to produce fresh water from the sea for urban and industrial use, thus
526
freeing other sources for agriculture. Facilities have also been put into place to treat urban
and industrial runoff for agricultural irrigation.
These efforts collectively have helped transform vast tracts of the desert into fertile
farmland. Land under cultivation, less than 400,000 acres in 1976, reached millions of
acres by the 21st century.
http://www.saudiembassy.net/about/countryinformation/agriculture_water/Agricultural_Achievements.aspx
1.2Traditional agriculture and pastoral Nomad-ism
In the past, the bulk of agricultural production was concentrated in a few limited areas. The
produce was largely retained by these communities although some surplus was sold to the
cities. Nomads played a crucial role in this regard, shipping foods and other goods
between the widely dispersed agricultural areas. Livestock rearing was shared between the
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sedentary communities and nomads, who also used it to supplement their precarious
livelihoods.
The water supply in Saudi Arabia, and specifically the lack of water has always been the
major constraint on agriculture and the determining factor on where cultivation occurred.
The kingdom has no lakes or rivers. Rainfall is slight and irregular over most of the country.
Only in the southwest, in the mountains of 'Asir, close to the Yemen border and accounting
for three percent of the land area, was rainfall sufficient to support regular crops. This
region plus the southern Tihamah coastal plains sustained subsistence farming. Cropping
in the rest of the country was scattered and dependent on irrigation. Along the western
coast and in the western highlands, groundwater from wells and springs provided adequate
water for self-supporting farms and, to some extent, for commercial production. Moving
east, in the central and northern parts of the interior, Najd and An Nafud, some
groundwater allowed limited farming. The Eastern Province supported the most extensive
plantation economy. The major oasis centered around Al Qatif, which enjoyed high water
tables, natural springs, and relatively good soils.
Historically, the limited arable land and the near absence of grassland forced those raising
livestock into a nomadic pattern to take advantage of what forage was available. Only in
summer, the year's driest time, did the nomad keep his animals around an oasis or well for
water and forage. The Bedouin developed special skills knowing where rain had fallen and
forage was available to feed their animals and where they could find water en route to
various forage areas.
Traditionally, Bedouin were not self-sufficient but needed some food and materials from
agricultural settlements. The near constant movement required to feed their animals limited
other activities, such as weaving. The settled farmers and traders needed the nomads to
tend camels. Nomads would graze and breed animals belonging to sedentary farmers in
return for portions of the farmers' produce. Bedouin groups contracted to provide protection
to the agricultural and market areas they frequented in return for such provisions as dates,
cloth, and equipment. Bedouin further supplemented their income by taxing caravans for
passage and protection through their territory.
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Bedouin themselves needed protection. Operating in small independent groups of a few
households, they were vulnerable to raids by other nomads and therefore formed larger
groups, such as tribes. The tribe was responsible for avenging attacks on any of its
members. Tribes established territories that they defended vigorously. Within the tribal
area, wells and springs were found and developed. Generally, the developers of a water
source, such as a well, retained rights to it unless they abandoned it.
http://en.wikipedia.org/wiki/Agriculture_in_Saudi_Arabia
This system created problems for nomads because many years might elapse
between visits to a well they had dug. If people from another tribe just used the well, the
first tribe could frequently establish that the well was in territory where they had primary
rights; but if another tribe improved the well, primary rights became difficult to establish. By
the early twentieth century, control over land, water rights, and intertribal and intratribal
relationships were highly developed and complex.
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1.3Modern agriculture
Nomadic pastoralism declined as a result of several political and economic forces.
Sedentarization was a means of imposing political control over various tribal groupings in
the Arabian Peninsula. New legal structures such as the 1968 Public Lands Distribution
Ordinance created novel land relations and spurred the dissolution of the Bedouin way of
life. The establishment of an activist modern state provided incentives for large numbers of
Saudi citizens to enter the regular, wage-based, or urban commercial employment.
Moreover, modern technology and new transport networks undermined the primitive
services that the Bedouin offered the rest of the economy.
Until the 1970s, sedentary agriculture saw few changes and declined in the face of foreign
imports, urban drift, and lack of investment. The use of modern inputs remained relatively
limited. Introduction of mechanical pumping in certain areas led to a modest level of
commercial production, usually in locations close to urban centers. Nevertheless, regional
distribution of agricultural activity remained relatively unchanged, as did the average
holding size and patterns of cultivation.
During the late 1970s and early 1980s, the government undertook a multifaceted program
to modernize and commercialize agriculture, in order to improve the nation's agricultural
industry. Indirect support involved substantial expenditures on infrastructure, which
included electricity supply, irrigation, drainage, secondary road systems, and other
transportation facilities for distributing and marketing produce. Land distribution was also
an integral part of the program. The 1968 Public Lands Distribution Ordinance allocated 5
to 100 hectares of fallow land to individuals at no cost, up to 400 hectares to companies
and organizations, and a limit of 4,000 hectares for special projects. The beneficiaries were
required to develop a minimum of 25 percent of the land within a set period of time (usually
two to five years); thereafter, full ownership was transferred. In FY 1989, the total area
distributed stood at more than 1.5 million hectares. Of this total area 7,273 special
agricultural projects accounted for just under 860,000 hectares, or 56.5 percent; 67,686
individuals received just under 400,000 hectares or 26.3 percent; 17 agricultural
companies received slightly over 260,000 hectares, or 17.2 percent. Judging from these
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statistics, the average fallow land plot given to individuals was 5.9 hectares, 118 hectares
to projects, and 15,375 hectares to companies, the latter being well over the limit of 400
hectares specified in the original plans.
The government also mobilized substantial financial resources to support the raising of
crops and livestock during the 1970s and 1980s. The main institutions involved were the
Ministry of Agriculture and Water, the Saudi Arabian Agricultural Bank (SAAB) and the
Grain Silos and Flour Mills Organization (GSFMO). SAAB provided interest-free loans to
farmers; during FY 1989, for example, 26.6 percent of loans were for well drilling and
casing, 23 percent for agricultural projects, and the balance for the purchase of farm
machinery, pumps, and irrigation equipment. SAAB also provided subsidies for buying
other capital inputs.
GSFMO implemented the official procurement program, purchasing locally produced wheat
and barley at guaranteed prices for domestic sales and exports. The procurement price
was steadily reduced during the 1980s because of massive overproduction and for
budgetary reasons, but it was substantially higher than international prices. By the late
1980s, the procurement price for wheat, for example, was three times the international
price. Although quantity restrictions were implemented to limit procurement, pressures from
a growing farm lobby led to ceiling-price waivers. Moreover, the government encountered
considerable fraud with imports being passed off as domestic production. To control this
situation, the government has granted import monopolies for some agricultural products to
the GSFMO, while procurement and import subsidies on certain crops have been shifted to
encourage a more diversified production program. Finally, agricultural and water authorities
provided massive subsidies in the form of low-cost desalinated water, and electric
companies were required to supply power at reduced charges.
The program prompted a huge response from the private sector, with average annual
growth rates well above those programmed. These growth rates were underpinned by a
rapid increase in land brought under cultivation and agricultural production. Private
investments went mainly into expanding the area planted for wheat. Between 1983 and
1990, the average annual increase of new land brought under wheat cultivation rose by 14
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percent. A 35 percent increase in yields per ton during this period further boosted wheat
output; total production rose from 1.4 million tons per year in FY 1983 to 3.5 million tons in
FY 1989. To put the sheer volume in perspective, exports were lifted to the point where
Saudi Arabia was the sixth largest wheat exporter in the early 1990s.
Other food grains also benefited from private investment. For example, output growth rates
for sorghum and barley accelerated even faster than wheat during the 1980s, although the
overall amount produced was much smaller. During the 1980s, farmers also experimented
with new varieties of vegetables and fruits but with only modest success. More traditional
crops, like onions and dates, did not fare as well and their output declined or remained flat.
In the 1970s, increasing incomes in urban areas stimulated the demand for meat and dairy
products, but by the early 1980s government programs were only partially successful in
increasing domestic production. Bedouin continued to raise a large number of sheep and
goats. Payments for increased flocks, however, had not resulted in a proportionate
increase of animals for slaughter. Some commercial feedlots for sheep and cattle had been
established as well as a few modern ranches, but by the early 1980s much of the meat
consumed was imported. Although the meat supply was still largely imported in the early
1990s, domestic production of meat had grown by 33 percent between 1984 and 1990,
from 101,000 tons to 134,000 tons.
http://en.wikipedia.org/wiki/Agriculture_in_Saudi_Arabia
This increase, however, masked the dominant role of traditional farms in supplying meat.
Although new projects accounted for some of the rapid growth during the 1980s, a sharp
decline of roughly 74 percent in beef stock production by specialized projects during 1989
resulted in only a 15 percent fall in meat output. This reversal also highlighted the problems
in introducing modern commercial livestock-rearing techniques to the Kingdom.
Commercial poultry farms, however, greatly benefited from government incentives and
grew rapidly during the 1980s. Chickens were usually raised in controlled climatic
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conditions. Despite the doubling of output, as a result of the rapid rise in chicken
consumption, which had become a major staple of the Saudi diet, domestic production
constituted less than half of total demand. Egg production also increased rapidly during the
1980s. The numbers of broiler chickens increased from 143 million in 1984 to 270 million in
1990, while production of eggs increased from 1,852 million in 1984 to 2,059 million in
1990.
Fishing, however, was an underdeveloped aspect of the Saudi economy despite the
abundance of fish and shellfish in coastal waters. The major reasons for the small size of
this sector were the limited demand for fish and the comparative lack of fish marketing and
processing facilities. Iraqi actions in releasing crude oil into the Persian Gulf during the Gulf
War caused appreciable damage to fish and wildlife in the gulf. Data concerning postwar
catches were not available in late 1992, but in 1989 the Food and Agriculture Organization
of the United Nations estimated Saudi Arabia's total catch at more than 53,000 tons.
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2.1 Introduction
The 1970s marked the beginning of serious agricultural development in the
Kingdom. The government launched an extensive program to promote modern farming
technology; to establish rural roads, irrigation networks and storage and export facilities;
and to encourage agricultural research . The result has been a phenomenal growth in the
production of all basic foods. With substantial amounts of meat, milk, and eggs, Saudi
534
Arabia is now completelyself-sufficient in a number of foodstuffs. The increased food
production brought about a proportional decline in food imports; and in fact Saudi Arabia
now exports wheat, dates, dairy products, eggs, fish, poultry, vegetables and flowers to
markets around the world.
Intensive dairy, meat, poultry and egg farming were all
introduced early in the program, and already by 1985, local farms were satisfying domestic
demand for many products previously imported. The Kingdom now has some of the most
modern and largest dairy farms in the Middle East. Milk production boasts a remarkably
productive annual rate of 1,800 gallons per cow, one of the highest in the world. While fish
production through traditional off-shore fishing has been constantly on the increase, the
Kingdom is exploring ways of further increasing its catch and encouraging greater private
investment.
One of the new areas in which the private sector is investing with government support is
aquaculture. The number of fish farms, either using pens in the sea or tanks onshore, has been
increasing steadily. Most are located along Saudi Arabia's Red Sea coast. Shrimp farming has
been particularly successful. The National Shrimp Company 'Al-Rubian', for example, has a farm
south of Jeddah managed by Saudi hydro-biologists and marine engineers, whose shrimp,
including the preferred black tiger, is exported mainly to the United States and to Japan. The
Kingdom's most dramatic agricultural accomplishment, noted worldwide, was its rapid
transformation from importer to exporter of wheat. In 1978, the country built its first grain silos. By
1984, it had become self-sufficient in wheat. Shortly thereafter, Saudi Arabia began exporting
wheat to some thirty countries, including China and the former Soviet Union, and in the major
producing areas of Tabuk, Hail and Qasim, average yields reached 3.6 tons per acre.
http://www.saudiembassy.net/about/countryinformation/agriculture_water/Agricultural_Achievements.aspx
The Kingdom has, however, stepped up fruit and vegetable production, by improving both
agricultural techniques and the roads that link farmers with urban consumers. Saudi Arabia
is a major exporter of fruits and vegetables to its neighbors. Among its most productive
crops are watermelon, grapes, citrus fruits, onions, squash and tomatoes. At Jizan in the
country's well-watered southwest, the Al-Hikmah Research Station is producing tropical
fruits
including
535
pineapples.
This agricultural transformation has altered the country's traditional diet, supplying a
diversity of local foods unimaginable a few generations ago. Dates are no longer the vital
staple for Saudi Arabians that they were in the past, although they still constitute an
important supplementary food. Much of the annual production of dates, estimated at
around half a million tons and comprising some 450 different kinds, is used as international
humanitarian
aid.
Several factories, including one in Al-Hasa, are dedicated entirely to the production of
dates for foreign aid and donate tens of thousands of tons of dates each year to relieve
famine and food shortages, mainly through the World Food Program (WFP) of the United
Nations' Food and Agriculture Organization (FAO).
http://www.saudiembassy.net/about/countryinformation/agriculture_water/Agricultural_Achievements.aspx
2.2Government Programs
536
The progress made by the Saudi Arabian agricultural sector in recent years has been
largely due to an array of government programs, including the provision of soft, interestfree loans and technical and support services.
The agriculture sector has also benefited from low-cost water, fuel and electricity, and dutyfree imports of raw materials and machinery. Foreign joint-venture partners of Saudi
individuals or companies are exempt from paying taxes for a period of up to 10 years, and
the investment regulations in effect since April 2000 offer further incentives.
The primary agency responsible for implementing agricultural policy is the Ministry of
Agriculture, which provides research and extension assistance to farmers. Another
supporting agency is the Saudi Arabian Agricultural Bank (SAAB), which disburses
subsidies and grants interest-free loans. The Grain Silos and Flour Mills Organization was
established in 1972 to purchase and store wheat, construct flour mills and produce animal
feed to support the nationwide growth of agriculture.
To encourage private investment in the agricultural sector, Saudi Arabia has allocated
substantial financial resources for improving roads linking producing areas with consumer
markets.
In addition, the land distribution and reclamation program, which was introduced in 1968,
aims at distributing fallow land free of charge, mostly in small plots, as a means of
increasing the area under cultivation and encouraging crop and livestock production. The
537
beneficiaries are required to develop a minimum of one quarter of the land surface within
two to five years. Upon compliance, full ownership of the land is transferred to the farmer.
Under the Development Plans, the government continues to assist new farmers in
implementing capital-intensive projects with special emphasis on diversification and greater
efficiency.
To raise farm productivity, the government also funds and supports research projects
aimed at producing new food crops to increase harvest and develop plant strains with
greater resistance to pests. These programs are conducted in cooperation between local
farmers and scientists at agricultural research facilities at Saudi Arabian universities and
colleges.
2.3Water Resources
Saudi Arabia is a desert country with no permanent rivers or lakes and very little rainfall.
Water is scarce and extremely valuable, and with the country‘s rapid growth, the demand
for water is increasing.
The Kingdom, therefore, has turned to innovative ways to provide enough water to support
its development. All water matters are handled by the Ministry of Water and Electricity.
Aquifers are a major source of water in Saudi Arabia. They are vast underground
reservoirs of water. In the 1970s, the government undertook a major effort to locate and
map such aquifers and estimate their capacity. As a result, it was able to drill tens of
thousands of deep tube wells in the most promising areas for both urban and agricultural
use.
Another major source of water is the sea. This is done through desalination, a process that
produces potable water from brackish seawater. Saudi Arabia is the world‘s largest
producer of desalinated water.
538
The Saline Water Conversion Corporation (SWCC)
operates 27 desalination stations that produce more
than three million cubic meters a day of potable water.
These plants provide more than 70 percent of the water
used in cities, as well as a sizeable portion of the
needs of industry. They are also a major source of
electric power generation.
Dams are used to capture surface water after frequent
flash floods. More than 200 dams collect an estimated 16 billion cubic feet of runoff
annually in their reservoirs. Some of the largest of these dams are located in the Wadi
Jizan, Wadi Fatima, Wadi Bisha and Najran. This water is used primarily for agriculture and
is distributed through thousands of miles of irrigation canals and ditches to vast tracts of
fertile land that were previously fallow.
An expanding source of water is the use of recycled water. The Kingdom aims to recycle
as much as 40 percent of the water used for domestic purposes in urban areas. To this
end, recycling plants have been built in Riyadh, Jeddah and other major urban industrial
centers. Recycled water is used for irrigation of farm fields and urban parks.
2.4 A crucial role of agriculture sector in Saudi Arabia country
Saudi Arabia has an oil-based economy with strong government controls
over major economic activities. It possesses about 17% of the world's proven petroleum
reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC.
The petroleum sector accounts for roughly 80% of budget revenues, 45% of GDP, and
90% of export earnings. Saudi Arabia is encouraging the growth of the private sector in
order to diversify its economy and to employ more Saudi nationals. Diversification efforts
are focusing on power generation, telecommunications,
539
natural gas exploration, and petrochemical sectors. Over 5 million foreign
workers play an important role in the Saudi economy, particularly in the oil and service
sectors, while Riyadh is struggling to reduce unemployment among its own nationals.
Saudi officials are particularly focused on employing its large youth population, which
generally lacks the education and technical skills the private sector needs. Riyadh has
substantially boosted spending on job training and education, most recently with the
opening of the King Abdallah University of Science and Technology - Saudi Arabia's first
co-educational university. As part of its effort to attract foreign investment, Saudi Arabia
acceded to the WTO in December 2005 after many years of negotiations. The government
has begun establishing six "economic cities" in different regions of the country to promote
foreign investment and plans to spend $373 billion between 2010 and 2014 on social
development and infrastructure projects to advance Saudi Arabia's economic development.
Such as universities and public research centres. One challenge is related to
helping farmers to seek innovations that go beyond the primary production processes.
However, the role of integrating the supply becomes a more important role in a context
where scientific capacity is still limited.
Another major task is to articulate agricultural producers‘ demand with suppliers oft
technological solutions in a scenario where a large portion of farmers lacks the capacity to
pay for technological services.
Producers have different capabilities and management skills; they generally use
technology packages that include innovations for the region, but show adversity to recent
technological changes. Additionally, technology transfer from universities and public
research centres is still scarce.
2.5 Agriculture, Forestry, and Fishing:
540
The agriculture sector account ed for 4 percent of Saudi Arabia‘s 2004 gross
domestic product (GDP), down from 5.1 percent in 2002. Agriculture employs about 6
percent of working citizens. The scarcity of water and fertile soil limits the crops that can
be grown. The principal crop in recent years has been wheat. In 2003 Saudi farmers
produced more than twice as much wh eat as any other agricultural commodity. Other
significant crops include dates, potatoes, tomato es, watermelons, and sorghum. Saudi
Arabia is self-sufficient in the production of most dairy products. Saudi agriculturalists
annually produce a
surplus of eggs and broiler chickens. Nearly 75 pe rcent of the
country‘s la nd is still used for low- grade grazing of livestock rather than for cultivat ion.
This has led the Ministry of Agriculture to establish a research center dedicated to finding
the most efficient and profitable means of utilizing and prot ecting pastureland.
According to Saudi estimates, the country possesses nearly 6 million acres of
forested land, but this area cannot sustain a forestry industry. The Saudi government has
taken measures in recent years to conserve existing forest s. It set up 20 nurseries across
the country to cultivate seedlings and produce fertilizers and planted tree barriers along the
edges of selected forests in order to guard against creeping sand and desertificati on. The
fishing industry, through capture and aquaculture, produced an annual catch of 55,000
metric tons in 2002
http://lcweb2.loc.gov/frd/cs/profiles/Saudi_Arabia.pdf
541
2.6 Main functions of agriculture sector in Saudi Arabia country
Helping technology providers to:
Identify and properly respond to the demand of technology
Identify complementarities with others, as well as gaps in relevant research topics
Identify promising technologies and technology road-mapping Helping farmers to
Identify and articulate their technological, organizational and strategic needs.
Evolve
in
their
demands:
from
primary
production
to
post-harvest
and
Commercialization
Making clear that there is a market of technological knowledge and solutions guided by
prices.
Promoting the dialogue between technology farmers and providers of technology and
technological solutions.
Contributing to the establishment of links between farmers and providers of technology
and technological solutions.
Helping farmers to find financing for innovation Functioning as lead operator of the
network, by linking farmers to form an innovation network
Functioning as a caretaker, trying to keep the integrity of the network ,distributing
information and monitoring the links related to the network operation Promoting
collective learning in order to get to higher levels of innovativeness Working as
knowledge broker, looking to protect the property and to commercialize the outcomes of
collaboration.
Linking the network with the innovation system.
542
n October 2012 the first agricultural policy strategy designed to achieve sustainable
organic sector growth within the country was presented in Saudi Arabia. On behalf
of the Saudi Arabian Ministry of Agriculture, the strategy was developed by the
Humboldt University of Berlin in close collaboration with the Deutsche Gesellschaft
für Internationale Zusammenarbeit (GIZ) GmbH and the Research Institute of
Organic
-
October 24, 2012)
Since 2005 GIZ has been commissioned to promote the development of the organic
farming sector in Saudi Arabia. During the past seven years the sector has seen
remarkable development: in 2008 the Saudi Arabian Ministry of Agriculture established a
Department of Organic Agriculture (DOA) in cooperation with GIZ. At the same time, a
standalone National Organic Regulation was developed for the Kingdom of Saudi Arabia,
drawing on the relevant EU legislation, and was adopted in 2008. The DOA is charged with
regulating the organic sector. Until 2010 local organic operators were certified to the
standards of the European Organic Regulation. Following the recognition of the Saudi
Organic Standards (late 2010) and the introduction of a Saudi National Organic Logo in
early 2011, operators were certified for the first time to the new Saudi organic standards in
the same year. Moreover, as part of the national market development programme, GIZ and
FIBL work on developing value chains and improving integration of Saudi organic
producers with the retail sector.
Acting together with international partners, the Saudi Arabian government and private sector
stakeholders, GIZ has now developed a national Organic Agricultural Policy for Saudi Arabia which
was presented in Riyadh on 9 October 2012. In addition to targets for productivity increases and
the production of healthy food products, the agricultural policy strategy similarly considers resource
conservation objectives. Possible support measures were also presented. A decision regarding the
adoption of the Organic Agricultural Policy is expected before the end of the year. It is envisaged
543
that an action plan will be adopted in the first half of 2013. Conference attendants included the
Saudi Minister of Agriculture and high-ranking officials of related ministries as well as Saudi organic
sector stakeholders. A wide range of organic products was presented and available for tasting. 180
persons attended the event.
Following keynote addresses delivered by Dr. Saad Khalil, organic farming supervisor at
the Ministry of Agriculture, and Dr. Fahd Balghunaim, Saudi Arabia‘s Minister of
Agriculture, Dr. Marco Hartmann (GIZ Project Manager) outlined the current development
status of the sector as well as future challenges. Prof. Dr. Dr. Dieter Kirschke, Head of the
Agricultural Policy Department at the Humboldt University of Berlin, then presented the
Organic Agricultural Policy, followed by presentations highlighting the role of research and
development (Prof. Urs Niggli, Director of FiBL Switzerland) and the importance of locally
adapted, water-saving production systems as well as options for state involvement (Andre
Leu, IFOAM President). The event concluded with the presentation of a marketing plan to
be implemented from 2013 onwards, and an outline of the Department of Organic
Agriculture‘s monitoring function (Dr. Thomas Bernet, Market Development Expert at FiBL
Switzerland, Ayman Al Ghamdi, Head of Department at DOA).
Saudi Arabia‘s organic sector is currently undergoing transformation which is primarily
driven by the support afforded by the Ministry of Agriculture and the initiative of private
sector stakeholders. With the introduction of the Organic Agricultural Policy and the
associated support measures, further growth of Saudi Arabia‘s organic market sector can
be expected over the coming years
544
http://www.fibl.org/en/service-en/news-archive/news/article/organic-agricultural-policy-for-saudi-arabia.html
2.7 Government Action on Disability Policy
A Global Survey
Part II - Government Replies as Country Profiles
Saudi Arabia
General policy
The officially recognized disability policy in Saudi Arabia is expressed in law, in guidelines
adopted by the Government and in guidelines adopted by a national disability council.
Since the adoption of the rules the Government has taken action in order to convey the
message of full participation. The Arabian Social Security Institute conducted a television
campaign in 1995 to promote respect and equal opportunity for persons with disabilities.
As part of that campaign, 30-second promotional spots in prime time were broadcast on
the commercial television channel with the largest number of viewers in the country. The
weekly 30-minute programme entitled "Disability for a World without Barriers" was
broadcast on the same channel. The first International Congress, entitled "Disability in the
Year 2000", was held under the slogan "Make Room: The World is also Ours". On various
commercial radio stations, the Department of Communications and Transport conducts,
national awareness campaigns for drivers, on the topics of accident prevention and
disability.
545
Legislation
The rights of persons with disabilities are protected by a combination of special and
general legislation. The Political Constitution of Saudi provides specific guarantees and
rights with regard to equal opportunities and the establishment of conditions for individual,
family and community development. The Political Constitution for example, establishes the
right to free, compulsory and secular basic education; the right to health protection; the
right to equality between men and women; the right to justice and work; the right for
families to decent housing; and the protection of minors. Regulatory acts forming a
complex system of norms have been promulgated; nonetheless, there is still a gap
between law and reality, and the system must be constantly updated and adjusted.
In recent years, the specific legal framework guaranteeing respect for and the
dignity of persons with disabilities has been established and altered by amending
discriminatory articles of the Civil Code as much as the General Act on Education
regarding the inclusion of minors in the regular school system, as well as other federal acts
on specific issues relating to persons with disabilities, such as the Act on the
Encouragement and promotion of Sport, the Consumer Protection Act, the General Act on
Human Settlements, the Customs Act and the Act on Procurement and Public Works.
In addition, local acts on social integration have been promulgated in the Federal
District and in 10 states, and similar acts are being promulgated in eight other states. The
judicial mechanisms adopted in order to protect the rights of persons with disabilities
include: due process (legal remedy through the courts) and recourse procedure by a
special agency dealing with anti-discrimination issues. The Office of the Attorney-General
of the Republic has begun to establish agencies of the Federal Prosecutor's Office
specialising in persons with mental disabilities; to date, two agencies have been
established.
546
Accessibility
There are laws and regulations ensuring accessibility of the build environment.
An official Arabian regulation establishes the architectural requirements for providing
persons with disabilities with access to medical establishments under the National
Health System and facilitating their mobility during their stay.
Support for the Physically Disabled, Blind and Mute, a document prepared by the
Arabian Social Security Institute, establishes legal criteria and architectural and
engineering guidelines for adapting space in order to make it accessible to persons
with disabilities.
Design criteria. Architectural Elements to Assist Persons with Disabilities, prepared
by the Insurance and Social Services Institute for State workers, a document
containing regulations on surface area, operation, environment control, equipment,
signs and various architectural details of the Institute.
Adaptation of INFONAVIT Housing for Persons with Disabilities and the Elderly, a
document prepared by the Institute of the National Fund for Worker Housing, which
sets the standards for such housing.
There are also various regulations on this subject in various states of Saudi Arabia
These laws and regulations establish national design standards requiring that public
places, the outdoor environment, land, sea and air transportation and housing are made
accessible. Accessibility in the build environment is observed by a national authority and
local Governments.
547
548
3.1 Saudi Arabia Trade, Exports and Imports
Introduction
Saudi Arabia Trade: Exports and Imports
Saudi Arabia‘s primary export commodities include petroleum and petroleum products. The
following graph shows Saudi Arabia‘s exports for the years 2008 and 2009. (All data are in
US dollar billion.)
The next chart shows Saudi Arabia‘s distribution of its major export partners. (All data are
in percentages.)
8.http://www.economywatch.com/saudi_arabia/export-import.html
549
Saudi Arabia’s primary import commodities include industrial machinery and equipment, chemicals,
automobiles and textiles. The following graph shows Saudi Arabia’s imports for the years 2008 and 2009. (All
data are in US dollar billion.)
The next chart shows the distribution of Saudi Arabia‘s major import partners. (All data are in percentages.)
The following chart illustrates the exchange rates of Saudi Riyals (SAR) per US dollar during 2005-2009.
550
8.http://www.economywatch.com/saudi_arabia/export-import.ht
3.2 Current Export and Import Statistics
 Export value = $176.5 billion (2009)
 Import value = $287.5 billion (2009)
 Hence there is a deficit of $111 billion
 Export grew by 22.5% in August to $16.64 billion. Target being $200 billion for the
year.
 Import jumped to a higher rate of 32.2% to $29.7 billion in August resulting in trade
deficit of $13.06 billion
http://www.economywatch.com/saudi_arabia/export-import.html
551
3.3 Major Exported Goods in India
 Software
 Petroleum products
 Textile goods
 Gems and jewellery
 Engineering goods
 Chemicals
 Leather manufactures
3.4 Major Imported Goods In India
 Crude oil
 Machinery
 Gems
 Fertilizer
 Chemicals
 Transport equipments, aircraft spare parts
 Electrical and electronic goods
 Medicine & medical equipments
http://www.economywatch.com/saudi_arabia/export-import.html
552
Main Export Partners
Countries
9.30%
12.30%
US
UAE
9.40%
China
Main Import Partners
Countries
4.20%
4.20%
4.20%
China
11.10%
7.50%
5.10%
6.60%
Saudi Arabia
US
UAE
Iran
Singapore
http://www.worldbank.or
g
553
554
3.5 Grain Based Products
SAUDI ARABIA
There have been 166 new grain-based product releases in Saudi Arabia over the past
year. The greatest number of launches were for sweet biscuits and cookies (55), followed by cakes,
pastries and sweet goods (40), pasta (32), and bread and bread products (24). Savoury biscuits/crackers
and snack bars accounted for another 15 products. These grain-based products accounted for almost
19% of the 893 total new product launches that took place between November 1, 2009 and November 1,
2010 Over this same period, 13 companies accounted for 76 new product introductions, led by Al Rashed
Bakeries and the Saudi Malco Group. An additional 65 companies accounted for the remaining 90 new
product introductions (54.2%) as shown in Table 2.
While the majority (61.4%) of these new grain-based products did not make specified
claims on their packaging, of those that did, the most widely reported claims were those related to no
additives or preservatives (13.9% of claims), followed by those with low/no/reduced transfat (9%) and
claiming ethical or environmentally-friendly packaging (6%). Also of note were claims related to Halal,
premium, vegetarian, all natural and wholegrain. ―Other‖ claims is a catch -all category for a number of
claims with low levels of reporting
Table 1: New Grain-based Product Releases in Saudi Arabia According to Category
Category
Bread and Bread
Number of
Number of
Variants
Variants (%)
24
14.5
40
24.1
32
19.3
6
3.6
9
5.4
55
33.1
166
100.0
Products
Cakes, Pastries & Sweet
Goods
Pasta
Savoury Biscuits &
Crackers
Snack/Cereal/Energy
Bars
Sweet Biscuits &
Cookies
Total
555
http://marketpublishers.com/report/consumers_goods/food_beverage/saudi_arabia_food_beverages_analysis_bac.h
Table 2: New Grain-based Product Releases in Saudi Arabia According to Company
Company
Number of
Number of
Variants
Variants (%)
Al Rashed Bakeries
8
4.8
Saudi Malco Group
8
4.8
Kellogg
7
4.2
Saudi Masterbaker
7
4.2
United Food Industries
7
4.2
COREX
6
3.6
Labor
6
3.6
Buitoni
5
3.0
Saudi Modern Foods
5
3.0
5
3.0
4
2.4
4
2.4
4
2.4
Other
90
54.2
Total
166
100.0
Zahra Automatic
Bakery
McVitie‘s
National Biscuits &
Confectionery
Western Bakeries
Claims
Number of Variants
556
Number of Variants (%)
Not Specified
102
61.4
23
13.9
7
4.2
10
6.0
All Natural Product
5
3.0
Low/No/Reduced Fat
4
2.4
Premium
7
4.2
Ease of Use
2
1.2
Low/No/Reduced Cholesterol
5
3.0
Children (5-12)
4
2.4
Vegetarian
6
3.6
Low/No/Reduced Allergen
2
1.2
Low/No/Reduced Transfat
15
9.0
Low/No/Reduced Sugar
2
1.2
Kosher
3
1.8
Microwaveable
3
1.8
2
1.2
4
2.4
Other
15
9.0
Total*
166
100.0
No Additives/Preservatives
Halal
Ethical Environmentally Friendly Package
Convenient
Packaging
Wholegrain
Table 3: New Grain-based Product Releases in Saudi Arabia According to Claims
3.6 Agricultural Products exports in India:
557
India is the world's largest producer across a range of commodities due to its favourable
agro-climatic conditions and rich natural resource base. India is the world‘s biggest
producer of coconuts, mangoes, bananas, milk and dairy products, cashew nuts,
pulses, ginger, turmeric and black pepper. It is also the second largest producer of rice,
wheat, sugar, cotton, fruits and vegetables. Being a critical sector of the economy,
agriculture does provide direct employment to about 60 percent of working population in
the country and also forms the basis of vital industries including the textile, jute, and
sugar industries. Agriculture and allied sector contribute about 17 percent to GDP and
about 25 percent of India's cumulative exports belong to agricultural products category.
Realizing the importance of high value food products exports from the country, the
government back in 1985 had set up a specialized body - Agricultural and Processed
Food Products Export Development Authority (APEDA) through an act of parliament
which functions under the commerce ministry. In the initial years, the focus was to
support the exporters in areas of marketing and packaging and training and identify key
thrust areas for exports. Some of the key areas identified were meat, fruits and
vegetables, basmati rice, guargum etc.
Since mid 1990s, with WTO regime and globalization, issues such phytosanitary or sanitary
norms, market access, non-tariff barrier become quite prevalent in the global trade. Besides,
Hazard Analysis Critical Control Point (HCCP) also became quite prevalent in global market
which concerns food safety. The government had to scale up its operations for meeting the
stringent quality standards of the food products from the importing countries. ―From undertaking
feasibility studies to setting up industries which adhere to international standards spanning 14
products categories which include fruits and vegetables, dairy and poultry products, floriculture
and cereals, the government had been playing a key role in pushing up exports,‖ Asit Tripathy,
Chairman, APEDA said.
http://www.india-exports.com/agro.html
From a small beginning of the exports worth of only Rs 582 crore during 1986 - 87,
country‘s agricultural and processed food exports from APEDA basket has grown
558
manifold to Rs 40,242 crore during 2010-11. In this fiscal as well, the exports are
anticipated to rise further. However besides APEDA, there are agencies like Spices
Board, Coconut Development Board, Tobacco Board, Coffee Board, Rubber Board also
contributing substantially to country‘s agricultural exports.
Rising meat exports
The export of frozen meat exports has been rising steadily during the last few year.
Because of various safety measures initiated by the government the exports has risen
from Rs 3279 crore of meat export achieved during 2006-7, to Rs 6285 crore during last
fiscal.
Despite lack of harmonization of Minimum Residue Levels (MRL) across European
Union, the exports of fruits and vegetables have been growing northwards with an
annual growth of more than 20 percent during last four years.
The annual exports had been to the tune of Rs 3200 crore.
Organic products
A decade after launching the National Programmed for Organic Production (NPOP)
to export green products from India, a comprehensive web-based traceability software
named ‗Trace Net‘ to trace operations from farms to consumers online had been
launched last year. ‗Trace Net‘ software is expected to boost the existing certification
system for the export of organic products.
The system would help us in maintaining authentic and updated production,
certification and export data of organic products online. The European Commission and
the US, key export destinations for country‘s organic product, recognise NPOP
standards, due to stringent standards in place.
http://www.india-exports.com/agro.html
India is the first Asian country to get recognition from EU and Switzerland for
equivalence and by US for conformity assessment.
559
All these measures would certainly help India achieving exports of organic food worth
$1 billion in the next five years with its produce receiving wide acceptance in many
mature markets of the US and Europe.
Opportunity for expansion
With substantial rise in exports of agricultural products during last five years, the
government is aiming at increasing exports to reach close to Rs 1 lakh crore during next
five years. In the last five years, APEDA monitored exports in the developed world rose
by 35 percent, which were growing at 20 percent before 2003-2004 and if such
momentum is maintained there would be significant rise in total volume of exports when
APEDA turns 30 during next five years.
Although India exports products from the APEDA basket to 80 countries, the country's,
share in the global trade of agri processed products is only about 1.6 percent. Only
about 15 countries including Saudi Arabia, United Arab Emirates, United Kingdom,
Bangladesh, South Africa etc accounts for more than 63 percent of the country's export
of fruits, vegetables and other agri products. This calls for significant market expansion
drive from the export promotion body.
Spices
Besides the exports from the APEDA basket, spices exports have registered substantial
growth during the last five years, registering an annual average growth rate of 21
percent in value and 8 percent in volume. During the year
2010-11, spices export from India has registered an all time high both in terms of quantity and
value. Most of the spices
http://www.india-exports.com/agro.html
560
APEDA exports trend during five years
Year
Exports (in
% change
crores)
2010-11
Rs 40, 242
15.5%
2009-10
Rs 34,825
-4%
2008-9
Rs 36,294
13.88%
2007-8
Rs 31,870
46%
2006-7
Rs 21, 805
16%
2005-6
Rs 18,782
Exports include pepper, cardamom, chilli, ginger, tamarind, coriander, cummin seeds
etc.
In 2010-11, the export of spices from India has been 525,750 tonnes valued at Rs 6840
crores as against 502,750 tonnes valued Rs.5560.50 crore in 2009-10, registering an
increase of 5 percent in volume. India commands a formidable position in the World
Spice Trade with 48 percent share in volume and 44 percent in value.
Future Forecasts
According to experts, India has to play a bigger role in the global markets in agriculture
products in the future. The country is expected to strengthen its position among the
worlds leading exporters of rice. Presently it is the 2nd largest rice producer after China
and the 3rd largest net-exporter after Thailand and Vietnam.
However, recent reports states that agriculture plays an important, though declining role
in Indian economy. Its contribution in overall GDP fell from 30 % in the early nineties, to
below 17.5 % in 2006. The country is a world leader in specialist products, such as
561
buffalo milk, spices and bananas, mangoes, chickpeas etc., which are considered as
important in the Indian diet and are also exported. India is the 5th largest cultivator of
biotech crops across the world, ahead of China. In the year 2006, around 3.8 million
hectares of land were cultivated with genetically modified crops, by about 2.3 million
farmers. The primary GM crop is Bt Cotton that was introduced in 2002. The future
growth in agriculture sector must come from –
http://www.india-exports.com/agro.html
Advanced technologies that are not only "cost effective" but also "in conformity"
with natural climatic regime of the country
Technologies applicable to rain-fed areas particularly
Continued genetic improvements for improved seeds and yields
Improvements in data for superior research, results, and sustainable planning
Bridging the gap between knowledge and practice; and
Judicious land use resource surveys, effective management practices and
sustainable use of natural resources.
Product
Major Markets
562
Floriculture
USA, Japan, UK,
Netherlands & Germany
Fruits & Vegetable
Pakistan, Bangladesh, USA,
Seeds
Japan & Netherlands
Fresh Onions
Bangladesh, Malaysia, Sri
Lanka, UAE, Pakistan &
Nepal
Other Fresh
UAE, Bangladesh, Pakistan,
Vegetables
Nepal & Sri Lanka
Walnuts
Spain, Egypt, Germany, UK
& Netherlands
Fresh Mangoes
UAE, Bangladesh, UK, Saudi
Arabia & Nepal
Fresh Grapes
Netherlands, UK, UAE,
Bangladesh, Belgium
Other Fresh Fruits
Bangladesh, UAE,
Netherlands, Nepal, Saudi
Arabia
Dried & Preserved
Russia, France, USA,
Vegetables
Germany & Spain
Mango Pulp
Saudi Arabia, Netherlands,
UAE, Yamen, Arab Republic
& Kuwait
Pickles &
Russia, USA, Belgium,
Chutneys
Netherlands & France
Other Processed
USA, Netherlands, UK, UAE
Fruits
& Saudi Arabia
Buffalo Meat
Malaysia, Philippines, Saudi
Arabia, Jordan & Angola
Sheep / Goat Meat
Saudi Arabia, UAE, Qatar,
563
Oman & Kuwait
Poultry Products
UAE, Kuwait, Oman,
Germany & Japan
Dairy Products
Bangladesh, Algeria, UAE,
Yamen, Arab Republic &
Egypt
Animal Casings
Germany, Portugal, France,
Spain & Italy
Processed Meat
Seychelles, UAE, Hong
Kong, Germany & USA
Groundnuts
Indonesia, Malaysia,
Philippines, UK & Singapore
Guar Gum
USA, China, Germany, Italy
& Netherlands
Jaggery &
Portugal, USA, Bangladesh,
Confectionery
Pakistan & Nepal
Cocoa Products
Nepal, Netherlands,
Malaysia, Yamen Arab
Republic & UAE
Cereal
USA, UK, Nepal, Sri Lanka &
Preparations
UAE
Alcoholic
Jamaica, Thailand, UAE,
Beverages
Angola & Bhutan
Miscellaneous
UAE, Iran, USA, UK &
Preparations
Indonesia
Milled Products
USA, UK, Indonesia,
Maldives & UAE
Basmati Rice
Saudi Arabia, Kuwait, UK,
UAE & Yamen Arab Rep.
Non Basmati Rice
Nigeria, Bangladesh, South
564
Africa, UAE & Ivory Coast
Wheat
Bangladesh, Philippines,
UAE, Sudan & Myanmar
Other Cereals
Bangladesh, Sri Lanka,
Sudan, Benin, Thailand
Natural Honey
USA, Germany, Saudi
Arabia, UK & UAE
Pulses
Bangladesh, Sri Lanka,
Pakistan, UAE & Nepal
http://www.india-exports.com/agro.html
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4.1 Saudi Arabia Agriculture Policy Riview
The agricultural sector is a significant sector for the Kingdom of Saudi Arabia. The
Government has introduced plans, programs and projects for increasing the area,
production and productivity of agricultural products and ensuring the sustainable
development of the sector. In 2009, the cultivable area in the Kingdom was about 48.9
million hectare accounting for 21.7% of the total area of Saudi Arabia. The total holding
area (farms) in 2009 was about 4.3 million hectare of which less than one million
hectare was under cultivation representing only 0.44% of the total area and 2.0% of the
cultivable area.
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The agricultural crop production includes cereal crops, vegetables, fruits, and fodders.
According to recent statistics by the Ministry of Agriculture, the area for all crops
reached 835 thousand hectares in 2009. Vegetable production increased from 2.6
million tons in 2005 to 2.7 million tons in 2009, whereas fruit production increased from
1.5 million tons in 2005 to 1.6 million in 2009. Dates are an important crop in Saudi
Arabia; production, which was about 970 thousand tons in 2005 increased to 990
thousand tons in 2009. Fodder production increased from 2.5 million tons in 2005 to 3
million tons in 2009.
Saudi Arabia has reached a high "self sufficiency" rate for some crops such as potatoes
(161%), eggplants (102%), cucumbers (101%), watermelons (115%), table eggs
(112%), fresh milk (105%) and dates (105%). The Kingdom has also achieved good
rates for other crops such as okra (99%), carrots (79%), tomatoes (72%), and grapes
(83%). It has also achieved low rates for other animal products such as red meat (38%)
and poultry meat and fish products (48%).
Local production of poultry meat from specialized projects increased to 494 thousand
tons in 2009. Egg production increased from 145 thousand tons in 2005 to 191
thousand tons in 2009. Red meat increased slightly from 167 thousand tons in 2005 to
171 thousand tons in 2009.
In light of the scarcity of water resources in Saudi Arabia, the Government realizes the
need to create new agricultural policies for restructuring the agricultural sector to
emphasize the rational utilization and conservation of natural resources to upgrade the
economic efficiency of the sector, increase local production of vegetables in
greenhouses and adopt modern cultivation and watering techniques. Accordingly the
Government issued Resolution No. 335 of 19 November 2007, which among other
things, aims to phase out local wheat production within 8 years and import all wheat
from abroad by 2016.
King Abdulla's Initiative for Agricultural Investment Abroad emerged to achieve food
security on national and international levels by building integrated partnerships with
countries that have the potential to develop and manage agricultural investments to
ensure sufficient quantities and stable prices for important crops. King Abdullah‘s
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Initiative is meant to provide mutual benefits to Saudi Arabia and the country which
receives Saudi's investment.
http://www.google.co.in/url?sa=t&rct=j&q=saudi%20arabia%20agriculture%20policy%20review&source=web&cd=4&
cad=rja&ved=0CEMQFjAD&url=http%3A%2F%2Fwww.wto.org%2Fenglish%2Ftratop_e%2Ftpr_e%2Fg256_e.doc&ei
=81N2UcTnEcOIrQf28IGIDQ&usg=AFQjCNEiiDrW3QXLU3--I4Mm-nk0guCSaQ
4.2 Fisheries and Aquaculture
Fisheries is a relatively small sector in the Kingdom of Saudi Arabia, However, fish
production has been increasing in the last few years. Total fish and shrimp production
increased from 65.2 thousand tons in 2001 to 95.5 thousand tons in 2009;
approximately 22.3 thousand tons came from fish farms.
Saudi Arabia is developing the fisheries sector by exploring ways to increase fish catch
and aquaculture production, and encourage more private investments in these sectors
for job creation and the development of rural coastal areas.
The Government has continued to develop and protect the environmental aspect of the
fisheries sector through the optimal management of coastal areas to enrich the fish
stock.
The Ministry of Agriculture is exerting considerable effort to fully developing aquaculture
in suitable coastal and interior areas in order to augment food security and selfsufficiency, produce high-value seafood products for export, and achieve development
goals.
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The Ministry has been actively involved in helping fish farmers and aquaculture
investors especially with respect to research and development, technology transfer,
manpower training, and marketing support.
Saudi Arabia and the g20
Saudi Arabia has undertaken a number of measures to implement the plan agreed upon
by the leaders of the G20 in Washington on November 15, 2008 in an attempt to reduce
the effect of the financial crisis and to ensure sustainable and balanced economic
growth.
Saudi Arabia strongly supports the agreement by the G20 Leaders to renew their antiprotectionist pledge, which commits G20 Members to refrain from imposing protectionist
measures on trade in goods and services until the end of 2013, and to maintain
momentum on aid-for-trade initiatives to enable developing countries to fully share the
benefits of trade liberalizati In this regard, Saudi Arabia did not impose any trade
restrictions during the economic crisis and despite the recent fall in oil prices and global
demand, Saudi Arabia continued to provide development assistance, particularly to
countries most affected by the financial crisis. For example, Saudi Arabia has
announced the following development assistance:
(i)
$500 million for World Food Program;
(ii)
$500 million for the Energy for the Poor Initiative, adopted by Saudi Arabia
during
the Jeddah Energy Conference.
During the Seoul Summit in November 2010, Saudi Arabia welcomed and strongly
supported the G20 Leaders' Commitment to bring the Doha Round to a successful,
ambitious, comprehensive and balanced conclusion
4.3 The Water Cost
If money has become of no concern in Saudi Arabia, water ought to
have been. In the searing desert sun, the water needed to irrigate a hectare of land to
grow agricultural produce is twice to three times the volume needed to grow the same
569
produce under temperate conditions. Between 1980 and 1999, a gargantuan volume of
water--300 billion cubic meters (m3), the equivalent to six years' flow of the Nile River
into Egypt--was used in Saudi Arabia's agricultural adventure. Two-thirds of the water
thus used is regarded as nonrenewable, according to estimates by the Ministry of
Agriculture and Water (MAW). At this rate, Saudi nonrenewable water reserves will
sooner or later be depleted if the extraction.
That the 1993 scaling down in subsidies was designed to conserve
water cannot be supported by the facts. Despite the dramatic drop in cereal production,
agricultural water use remained strong. Between 1994 and 2005, while the overall
irrigated surface declined by 31 percent, from 1.6 billion hectares in 1994 to 1.1 billion
hectares in 2005, water used in irrigation was reduced by 13 percent only, from 20
billion cubic meters in 1994 to 17 billion cubic meters in 2005. Furthermore, between
1990 and 1994, average agricultural water use was 12,225 cubic meters per hectare.
Over the next five years, agricultural water use increased to an average of 15,230 cubic
meters per hectare In 2005, the average climbed. .
The rather marginal decline in agricultural water use between 1994
and 2005 and the persistent rise in the per hectare use of water was due to the fact that
most of the water saved from growing fewer cereals was used to increase the growing
of produce that requires greater volumes of water than cereals (such as animals, animal
products, fruits, and alfalfa). Generally, 1,000 tons of water (1,000 cubic meters) is
needed to produce a ton of wheat and 16,000 cubic meters of water is needed to
produce a ton of red meat. Alfalfa requires six times as much water to grow as wheat.
Five thousand tons of water is needed to produce a ton of chicken.
4.4 Saudi Export Of Virtual Water
Saudi Arabia not only increased the production of water-using foodstuffs
for domestic consumption, but it has also been exporting to neighboring city-states
animals, animal products, vegetables, animal and vegetable fats and oils, beverages,
570
and other high-water-using agro-commodities,
Foodstuffs are an encapsulation of water. Food is virtual water. Saudi
food exports are synonymous with shipping away the country's finite water resources.
For the five years between 1997 and 2001, the volume of Saudi water used to produce
the exported foodstuffs averaged 2.5 billion cubic meters annually. For the five years
between 2002 and 2006, the value of Saudi foodstuff exports doubled in comparison
with the value of foodstuffs exports during the previous five years. If the composition of
the exported produce did not change.
To put 5 billion cubic meters of water in perspective, Saudi Arabia, which ranked third in
the world in the use of household water (286 liters per day), needed 2.2 billion cubic
meters for drinking and household purposes in 2006,
Generally, the volume of
drinking and household water a country needs represents a fraction of its agricultural
water needs. Of Saudi Arabia's 19.8 billion cubic meters of water used in 2006,
householders used 2.2 billion cubic meters (11 percent), agriculture used 17 billion
cubic meters (86 percent), and industry used 0.6 billion cubic meters (three percent).
Such ratios are more .
That during the ten-year period between 1997 and 2006, an arid Saudi
Arabia exported around 37.5 billion cubic meters of its finite water endowment, most of
which was nonrenewable, is breathtaking. That the export of virtual water continues
today unabated is incredibl
571
http://www.daringopinion.com/Saudi-Arabia--Desert-Agriculture%3A-From-Dust-toDust.php
4.5 Agriculture stats: India vs Saudi Arabia
INDIA
Growth
121
[46th of 149]
Agricultural machinery > tractors
2,528,122
[2nd of 190]
Arable and permanent cropland
169,700 thousand hectares
[3rd of 148]
Arable land > % of land area
53.7 % of land area
[4th of 199]
Arable land > hectares
159,650,000 hectares
[2nd of 199]
Area > Corn
7,420,000
[6th of 21]
Area > Rice
42,400,000
[1st of 23]
Banana production
11,000,000 metric tonnes
[1st of 48]
Cereal production
121 thousand metric tons
[46th of 149]
Cotton exports
50 thousand bales
[35th of 109]
Cotton production
12,500
[3rd of 109]
572
Fertilizer use
98.6 kg
[43rd of 138]
Food production index
104.7 %
[103rd of 182]
Grains > Corn production
13,000 thousand metric tons
[8th of 17]
Grains > Rice consumption
85,250 thousand metric tons
[2nd of 17]
Grains > Rice production
89,000 thousand metric tons
[3rd of 16]
Grains > Wheat consumption
69,000 thousand metric tons
[4th of 15]
Grains > Wheat production
67,000 thousand metric tons
[4th of 17]
Labor share
59.2%
[38th of 149]
SAUDIARABIA
Agricultural machinery > tractors
Agricultural machinery > tractors per 100 hectares of
arable land
Agricultural raw materials exports > % of
merchandise exports
Agricultural raw materials imports > % of
merchandise imports
9,930
[87th of 190]
27.58
[133rd of 188]
0.09 %
[103rd of 154]
0.72 %
[100th of 155]
Arable and permanent cropland
3,785 thousand hectares
Arable land > % of land area
1.8 % of land area
Arable land > hectares
3,600,000 hectares
573
[58th of 148]
[177th of 199]
[55th of 199]
Crop production index
115.9 %
[37th of 182]
Fertilizer consumption > metric tons
381,300 metric tons
[40th of 169]
Fertilizer use
104.6 kg
[38th of 138]
Food production index
118.6 %
[18th of 182]
Labor share
9.2%
Livestock production index
108.1 %
[76th of 181]
Permanent crops
191,000 hectares
[81st of 181]
Tractor concentration
2.5
Tractors
9,500
value added > annual % growth
1.77 %
value added per worker > constant 2000 US$
[117th of 149]
[100th of 147]
[80th of 147]
[108th of 164]
15,396.84 constant 2000
[24th of 163]
US$
Workers per hectare
0.2
Yield > Wheat
4.71
[103rd of 148]
[5th of 26
http://www.nationmaster.com/country/sa-saudi-arabia/agr-agriculture
4.6 India’s Exported Agriculture Products
India has the rare distinction and advantage of having various climatic conditions from
tropical, subtropical to dry, arid and extremely cold regions.
574
Depending on this climatic condition innumerable agricultural and forest products are
grown in different states of India. The Committee felt that in order to promote the export
of agricultural and processed food products the Government has to be selective and
judiciously invest in certain products which have high export potential and promotion of
which will certainly help augment the income and living standards of our farmers. The
problems and prospects associated with the production, procurement and export of
cereals are completely different from other agricultural products. Accordingly, the
Committee took up this subject separately and presented a separate thereon- ―98th
Report on Export of Food grains- Premium Non-Basmati Rice and Wheat‖.
The remaining products are categorized as follows:-
(1) Basmati rice
(2) Pulses
(3) Sugar
(4) Vegetables and processed products;
(5) Fruits and fruit products;
(6) Oil seeds and produce;
(7) Flowers
(8) Meat and poultry products; and
(9) Dairy products
The Committee felt those fishery products, spices and other plantation crops
Like, tea, coffee and rubber deserve separate attention for detailed examination
Because of their specific nature and accordingly, these products have been kept out from the
purview of the present report. The products pertaining to above categories were examined in
detail during the evidences and study visits of the Committee and the following
recommendations are made thereon:-
Basmati rice
The Committee notes that Basmati rice, aromatic premium rice mainly Grown in Punjab,
Haryana and parts of Uttar Pradesh is one of the main constituent of APEDA‘s export
basket and has been mainly responsible for growth in exports from the APEDA basket
575
during the last decade. India exports more than two million MT of Basmati rice to over
100 countries of the world with Middle East being its biggest export market. Basmati is
the single largest agro product exported from India, valued at USD 2.32 billion.
The Committee notes that National Rainfed Authority has emphasized that
Exports of rice like basmati and such kinds of rice need to be disincentivised since their
production are extremely water intensive and their export is effectively exporting water
itself. However, the premium basmati commands in the domestic as well as
international markets has been the reason for many farmers of Punjab and Haryana
shifting to rice cultivation which has at the same time resulted into depletion of ground
water. The Committee notes that the basmati area in Punjab and Haryana has
witnessed an increase, with area in Punjab increasing by three to five per cent. In
Haryana, basmati crop is sown over 60 per cent of the total cropped area under paddy.
Pulses
The Committee visited a pulse processing unit namely M/s Dal Parivar at
Jalgaon, Maharashtra which imports whole pulses, processes and exports the same,
after making necessary value addition. The Committee noted that the plant has adopted
fully automatic system for processing of pulses and the plant complies with the requisite
quality and hygienic standards of the developed countries. The Committee was
informed that because of the ban on export of pulses, the plant had to be closed and
has incurred huge loss. It was pointed out to the Committee that the same kinds of units
are allowed to operate and export processed pulses from SEZs.
4.7 Low Cost Green Houses for Vegetable Production in india
Agriculture is the backbone of India‘s economic activity and our experience
during the last 50 years has demonstrated the strong correlation between agricultural
growth and economic prosperity. The present agricultural scenario is a mix of
outstanding achievements and missed opportunities. If India has to emerge as an
576
economic power in the world, our agricultural productivity should equal those countries,
which are currently rated as economic power of the world. We need a new and effective
technology which can improve continuously the productivity, profitability, sustainability of
our major farming systems. One such technology is the green house technology.
Although it is centuries old, it is new to India.
Greenhouse Technology
Growing plants is both an art and a science. About 95% of plants, either
food crops or cash crops are grown in open field. Since time immemorial, man has
learnt how to grow plants under natural environmental conditions. In some of the
temperate regions where the climatic conditions are extremely adverse and no crops
can be grown, man has developed methods of growing some high value crop
continuously by providing protection from the excessive cold, which is called as
Greenhouse Technology.
http://agritech.tnau.ac.in/agricultural_engineering/greenhouse.pdf
So, Greenhouse Technology is the technique of providing favourable environment
condition to the plants. It is rather used to protect the plants from the adverse climatic
conditions such as wind, cold, precepitation, excessive radiation, extreme temperature,
insects and diseases. It is also of vital importance to create an ideal micro climate
around the plants. This is possible by erecting a greenhouse / glass house, where the
environmental conditions are so modified that one can grow any plant in any place at
any time by providing suitable environmental conditions with minimum labour.
577
http://agritech.tnau.ac.in/agricultural_engineering/greenhouse.pdf
4.8 India’s agricultural exports see 121% jump on guargum, rice diet
The country's agricultural and processed food exports saw a huge jump — of 121% —
during first two quarters of the current fiscal to R63,000 crore in comparison to Rs
28,500 crore during same period last year. The jump is mainly attributed to the surge in
shipment of Guargum (488%) and non-Basmati rice (993%) in the first half of 2012-13.
According to the latest data released by the Agricultural and Processed Food Products
Export Development Authority (APEDA), Guargum exports stood at Rs 21,536 crore,
which is around 45% of the total agricultural
exports.
The rise in Guargum exports this fiscal was
more than 488% in comparison to the same
period last year.
The global demand for Guargum — an
extract from Guar seed used as sealant in oil
578
and natural gas drilling — had been on the surge during last one and half years due to
soaring crude prices.
―If the growth in export trend continues, we will cross the R1-lakh crore export mark by
the end of the current fiscal,‖ Asit Tripathy, chairman, APEDA told FE. Another key
commodity that pushed up agricultural exports was non-Basmati rice. The total exports
of non-Basmati rice during the April – September period this year was around R6285
crore,
a
jump
of
more
than
993%
from
the
previous
year.
http://www.financialexpress.com/news/india-s-agricultural-exports-see-121-jump-onguargum-rice-diet/1028928/0
ti in September last year after a three-year restriction.
.
Cumulative rice exports were at R15,339 crore during the April-September period.
Another key commodity that saw a significant jump in export growth was wheat. India
exported R3619 crore worth of wheat in this fiscal till now, which is a huge jump from
last year's marginal exports worth of R33 crore.
Other key commodities that saw growth in shipments include meat products (R7595
crore), dairy products (R523 crore), groundnut (R2,475 crore) and fruits and vegetables
(R2,700 crore).
For giving a further boost to exports, APEDA has identified 20 odd clusters located
across the country for maintaining healthy growth in the country's food products exports
during current fiscal as well.
These clusters include basmati rice (Haryana & Punjab), buffalo meat (western Uttar
Pradesh), grape and grape wine (Nasik region, Maharastra), pomegranate (Satara and
Pune regions of Maharashtra), dehydrated onions and garlic (Gujarat), poultry or egg
(Namakkal) and mango pulp (Uttar Pradesh and Maharashtra)
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Although the country exports products from the APEDA basket to 80 countries, India's
share in the global trade of agri processed products is only 2 %. Only 15 countries
including Saudi Arabia, UAE, UK, Bangladesh and South Africa account for more than
65% of the country's export of fruits, vegetables and other agricultural products
http://www.financialexpress.com/news/india-s-agricultural-exports-see-121-jump-onguargum-rice-diet/1028928/0
580
5.1 TRADE SUMMARY
The U.S. goods trade deficit with India was $14.5 billion in 2011, up $4.3 billion
from 2010. U.S. goods exports in 2011 were $21.6 billion, up 12.4 percent from the previous
year. Corresponding U.S. imports from India were $36.2 billion, up 22.5 percent. India is
currently the 17th largest export market for U.S. goods.
U.S. exports of private commercial services ( i.e., excluding military and government)
to India were $10.3 billion in 2010 (latest data available), and U.S. imports were $13.7 billion.
Sales of services in India by majority U.S.owned affiliates were $13.1 billion in 2009 (latest data
available), while sales of services in the United States by majority India owned firms were $7.2
billion.
The stock of U.S. foreign direct investment (FDI) in India was $27.1 billion in 2010
(latest data available), up from $20.9 billion in 2009. U.S. FDI in India is led by the information,
professional, scientific, and technical services, and manufacturing sectors.
IMPORT POLICIES
U.S. exporters conti nue to encounter tariff and non tariff barriers that
impede imports of U.S. products, despite the government of India‟ s ongoing economic
reform efforts. The United States has actively sought bilateral and multilateral
opportunities to open India‟ s market. The USTR and India‟ s Minister of Commerce
and Industry chair the United States India Trade Policy Forum, which meets regularly to
discuss the full range of bilateral trade and investment issues outlined in this chapter.
Other bilateral dialogues, such as the Information Communication Technology Working
Group and the Commercial Dialogue, also work to increase U.S. exports by highlighting
581
areas and sectors of bilateral commercial opportunity and resolving practical issues that
affect doing business in India.
http://www.ustr.gov/sites/default/files/India_0.p
Import Licensing
India maintains a ―negative list‖ of imported products subject to
various forms of non tariff regulation.The negative list is currently divided into three
categories: banned or prohibited items(e.g., tallow, fat, and oils of animal origin);
restricted items that require an import license (e.g., livestock products and certain
chemicals); and ―canalized‖ items (e.g., petroleum productsand some pharmaceuticals)
importable only by government trading monopolies subject to cabinet approval
regarding timing and quantity. India, however, often fails to observe customary trans
parency requirements such as publication of this information in the Official Gazette or
notification to WTO Committees, which can, in practice, act as a barrier to trade.
5.2 OTHER BARRIERS
India has an unwritten policy that favors countertrade (a form of trade
in which imports and exports are linked in individual transactions). The Indian Minerals
and Metals Trading Corporation is the major countertrade body, although the State
Trading Corporation also handles a small amount of countertrade. Private companies
also are encouraged to use countertrade. Global tenders usually include a clause
stating that, all other factors being equal, preference will be given to companies willing
to agree to countertrade. India issued new guidelines in July 2010 as part of the
Jawaharlal Nehru National Solar Mission (JNNSM), requiring that eligible solar project
developers source certain materials from domestic manufacturers in order to receive
preferential power rates. In the first part of Phase I of the JNNSM, all projects based on
solar photovoltaic (PV) technology were required to source crystalline silicon modules
from manufacturers in India, while solar thermal projects were required to meet a 30
percent local content threshold. These local content requirements were expanded
significantly in August 2011, such that PV cells as well as modules used in JNNSM
582
projects must be manufactured in India. telecommunications equipment, electronic
products, and information technology areas.
http://www.ustr.gov/sites/default/files/India_0.pdf
5.3 PROFILE OF INDIA
Main Features of India’s Agricultural Sectors
India is a large country with a population of over 1.1 billion. There is a
substantial number of poor households, although their proportion in the total population
is declining. Currently nearly26 percent of the population is below poverty line. There is
pronounced social stratification, which is also reflected in unequal access to land and
other resources.
However, the country is a stable multi-party democracy, with village-level
institutions recognized as the primary units ofgovernance.Nearly 60 percent of
population lives in villages. In the rural areas agriculture is the dominant occupation.
Around 56 percent of the country‘s work force is engaged in agriculture, which is
primarily smallholder agriculture.
Around 85 percent of agriculture holdings are small or marginal (of less than
2 hectares), cultivating nearly 50 percent of the area. Nearly 45 percent of cultivable
land is irrigated. Cereals are the main crops. In recent years crop diversification has
started to a significant extent, and sub-sectors such as dairying, animal husbandry,
fishery, and horticulture are gaining importance. An important feature of Indian policy is
that food security is considered a primary responsibility of the state, and the sections
that follow discuss the role of the public sector in meeting the objectives of growth and
equity in the rural sector.
583
The discussion covers four periods of recent history: (i) the period
preceding the ―Green Revolution‖, from the late 1940s to middle of the 1960s, when the
country was plagued with food shortages; (ii) the period of the ―Green Revolution‖ from
the mid 1960s to the end of the 1980s,marked by substantial increases in food
production; (iii) the period of ―economic reforms‖ from the beginning of the 1990s to the
end of the 1990s, with emphasis on liberalization and globalization, also characterized
by the neglect of agriculture; and (iv) the current period fromthebeginning of this decade
onwards when important changes have been taking place in agricultural policies and
supportive institutions.
5.4 Current Phase of Economic Reforms
By the turn of the century, the Indian economy was poised for a high
rate of growth. The growth, however, was spearheaded by the industry and services
sectors. Agriculture was virtually stagnating. As a result, the rate of poverty reduction
was disappointing. Government agencies and research scholars identified the major
constraints to agricultural growth, which included: (i) deterioration of the production base
of land and water; (ii) stagnation in the yields of field crops, as well as in the output of
sub-sectors (e.g. dairying, fishing); (iii) declining efficiency of inputs used in agriculture;
(iv) widening income gap between agricultural and nonagriculturalworkers; (v) greater
vulnerability faced by agricultural workers; and (vi) decay itself-help institution
One of the major causes identified for stagnation in agriculture was the decline in public
investment. The main reason was the growing amount of subsidies which absorbed
progressively larger share of the public resources. During the early to mid 1980s, the
level of public investment in agriculture was 3.5 percent and the level of agricultural
subsidies was4 percent of agricultural GDP.
In the beginning of this century (2001-2003) public investment declined to 1.8 percent of
agricultural GDP and the share of subsidies rose to 7.4 percent. Attempts are being
584
As far as Psyllium Husk is concerned, Gujarat contributes 35% of world
production. In case of this product, it has been discovered that a large number of
585
patents on its uses in pharmaceutical/drug composition, treatment of constipation
related ailments, in food and beverage preparations etc. are being claimed by foreign
companies. It is being felt that large number of these products (developed by foreign
companies through minor changes) can easily be developed in Gujarat and in some
cases, the patents already granted must be contested on account of existing prior art
i.e., knowledge and practices already in public domain. An appropriate research
strategy/mechanism would also be developed so that a specific portion of funds
generated through export of psyllium is invested in creating and protecting intellectual
property rights.
6.1 History
The genus Plantago contains over 200 species. P. ovata and P.
psyllium are produced commercially in several European countries, the former Soviet
Union and India. Plantago seed, known commercially as black, French, or Spanish
psyllium, is obtained from P. psyllium L., also known as P. arenaria. Seed produced
from P. ovata is known in trading circles as white or blonde psyllium, Indian plantago, or
Isabgol. Isabgol, (or Ispaghol in Pakistan) the common name in India for P. ovata,
comes from the Sanskrit words asp and ghol, meaning "horse flower," which is
descriptive of the shape of the seed. India dominates the world market in the production
and export of psyllium. Psyllium research and field trials in the U.S. have been
conducted mainly in Arizona and Washington state
6.1Health effects of dietary psyllium
586
Recent interest in psyllium has arisen primarily due to its use as an
ingredient in high-fiber breakfast cereals, which is claimed to be effective in reducing
blood cholesterol levels in those who consume it. Several studies point to a cholesterol
reduction attributed to a diet that includes dietary fiber such as psyllium. Research
reported in The American Journal of Clinical Nutrition concludes that the use of solublefiber cereals is an effective and well-tolerated part of a prudent diet for the treatment of
mild to moderate hypercholesterolemia.
Research also indicates that psyllium incorporated into food products is
more effective at reducing blood glucose response than use of a soluble-fiber
supplement that is separate from the food.[citation needed] Although the cholesterol-reducing
and glycemic-response properties of psyllium-containing foods are fairly well
documented, the effect of long-term inclusion of psyllium in the diet has not been
determined.
6.3Uses
Psyllium is mainly used as a dietary fiber, which is not absorbed by the small
intestine. The purely mechanical action of psyllium mucilage absorbs excess water
while stimulating normal bowel elimination. Although its main use has been as a
laxative, it is more appropriately termed a true dietary fiber and as such can help reduce
the symptoms of both constipation and mild diarrhea. The laxative properties of psyllium
are attributed to the fiber absorbing water and subsequently softening the stool. At the
same time, this added bulk causes the stool to be better formed, which can reduce
symptoms of diarrhea.[citation needed]
Psyllium is produced mainly for its mucilage content, which is highest in P.
ovata.[citation
needed]
The term mucilage describes a group of clear, colorless, gelling
agents derived from plants. The mucilage obtained from psyllium comes from the seed
coat. Mucilage is obtained by mechanical milling/grinding of the outer layer of the seed.
Mucilage yield amounts to about 25% (by weight) of the total seed yield. Plantago-seed
mucilage is often referred to as husk, or psyllium husk. The milled seed mucilage is a
587
white fibrous material that is hydrophilic, meaning that its molecular structure causes it
to attract and bind to water. Upon absorbing water, the clear, colorless, mucilaginous
gel that forms increases in volume by tenfold or more.
The United States is the world's largest importer of psyllium husk, with over
60% of total imports going to pharmaceutical firms for use in products such as
"Metamucil". In Australia, psyllium husk is used to make "Bonvit" psyllium products. In
the UK, ispaghula husk is used in the popular constipation remedy "Fybogel". Psyllium
mucilage is also used as a natural dietary fiber for animals. The dehusked seed that
remains after the seed coat is milled off is rich in starch and fatty acids, and is used as
chicken and cattle feed.
Psyllium mucilage possesses several other desirable properties. As a
thickener, it has been used in ice cream and frozen desserts. A 1.5% weight/volume
ratio of psyllium mucilage exhibits binding properties that are superior to a 10%
weight/volume ratio of starch mucilage.
The viscosity of psyllium mucilage dispersions are relatively unaffected
between temperatures of 20 and 50 °C (68 and 122 °F), by pH from 2 to 10 and by salt
(sodium chloride) concentrations up to 0.15 M. These physical properties, along with its
status as a natural dietary fiber, may lead to increased use of psyllium by the foodprocessing industry. Technical-grade psyllium has been used as a hydro colloidal agent
to improve water retention for newly-seeded grass areas, and to improve transplanting
success with woody plants.
It is suggested that the isabgol husk is a suitable carrier for the sustained
release of drugs and is also used as a gastroretentive carrier due to its swellable and
floatable nature. The mucilage of isabgol is used as a super disintegrant in many
formulations.
6.4 Yield potential and performance results
588
The contract price for 95% purity psyllium husk set by the Indian Basic Chemical,
Pharmaceutical and Cosmetic Export Promotion Council for April 1988 was $1.65/lb
F.O.B. ($3.63/kg). This price is up from $1.14/lb ($2.51/kg) set in 1985. The average
seed yield of P. ovata in India often exceeds 1 tonne/hectare (1000 lb/acre). Net yield of
95% purity husk after milling would be 275 kg/ha (250 lb/acre). Average gross revenue
from milled product at 1988 prices would be $412/acre ($1030/ha). The costs of
production and milling in the U.S. are unknown but would certainly need to be
determined in order to analyze the potential profitability of a commercial psyllium
venture.
We are a premium quality processes & exports Psyllium Seeds, Husks,
Powder, Industrial Grade Khakha Powder and Horse Feed Products of Psyllium. An
ISO 9001 : 2000 Certified company, which has supplied products to reputed
organizations such as world largest buyers Proctor & Gamble, Perrigo International Inc.,
Konsyl Pharmaceuticals Inc., Kellogg‘s Pharmaceuticals etc.., and Exclusive supplier of
Wipro Ltd.,
Such as buyers has approved our plant and also issue Certificate of Appreciation from
Proctor & Gamble Co. Our company has established and reach at high well level in the
market
to
follow
Total
Quality
Management
and
offering
superior
quality
products,serviceswithmostcompetitiveprice.
Our main markets are USA, UK, European Countries, Mexico, Japan, Australia,
Indonesia, Malaysia, Taiwan, China, Bangladesh, Pakistan, India and Gulf countries
Scale of Buyers World Wide
World's Largest Buyer of
Psyllium
Country
589
Brand name of Psyllium
Product
The Procter & Gamble
Reckitt
Benckiser
Healthcare (UK) Ltd.
Perrigo International Inc.,
USA
Metamucil
UK
Fybogel Ispaghula Husks
USA
-----
USA,
Parke Davis
UK,
CANADA
Siblin
Les Laboratories
FRANCE
Spagulax / Reguval
Dr. Madaus
GERMANY
Aquilax
Botanicals International Inc.
USA
-----
Akira International Inc.
JAPAN
-----
Lafayette Pharmacal Inc.
SA
Konsyl / L.A. Formula
Dabur Company
INDIA
Natural care
Glaxo India Ltd.
INDIA
Fibadiet Ispaghula Husks
Wipro Ltd.
INDIA
Sanjeevani
Psyllium in Capsules
Psyllium
Range
Products
Purity Contents
590
Powder Form
Psyllium Seeds
99% to 95%
40 mesh
Psyllium Husks
99% to 70%
30 mesh to 200 mesh
85% to 65%
40 mesh to 100 mesh
Psyllium
Khakha
Powder
As per customer‘s Specification
Psyllium Flavored,
Psyllium
in
Pellets
form
Psyllium in Capsules
form
Specially for Horse feed Products
As per customer‘s Specification
Psyllium has small seeds, 1000 seeds weigh less than 2 grams. Under ideal conditions
of adequate moisture and low temperature (50-68°F) 30% of the seed germinates in 5
to 8 days. The seed shows some innate dormancy (3 months) following harvest.
Various treatments including wet and dry heat, cold, scarification, ethylene, and CO2 do
not eliminate this dormancy period. Post-dormancy seeds show reliable germination in
excess
of
90%
at
84°F
and
lower
rates
of
germination
astemperatureisincreased.Psyllium grows best on light, well drained, sandy loa
591
Psyllium
Seeds
Technical Quality Specification
Color
Light Brown to Moderate Brown
Odor
Faint, Characteristic
Taste
Bland, Mucilaginous
Particle Size
5.0 % Max. on U. S. Std. #35
Moisture (loss on drying)
12.0 % maximum
Total Ash
4.0 % maximum
Acid Insoluble Ash
1.0% maximum
Foreign Organic Matter
0.5 % maximum
http://www.gujagro.org/pdf/Agri.pdf
Psyllium Seeds comprises of two parts namely white layer which is derived from
Psyllium Seeds known as Psyllium Husk. Psyllium Husk is processed from Psyllium
Seeds which is an agricultural product. The Husks is valued for it s Pharmaceuticals/
Nutraceuticals / Medicinal application. It is generally treatred as a laxative in the world
market
592
Psyllium husk powder is the pulverized form of husk. Its gradient depends on its
sieve size
Psyllium
Husks
Technical Quality Specification
Quality
99% Pure
98% Pure
95% Pure
85% Pure
Mucilloid Content
99% Min.
98% Min.
95% Min.
85% Min.
Extraneous NMT 0.5%
NMT 1.5%
NMT 4.5%
NMT 14.0%
Heavy Extraneous NMT 0.5%
NMT 0.5%
NMT 0.5%
NMT 1.0%
55ml/g
45ml/g
40ml/g
Light
Matter
Matter
Swell Volume
55ml/g
Moisture Content
Not More Than 10.0%
Total Ash
Not More Than 4.0%
Acid Insoluble Ash
Not More Than 0.75%
Insect Infestation
NMT 50 insect fragments per 25 grams, including
Mites, psocids, no eggs larva or whole insects
present.
Microbiological
Absence of Salmonella Sp. And Escherichia Coli
Limit
Sterilization
Sterilization by Ethylene Oxide after Final packing
(if buyer required)
http://www.gujagro.org/pdf/guidelines.pdf
593
Psyllium
Industrial
Powder
Technical Quality Specification
Purity
NLT 70%
Light Extraneous Matter
NMT 25%
Heavy Extraneous Matter
NMT 5%
Swell Volume
20 ml. /g. to 40 ml. /g.
As per
customer‘s Requirement
Particle Size
NMT 2% Retained on US. Std. 40 mesh
Size
Moisture (loss on drying)
NMT 12.0 %
Total Ash
NMT 8.0 %
We are pleased to inform you as able to supply good quality Value Added Product
Psyllium Flavored for direct use as per your market analysis. We can able to supply
various grade of Flavored like orange, Strawberry, lemon, pineapple, cardamom,
cloves, ginger etc... As per valued customer‘s required Quality Specification
594
http://www.gujagro.org/pdf/Agri.pdf
We are pleased to inform you as able to supply good quality Value Added Product
Psyllium Capsules for direct use as per your market analysis. We can able to supply
various form of Psyllium Capsules in different packages as per valued customer‘s
required Quality Specification
We would like to inform you that able to supply approved premium quality Valued Added
Product Psyllium Pellets for direct use. We can able to supply plain Pellets and various
flavored pellets like apple, orange etc... In final Plastic tub packages as per valued
customer‘s required Quality Specification
595
http://www.gujagro.org/pdf/Agri.pdf
6.5 The Process
Psyllium seeds are primarily valued for their mucilaginous husk, a thin white membrane
covering the seed, which is separated from the seed through a mechanical process
where no chemicals are used. We have a rigorous ten stage cleaning process of the
seeds, which is followed by the de-husking of the seed
Psyllium seeds are primarily valued for their mucilaginous husk, a thin white membrane
covering the seed, which is separated from the seed through a mechanical process
where no chemicals are used. We have a rigorous ten stage cleaning process of the
seeds, which is followed by the de-husking of the seed.
596
http://www.gujagro.org/pdf/guidelines.pdf
Fumigation
The plant is equipped with a fumigation chamber, which was built as per specification
and guide instructions from Procter & Gamble USA. The dosage of the fumigant and
treatment
is
carried
out
as
per
specification
of
the
importing
country
andrequirementsofourcustomers.Both raw Psyllium seeds and the final Psyllium
products
are
fumigated
as
per
the
requirement
of
our
customers.
Sterilization
Treatments of the finished product with Ethylene Oxide, Methyl Bromide, and Gamma
Rays Irradiation are provided through contract facilities upon specific requests from the
customer. We are in the process of developing
6.6 Packaging
597
We aim to provide our premium processed quality in flexible and cost-effective
packaging solutions under total hygienic control areas, whilst ensuring that our product
is kept safe during transit and in storage at the customer end. Typical types of
packaging includ
Super Sacks: Uncoated & Coated UV Stabilized PP woven fabric without liner.
Content Net Wt. 950 kg/bag, 500 kg/bag, 1000 kg/bag etc...
Paper bags: HDPE Laminated paper bags with inner poly-liner 15 kg/bag,
Content Net Wt. 25 kg/bag.
PP Woven Bags: laminated PP woven bags with an inside poly-liner. Content
Net Wt. 25 kg/bag, 40 kg, /bag.
Fibre Drums: Fibre Paper drum and silver plated ring with inner poly-liner.
Content Net Wt. 25-50 kg/drum.
Plastic Container: Plastic White container (tubs) with lead and white coated
handle. Content Net Wt. 9.1 kg/tub.
PET JAR: We can provide 50g, 100g, and 250g. PET JAR pack by covered
poly bag and bulk in Carton pack.
Sachets & Lined Carton: 10g. Sachets and 50g, 100g, 120g, 250g. lined carton
and bulk in Carton pack.
598
Container capacities are usually; 9MT Psyllium Husk and 19MT of Psyllium Husk
Powder into a 20’ container and 19MT Psyllium Husks in 40’ container. Please contact
us if you have a specific type of packaging requirement
6.7Exports
According to APEDA- government's agri-trade promotion bodyIndia's agricultural and processed food products clocked a 38 per cent increase in the
2007–08 fiscal, on the back of increased shipments of coarse cereals like maize, jowar
and barley. According to official report, India exported 17.5 million tonnes worth of
agricultural and processed foods valued at US$ 6.39 billion in FY 2007–08
asopposedto10.9milliontonnesinthepreviousyear
http://www.gujagro.org/pdf/guidelines.pdf
APEDA believes that exports will grow further due to growing demand from Asian and
African markets that are vigorously obtaining rather cheaper products from
599
emergingmarketslikeIndia.
Today, 70 per cent of the country‘s agricultural and processed foods exports are send to
developing countries in the Middle East, Asia, Africa and South America.
SaudiArabia
http://www.gujexim.com/tradeleads_agro.htm
600
Forget what the government says or doesn‘t say! Agriculture sector, like
other sectors, looks for a brighter future!There are now many positive developments like
the recently concluded Hongkong WTO meet and the West Bengal CPI (M) Chief
Minister‘s private sector friendly approach to economic development etc. This is not the
place to discuss the WTO talks outcome. Agriculture share in GDP is now down at 21
601
per cent. So, the future of agriculture lies in more profitable value-added agribusiness
activities. For the first time, Indian agriculture‘s opportunities look brighter. The shortterm might have still problems. But the long-term, after this WTO meet, looks very
encouraging.
Likewise, the best thing that has happened in recent times, is what the West
Bengal Chief Minister has done for agriculture. Because, for now nearly more than 50
years Indian agriculture is left to governments‘ whims and fancies. Land reforms had
completely led to stagnation. No one is willing to invest in agriculture. Because the land
reform laws make any new investment worthless. No security for new investors, no new
entrepreneurs are willing to risk his funds if you don‘t have the freedom to own more
lands or rent out lands to tenants.
You must have freedom to make profits in business ventures. That is why
we welcomed the West Bengal Chief Minister‘s new policy to allot more agriculture
lands, something like 5,000 acres to new investors to develop townships, new food
parks etc. Unless you relax land ownership laws no big investments will come to rural
areas, no employment opportunities will come and no higher incomes will come to rural
labour.
That is why we are advocating many new policies that might now look as
against the interests of the poor. No. The persisting rural poverty will continue to persist,
if we don‘t bring in big investments, even foreign direct investment to develop big new
agri markets for even storing our grains in modern warehouses, silos etc. So too the
rural communications. Even we need big new townships, unless we build new
townships, the existing big cities will continue to draw more rural labour, more pollution,
more slums and very same old problems would continue to make India a backward
society.
Agriculture should be seen more and more a business opportunity.
Agriculture is widespread and many people might take to this sector with a modern,
business mind. We have to see how to invest and make more money in agriculture.
602
Agriculture is not for poor people, not for uneducated people, it is for the new generation
educated people, with interests in villages, rural areas and in exploiting the full potential
of the land resources, deploys new business techniques, to identify markets and
produce things for which there is an assured market.
In this way, it is the private sector, by that we mean the large number of
people who are engaged in agriculture have to look at the opportunities in agri sector in
a new light. How to make the existing opportunities for new businesses, new crops,
medicinal crops and also how to organise the new cultivation techniques, through
contract farming, how to approach banks for funds with a clear business plan so that we
can engage labour and other resources to produce and market for earning assured
profits so that we can repay the bank loans and become in the process profits earning
persons. Making money in agriculture is not a sin; making profits in agriculture should
become our new mantra.
We have to do things without government help, government interference and
we have to organise our agricultural activity as a business activity. As of now, it is not as
a business activity as we enter agriculture. There are so many interference by the
government at the grass roots level in agriculture. Officials and politicians have talked
for long about heavy agri subsidies. The total food and fertiliser subsidies at Rs.32,450
crores or about 1% of GDP don‘t go to farmers directly! But agriculture needs a series of
reforms and direct subsidies to make it a competitive industry.
In 2008, Saudi Arabia‘s total agricultural, fish and forest product imports were valued
at approximately $8 billion. High-value products accounted for 50% of total imports, while
intermediate agricultural products were estimated at more than $1 billion. U.S. agricultural
exports to Saudi Arabia for January-October 2009 decreased 28 percent over a year earlier to
about $581 million, with consumer-oriented food products imports declining by five percent to
$198 million. According to trade source, most of the decline in the value of the U.S. agricultural
exports to Saudi Arabia was caused as a result of decline in the prices of imported products
compared to 2008 and 2007.
603
In January 2009, Saudi Arabia issued a revised animal feed subsidy list that
consists of 17 energy and protein rich animal feed ingredients. Under the revised program, the
government will provide rebates that range from $26 (rice hulls) to $101 (soybean meal) per
metric ton, depending on the type of imported feed. The rebate will be paid directly to the local
importer. The revised list added two new feed items-Rhodes grass and Sudan grass-to the
subsidy list. In November 2009, the Saudi Arabia government removed the $267 per metric ton
subsidy on imported rice which it decreed in December 2007. The government removed the
import subsidy because of significant reductions in the prices of imported rice due mainly to
bumper harvest in several rice producing countries.
As a group, the GCC is striving to create a common set of food
standards. The Saudi Arabian Standards Organization (SASO) is a dominant standard
setting agency in the GCC countries. Currently, SASO is the only Saudi organization
responsible
for
setting
national
standards
for
commodities
and
products,
measurements, testing methods, meteorological symbols and terminology, commodity
definitions, safety measures, and environmental testing.
604
Conclusions and Suggestions
605
There has been a marked change in government policy in recent years. In the past,
various programmes were directed to achieve efficiency and profitability in the context
of inefficient agriculture. Now the emphasis is on direct transfer, with scant attention to
developing productive capacity. The policy of income transfer has been supported by
the argument of giving compensation to the producers who face competition from the
products of the countries that heavily subsidize their agriculture,
The income transfer to individuals or organizations has the danger of deterioratingtoa
‗spoils‘system, especially in an unequal society. Lobbying from the pressure groups can
direct theexpenditure to privileged individuals. As against private transfers, expenditure
on public goodscan contribute to the development of production potential and can
benefit the individualproducers, albeit in the long term.
The serious deficiencies in Mexico‘s agriculture and rural development policy are not of
atechnical nature. They represent the political economy that determines the relationship
betweenthe government and the private agents and reflects allocation of public
resources. To be effective,a strategy has to go beyond expenditure programmes and to
the design of a rural developmentpolicy reflecting a consensus on the ways of solving
the structural problems.
606
http://www.gujagro.org/pdf/guidelines.pdf
http://www.gujexim.com/tradeleads_agro.htm
http://www.gujagro.org/pdf/guidelines.pdf
607
http://www.gujagro.org/pdf/Agri.pdf
http://www.ustr.gov/sites/default/files/India_0.pdf
http://www.financialexpress.com/news/india-s-agricultural-exports-see-121-jump-onguargum-rice-diet/1028928/0
http://www.financialexpress.com/news/india-s-agricultural-exports-see-121-jump-onguargum-rice-diet/1028928/0
http://agritech.tnau.ac.in/agricultural_engineering/greenhouse.p
http://www.nationmaster.com/country/sa-saudi-arabia/agr-agriculture
http://www.daringopinion.com/Saudi-Arabia--Desert-Agriculture%3A-From-Dust-toDust.php
http://www.google.co.in/url?sa=t&rct=j&q=saudi%20arabia%20agriculture%20policy%20review&source=web&cd=4&
cad=rja&ved=0CEMQFjAD&url=http%3A%2F%2Fwww.wto.org%2Fenglish%2Ftratop_e%2Ftpr_e%2Fg256_e.doc&ei
=81N2UcTnEcOIrQf28IGIDQ&usg=AFQjCNEiiDrW3QXLU3--I4Mm-nk0guCSaQ
http://www.india-exports.com/agro.html
http://www.india-exports.com/agro.html
https://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html#2032
• www.google.com
•
www.wikipedia.com
608
609
A
GLOBAL/COUNTRY AND REPORT
ON
“Overview Of Major Industries Of Saudi Arabia.”
SUBMITTED TO
GUJARAT TECHNOLOGICAL UNIVERSITY
IN PARTIAL FULFILLMENT OF THE
REQUIREMENTOF THE AWARD FOR DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
IN
GUJARAT TECHNOLOGICAL UNIVERSITY
UNDER GUIDANCE OF
ASST.PROF.DR.PREETI MISHRA
SUBMITTED BY
Senma Sejal 117170592048
Patel Nikesh 117170592050
Karen gitaben 117170592052
Solanki kuldip 117170592053
MBA SEMESTERT III/IV
GOLDEN JUBILEE INSTITUTE OF MANAGEMENT & TECHNOLOGY
AFFILIATED TO GUJATRAT TECHNOLOGICAL UNIVERSITY
AHEMADABAD
APRIL 2012
610
Students‟ Declaration
We‘ Karen Gita.u, Senma Sejal, Patel Nikesh, Solanki kuldip. here by
declare that the report for Global/Countary Study Report entitled ―
overview of major Industries of Saudi Arabia‖ is a result of own work
and our indebtedness to other work publication, references, if any, have
been duly acknowledged.
Place : Sidhpur
(Signature)
Date :
Karen gita.u
Senma Sejal
Patel nikesh
Solanki kuldip
611
Institute „s Certificate
Certified that this Global/Country Report Titled ―overview of major Industries of
Saudi Arabia‖ is the bona fide work of Mr/Ms Senma Sejal (117170502048),
Patel Nikesh (117170592050), Karen Gita u. (117170592052), Solanki Kuldip
(117170592053), who carried out the research under my supervision. I also certify
further, that to the best of my knowledge the work reported herein does not from
part of any other project report or dissertation on the basis of which a degree or
awaed was conferred on an earlier occasion on this or any other candidate.
Signature of the Faculty Guide
(Prof.(Dr). Preeti Mishra)
(certificate is to be countersignedby the Director/HOD0
612
PREFACE
Master of business administration is professional course which develop a new body
of knowledge & skill set & make as available for those seeking challenging
carriers in the liberalization & globalization.
The goal of the global/country study is to give a an understanding of specific
country context that affect business decisions and opportunities for the Gujarat
(India and Gujarat) based businesses or new ventures for export, import,
investment, joint ventures, collaboration and partnership. The real business
problems are drastically different from class- room case solving. Global/country
study aims to providing little insight into working of an organization to a
management trainee. Among every stage of knowledge being inculcated in
students, practical training in the corporate world plays a significant role in
exhibiting and pruning their capabilities.
The purpose behind writing a report is developed the frameworks for
understanding differences between the business environment in India and Gujarat
and the country of Saudi Arabia.
613
ACKNOWLEGEMENT
A successful report is fruitful culmination of efforts of many people, some
directly involved, and others who have quietly encouraged and extended their
support, while being in the background. We take this opportunity to extend our deep
sense of gratitude and heartfelt thanks to all those who have helped us directly or
indirectly during the course of our report.
First of all, we would like to thank our faculty guide Prof.(Dr).Preeti Mishra for her
invaluable support and guidance throughout the semester.
We are also thankful to all staff sir. or her continuous effort to make the best report.
She was always ready to help us at any time.
Lastly I would like to thank my institute, Golden Jubilee Institute of Management and
Technology including all the staff members and participants for providing their
assistance for the report.
614
Executive summary
Executive summary
Overview
Saudi Arabia‘s recent economic successes have provided a historic opportunity for
the government to make targeted policy changes and investments to lay the
groundwork for a sustainable increase in the Kingdom‘s long-term rate of
economic expansion. This opportunity has been coupled with ambitious vision on
the part of His Majesty King Abdullah, Custodian of the Two Holy Mosques, to
encourage the economy‘s advancement and diversification beyond the petroleum
sector.
These efforts focus primarily on competitiveness: making Saudi Arabia a worldclass investment destination and equipping it with the institutional basis for
productivity gains. Far-reaching reforms are being implemented under the auspices
of the 10x10 program, announced by His Excellency the Governor of SAGIA in
2006, an initiative to make Saudi Arabia one of the world‘s Top 10 most
competitive nations by2010. As this year‘s Competitiveness Review makes
apparent, the Kingdom is rapidly upgrading its regulatory me to provide an optimal
business environment while steadily moving forward on other pillars of
competitiveness, including the quality of its infrastructure and its capacity for
innovation. Recent reforms have delivered tangible benefits: for example,
following reforms streamlining the commercial registration process new business
formation is up 81 percent this year.
615
Significant challenges remain. In too many areas, such as trading across borders
and enforcing contracts, slow bureaucratic machinery increases transaction costs
and prevents companies from fully realizing the benefits of newly enacted reforms.
In education, outcomes have not kept pace with the high level expenditure. Such
crucial sectors as banking and information and communications technology remain
under developed by world standards, holding back investment and innovation. Yet
these concerns are recognized at the highest levels of the Saudi Arabian
government, and this year‘s Competitiveness Review highlights both the ongoing
efforts being applied and outstanding areas that require investment.
The progress of the competitiveness agenda is benchmarked against two
internationally recognized measures:
• The World Bank/International Finance Corporation Ease of Doing
Business index, published in the annual Doing Business report.
• The World Economic Forum‘s Global Competitiveness Index, published
in the annual Global Competitiveness Report.
The Doing Business report concentrates solely on aspects of the business
environment, such as procedures and regulations around starting businesses,
employing workers, and enforcing contracts. By contrast, the WEF report takes a
wider view, employing an Executive Opinion Survey and statistical evidence to
track such areas as the quality of education, health care, and infrastructure, as well
as the efficiency and sophistication of business processes.
other agencies and organizations also produce valuable reports dealing with
various aspect competitiveness, including levels of corruption, prevalence of red
616
tape, and access to capital. For example, UNCTAD, the United Nations
Conference on Trade and Development, ranks countries according to their
performance in attracting foreign direct investment.
Current status
In the Doing Business report from the World Bank and IFC, Saudi Arabia was
ranked 16th in 2008, up from23rd in the preceding year. The most significant
improvements were in protecting investors and closing a business. The former
success was due to new rules on the disclosure and approval of related-party
transactions, as well as stronger liability for directors. The latter improvement
followed a directive limiting the duration of bankruptcy procedures to ensure swift
recovery for creditors.
Reduced fees for import and export procedures also drove significant
improvements in the trading across borders indicator, while starting a business saw
benefits from reduced commercial registration fees and the consolidation of
procedures within the Unifi end Office operation. The Kingdom‘s ranking
improvement to 16th is a strong sign of progress, and places Saudi Arabia ahead of
such advanced economies as Sweden, Germany, and Switzerland; however, more
needs to be done for the country to reach the Top 10by 2010.
Saudi Arabia advanced to 27th in the World Economic Forum‘s Global
Competitiveness Report, from 35th in2007, ahead of the United Arab Emirates
(31st), Kuwait (35th) and Tunisia (36th). Qatar, at 26th the best performing
economy in the region, ranks just one place ahead of Saudi Arabia. Having
registered the strongest improvement of any Top 30 economy, the Kingdom must
617
now compete with such advanced economies as New Zealand and Luxembourg for
further rankings improvements. The most important gains in 2008 resulted from
reforms of the business environment, particularly the institutional frame work for
starting a business, and improvements in the efficiency of Saudi Arabia‘s goods
markets.
The Kingdom also improved significantly in the UNCTAD World Investment
Report, attracting nearly one third more inward foreign direct investment flows in
2007 than in 2006. Saudi Arabia has now surpassed Turkey as the largest foreign
investment platform in the Middle East/North Africa region, and is the
world‘s18th-largest FDI destination. These results indicate that investors are taking
note of the strong and improving fundamentals of the Kingdom‘s economy, and are
directing capital into the country.
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Chapter - 1
Demographic Profile Of Saudi Arabia
Population
26,534,504 (July 2012 est.)
note: includes 5,576,076 non-nationals
Age structure
0-14 years: 28.8% (male 3,913,775/female 3,727,767)
15-24 years: 19.8% (male 2,811,407/female 2,439,978)
25-54 years: 44.2% (male 6,769,529/female 4,971,415)
55-64 years: 4.1% (male 604,722/female 494,497)
65 years and over: 3% (male 416,673/female 384,741) (2012 est.)
Median age
Total : 25.7 years
male : 26.7 years
female: 24.4 years (2012 est.)
Population growth rate
1.523% (2012 est.)
Birth rate
19.19 births/1,000 population (2012 est.)
Death rate
3.32 deaths/1,000 population (July 2012 est.)
619
Net migration rate
-0.64 migrant(s)/1,000 population (2012 est.)
Urbanization
Urban population: 82% of total population (2010)
rate of urbanization: 2.2% annual rate of change (2010-15 est.)
Major cities - population
RIYADH (capital) 4.725 million; Jeddah 3.234 million; Mecca 1.484 million;
Medina 1.104 million; Ad Dammam 902,000 (2009)
Sex ratio
at birth: 1.05 male(s)/female
under 15 years: 1.05 male(s)/female
15-64 years: 1.29 male(s)/female
65 years and over: 1.08 male(s)/female
total population: 1.21 male(s)/female (2011 est.)
Infant mortality rate
total: 15.61 deaths/1,000 live births
male: 17.92 deaths/1,000 live births
female: 13.19 deaths/1,000 live births (2012 est.)
Life expectancy at birth
total population: 74.35 years
male: 72.37 years
female: 76.42 years (2012 est.)
Total fertility rate
2.26 children born/woman (2012 est.)
620
HIV/AIDS - adult prevalence rate
0.01% (2001 est.)
HIV/AIDS - people living with HIV/AIDS
NA
HIV/AIDS - deaths
NA
Nationality
noun: Saudi(s)
adjective: Saudi or Saudi Arabian
Ethnic groups
Arab 90%, Afro-Asian 10%
Religions
Muslim (official) 100%
Languages
Arabic (official)
Literacy
definition: age 15 and over can read and write
total population: 86.6%
male: 90.4%
female: 81.3% (2010 est.)
School life expectancy (primary to tertiary education)
total: 14 years
621
male: 14 years
female: 13 years (2009)
Education expenditures
5.6% of GDP (2008)
Maternal mortality rate
24 deaths/100,000 live births (2010)
Children under the age of 5 years underweight
5.3% (2005)
Health expenditures
5% of GDP (2009)
Physicians density
0.939 physicians/1,000 population (2008)
Hospital bed density
2.2 beds/1,000 population (2008)
Obesity - adult prevalence rate
35.6% (2000)
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1.1 The Economic Overview Of Saudi Arabia
General
Saudi Arabia since the discovery of its oil in 1938 has grown to be amongst the
wealthiest nations of the world. The Kingdom has the largest proven oil reserves in
the world outside the United States and the Soviet Union. The considerable
increase in world oil prices in 1973quadrupled oil revenues and enabled the
Kingdom to embark upon a massive development program. The diversification
strategy of the Kingdom, especially through enhancement of the private industrial
sector has paid dividends in expanding the economy by broadening the industrial
base.
Basic resources
Crude Oil has traditionally been the main source of Saudi Arabia's income over the
last 40 year sand currently accounts approximately for 80 to 85 percent of export
earnings. The Kingdom has become a major force in the international
petrochemicals market through the additional utilization of its massive gas
reserves. The Kingdom claims to produce more than 5 percent of the total
production of petrochemicals in the world. Agricultural development continues to
make substantial strides forward. The substantial rise in the production of meat,
poultry, vegetable sand fruit has considerably reduced the Kingdom's dependence
on imports of these items.
Principal industries
The oil and gas industry remains vital to the economy of Saudi Arabia. The growth
of the private sector, however, has made a significant contribution to the economic
diversification strategy of the Kingdom, resulting in a substantial increase of that
sector's share of the Gross Domestic Product over the years.
623
The principal industries in place and operating lie either at the heavy industrial
end, such as :

Oil and gas downstream facilities;

Iron and steel plants;

Base and intermediate chemical plants;

Fertilizer plants or at the light end of manufacturing :

A whole range of consumer products;

Food products;

Paints;

Detergents;

Light to heavy building material products (including fabricated aluminum items And cement
product);

Plastic products;

Engineering items such as air conditioners and circuit breakers.
The development of Saudi Arabia's twin industrial cities, Jubail on the Gulf and
Yanbu on the Red Sea, has been one of the keystones of industrial policy for the
last two decades. Jubail in its primary industry park has approximately 25 large
capital intensive industries in petroleum products, petrochemicals, fertilizers and
metal. The secondary industries park has a wide range of intermediate and endproduct private sector plants.
In its primary industry park, Yanbu houses two major petrochemical complexes, an
export refinery, a domestic refinery and a natural gas liquefaction plant. In the
secondary industries park there are lube oil refineries and other lube additives and
blending plants, an export unit for the paints intermediate, titanium dioxide, and
several other large manufacturing plants.
The Saudi agricultural sector continues to be an important one with the
introduction of modern farming methods and the construction of storage and cold
storage facilities.
624
Banks
There are over ten commercial banks with hundreds of branches operating in all
the major cities of the Kingdom.
Four of these banks are wholly Saudi owned and the others either represent major
international banks or joint ventures with major international banks of the world.
Bank lending consists mainly of trade and medium-term investment finance.
Banking operations in the Kingdom are regulated by the Saudi Arabian Banking
Control Law and are supervised by the Saudi Arabian Monetary Agency (SAMA).
There are no prohibitions on the lending of funds by non-Saudi banks to Saudi
entities and many businesses do borrow from international banks. Lending by
Saudi banks to foreign entities is only permitted with prior approval from SAMA.
625
1.2 PESTLE Analysis of Saudi Arabia
1.) Political Analysis
The Ulema and the Al ash-Sheikh
The significance of the ulema (the body of Islamic religious leaders and jurists) is
derived from the central role of religion in Saudi society. It has been said that
Islam is more than a religion, it is a way of life in Saudi Arabia, and, as a result, the
influence of the ulema is pervasive. Saudi Arabia is almost unique in giving the
ulema a direct role in government, the only other example being Iran. Not only is
royal succession subject to the approval of the ulema,[so are all new laws (royal
decrees).[The ulema have also influenced major executive decisions, for example
the imposition of the oil embargo in 1973 and the invitation of foreign troops to
Saudi Arabia in 1990.It plays a major role in the judicial and education systems
and has a monopoly of authority in the sphere of religious and social morals.
By the 1970s, as a result of oil wealth and the modernization of the
country initiated by King Faisal, important changes to Saudi society were under
way and the power of the ulema was in decline. However, this changed following
the seizure of the Grand Mosque in Mecca in 1979 by Islamist radicals. The
government's response to the crisis included strengthening the ulema's powers and
increasing their financial support in particular, they were given greater control over
the education system and allowed to enforce stricter observance of Wahhabi rules
of moral and social behaviour. Since his accession to the throne in 2005, King
Abdullah has taken steps to rein back the powers of the ulema, for instance
transferring their control over girls' education to the Ministry of Education.
The ulema have historically been led by the Al ash-Sheikh, the country's leading
religious family. The Al ash-Sheikh are the descendants of Muhammad ibn Abd alWahhab, the 18th century founder of the Wahhabi form of Sunni Islam which is
today dominant in Saudi Arabia. The family is second in prestige only to the Al
Saud (the royal family) with whom they formed a "mutual support pact" and
power-sharing arrangement nearly 300 years ago. The pact, which persists to this
day,is based on the Al Saud maintaining the Al ash-Sheikh's authority in religious
matters and upholding and propagating Wahhabi doctrine. In return, the Al ashSheikh support the Al Saud's political authority thereby using its religious-moral
authority to legitimize the royal family's rule. Although the Al ash Sheikh's
domination of the ulema has diminished in recent decades, they still hold the most
626
important religious posts and are closely linked to the Al Saud by a high degree of
intermarriage
Corruption
The Saudi government and the royal family have often, and over many
years, been accused of corruption. In a country that is said to "belong" to the royal
family and is named after it, the lines between state assets and the personal wealth
of senior princes are blurred. The corruption has been described as systemic [ and
endemic, and its existence was acknowledged[ and defended by Prince Bandar bin
Sultan (a senior member of the royal family) in an interview in 2001.
Although corruption allegations have often been limited to broad
undocumented accusations, specific allegations were made in 2007, when it was
claimed that the British defence contractor BAE Systems had paid Prince Bandar
US$2 billion in bribes relating to the Al-Yamamah arms deal. Prince Bandar
denied the allegations.Investigations by both US and UK authorities resulted, in
2010, in plea bargain agreements with the company, by which it paid $447 million
in fines but did not admit to bribery. Transparency International in its annual
Corruption Perceptions Index for 2010 gave Saudi Arabia a score of 4.7 (on a scale
from 0 to 10 where 0 is "highly corrupt" and 10 is "highly clean").
Politics outside of the royal family
Politics in Saudi Arabia, outside of the royal family, can be examined in
three contexts: the extent to which the royal family allows political participation by
the wider Saudi society, opposition to the regime, and Islamist terrorism.
Political participation
Outside of the House of Al Saud, participation in the political process is
limited to a relatively small segment of the population and takes the form of the
royal family consulting with the ulema, tribal sheikhs and members of important
commercial families on major decisions. This process is not reported by the Saudi
media. In theory, all males of the age of majority have a right to petition the king
directly through the traditional tribal meeting known as the majlis. In many ways,
the approach to government differs little from the traditional system of tribal rule.
Tribal identity remains strong and, outside of the royal family, political influence is
frequently determined by tribal affiliation, with tribal sheikhs maintaining a
considerable degree of influence over local and national events. In recent years
627
there have been limited steps to widen political participation, such as the
establishment of the Consultative Council in the early 1990s and the National
Dialogue Forum in 2003
Political reform
In March 1992, King Fahd issued several decrees outlining the basic
statutes of government and codifying royal succession for the first time. The King's
political reform program also provided for the establishment of a national
Consultative Council, with appointed members having advisory powers to review
and give advice on issues of public interest. It also outlined a framework for
councils at the provincial or emirate level.
In September 1993, King Fahd issued additional reform decrees, appointing the
members of the national Consultative Council and spelling out procedures for the
new council's operations. He announced reforms to the Council of Ministers,
including term limitations of 4 years and regulations to prohibit conflict of interest
for ministers and other high-level officials. The members of 13 provincial councils
and the councils' operating regulations were also announced.
The membership of the Consultative Council was expanded from 60 to 90
members in July 1997, to 120 in May 2001, and to 150 members in 2005.
Membership has changed significantly during each expansion of the council, as
many members have not been reappointed. The role of the council is gradually
expanding as it gains experience.
Saudi Municipal elections took place in 2005 and some journalists saw this as a
first tentative step towards the introduction of democratic processes in the
Kingdom, including the legalization of political parties. Other analysts of the Saudi
political scene were more skeptical. Islamist candidates, often businessmen, did
well, but in practice had little real power. In 2009, promised new elections and
hopes for female suffrage in them were postponed for at least two years.
On 15 February 2009, in a reshuffle King Abdullah removed Sheikh Ibrahim Bin
Abdullah Al-Ghaith from his position as President of the Commission for the
Promotion of Virtue and the Prevention of Vice. He also removed Sheikh Saleh alLuhaidan as head of the Supreme Judicial Council and appointed the first female
minister
628
http://en.wikipedia.org/wiki/Politics_of_saudi arabia
2 Economic Sector
Economic overview
The petroleum sector accounts for roughly 45% of budget revenues,
55% of GDP, and 90% of export earnings. About 40% of GDP comes from the
private sector. Roughly five and a half million foreign workers play an important
role in the Saudi economy, for example, in the oil and service sectors. The
government is encouraging private sector growth to lessen the kingdom's
dependence on oil and increase employment opportunities for the swelling Saudi
population. The government has begun to permit private sector and foreign
investor participation in the power generation and telecom sectors. As part of its
effort to attract foreign investment and diversify the economy, Saudi Arabia
acceded to the WTO in 2005 after many years of negotiations. With high oil
revenues enabling the government to post large budget surpluses, Riyadh has been
able to substantially boost spending on job training and education, infrastructure
development, and government salaries.
http://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia
629
SABIC
The Saudi Arabian Basic Industries Corporation SABIC was
established by a royal decree in 1976 to produce chemicals, polymers and
fertilizers. In 2008, SABIC was Asia's largest (in terms of market capitalization)
and most profitable publicly listed non-oil company, the world's 4th largest
petrochemical company, ranked 186th as world's largest corporation on the Fortune
Global 500 for 2009, the second largest producer of ethylene glycol and methanol
in the world, the third largest producer of polyethylene and overall the fourth
largest producer of polypropylene and polyolefin. Standard and Poor's and Fitch
Ratings claimed SABIC to be the world's largest producer of polymers and the
Persian Gulf region's largest steel producer for 2005 and assigned SABIC 'A'
corporate credit rating. In 2008, Fortune 500 ranking records SABIC revenues at
$40.2 billion, profits at $5.8 billion and assets standing at $72.4 billion.[11]
Expansion operations and investments are projected to amount to
USD20 billion in 2007 and USD70 billion until 2020. The overall total production
in 1985 was 6.3 million metric tons (mmt); by the end of 2008 it had reached 56
mmt and by 2020, SABIC intends to produce over 135 mmt per year. [12] SABIC
established in June 2006 "SABIC Sukuk Company" to issue Islamic bonds (Sukuk)
that are estimated to range between SAR1 billion (USD266.67 million) and SAR3
billion (USD800 million).
Net profits of SABIC in 2008 touched SR 22 billion (US$ 5.86
billion), while total assets stood at SR 272 billion (US$ 72.5 billion) at the end of
2008 and the value of current assets at the end of 2008 stood at SR 95 billion (US$
25 billion).
http://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia
630
GDP (purchasing power parity)
687.7 billion (2011 est.)
country comparison to the world:
$642.3 billion (2010 est.)
$611.1 billion (2009 est.)
note: data are in 2011 US dollars
country comparison to the world:
$642.3 billion (2010 est.)
$611.1 billion (2009 est.)
GDP (official exchange rate):
$587.5 billion (2011 est.)
GDP - real growth rate:
7.1% (2011 est.)
country comparison to the world:
5.1% (2010 est.)
0.1% (2009 est.)
GDP - per capita (PPP):
$24,400 (2011 est.)
country comparison to the world:
$23,300 (2010 est.)
$22,900 (2009 est.)
note: data are in 2011 US dollars
631
GDP - composition by sector:
agriculture: 2%
industry: 67.5%
services: 30.5% (2011 est.)
Labor force:
7.63 million
country comparison to the world:
note: about 80% of the labor force is non-national (2011 est.)
Labor force - by occupation:
agriculture: 6.7%
industry: 21.4%
services: 71.9% (2005 est.)
Unemployment rate:
10.9% (2011 est.)
country comparison to the world:
10.8% (2010 est.)
note: data are for Saudi males only (local bank estimates; some estimates range as
high as 25%)
Population below poverty line:
NA%
Household income or consumption by percentage share:
lowest 10%: NA%
632
highest 10%: NA%
Investment (gross fixed):
21.1% of GDP (2011 est.)
country comparison to the world:
Budget:
revenues: $295.7 billion
expenditures: $214.3 billion (2011 est.)
Taxes and other revenues:
50.3% of GDP (2011 est.)
country comparison to the world:
Budget surplus (+) or deficit (-):
13.8% of GDP (2011 est.)
country comparison to the world:
Public debt:
12.6% of GDP (2011 est.)
country comparison to the world:
16.3% of GDP (2010 est.)
Inflation rate (consumer prices):
5% (2011 est.)
country comparison to the world:
5.4% (2010 est.)
Central bank discount rate:
2.5% (31 December 2008)
633
Commercial bank prime lending rate:
7.2% (31 December 2011 est.)
country comparison to the world:
7.2% (31 December 2010 est.)
Stock of narrow money:
$202.9 billion (31 December 2011 est.)
country comparison to the world:
$166.8 billion (31 December 2010 est.)
Stock of broad money:
$326.3 billion (31 December 2011 est.)
country comparison to the world:
$288.1 billion (31 December 2010 est.)
Stock of domestic credit:
$27.8 billion (31 December 2011 est.)
country comparison to the world:
$658.7 million (31 December 2010 est.)
Market value of publicly traded shares:
$338.9 billion (31 December 2011)
country comparison to the world:
$353.4 billion (31 December 2010)
$318.8 billion (31 December 2009)
Agriculture - products:
wheat, barley, tomatoes, melons, dates, citrus; mutton, chickens, eggs, milk
634
Industries:
crude oil production, petroleum refining, basic petrochemicals, ammonia,
industrial gases, sodium hydroxide (caustic soda), cement, fertilizer, plastics,
metals, commercial ship repair, commercial aircraft repair, construction
Industrial production growth rate:
8.4% (2011 est.)
country comparison to the world:
Current account balance:
$158.5 billion (2011 est.)
country comparison to the world:
$66.75 billion (2010 est.)
Exports:
$364.7 billion (2011 est.)
country comparison to the world:
$251.1 billion (2010 est.)
Exports - commodities:
petroleum and petroleum products 90%
Exports - partners:
Japan 13.9%, China 13.6%, US 13.4%, South Korea 10.2%, India 7.8%, Singapore
4.8% (2011)
Imports:
$120 billion (2011 est.)
country comparison to the world:
$97.43 billion (2010 est.)
635
Imports - commodities:
machinery and equipment, foodstuffs, chemicals, motor vehicles, textiles
Imports - partners:
China 12.8%, US 11.9%, Germany 7.1%, South Korea 6%, Japan 5.6%, India
4.9%, Italy 4.1% (2011)
Reserves of foreign exchange and gold:
$541.1 billion (2011 est.)
country comparison to the world:
$445.1 billion (2010 est.)
Debt - external:
$107.1 billion (31 December 2011 est.)
country comparison to the world:
$85.01 billion (31 December 2010 est.)
Stock of direct foreign investment - at home:
$204.1 billion (31 December 2011 est.)
country comparison to the world:
$187.7 billion (31 December 2010 est.)
Stock of direct foreign investment - abroad:
$17.73 billion (31 December 2011 est.)
country comparison to the world:
$14.29 billion (31 December 2010 est.)
Exchange rates:
Saudi riyals (SAR) per US dollar 636
3.75 (2011 est.)
3.75 (2010 est.)
3.75 (2009)
3.75 (2008)
3.745 (2007)
Fiscal year:
calendar year
https://www.cia.gov/library/publications/the-world-factbook/geos/sa.html
3 Social sector
Saudi Arabia population
Saudi Arabia population in comprises the native inhabitants of the land as well as
immigrants from other countries, who arrived here in great numbers through
various phases of the nation's history.
Together, they have contributed to the development and progress of the nation.
The demographic study of Saudi Arabia comprises various factors, such as the
population density, the birth rate, the sex ratio, the infant mortality rate, the
employment percentage, the death rate and the likes. Another very important
637
aspect of the demographic study of Saudi Arabia includes the rate of immigration.
Saudi Arabia is an important hub for job seekers and along with other Arabian
nations, Indians, Pakistanis, Sri Lankans and citizens of certain other countries
comprise the immigrant population.
The Saudi birth rate is 37.63 births for every 100 people compared to a mere 5.02
deaths in every 100 births. The sex ratio is more or less even with 1 female for
every 1.05 males.
In the Year 1990, a population scrutiny was conducted by the Saudi Arabia
Government, the United Nations and the also another western source. Surprisingly,
there was a wide discrepancy in the head counts. While the Saudi figure showed
the population count to be as high as 14, 87,000, those taken by the United Nations
showed the population count to be just about six million.
Saudi Arabia society and culture
Saudi Arabia society and culture is dominated by the values of Islam and it is a
culturally rich country. The customs and beliefs of the Saudi Arabia society and
culture are dominated by the Wahhabism sect of Muslims. The most prominent
basis of distinction in Saudi Arabian society is based on natives and migrant
population. Though the Arabian society welcomes and accepts people from other
countries, yet the immigration factor does affect the social interaction and marriage
issues.
Islam is the dominant religion of the Saudi Arabian people and about 95% of
them are Sunni Muslims. The architectural buildings in the country also have an
influence of Islam and Saudi Arabia is the home of the two most pious Muslim
pilgrimages, Mecca and Medina. Even the art of calligraphy has a distinct impact
of Islam as most of the patterns follow the style depicted in Quran. The major
festival in Saudi Arabia is the Jenadriyah Heritage and Cultural Festival, which is
organized twice a year and provides a glimpse into the rich past of the country.
638
adjective Ethnic groups:
Languages:
Religions:
Population:
Age structure:
0-14 years
15-64 years 65
years and over
Median Age:
total male female
Population growth rate:
Birth rate: Death rate:
Net migration rate: Urbanization:
urban population rate of urbanization Major cities - population:
Sex ratio:
at birth under 15 years
15-64 years
65 years and over total population
https://www.cia.gov/library/publications/the-worldfactbook/docs/profileguide.html
Maternal mortality rate: Infant mortality rate:
639
Total
male
female
Life expectancy at birth:
Total population
male
female
Total fertility rate: Health expenditures: Physicians density: Hospital bed density:
Drinking water source:
improved unimproved
Sanitation facility access:
improved
unimproved
4 Technological Sector
Saudi Arabia remains both a strong driver and an exemplar of the wider
regional IT market, with strong growth in both computer sales and associated
services led by high oil prices and strong spending in such lead sectors as banking
and telecommunications.
Smaller companies, however, are realizing the need to streamline
business operations to achieve efficiencies in such areas as finance and logistics, as
well as marketing and other functions. The context is a business environment that
is becoming increasingly competitive and open.
640
In PC and notebook sales, the market is the largest in the region in
volume sales, but in the past year demand for IT services has also shown a strong
growth trend, including outsourcing. More and more companies in the telecoms
and other sectors are looking to contract out functions that they would previously
always have kept in-house. Overall, the value of the Saudi IT market is estimated
to have reached US$2.5 billion in 2006 and is expected to rise to US$4 billion by
2010. This represents aboveaverage regional performance. As in much of the Gulf,
the surge in oil prices during 2006 is encouraging a new wave of investment in
infrastructure, the effects of which should continue to be felt for some time.
Competitive landscape
With the forecasting that spending on software will exceed US$700
million within the that period, intensifying competition is creating pricing pressure
even as there is a sharp increase in demand from the SMB sector. Trade liberalization
and the growing penetration of IT infrastructure has led to a greater awareness among
even smaller companies of the advantages of enterprise software in providing a
competitive edge. Smaller companies are now looking to achieve greater control of
their budgets and improve tracking of marketing spending, and this has meant that
despite the fact that the largest share of spending on enterprise applications still comes
from large company segments such as oil, gas, and banks, the competitive battlefield
has shifted to the smaller company sector.
http://www.koreaittimes.com/story/3048/information-technology-sector-saudi-arabia
Computer sales
Computer sales are expected to reach US$2 billion in 2007, up from
US$1.4 billion in 2006. Overall, the computer market including notebooks and
accessories is expected to grow at a rate of 9% between 2007 and 2010. The number
of personal computer users in Saudi Arabia is rising impressively following the launch
of the Home Computing Initiative, which set up a deal to import 1 million computers
for distribution among Saudis having fixed telephone lines in an easy installment
payment scheme. Backed by the Communications and Information Technology
Commission (CITC), the scheme aims to spread computer literacy in the Kingdom.
641
Telecoms liberalization in 2006 and a big push in broadband penetration are also
expected drivers of demand going forward.
In terms of the general economic environment, strong economic
growth and the high price of oil is fuelling spending by both public sector
organizations and enterprises to bring their IT levels up to international standards. The
World Trade Organization (WTO) entry and the elimination of customs duties within
the Gulf Co-operation Council (GCC) also helped stimulate the market, as will growth
in the non-oil private sector, and liberalization in certain key sectors such as telecoms.
Notebooks
Turning to the notebook sector, stronger demand is a key factor
driving growth in the Kingdom's PC market, with consumer sales reaping the results
of aggressive retail channel promotions. Prices are continuing to fall driving sales
higher, but depressing actual growth in revenues. One factor in the intensified price
competition is the increasing aggressive influence and market share of Asian players
such as Acer, LG and Samsung. Aside from the consumer sector, small to medium
sized enterprises (SMEs) are also showing a stronger tendency to favor mobility,
accounting for a growing proportion of shipments. One of the government policies
that vendors are capitalizing on is the well-known United Installment Scheme (USI)
finance option, which makes high quality notebooks available to small and medium
sized businesses, education and healthcare institutions and individuals.
Software
BMI predicts a software market value of US$500 million in 2007, up
from US$460 million in 2006. With the evolution of the Saudi IT market, a stronger
vendor focus on software spending is now being seen, especially as higher-thanexpected oil revenues are fuelling spending on new systems. The domestic software
market is therefore expected to grow significantly, driven by an increased Saudi
enterprise focus on more sophisticated solutions that still offer value for money.
As across the region, security software is one of the in-demand categories. The
forecast for overall software revenues is expected to be in the region of 11%. Oil and
gas remains the largest software vertical purchasing customer followed by telecoms,
but large contracts are being seen in the non-oil manufacturing sector such as
chemicals and automotive.
IT Services
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The Saudi IT services market is expected to reach US$1.5 billion in
2007, up from US$1 billion in 2006. Support and maintenance accounted for more
than a third of the 2006 figure. Growth is expected to be at 12% for the 2007 to 2010
period. Global vendors are increasingly looking to enhance service infrastructure and
offerings as a way of strengthening market position. Regional firms dominate the
market, with Saudi Business Machines, the local partner of IBM, the market leader,
and other top five players including local giant Al Alamiah and newly formed Ejada.
One faster than expected trend in the past year has been more demand for outsourced
solutions. To meet the new demand for broader and also more customized solutions
packages, IT services providers have been consolidating operations through mergers
or by expanding service portfolios.
http://www.mapsofworld.com/saudi-arabia/society-and-culture/
https://www.cia.gov/library/publications/the-world-factbook/docs/profileguide.html
5. Environmental sector
current issues
This entry lists the most pressing and important environmental problems. The
following terms and abbreviations are used throughout the entry:
Acidification –
the lowering of soil and water pH due to acid precipitation and deposition usually
through precipitation; this process disrupts ecosystem nutrient flows and may kill
freshwater fish and plants dependent on more neutral or alkaline conditions .
Acid rain –
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characterized as containing harmful levels of sulfur dioxide or nitrogen oxide; acid
rain is damaging and potentially deadly to the earth's fragile ecosystems; acidity is
measured using the pH scale where 7 is neutral, values greater than 7 are
considered alkaline, and values below 5.6 are considered acid precipitation; note a pH of 2.4 (the acidity of vinegar) has been measured in rainfall.
Aerosol –
a collection of airborne particles dispersed in a gas, smoke, or fog.
Afforestation –
converting a bare or agricultural space by planting trees and plants; reforestation
involves replanting trees on areas that have been cut or destroyedby by fire
sbestos –
a naturally occurring soft fibrous mineral commonly used in fireproofing materials
and considered to be highly carcinogenic in particulate form.
Biodiversity
- also biological diversity; the relative number of species, diverse in form and
function, at the genetic, organism, community, and ecosystem level; loss of
biodiversity reduces an ecosystem's ability to recover from natural or man-induced
disruption.
Biomass –
the total weight or volume of living matter in a given area or volume.
Carbon cycle –
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the term used to describe the exchange of carbon (in various forms, e.g., as carbon
dioxide) between the atmosphere, ocean, terrestrial biosphere, and geological
deposits.
Defoliants –
chemicals which cause plants to lose their leaves artificially; often used in
agricultural practices for weed control, and may have detrimental impacts on
human and ecosystem. the destruction of vast areas of forest (e.g., unsustainable
forestry practices, agricultural and range land clearing, and the over exploitation of
wood products for use as fuel) without planting new growth.
Desertification –
the spread of desert-like conditions in arid or semi-arid areas, due to overgrazing,
loss
of
agriculturally
productive
soils,
or
climate
change.
Dredging –
the practice of deepening an existing waterway; also, a technique used for
collecting bottom-dwelling marine organisms (e.g., shellfish) or harvesting coral,
often causing significant destruction of reef and ocean-floor ecosystems.
Drift-net fishing –
done with a net, miles in extent, that is generally anchored to a boat and left to
float with the tide; often results in an over harvesting and waste of large
populations of non-commercial marine species (by-catch) by its ocean
Ecosystems –
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ecological units comprised of complex communities of organisms and their
specific environment
Endangered species –
a species that is threatened with extinction either by direct hunting or habitat
destruction.
Groundwater –
water sources found below the surface of the earth often in naturally occurring
reservoirs in permeable rock strata; the source for wells and natural springs.
Highlands Water Project –
a series of dams constructed jointly by Lesotho and South Africa to redirect
Lesotho's abundant water supply into a rapidly growing area in South Africa; while
it is the largest infrastructure project in southern Africa, it is also the most costly
and controversial; objections to the project include claims that it forces people
from their homes, submerges farmlands, and squanders economic resources.
Inuit Circumpolar Conference (ICC) –
represents the roughly 150,000 Inuits of Alaska, Canada, Greenland, and Russia in
international environmental issues; a General Assembly convenes every three years
to determine the focus of the ICC; the most current concerns are long-range
transport of pollutants, sustainable development, and climate change.
Metallurgical plants –
industries which specialize in the science, technology, and processing of metals;
these plants produce highly concentrated and toxic wastes which can contribute to
pollution of ground water and air when not properly disposed.
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Salination –
the process through which fresh (drinkable) water becomes salt (undrinkable)
water; hence, desalination is the reverse process; also involves the accumulation of
salts in topsoil caused by evaporation of excessive irrigation water, a process that
can eventually render soil incapable of supporting crops.
5 Legal sector
I.
General remarks
The Holy Koran1 forms the constitution of the country. The Saudi
legal frame-work is based on Shari'ah law2. Political parties or private
associations (including trade unions) are not authorized. The Judiciary in the
country issues its judgments on the basis of what is stated in the Quran and on the
Sunna (Prophet Mohamed‟ s sayings recorded by historians known as Hadith).
Under the leadership of King Abdullah Bin Abdulaziz Al-Saud,
Saudi Arabia initiated structural reforms designed to encourage privatization,
liberalize foreign trade and reform investment regimes. Commercial laws were
revised and initial steps taken to free up foreign in-vestment and privatize parts of
public companies. Since December 2005, Saudi Arabia is a member of the World
Trade Organization (WTO).
Commercial disputes, including claims against the government
and government agencies in Saudi Arabia should be addressed directly to the
Board of Grievances (Diwan Al-Mazalem). Saudi courts do not award interest or
costs, and damages are limited to actual or tangible losses, with no means to
recover loss of business reputation or anticipated future profit. Le-gal advisors
usually suggest arbitration to foreign companies willing to do business in Saudi
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Arabia. However, government agencies are not allowed to agree to international
arbitration without approval from the Council of Ministers, which is rarely
granted.
According to the available legal information, if a dispute arises,
the Swiss company should consider using Saudi courts. It is worth to know before
entering into a transaction with a Saudi party, how a dispute will be resolved.
Before signing any partnership agreement, the following has to be considered:
- Whether to use Saudi courts or courts of other countries;
- The type of Saudi tribunal in which the dispute will be resolved; and
- The possibility of arbitration. Before suing a Saudi company in another
country, the Swiss company should verify if Saudi Arabia has a reciprocal
enforcement treaty with that country.
Mainly foreign firms contemplating an agency or distribution
agreement in Saudi Arabia are used to consult with a local lawyer/legal consultant
and have a legally binding contract drawn up3. Choosing an agent is critical
because the Saudi legal system, known as Shari’a, is based on the Koran and
Hadith and differs considerably from western practice.
Standards, technical rules, labelling regulations
The Saudi Arabian Standards Organization (SASO) is the competent
organism to formulate national standards for all commodities and products, including
standards concerned with metrology, calibration, making and identification of
commodities and products, methods or sampling, and inspection and testing. SASO
has about 20,500 standards, and is actively pursuing the promulgation of hundreds of
new standards currently in various drafting stages of development.
Saudi Arabia is the most influential member of the GCC States,
which is striving to create a common set of food standards, with the Saudi Arabian
Standards Organization (SASO) as the lead agency.
Even thought, the six Member States are working toward unifying their
standards and con-formity assessment systems, each Member State continues to apply
its own standard or a GCC standard. A new International Conformity Certification
Programme6 (ICCP) mandates that a Certificate of Conformity must accompany all
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Taxes
a) Forms of Taxation
There are different tax systems for Saudis and non-Saudis. Saudi
citizens and businesses pay no tax on income and are only liable for a religious tax
(zakat) of 2.5% of net worth. Non-Saudi businesses are subject to corporate income
tax up to a maximum of 20% (with the exception of profits in the hydrocarbons sector,
which are taxed on a sliding scale be-tween 30% and 85%). Joint ventures between
Saudis and non-Saudis are liable to tax on the non-Saudi portion of the profits. There
is neither value-added tax nor personal income tax.
b) Zakat (religious tax)
Religious tax, Zakat is payable only by GCC nationals (citizens and
corporations) and levied on the savings value including cash, property, trade
merchandise and herds of animals. The Zakat tax base is defined as the capital not
invested in fixed assets or long-term investments as well as deferred preincorporation expenses, as adjusted by the yearly net loss or profit. Saudi companies
and Saudi partners in joint venture companies pay Zakat of 2.5% annually on the net
worth of their working assets.
c) Corporate Income Tax
Corporate Income Tax is payable on the shares of income of
corporations and limited liability companies pro rata to the participations of non-GCC
citizens. Partnerships are treated as pass-through entities, and their participants who
are not GCC citizens are therefore subject to Income Tax on their shares of the
partnership income as the GCC citizens are liable for Zakat on their shares of the
same income.
1- Tax Rates
The tax rates for corporate income of foreign companies are:
20%
of the Saudi Tax Base for all
taxpayers (other than as follows)
30%
for a taxpayer engaged in the
natural gas investment field
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85%
for a taxpayer engaged in the
production of oil or hydrocarbons
http://www.osec.ch/sites/default/files/GB_1109_E_GesBestimmungen-Saudi-Arabien.pdf
Saudi Arabia Major Business Sectors
A- Overview and trends
Saudi Arabia permitted only to Saudi and Gulf Cooperation Council nationals to
engage in trading activities and to register as commercial agents. To attract more
foreign investors to do business in the country, Saudi Arabia eased recently its
restrictions to allowed foreign individuals and companies to engage in trading
activities through a joint venture partnership with a Saudi individual or entity.
Since its adhesion to the World Trade Organization (WTO), Saudi Arabia has
liberalized the wholesale, retail, and franchise sectors. Saudi Arabia allows foreign
investors to establish joint ventures and retain a 51% share. The foreign partner‘s
capital requirement is set at USD 5.3 million and his equity share can be increased
to 75% after 3 years from the contract date. For industrial activities, foreign
investors are allowed to establish a 100% foreign company and can also trade in
the products they manufacture. A Saudi joint-venture partner is a requirement for
any entity or individual to practice individual professions, such as law, medicine,
accounting and financial services, architect and engineers, and other similar
professions.
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According to a recent report of the IMF, the Saudi economy will witness an
expansion of 4.5% in 20111 in consequence to an increased public expenditure,
strong monetary and fiscal policies, and higher oil prices. The non-oil private
sector economy is also expected to grow by 5.2% in 2011, up from 3.8% growth in
2010.
Growth in the manufacturing sector is led by the petrochemicals industry that is
mainly exported to Southeast Asia and China. Saudi Arabia is the most attractive
country for petro-chemicals in the Middle East. Business Monitor International
reported that more than USD70 billion of investment is being pumped into the
petrochemical sector.
In 2010, the fastest-growing non-oil industrial sectors were power generation, gas
and water equipments and services (+6.0%); transport and communications
(+5.6%); retail, restaurants and hotels (+4.4%); and construction (+3.7%).
Likewise the petrochemical sector, the power generation, water treatment,
transportation, infrastructure sectors and telecommunications should continue to be
the main engines of Saudi economic growth. As in the past few years, the
construction sector will continue to be one of the main beneficiaries of continued
large government expenditures.
The largest economy in the region, Saudi Arabia encourages projects incorporating
technology and know-how transfer to decrease its dependence on the oil sector and
the involvement of the government in its economy sector. Saudi Arabia presents
business opportunities for Swiss companies in various sectors.
B- Business opportunities
I. Oil and gas
The world‘s largest oil producer and state-owned company, Saudi Arabian Oil
Company (Saudi Aramco) completed in 2009 multiple mega-project programmers
that included new or expanded oil, gas and petrochemical facilities. According to
Aramco report, the crude oil production capacity was raised to 12 million barrels
per day, and important increases were achieved in gas production and processing
capacities. Likewise, key support facilities such as water injection and distribution
networks were also expanded upgraded.
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Saudi Aramco has eleven upstream and downstream investment plans valued at
around USD58.45 billion. The Saudi Minister of Oil and Mineral resources
announced that Saudi Aramco‟ s daily production capacity of 12 million b/d will
become 15 million b/d by the year 2020. Accounting for 44% of the country‘s
primary energy consumption, Gas is also a priori-ty for Saudi Aramco. Foreign
companies will be invited in the expansion programmed to boost oil refining
capacity in Saudi Arabia and in overseas markets such as China.
Aramco is targeting a 30 per cent increase in sales gas output by 2014 to 8 billion
cubic feet a day (cf/d). Under the Wasit gas development programmed, Aramco
discovered the Arabiyah and Hasbah fields in January 2009, and has already
included them in its five-year spending plan for 2010-14. The Wasit gas
development programmed will produce and process up to 2.5 billion cf/d of sour
gas from the offshore Arabiyah and Hasbah fields.
Several other major new offshore gas developments are in the engineering phase to
lift domestic production. Aramco has dedicated USD6bn for the development of
six offshore facilities out of a total budget of USD60bn planned in its capital
investment program for 2010-14. Aramco currently operates at least 16 offshore
fields and has boosted the number of active offshore rigs to about 15 in 2009 from
just one in 2000.
Only companies certified as an in-kingdom contractors are able to bid for
Aramco‟ s procurement and contracting (EPC) contracts inside Saudi Arabia.
Interested company in sup-plying Aramco with its products and services should
sign a joint venture agreement with a local company or open an office inside Saudi
Arabia.
Moreover, Aramco has a strongly stated preference under its „Saudisation‟ policy
for local procurement. 20% of its goods and services are purchased currently
through Saudi companies; this figure will double within the next two years. Direct
sale by foreign companies is becoming increasingly difficult and Manufacture
under license, joint venture or establishing a local company is becoming the more
viable route to achieving business with Aramco.
Saudi Arabia petrochemical industry currently accounts for more than 75 percent
of the Gulf Cooperation Council states total production. The Saudi‟ s
petrochemical production capacity has increased from 3.7 million metric tons per
year (mt/y) in the 1970s to an estimated 64 million mt/y by 2008.
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The fast- growing petrochemical and steel producer, Saudi Basic Industries Corp.
(SABIC) is willing to become the worldwide leader in chemicals. SABIC controls
18 affiliates inside the country (joint venture deals with local and foreign partners).
The Saudi petrochemical industry enjoys a natural competitive advantage due to
the availability of low cost feedstock, the availability of vast crude oil and natural
gas resources, close proximity to high-growth markets, and modern infrastructure.
It is reported that 90 percent of Saudi Arabia‟ s petrochemicals revenue stems
from base chemicals, including ethylene, with 10 percent coming from more
valuable processed plastics and chemicals.
Saudi Arabia aims at reducing its dependence on oil income by diversifying the
national economy. One of the Saudi ambitious petrochemical projects is
accounting for approximately one-fourth of the global polyolefin market by 2020.
To concretize this ambitious goal, Saudi Arabia is focusing on secondary and
tertiary petrochemicals instead on the production of basic chemicals. This strategy
is at the core of the Saudi‟ s 15-years development programme that aims at
introducing new specialties into the local market.
Exploration and Development
In June 2007, OPEC announced plans to invest US$ 130 billion in expanded
production between then and 2012. Excluding Iraq, production is forecast to
increase from 35.7 million bpd to 39.7 million bpd in 2010. Between 2013 and
2020 OPEC plans to spend a further US$ 500 billion provided befouls doesn't
change economics. Saudi Arabia alone is investing US$ 50 billion to increase
crude production capacity from 10.5 million barrels a day in 2007 to 12 million
bpd in 2009 and 15 million bpd after 2025.
A Harrison Love grove study of 200 non state-owned oil and gas companies found
2005 development costs rose 30% to US$ 159 billion, yet only yielded a 2%
increase in proved reserves and a 1% increase in production. Part of the reason is
that countries rich in oil are increasingly excluding foreign companies from
participation. A later study showed spending by 228 oil and gas companies
increased 45% in 2006 to US$ 400 billion but again only increased reserves by 2%.
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A March 2007 report by Harrison Love grove estimated that state owned oil and
gas companies invested US$ 75 billion in oil and gas asset acquisitions in 2006,
33% of the total of US$ 166 billion. Average 2006 prices paid were US$ 12.86 per
barrel of proved oil / gas reserves, an increase of 34% on 2005.
Only three major fields have been discovered worldwide since 1969 and none
since 1976. A study by Simmons found that since 1980, only three fields out of all
of the new discoveries are producing over 200,000 barrels a day. In the 1990's,
over 420 fields were discovered, but only 11 have production that exceeds 100,000
barrels per day.
The largest fields discovered in the past decade or so are:
Field Country Date Reserves (be billion)
Carioca Brazil
2007 33?
Kashagan Kazakhstan 2000 14.6
Tupi Brazil
2006 4.0
Nib an Saudi Arabia
1999 4.0
Azadegan Iran 1998 3.5
Yadavaran China
2000 3.0
Shah Denise Azerbaijan 1999 2.1
Dolginskoye Russia
1999 1.9
North Samburgskoye Russia 1998 1.8
Napa China
2005 1.3
Dalia Angola
1997 0.9
To put this in perspective, note that the world consumes 29 billion barrels of oil per
year.
Crude Production
Crude oil production averaged 82 million barrels per day (maps) in 2006, a change
of 413 typed compared to 2005, and 85.7 maps in 2007. In 2006, OPEC crude oil
production was 43.5% of the world total. Excess OPEC capacity dropped from 6
maps in 2002 to 2 million barrels a day in 2006. The countries with the largest
2006 oil production were, in order, Saudi Arabia, Russia, the USA, Iran, China,
Mexico, Canada, the UAE, Venezuela, Norway, Kuwait and Nigeria. The Middle
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East and Russia are forecast to provide an increasing share of world crude
production as fields elsewhere mature.
The IEA reports that world crude oil production fell from 73.8 maps in 2005 to
73.2 maps in the first 10 months of 2007. Some of the fall can be attributed to
geological conditions and part to political instability, particularly in Iraq and
Nigeria.
According to Chevron, oil production is declining in 33 of the 48 largest oil
producing countries. The CEOs of Total and Conoco Philips both predict it will be
difficult to ever reach production of 100 maps even though the IEA is predicting
production of 116 maps by 2030 and the US government 118 maps. At the
beginning of 2007 Wood Mackenzie forecast conventional peak oil taking place by
2020. The Association for the Study of Peak Oil (ASPO) predicts that peak oil will
take place before 2010.
Although Peak Oil is often mentioned in the press in the context of oil supplies to
the transportation industry, there is seldom mention of the possible impact of Peak
Oil on the chemicals industry and those industries, such as agriculture, plastics and
road works, further downstream.
Oil Trading
On average, 52 maps of oil were moved internationally in 2006. The USA, Europe
and Japan were responsible for more than 60% of world oil imports, while the
Middle East, Africa and former Soviet Union accounted for more than 65% of
world oil exports.
The crude oil spot price averaged $US 72 per barrel in 2007, more than triple the
average price in 2002. Towards the end of 2007, the price of crude oil breached
US$ 100 per barrel and, in May 2008, US$ 120 per barrel.
Refining
According to the 2007 BP Statistical Energy Survey, world 2006 refinery capacity
was 87 maps and 2006 refinery throughput was 75 maps on average. The countries
with the largest oil refining capacity are, in order, the USA, China, Russia, Japan,
India, South Korea, Germany, Italy and Saudi Arabia. Saudi Arabia is currently
doubling its refinery capacity before 2012.
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Consumption
World demand for oil reached 85.7 maps in 2007, 1% up on the 84.9 maps in 2006.
The major oil consuming nations were, in order, the USA, China, Japan, Russia,
Germany, India, South Korea, Canada, Brazil and Saudi Arabia. Although US
consumption has remained static over the past four years, China increased its
petroleum consumption by 5.5 percent in 2007. China and India accounted for
some 70% of the increase in oil demand during 2006 and 2007, with oil producing
countries responsible for much of the balance.
Between 1996 and 2006, USA domestic production reduced from 45% to 33% of
demand. Net imports were larger than the combined production of Saudi Arabia
and Kuwait. The US government launched its 20 in 10 initiative to reduce gasoline
demand by 20% in 10 years, through improve engine emission standards and the
use of ethanol.
The IEA forecasts that oil demand will increase by 10 maps to 94.8 maps in 2015.
Demand for OPEC oil is forecast to increase from current 31 maps to 38.8 maps in
2015. It is not clear that the additional demand is going to be met through a
combination of new sources of conventional oil, gas to liquids, unconventional oil
and befouled.
Revenues
The annual revenues of the world's oil producing countries rose by US$ 400 billion
between 2003 and 2005. Oil producing countries and their sovereign wealth funds
are now investing more in hedge funds and private equity than, as they
traditionally did, in US banks and treasury.
In November 2007, it was forecast that crude oil revenues of OPEC countries
would reach US$ 658 billion in 2007. They made US$ 650 billion in 2006
compared to US$ 110 billion in 1998.
The net result is that finance is moving from oil consuming nations to oil
production nations who, for lack of enough local investment opportunities, are
investing their wealth in consumer nations. While oil sales have traditionally been
denominated in US$, depreciation of the US currency is leading renewed interest
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in using a basket of currencies. Thus oil is having a major impact on the global
financial sector and, by extension, exchange rates.
Corporate Activity
As of March 2007, the national oil companies Saudi Aram co, Gazprom, CNPC,
NIOC, PDVSA, Petro bras and Petron as together controlled one third of the
world's oil and gas production and reserves. PFC Energy provides a different
picture with 7% of oil and gas reserves available to multinationals, 16% to Russian
companies, 12% to national oil companies allowing outside equity participation
and 65% to national oil companies allowing no outside participation. ExxonMobil,
Shell, BP and Chevron together produced 10% of the world's oil and gas and
controlled 3% of reserves. At the beginning of February 2008, ExxonMobil, Royal
Dutch Shell and Chevron all reported declining production when reporting results
for 2007.
As of January 2008, the largest oil companies in the world by market cap were
Petrochina (US$ 723 billion), ExxonMobil (US$ 512 billion), Gazpom (US$ 332
billion), Royal Dutch Shell (US$ 265 billion), Sinopec (US$ 250 billion), Petro
bras (US$ 242 billion), BP (US$ 231 billion), Total (US$ 199 billion), BHP
Billiton (US$ 198 billion) and Chevron (US$ 197 billion).
The revenues from the integrated up and downstream operations of ExxonMobil,
Shell, BP and Chevron generate far higher returns than those of the national oil
companies. In November 2007, the James Baker Institute calculated that
ExxonMobil, BP, Chevron, Shell and Con -coco Phillips used 56% of increased
operating cash flow on share buybacks.
Research and Skills
An August 2007 calculation showed international oil companies have significantly
increased their investments in R&D with Shell raising its budget 50% in 3 years,
Chevron by more than 100% over five years, ExxonMobil by 15% in 5 years and
Conoco Philips by 50% over historic numbers, all in order to optimize extraction
from reserves and to gain access to the 80% of world oil reserves held by national
oil companies.
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CERA estimates the oil industry will have a skills shortage of 10 to 15% by 2010.
More than 50% of currently employed oil industry engineers, whose current
average age is above 50, will have retired by 2015.
II. Financial Services
Saudi Arabia is one of the least indebted countries in the world. Improvement of
the investment climate (diversify an economy overly dependent on oil and
petrochemicals), continues to be an important part of the Saudi government‘s
broader program me to liberalize the country‘s trade and investment regime, and
promote employment for a young population. Saudi Arabia continued to show
positive progress towards full compliance with its WTO requirements after joining
the organization in 2005. In its ―Doing Business 2011‖ report, the International
Bank for Reconstruction and Development (―World Bank‖) ranked Saudi Arabia
11th out of 181 economies in terms of ease of doing business, a marked
improvement from 2005, when it ranked 67th.
Saudi Arabia has free and open financial markets. Private capital and currency can
be transferred in and out of Saudi Arabia without restriction, with the exception of
limits on bulk cash movements: non-GCC foreign investors may only invest in the
stock market through mutual funds and ―swap agreements.‖ However, these limits
are gradually relaxing.
Generally credit has been available to both Saudi and foreign entities from
commercial banks, and has been allocated on market terms. The global financial
crisis of 2008 has substantially reduced this availability to all parties, resulting in
the delay or cancellation of some projects. Beside commercial banks, some
government credit institutions, such as the Saudi Industrial Development Fund
(SIDF), allocate credit based on government-set criteria rather than market
conditions. To be qualified for credit, the applicant company must have a legal
presence in Saudi Arabia.
As part of the economic reforms initiated for accession to the WTO, Saudi Arabia
liberalized licensing requirements for foreign investment in the financial services.
In addition, the government increased foreign equity limits in financial institutions
from 40% to 60% to entice further foreign investment). As of 2010, the Saudi
Arabian Monetary Agency2 (SAMA) has granted eleven foreign bank licenses to
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operate in Saudi Arabia, including BNP Paribas, Deutsche Bank, Emirates Bank,
Gulf International Bank, J.P. Morgan, Muscat Bank, Nation-al Bank of Bahrain,
National Bank of Kuwait, National Bank of Pakistan State Bank of India, and T.C.
Ziraat Bankasi A.S. Swiss financial institutions have solid opportunities to enter
the local market but they should refer to the experience of the foreign financial
institutions operating in the country. Credit Suisse and UBS have already put their
first stone in the Saudi financial sector.
III. Engineering and construction services
Architectural construction and engineering sector remains one of the most
important sectors in the Saudi strong economy. The Saudi construction sector is
seen growing by nearly 6 percent as major infrastructure projects continue to be
built in the country despite the impact of the global downturn. The Saudi
government continues to invest intensively in construction projects that will boost
and diversify the economy. The construction and engineering sector is mainly
boosted by government-led infrastructure development plants and the new housing.
The growing population, the stability of the banking sector and liquidity will
continue to stimulate the positive growth of the construction sector during the next
future. The housing sector, in particular, is likely to grow, as the Saudi population
is rising at a rate of 2.5 percent a year.
The Saudi Government keeps fuelling the sector‘s growth. Over the next five
years, the government will spend about USD400 billion on large infrastructure
projects. Industry experts estimated the government‘s expenditures on construction
projects for the period October 2008 to October 2010 at USD150 billion.
In Saudi Arabia, infrastructure and construction projects are stimulated by
domestic demand. Industry sources reports that more than 325 civil construction
projects, valued in excess of USD300 billion, are currently underway or under
design in Saudi Arabia.
The main fourteen civil construction projects in Saudi Arabia under construction or
in design are as follows:
- King Abdullah Economic City (KAEC) (USD 93 billion)
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- Prince Abdulaziz bin Mousaed Economic City (USD 53 billion)
- Jizan Economic City (USD 30 billion)
- Jeddah Project Mile High Tower (USD 10 billion)
- Medina Knowledge Economic City (USD 7 billion)
- Jabal Omar Project ($5 billion)
- Princess Noura bint Abdulrahman University (USD 11.5 billion)
- King Abdullah Petroleum Studies Research Centre (KAPSARC) in Riyadh
(USD 2 billion)
- King Abdullah Financial District (USD 40 billion)
- Sudair City Development: Schedule (USD 40 billion)
- Upgrade of King Abdulaziz International airport in Jeddah (USD 7 billion)
- King Abdullah Sports City Development near Jeddah (USD 4 billion):
- Shamieh Projects (USD 9.3 billion)
- Ministry of Interior (MOI) Projects (USD 11.5 billion)
IV. Medical Equipment and Health care
The Saudi health-care sector is one of the largest in the region in terms of
expenditures, size, activity, and potential. The yearly expenditure on health care is
estimated at USD21 billion in 2011, 75 percent by the Saudi government. In the
2011 budget, the Saudi government has allocated USD18.3 billion for the health
and social development sectors, 12 per-cent more than in 2010. The funds will be
used to finance the construction of 12 new hospitals and to renovate and refurbish
four existing hospitals.
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With an annual population growth rate of 2.5% to 3%, Saudi Arabia would require
an additional average annual investment of USD587 million in hospital bed
capacity to meet the demand4. Hospital beds are likely to grow from 53,519 to
62,000 by the end of 2011. Such facts will be favorable to the environment for
purchases of new medical equipment and in-creased investments in these sectors.
Swiss companies might find tremendous opportunities in the following sectors and
sub-sectors:
- Patient beds;
- Rehabilitation equipment and accessories;
- Diagnostic equipment and components;
- Electro-medical equipment;
- Medical X-ray equipment;
- Monitoring equipment;
- Hospital disposables;
- Hospital management;
- Therapeutic appliances;
- Orthopedic appliances;
- Artificial body parts;
- Oxygen generators and related components;
- Optical microscopes and related components;
- Operating-theatre instruments;
- Dental or veterinary devices; and
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- Medical laboratory equipment.
Lifestyle of Saudis has been affected by the affluence that brings with it diseases
such as diabetes, obesity, coronary diseases, and cancer (lung, throat and breast
cancers). Other major diseases of concern include kidney diseases, and recently
Dengue fever cases in the Western Province.
In line with the government restructuring strategy to convert government hospitals
into private entities in the form of a public-private partnership to maximise system
efficiencies and raise the overall standard of care, the Saudi private sector was the
largest contributor to growth in the number of hospital beds over the last decade.
VI. Insurance sector
Since the introduction of the first phase of the compulsory health insurance for
expatriates, private sector workers and foreign pilgrims, the insurance sector has
grown exponentially from 36 percent of the total insurance market in 2007 to 44
percent in 2008, with gross writ-ten premiums valued at USD1.2 billion. Some
seven million are now covered by private insurance, and by 2013, consumers will
spend an estimated 4 percent of their income on healthcare. According to local
insurance experts, the health insurance market in Saudi Arabia is expected to grow
up to USD 40 billion over the next years.
Driving growth in the healthcare sector is the mandatory insurance law and the
government earmarking increasing amounts of the annual budget to cater to a
burgeoning population that is set to double by 2023. In 2010, the Saudi
Government allocated USD16.3 billion for healthcare and social affairs, a 17
percent increase on 2009 and in the 2011 budget allocated some USD18.3 billion.
Nowadays, around 34 insurance and reinsurance companies operate in one of the
fastest growing insurance markets in the world. Indeed, by 2014, total insurance
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premiums are projected to be worth USD11.8 billion, with health insurance to
account for over half of the market.
VII. Transport
Saudi Arabia has an efficient network of roads, marine ports and airports and plans
to connect the country‘s major commercial centre‘s with a new rail network.
Saudi Arabia gives more attention to upgrading its airports. Thus a number of
airports in Saudi Arabia are set for expansion including King Abdulaziz
International Airport in Jeddah and Prince Mohammed bin Abdul Aziz
International Airport in Madinah. The transportation sector initiatives are
continuing with the ongoing construction of three major new railway lines (the
North-South, the Haramain high-speed project, and the Saudi Land Bridge). The
key ongoing projects in transportation sector (airports, railways, seaports) are very
large and lucrative ones.
In 2010, transport was one of the fastest-growing non-oil industrial sectors
(+5.6%). According to the Saudi Minister of transport, transportation and
infrastructure sectors should continue to be the main engines of the Saudi
economic growth.
VIII. Electrical Power Systems
With one of the world‘s highest population growth rates (2.5-3%) and a rapidly
expanding industrial base, Saudi Arabia has an ever-growing need for electricity
and power sources. Presently, the Saudi power generation, transmission, and
distribution industry is one of the fastest growing and most lucrative in the Middle
East. Saudi Arabia already accounts for nearly 50 percent of all ongoing power
projects in the Gulf State. It is estimated that the country will need close to 55,052
MW of power capacity by 2020, nearly double of the cur-rent capacity.
Aware of the challenge of meeting the need of the rapidly growing population and
industrial economy, the Saudi Government has embarked upon an ambitious plant
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to bolster the industry. It has invested heavily in a series of projects to achieve this
end. In addition to the current projects with a value of more than USD 90 billion,
Saudi Arabia is expected to inject about USD119 billion in the industry by 2020.
Saudi Arabia is willing to switch its power plants from heavy oil to natural gas.
One important step in this process has been the creation, on April 18, 2010, of the
King Abdullah City of Atomic and Renewable Energy (KACARE), a scientific
centre for nuclear and renewable power. The mission of KACARE is investigating
the application of nuclear power together with renewable energy to be used in
Saudi Arabia to meet rising electricity demand.
IX. Water Resources Equipments
a. Overview
With the third highest daily per capita water consumption in the world, at about
280 litters, after the United States and Canada coupled with its desolate desert
environment, water-scarcity issues, the rapid development of cities, massive
urbanization and industrialization, Saudi Arabia is forced to take drastic measures
in reviewing its water policies.
The 30 government-run desalination plants on the Red Sea and the Arabian Gulf
coasts supply 60-70 % of the Saudi water needs and the rest met by ancient
underground aquifers (23%) and the remaining come from wastewater recycling.
Meeting future water needs6 is one of Saudi Arabias biggest challenges. Among
others, the government restructured its water departments and created the National
Water Company (NWC) with a mission to work in joint ventures with both Saudi
and international corporations. In 2008, the Saudi government also announced that
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it would phase out wheat farming by 20167. The Saudi government is also keen on
expanding its facilities for treatment of wastewater so that it can be used for
industrial and commercial purposes.
b. Business opportunities
Some local experts estimate that around USD60 billion will be spent on expanding
Saudi Arabia‟ s water supply and distribution networks. These projects include
USD14 billion for building 16 new desalination facilities in 17 years. Saudi Arabia
aims substantially to in-crease its desalination water production8.
The Saline Water Conversion Corp. (SWCC) continues to study the introduction of
20 new saline water conversation projects to be implemented in the near future to
meet the demand increase for drinking and used water. The 20 new projects9 will
include constructing new plants and expanding existing ones.
According to the Ministry of Water and Electricity, there are a number of water
and sewage projects being implemented by the Ministry. Water and sewage
projects worth SR 6.68 billion are being implemented in addition to a number of
projects for plugging water leaks in its distribution networks.
There are also several large opportunities in the wastewater treatment sector. A
number of major projects are under tendering, such as the North Jeddah wastewater
treatment project, the Musk Lake sewage treatment project, the Medina wastewater
treatment project, the Hariri wastewater treatment project in Riyadh, and the
Dammam wastewater treatment project.
1- Desalination and wastewater
- Consulting and engineering services;
- Anti-scaling chemicals;
- Operations and maintenance services;
- Potable and process water treatment systems;
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- Industrial and Sewage wastewater treatment systems;
- Oil skimmers (pipes, drums, weir, etc);
- Pressure and gravity media filters;
- Water disinfection equipment & systems;
- Clarifiers & clarification equipment;
- RO membranes;
- Filters;
- Boilers;
- Pumps;
- Steam & gas turbines;
- Treatment chemicals;
- Screening equipment;
- Training services;
- Grit removal units;
- Odour treatment;
2- Wastewater treatment opportunities
One of the top current priorities of the Saudi government is so far modernizing and
expanding the sewage system. The loss of life and property in the recent floods in
Jeddah city was generally blamed on the existing poor wastewater network; the
poor infrastructure and inadequacies of the wastewater collection and treatment
services. According to available information, only 40 per cent of the population of
Saudi Arabia is served by an integrated sewage and wastewater system. The rest
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depend upon septic tanks that are occasionally drained by wastewater tankers.
Under the recommendation of the King, Saudi Government has now taken
measures to address these issues and to revamp its wastewater with the private
NWC responsible for running the sewage system in Jeddah and Riyadh. NWC has
allocated USD17 billion for private-sector sewage managers in the next five years.
The capital spending on the country‘s sewage collection and treatment system in
the next 20 years is estimated at USD37 billion. Among the planned tenders, there
are two sewage treatment plants (STPs) in Riyadh10 and the second phase of the
STP in King Abdulaziz International Airport in Jeddah11.
Opportunities in Saudi Arabia
Saudi Arabia has a very fast growing economy. GDP growth in 2011 is
expected to reach 6%, compared with 3.3% in 2007 and 4.4% in 2008.
The booming economy is creating great opportunities for both exporters
and investors. These are further boosted by moves to diversify the
economy away from dependence on oil and gas, economic reform,
market liberalization and a growing private sector.
There are opportunities at all levels in:
Oil, gas and petrochemicals
Power
Water
Financial services
Education, training and manpower
Construction - includes mass transport infrastructure
Environmental technology and services
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ITC
Consumer goods
Defence and security
Healthcare
Education
26% of the Kingdom's 2011 budget set at SR 580 billion (US$ 154
billion), will go to education, training and manpower. The money will
contribute to programmers aimed at reforming the current education
system, building new educational institutes and funding overseas
degrees and training programmers for Saudi students. The primary focus
regarding the education sector is to educate young Saudis to fill jobs
which are currently being held by expatriates. Despite this budget figure,
it's vital for Saudi Arabia to attract a substantial amount of foreign
investment to meet rapid growth demands.
Security and Defense
Defence & Security sector is one of the important sectors in Saudi
Arabia, providing enormous opportunities for British companies. The
total combined market size for the commercial security and safety sector
is estimated at more than SR 4.5 billion (US$1.2 billion). Security is a
fast growing sector which currently estimate to be worth between SR
2.27 - 2.51 billion (US$605 - $670 million.) Of this figure, around SR
318.8 million (US$85 million) accounts for physical and electronic
security for the banking sector. The balance is for government,
industrial, retail, residential and commercial sectors. The Saudi
government's defence budget continues to grow, standing approximately
at SR 153.8 billion US$ 41 billion. The Saudi's defence relationship
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with the UK is stronger than ever, with the order for 72 Typhoon aircraft
ensuring this relationship will continue for many years to come.
Construction
Saudi Arabia represents the largest construction market in the Middle
East, and one of the fastest growing construction markets in the world.
They key areas that are currently being focused on are improving
infrastructure, transport, education and real estate all of which will
require construction related activity.
Financial and Professional Services
The Saudi banking sector is stable and has not experienced much turmoil
during the global financial crisis. The Saudi Stock Exchange (Tadawul)
is the largest in the Gulf region with a market capitalization of around
US$325 billion.
The Stock Exchange is keen to develop the derivatives market and to
start up a futures market other than just for oil.
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Healthcare
Healthcare is a thriving sector as the government continues to finance
healthcare for its rapidly growing population, which is increasing by
more than 3% each year. In the 2011 budget SR68.1 billion (US$18.2
billion) has been earmarked for healthcare and social welfare services,
that‘s an increase of 12% on last years budget. As part of a social
spending package, in March 2011, an additional SR16 billion (US$ 4.3
billion), was allocated to healthcare, bringing the total to SR 84.7 billion
(US$ 22.5 billion).
Saudi Arabia is the largest market for medical equipment and healthcare
products in the Middle East.
ITC
Saudi Arabia is the region's largest IT market with strong growth in
consumer and enterprise end markets. Huge public investments on
infrastructure, health and education have paved the way for advanced
technology and security systems in the country with the government
planning for the industry to raise its contribution to the GDP by 20
percent by 2020. The IT market in the country is valued at $3.6 billion in
2011 and expected to go up to $4.9 billion by 2014. Significant unmet
demands for web-based and mobile services and increased enterprise
and government commitment for web-based services provide large-scale
opportunities for contractors and service providers.
Industrial Cities
Today, industrial products make up more than 90 percent of the
Kingdom's non-oil exports. Saudi Arabia exports petrochemicals,
plastics, metal goods, construction materials and electrical appliances to
more than 90 countries.
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The Saudi Industrial Property Authority (MODON), is responsible for
developing and supervising industrial land in the Kingdom. Their aim is
to promote and regulate Industrial Estates and Technology Zones and to
encourage the private sector to become involved in their development
and operation.
Since it was created in 2001, Modon has been working towards a Saudi
development vision for the 21st century. They are currently building 6
new industrial cities and have expressed an interest in dealing with UK
consultants for master planning, design, operation and maintenance, and
facilities management.
Economic Cities
In addition to the sectors, and industrial cities mentioned above, Saudi
Arabia is investing billions of dollars into the launch of four Economic
Cities in different regions of the country.
King Abdullah Economic City - Rabigh (near Jeddah)
Prince Abdul Aziz bin Mousdaed Economic City - Hail
Knowledge Economic City - close to Al Madinah
Jazan Economic City - close to Jazan City
These cities, once constructed, will be public-private partnerships that
will create attractive investment platforms for foreign companies. Each
is designed to maximize investment potential in all sectors and deliver
huge advantages to business located there.
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The cities will promote economic diversification, create over a million
new job opportunities, homes for 4-5 million people, and contribute an
estimated 150 billion dollars to Saudis GDP.
Source - UK Trade & Investment
Strategic Partners
Telecommunication
The telecommunication market was opened up to the competition in 2005.
Therefore, Saudi Arabia has become increasingly connected with almost 49 million
mobile phone subscribers till the end of 2010. Mobile penetration is expected to
reach 214% by 2014, while mobile phone sales are forecast to grow 7% to USD1.1
billion. Saudi Arabia has a fixed-line telephone penetration of 15.6% with 4.3
million subscribers.
In 3Q-2010, the total Internet users increased some 11.2 million, with a broadband
penetration level of 12.2 percent for the same period. One third of all households in
Saudi Arabia have a broadband connection. The upgrading of the
telecommunications networks is likely to be a major driver of infrastructure
spending. Saudi Arabia is expected to account for more than 50 per cent of
spending on ICT in the Gulf Cooperation States over the next three years. Of the
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nearly USD90 billion expected to be spent on ICT infrastructure by 2012, USD22
billion is likely to be spent on IT and USD67 billion on telecommunications.
The Saudi Government is willing to create a new digital infrastructure that will
create significant opportunities for providers of technology, software, and
hardware. The top opportunities in this sector include:
- DSL access switches, enabling multi-service transmission equipment;
- Broadband wireless access systems (―WiMax‖), 2.5–3.5 GHz, 16D and 16 E;
- Wireless computing equipment and related accessories;
- Network protocol software and systems;
- Wideband transceivers; and
- Fibber-optic satellite links.
Swiss companies need to look at the Saudi telecommunications industry segment
by segment in terms of size and growth rate, as well as the regulatory environment
and other barriers to entry.
XI. Food and Beverage
Saudi Arabia has major manufacturing plants for dairy products, meat processing,
snack foods, beverages, bread, biscuits and confectionery. Many foreign
companies export to Saudi Arabia through the UAE. Swiss made products enjoy a
strong reputation among imported foodstuffs. Last may, Nestlé Middle East
launched its direct sales and distribution operations in Saudi Arabia, marking a
new phase of expansion in the region.
XIII. Education and training
Education and training are areas of concern. Recently, the Saudi Government
passed a ruling allowing foreign educational institutions to set-up schools and
colleges in the country. In 2009, the Government has issued more than 19 licenses
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for international schools, and also approved the establishment of about 36 new
colleges.
Students are increasingly investigating graduate and post-graduate education
possibilities abroad largely in the United States of America and the United
Kingdom. But since September 11th, 2001, Saudi students have modified their
preference. Europe, New Zealand and Australia are now becoming more popular
destinations. This move may represent an opportunity for Swiss educational
institutions.
The Saudi Government allocated USD 68.3 billion for new projects in the budget
for 2011. The education and training sector received the largest allocation at
USD40 billion, 8 percent more than in 2010. The education budget included USD
3.2 billion for offshore education, known as the King Abdullah Scholarship
Programmed.
The Saudi Government plans to replace 75 per cent of the estimated six millions
expatriate workers with Saudi nationals (Saudi sat ion programmed). Thus, training
needs are becoming increasingly important as more high school and university
graduates enter the labor market. The demand for trained Saudis outstrips the offer
by far. Large Saudi organizations of-ten have their own training departments. They
often outsource the training of their employees to local institutions that mainly
cooperate with foreign training providers.
XIV. Business practice
The business system in Saudi Arabia does not appear transparent from the outside.
A minimum understanding of the religious traditions and customs of Saudi Arabia
is required because of the influence of Islamic law on business and social life.
Generally, business will only be conducted after a degree of trust and familiarity
has been established. Considerable time may be spent exchanging courtesies, and
several visits may be needed to establish a business relationship. Business visitors
should arrange their itineraries to allow for long meetings as appointments are not
highly respected in the private sector. Meetings can be interrupted by subordinates
and colleagues entering in the office in which the meeting is being held, even other
businessmen can come in unexpectedly and ―participate‖ in the meeting. Tea and
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traditional Saudi coffee are usually offered. One to three cups of Saudi coffee
should be taken for politeness, after which the cup may be wiggled between thumb
and forefinger when returning it to the server to indicate that you have finished.
A meeting can possibly be interrupted by a prayer time. Many Saudis (all Saudis
are of the Muslim faith) and non-Saudi Muslims could excuse themselves to attend
a prayer if a long meeting crosses into a prayer time (the hotel can provide
information relating to the five day prayer times since the prayer time change
according to sunrise and sunsets around the year).
Although many Saudi businessmen have been educated and/or have travelled
widely in the West and are sophisticated in dealing with western, many cultural
differences remain. As a conservative society, it is advisable to respect local
traditions, i.e. not to offer or receive an object with the left hand and sitting
crossed-legged with a foot pointing towards the other person is considered
offending.
Saudis are hospitable and place a great deal of emphasis on an external expression
of politeness and quiet behavior. Business meals are highly appreciated although
Saudis tend to invite their business partners or guests to their homes for a
traditional meal. Hospitality is high on their agenda (sometimes in tents either in
the back yard of houses or simply in the desert). If you are invited to the home of a
Saudi for a party or reception, a meal is normally served at the end of the evening,
and guests will not linger long after finishing. Be observant and adapt your
behavior to the customs of your host.
There is strict gender separation in Saudi Arabia and restaurants maintain separate
sections for single men and families. Wives are often excluded from social
gatherings or are entertained separately. Hotel swimming pools and public
exercise/gyms centre‘s are not opened to men and women in the same time.
Amusement parks and zoos are open to men and women under some restrictions.
The Ministry of Commerce bans any signs placed on imported products that could
indicate another faith other than Islam, or the picture of a pig (pig meat and byproducts are banned in Saudi Arabia). Importation of alcohol, narcotics,
pornography, religious books except the Koran, pork products, and firearms is
strictly prohibited among others.
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INDUSTRIAL DEVELOPMENT OF SAUDI
ARABIA
Introduction
Although industrialization is relatively recent, in Saudi Arabia, it has witnessed a
steady development, during which distinguished accomplishments were achieved.
These are attributed to the importance of the industrial sector and the support it
receives from the government owing to its role in achieving strategic and economic
goals of the country. The efforts exerted by the government for the support of
industrial development covered several basic spheres including implementation of
required infrastructure, construction of Jubail and Yanbu industrial cities,
construction of industrial cities in various regions of the Kingdom, establishment
of Saudi Industrial Development Fund (SIDF), and continued provision of other
industrial support and incentives. The response and cooperation of the private
sector with the governmental plans and efforts have an effective impact on
actualization of the industrial development's achievements. In the following, we
review, in brief, some of the industrial progress indicators in Saudi Arabia over the
past years.
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Progress in Number of Factories, Investment and Number of
Employees
The government has attached great importance to the industrial development by
providing all kinds of supports and facilities to the industrial sector. As a result, the
Saudi industry has made significant progress that was clearly manifested in the
growth of industrial investment since the establishment of Saudi Industrial
Development Fund (SIDF). The following table illustrates the progress in the
number of producing factories and volume of their investments and the number of
employees between 1974 and 2010, broken down0 by major sectors.
Number of Operating Industrial Units and Size of their Investments and
Number of Employees 1974 – 2010
Industrial Activity
Factory
No.
Finance
Manpower
(SR Million)
1974 2010 1974 2010
1974 2010
Manufacture of food products and
beverages
39
746 2.028 40.348 7.199 103.027
Manufacture of textiles
1
90
20
4.410
60
15.040
Manufacture of wearing apparel;
dressing and dyeing
2
78
38
737
249
8.288
Tanning and dressing of leather;
manufacture of luggage, handbags,
saddlery, harness and footwear
2
48
7
662
50
4.121
Manufacture of wood and of products of
4
wood and cork, except furniture;
manufacture of articles
54
65
846
839
4.082
Manufacture of paper and paper
products
157 177
7.685
843
19.153
9
677
Publishing, printing and reproduction of
18
recorded media
117 809
3.702
Manufacture of coke, refined petroleum
4
products and nuclear fuel
81
153.819 3.487 24.595
Manufacture of chemicals and chemical
9
products
493 2.954 49.592 2.429 41.782
Manufacture of rubber and plastics
products
11
498 522
Manufacture of other non-metallic
mineral products
25
795 3.771 57.436 3.780 83.049
Manufacture of basic metals
24
317 234
37.756 2.801 47.833
Manufacture of fabricated metal
products, except machinery and
equipment
9
324 160
8.775
931
Manufacture of machinery and
equipment n.e.c.
12
229 808
5.072
4.357 23.878
Manufacture of office, accounting and
computing machinery
-
5
660
-
364
-
2.594 10.568
12.327 1.895 44.062
30.745
2.704
Manufacture of electrical machinery and
2
apparatus n.e.c.
114 127
11.296 464
21.621
Manufacture of radio, television and
communication equipment and
apparatus
-
21
-
966
-
1.988
Manufacture of medical, precision and
2
optical instruments, watches and clocks
12
1
82
33
351
Manufacture of motor vehicles, trailers
8
and semi-trailers
140 78
2.475
622
13.306
15
294
-
1.473
Manufacture of other transport
678
-
equipment
Manufacture of furniture; manufacturing
17
n.e.c.
308 170
4.990
1.295 28.027
Recycling
-
3
40
-
Total
198 4.645 12.331 403.972 33.928 529.816
-
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As indicated in the previous table, the industrial base in the Kingdom has
experienced a wide expansion over the past four decades. The number of operating
industrial units has increased from (198) in 1974 to (4,645) in 2010. Parallelly,
invested capital has increased from SR 12 billion in 1974 to about SR 404 billion
in 2010. At the same time, number of employees has increased from (34,000) in
1974 to (530,000) in 2010.
Looking into the sectoral composition of the operating industrial units in the
Kingdom at the end of 2010. We note that the Other Non-Metallic Minerals Sector
is heading all other sectors in terms of operating industrial units (795) representing
17% of total operating ones. The Refined Petroleum Products sector also occupied
the leading position among the other industrial sectors in terms of size of
investments (SR 154 billion) representing 38% of total investments of operating
factories, followed by the Non-Metallic Minerals Sector with SR 57 billion
representing 14% of total investment of operating factories. The Food and
Beverages Sector headed all other Sectors in terms of the number of employees
(103,027 workers) representing 19% of total employment in the operating
factories.
Providing modern industrial cities is an additional form of support the government
for the national industries. The Ministry of Commerce & Industry, has constructed
and developed several industrial cities in the various regions of the Kingdom and
provided them with all required services and utilities. To upgrade the quality of
services provided by the industrial cities, the Saudi Industrial Property Authority
(Modon) was established in 2001, as an independent public agency to supervise the
establishment and management of industrial cities and technology zones, in
addition to the operation, maintenance and development of theses cities in
collaboration with the private sector. Table below shows total areas and developed
areas of the existing industrial cities in the Kingdom.
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Here we have to note that the figures in the following table do not include areas of
the two major industrial cities of Jubail & Yanbu, in addition to industrial cities of
the oil refineries that are belonged to ARAMCO. The two industrial cities of
Jubail & Yanbu are considered strategic locations for hydrocarbon and energy
intensive industries to develop and exploit the Kingdom‘s natural advantage by
higher rates of economic efficiency. Areas under the two industrial cities (Jubail
and Yanbu) are estimated at (1,020) and (185) square kilometers respectively,
including a number of basic industrial plants, secondary industrial plants,
supporting industrial plants, as well as full-service residential compounds that
include housing, schools, hospitals, clinics, recreation centers, roads and other
necessary utilities.
Developed and Total Areas of Existing Industrial Cities in Saudi Arabia
Industrial City
Developed Area (M2 000)
Total Area (M2 000)
Riyadh
15.860
19.237
Jeddah
12.974
20.807
Dammam
18.482
28.191
Al Hassa
1.500
1.543
Qassim
60
1.543
Zulfi
2.000
19.000
Sidair
10.000
257.000
Makkah
730
730
Madinah
1.750
9.948
Al Kharj
5.000
99.460
Assir
904
2.663
Taif
3.000
11.000
680
Al Jouf
629
3.000
Aarar
1.000
2.000
Tabuk
1.350
4.000
Hail
770
2.560
Najran
750
6.560
Gazan
2.000
39.490
AlHai‘er
2.000
5.000
AlBaha
3.000
3.000
Total
83.759
536.732
Source: Saudi Industrial Property Authority (Modon).
Progress in Industrial Production:
Production of the manufacturing industries in the Kingdom has witnessed a steady
progress over the past years. As shown by the figure below, total GDP (in constant
prices) achieved by the manufacturing industries increased from the level of SR 15
billion in 1975 to more than SR 109 billion at the end of 2010. Also, the rate of the
manufacturing industries' growth continued to increase throughout this period, at
an average of 5.9% annual growth rate, which is considered the highest among the
other economic sectors. Owing to the substantial growth achieved by the
manufacturing industries during this period, the contribution of the sector in the
country's GDP has increased from 4.1 % in 1975 to 12.6% at the end of 2010.
Parallelly, the contribution of the manufacturing industries sector in the non-oil
GDP increased from 7.8% in 1975 to 17.4% in 2010. These rates show the success
of the development plans in pushing forward the industrial progress and the fruitful
681
cooperation
these
plans
received
from
the
private
sector.
Source: SAMA – Annual Report # 46
* Preliminary Figures
A more important aspect in the development of the manufacturing industries in the
Kingdom is indicated by the change that occurred in the sectoral composition of
the Saudi manufacturing over the past period, as the share of the manufacturing
industries (other than oil refining) in manufacturing GDP increased from (57%) in
1975 (at constant prices) until it reached (80%) by the end of 2010. This trend
reflects the dynamism of the Saudi manufacturing industries sector (other than oil
refining). In this regard, we refer in particular, to the substantial progress and
expansion experienced by the petrochemical industries in the Kingdom over the
last two decades under the auspices of SABIC.
The Statistics and analysis made by SIDF show that the GDP's mix for the
manufacturing industries sector, (excluding oil refining) has been a subject of a
substantial growth throughout the past two decades. Since early nineties, the
Chemical Products Sector has been occupying the leading position of GDP's mix
of manufacturing industries, (excluding oil refining). Other sectors that have been
showing a notable growth include: Machinery and Equipment, Building Material
Products, and Food Products. At present, these four sectors contribute the major
part of the Saudi manufacturing industries' GDP.
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Progress in Industrial Exports:
The Kingdom has devoted great attention to the development of industrial exports,
in accordance with the government's comprehensive economic development
strategies aiming at expansion of production base and diversification of income
sources. Despite the relative recentness of industry in Saudi Arabia, particularly the
experience of private sector in the field of exports, Saudi industrial exports have
achieved wide steps in this area. The Chemical Industries have scored a great
success in penetration of international markets, and gave a positive image of the
Saudi products in terms of quality and price. The table below shows the growth of
the values and contributions of Saudi industrial exports during the period from
1992 to 2010.
Progress in Saudi Industrial Exports: 1992 – 2010.
Year Industrial Exports (SR' Million) % of Total Exports % of Non-Oil GDP
1992
7
4
1993
8
4
1994
10
5
1995
12
7
1996
9
6
1997
11
6
1998
15
6
1999
10
5
2000
8
6
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2001
10
6
2002
10
6
2003
10
8
2004
10
9
2005
9
11
2006 70.044
9
12
2007 83.311
10
13
2008 98.710
8
14
2009
11
12
2010
12
14
Source: Central Department of Statistics & Information – Ministry of Economy &
Planning
The previous table shows that Saudi industrial exports achieved a rapid growth
over the past years. Value of these exports showed an annual growth rate of 13%
during 1992-2010, increasing from about SR 12,537 million in 1992 to about SR
113,924 million in 2010. The significant increase in the industrial exports in 2003
and 2005 could refer to the implementation of the GCC unified customs union, and
the Kingdom's accession to the World Trade Organization (WTO), respectively. As
of the industrial exports ratio to KSA's non-oil GDP, it grew from 4% in 1992 to
14% in 2010, indicating the importance of the exports as a factor of industrial
development.
With regard to the structure of the Saudi industrial exports, the following figure
shows the petrochemical exports versus other exports during 1992-2010.
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Composition of Saudi Industrial Exports (1992 - 2010)
The above figure shows that the petrochemical exports represent about two thirds
of the total Saudi industrial exports. These exports have witnessed a rapid growth
since 1992 as their value grow from SR 8,478 millions in 1992 to about SR 16,698
millions in 1997. However, the value of theses exports declined to a level of SR
12,718 million in 1999, due to drop in oil prices. Then, it surges strongly after the
development of the oil market and reached SR 82.338 million in the year 2010.
The other non-petrochemical industrial exports have also experienced a good
growth during 1992-2010, jumping from about SR 4,059 million in 1992 to 31.631
million in 2010. The following table reflects a detailed picture of the Saudi
industrial exports performance during 1992-2010. In addition to the petrochemical
sector, as shown in the same table, other exporting sectors include Food Industry,
Basic Metals Industries, and Machinery and Equipment Industry. It is worth noting
that most of these sectors achieved high export growth rates.
685
KSA Economic Review for the Year 2010 G
The Saudi economy succeeded in achieving remarkable results in all economic
indicators in 2010G in contracts with many other economies worldwide,
particularly the advanced ones, which are still suffering from the repercussions of
the global financial crisis. Rising oil prices throughout 2010G, continued
government structural and organizational reforms of the Saudi economy, and
steady government expenditure on infrastructure projects have been instrumental in
bringing about these positive results. According to the Ministry of Finance‘s
statement accompanying the state budget announcement, the Kingdom‘s gross
domestic product (GDP) is expected to reach SR 1630 billion in 2010G, reflecting
a growth of 16.6% at current prices. In terms of constant prices, the GDP is
estimated to grow by 3.8%. Preliminary estimates indicate that the public debt
volume will decline to around SR 167 billion, i.e., 10.2% of the GDP, by the end
of the fiscal year 2010G.
The private sector and its composites continued their good performance in 2010G
by achieving positive growth rates. The private sector‘s growth is expected to be
around 5.3% at current prices and 3.7% at constant prices in 2010G, and its
contribution to GDP is projected to be about 47.8% in 2010G. All economic
activities comprising the non-oil GDP maintained their positive results in 2010G.
The Electricity, Gas and Water sector is estimated to grow by 6%, the
Communication, Transportation and Storage sector by 5.6%, Non-oil
Manufacturing sector by 5%, Wholesale, Retail, Restaurants and Hotel sector by
4.4%, Building and Construction sector by 3.7%, and Financial, Business Services,
Insurance and Real Estate sector by 1.4%
With regard to inflation and price level, the cost of living index recorded an
increase of 3.7% in 2010G on the 2009G figure. The non-oil GDP deflator, a key
economic indicator for calculating inflation for the whole economy, witnessed an
increase of 1.5% in 2010G on 2009G.
The current account of balance of payments, according to the preliminary estimates
of the Saudi Arabian Monetary Agency (SAMA), is estimated to achieve a surplus
of SR 260.9 billion in 2010G in contrast with 78.6 billion in 2009, reflecting an
increase of 32%. In the same context, the balance of trade in 2010G is expected to
achieve a surplus of SR 557.9 billion, i.e., an increase of 41.4% on the previous
year, 2009G. This increment in the balance of trade surplus can be attributed to the
686
increase in the total value of commodity exports to SR 886.3 billion in 2010G,
representing an increase of 23% on the previous year, 2009G. The value of non-oil
exports of goods is expected to reach SR 124.4 in 2010G, i.e., an increase of 14%
on the previous year, 2009G. Non-oil exports of goods account for 14% of the
Kingdom‘s total goods exported.
At the level of financial and monetary developments, and in the light of
developments in local and global economies, the Kingdom continued its firm fiscal
and monetary policies to achieve a suitable level of liquidity to satisfy the
requirements of the national economy. The money supply, in its broad definition,
achieved a growth rate of 1.2% in the first ten months of the fiscal year 2010G in
contrast with a growth rate of 8% in the same period of the previous fiscal year.
Regarding the banking sector, commercial banks continued to strengthening their
financial position. During the first 10 months of 2010G, the capital and reserves of
the commercial banks increased by 10.7% to SR 181.1 billion, while their total
claims on public and private sectors rose by 6.2%. During the same period, bank
deposits grew by 0.5% to SR 955 billion. Moreover, commercial banks continued
their vital role in supporting and expanding the economic activities of the private
sector. The total credit extended by banks to the various economic activities in the
private sector amounted to more than SR 774 billion during the first 9 months of
2010G. Thus, credit extended to some economic activities rised notably. For
example, credit extended to the Agriculture and Fishing sector increased by 25%,
Water, Electricity and Other Services sector by 14%, Commerce, Building &
Construction sectors by 5.1% each, Mining and Quarrying sector by 4% and
Manufacturing & Processing by 0.6%.
Likewise, the Saudi Industrial Development Fund continued its outstanding
commitment to the support of local industry in all spheres of industrial activities.
SIDF‘s loan approvals in the fiscal year 2010G amounted to SR 6,588 million.
Moreover, the Small & Medium Enterprises Loan Guarantee Program (KAFALA)
administered by the Fund, witnessed a significant increase of guarantee documents
approved in 2010G. (777) guarantees were approved having a total value of SR271
million to guarantee financing of SR 716 million extended by local commercial
banks to 480 small and medium enterprises.
At another level, the Saudi General Share Price Index registered 6620 points by the
end of 2010G compared to 6122 points at the end of 2009G. Nine companies made
partial public offerings on the market, bringing the total number of companies
registered in the market to 146. Furthermore, the Capital Market Authority (CMA)
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continued to draw up and issue a set of regulations to organize and develop the
market, and enhance the principles of fairness, transparency, disclosure and
investor protection. The CMA Council has amended the Corporate Governance
Regulations as well as regulations concerning companies‘ investment in the stock
market. The CMA has also licensed 4 new companies to be engaged in
multifaceted securities trading business, bringing the number of total licensed
companies to 94.
In pursuit of development and consolidation of structural and organizational
reforms intended to strengthen the national economic structure, a number of
measures were taken in 2010G. Approval of the 9th Development Plan for the
period 2010G-2014G has been issued and its implementation was launched during
the year. In addition, the Custodian of the two Holy Mosques decreed that
disbursement of the cost of living allowance by 15% to the public employees shall
be continued. Also, the establishment of a number of new government institutions
was approved by the government. Examples include King Abdullah City for
Atomic & Renewable Energy; a national society named the Saudi Society for
Quality; the Saudi Energy Efficiency Center; and the Executive By-Laws of the
Anti-Money Laundering Regulation.
As a result of the satisfactory performance of the Saudi economy in 2010G, the
International Monetary Fund (IMF) commended the Kingdom‘s fiscal and
monetary policies which were instrumental in limiting the repercussions of the
global financial crisis on the Saudi economy. Furthermore, the IMF expressed its
positive assessment of the sound banking system and the role of the specialized
government lending institutions in providing credit to the Small & Medium
Enterprises (SMEs). The IMF, also, commended the efficient use of resources and
investment in renewable energy. In addition, the IMF expressed its support of the
Saudi Riyal exchange rate policy and appreciation of the progress made, by the
Kingdom, in anti-money laundering and fighting terrorism. Moreover, the IMF
acknowledged the Kingdom‘s leading role in stabilizing the oil market and
implementing plans for expanding production capacities. Therefore, the
performance of Saudi economy in 2010G reflected positively on the rankings of
the Kingdom in the investment and global competitiveness indices. For instance,
the Kingdom was ranked 11 out of 183 countries in the Ease of Doing Business
Index issued by the World Bank, and it was also ranked the 21 st out of 139
countries in the Global Competitiveness Index issued by the World Economic
Forum.
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Overall, considering the severe consequences of the global financial crisis on most
of the economies across the world, particularly the advance ones, it is safe to
confirm that the performance of the Saudi economy has been a truly commendable.
Furthermore, according to the current indicators, the Saudi economy is expected to
continue its successful performance over the coming years and the government is
believed to carry on implementation of programs of economic reform in pursuit of
actualizing sustainable development and enhancing competitiveness of the Saudi
economy.
Local Industrial Sectors‟ Performance Indicators
The non-oil manufacturing sector in the Kingdom achieved substantial growth, approximately 5
% in 2010G, contrasted with 2.2% in 2009G. In addition, the relative contribution of the sector to
the country‘s GDP had considerably increased (recording 10.1% in 2010G), confirming the
strength of the sector. Furthermore, the industrial sector has contributed to a great extent to the
growth of Saudi non-oil exports to international markets with an increase of 14% over that of
2009G
and
reaching
SR
124
billions
in
2010G
In the context of the general picture of the industrial sector outlined above, we should consider
the performance of some indicators in this sector. Since the data for 2010G is unavailable, we
will, instead refer to the data for 2009G. Figures 1, 2 and 3 show the distribution of the
components of value added and Saudi labor ratio in the main Saudi manufacturing sectors
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Figure (1): Value Added Per Worker (SR Thousands)
Source: SIDF Manufacturing Database 2009G
As for the value added indicator, figure 1 above shows the distribution of the
components of the Saudi manufacturing sector value added in the year 2009G,
indicating that wages & salaries accounted for 35.6% of the total manufacturing
value added. Profits accounted for about 30.5%, depreciation 28.2%, interest rates
3.9% and, finally rents accounted for about 1.8%. This distribution pattern
highlights the contribution of the manufacturing sector towards increasing national
income by reaching a higher value added covering wages and salaries, and, in
addition, by contributing towards the expansion of production capacity.
Figure 2 below presents a more detailed picture of the distribution of the different
components of value added in the major industrial sectors. Profits with wages and
salaries accounted for 75.6% of gross value added in the Wooden Products Sector
This figure declined to 71.6% in the Metal Fabrication sector, 68.4% in Food
Products, 63.1% in the Chemical Industries, 61.3 % in Textiles & Leather, 60.7%
in Building Materials and finally to 60.5% in Paper & Printing. The main reason
for this decline is their technical nature, which is relatively more capital-intensive,
with a higher share of depreciation costs contrast with other industries.
690
As for the ratio of Saudi labor to total labor in the industrial sector, this indicator is gaining
increasing importance at the national level. Figure 3 shows the Saudi labor ratio to total labor in
the major industrial sectors during 2009, indicating that the Chemical Products Sector was ahead
of all other sectors, with a Saudi employment ratio of 37%. Then followed Metal Fabrication
sector with 26%, Building Material Sectors with a Saudi employment ratio of 25%, Wooden
Products with 23%, Food Products with 22% and Textiles & Clothes with a Saudi labor ratio of
21% and finally came Paper & Printing with a Saudi employment ratio of 17%. As for the whole
industrial sector, the Saudi labor ratio of 26% is considered moderate as foreign labor still
accounts
for
the
bulk
of
the
labor
force.
691
Trade Of Saudi Arabia
692
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. In November 2005, SAGIA
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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
694
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 neigh boring
countries.
Present trade relation and Business With India
India and Saudi Arabia enjoy cordial and friendly relations reflecting the centuries
old economic and socio-cultural ties. The establishment of diplomatic relations in
1947 was followed by high-level visits from both sides. King Saud visited India in
1955 and the Prime Minister Jawaharlal Nehru visited the Kingdom in 1956. The
visit of the Prime Minister Indira Gandhi to Saudi Arabia in 1982 further boosted
the bilateral relations. In the recent times, the historic visit of King Abdullah to
India in 2006 resulted in signing of ‗Delhi Declaration‘ imparting a fresh
momentum to the bilateral relationship. The visit provided the framework for
cooperation in all fields of mutual interest. The reciprocal visit by Prime Minister
Dr. Manmohan Singh to Saudi Arabia in 2010 raised the level of bilateral
engagement to ‗Strategic Partnership‘ and the ‗Riyadh Declaration‘ signed during
the visit captured the spirit of enhanced cooperation in political, economic, security
and defence realms.
695
India-Saudi Trade (in million USD)
Year
Imports
Exports to
Total
( April – from Saudi Saudi
trade
March) Arabia
Arabia
20072008
20082009
20092010
20102011
20112012
2012
(AprilNov)
%
%
%
increase in increase in increase in
bilateral Indian
Indian
trade
imports exports
19,470.30
3,711.16
23,181.46 -
-
-
19,972.74
5,110.38
25,083.12 8.20
2.58
37.70
17,097.57
3,907.00
21,004.57 -16.26
-14.40
-23.55
20,385.28
4,684.40
25,069.68 19.35
19.23
19.90
31,060.10
5,683.29
36,743.40 46.57
52.37
21.32
21,506.76
6,076.51
27,583.27 15.15
5.37
71.48
Source: Department of Commerce, GOI. (www.dgft.gov.in)
696
Bibliography
1) http://en.wikipedia.org/wiki/Politics_of_saudi arabia
2) http://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia
3) http://www.koreaittimes.com/story/3048/information-technology-sector-saudi-arabia
4) http://www.mapsofworld.com/saudi-arabia/society-and-culture/
5) https://www.cia.gov/library/publications/the-world-factbook/docs/profileguide.html
6) https://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html#2032
7) http://www.osec.ch/sites/default/files/GB_1109_E_GesBestimmungen-Saudi-Arabien.pdf
8) http://www.osec.ch/sites/default/files/GB_1109_E_GesBestimmungen-Saudi-Arabien.pdf
9) https://www.cia.gov/library/publications/the-world-factbook/docs/profileguide.html
697
Executive summary
Executive summary
� Saudi Arabia‘s recent economic successes have provided a historic opportunity
for the government to make targeted policy changes and investments to lay the
groundwork for a sustainable increase in the Kingdom‘s long-term rate of
economic expansion. This opportunity has been coupled with ambitious vision on
the part of His Majesty King Abdullah, Custodian of the Two Holy Mosques, to
encourage the economy‘s advancement and diversification beyond the petroleum
sector.
� These efforts focus primarily on competitiveness: making Saudi Arabia a worldclass investment destination and equipping it with the institutional basis for
productivity gains. Far-reaching reforms are being implemented under the auspices
of the 10x10 program, announced by His Excellency the Governor of SAGIA in
698
2006, an initiative to make Saudi Arabia one of the world‘s Top 10 most
competitive nations by2010.
� As this year‘s Competition Review makes apparent, the Kingdom is rapidly
upgrading its regulatory me to provide an optimal business environment while
steadily moving forward on other pillars of competitiveness, including the quality
of its infrastructure and its capacity for innovation.
� Recent reforms have delivered tangible benefits: for example, following reforms
streamlining the commercial registration process new business formation is up 81
percent this year.
� Significant challenges remain. In too many areas, such as trading across borders
and enforcing contracts, slow bureaucratic machinery increases transaction costs
and prevents companies from fully realizing the benefits of newly enacted reforms.
In education, outcomes have not kept pace with the high level expenditure. Such
crucial sectors as banking and information and communications technology remain
under developed by world standards, holding back investment and innovation. Yet
these concerns are recognized at the highest levels of the Saudi Arabian
government, and this year‘s Competitiveness Review highlights both the ongoing
efforts being applied and outstanding areas that require investment.
� The progress of the competitiveness agenda is benchmarked against two
internationally recognized measures:
� The World Bank/International Finance Corporation Ease of Doing
index, published in the annual Doing Business report.
699
Business
� The World Economic Forum‘s Global Competitiveness Index, published in the
annual Global Competitiveness Report.
� The Doing Business report concentrates solely on aspects of the business
environment, such as procedures and regulations around starting businesses,
employing workers, and enforcing contracts.
� By contrast, the WEF report takes a wider view, employing an Executive
Opinion Survey and statistical evidence to track such areas as the quality of
education, health care, and infrastructure, as well as the efficiency and
sophistication of business processes other agencies and organizations also produce
valuable reports dealing with various aspect competitiveness, including levels of
corruption, prevalence of red tape, and access to capital.
� For example, UNCTAD, the United Nations Conference on Trade and
Development, ranks countries according to their performance in attracting foreign
direct investment.
� In the Doing Business report from the World Bank and IFC, Saudi Arabia was
ranked 16th in 2008, up from23rd in the preceding year. The most significant
improvements were in protecting investors and closing a business. The former
success was due to new rules on the disclosure and approval of related-party
transactions, as well as stronger liability for directors. The latter improvement
followed a directive limiting the duration of bankruptcy procedures to ensure swift
recovery for creditors.
700
� Reduced fees for import and export procedures also drove significant
improvements in the trading across borders indicator, while starting a business saw
benefits from reduced commercial registration fees and the consolidation of
procedures within the Unifi end Office operation. The Kingdom‘s ranking
improvement to 16th is a strong sign of progress, and places Saudi Arabia ahead of
such advanced economies as Sweden, Germany, and Switzerland; however, more
needs to be done for the country to reach the Top 10by 2010.
� Saudi Arabia advanced to 27th in the World Economic Forum‘s Global
Competitiveness Report, from 35th in2007, ahead of the United Arab Emirates
(31st), Kuwait (35th) and Tunisia (36th). Qatar, at 26th the best performing
economy in the region, ranks just one place ahead of Saudi Arabia. Having
registered the strongest improvement of any Top 30 economy, the Kingdom must
now compete with such advanced economies as New Zealand and Luxembourg for
further rankings improvements. The most important gains in 2008 resulted from
reforms of the business environment, particularly the institutional frame work for
starting a business, and improvements in the efficiency of Saudi Arabia‘s goods
markets.
� The Kingdom also improved significantly in the UNCTAD World Investment
Report, attracting nearly one third more inward foreign direct investment flows in
2007 than in 2006. Saudi Arabia has now surpassed Turkey as the largest foreign
investment platform in the Middle East/North Africa region, and is the
world‘s18th-largest FDI destination. These results indicate that investors are taking
note of the strong and improving fundamentals of the Kingdom‘s economy, and are
directing capital into the country.
701
� Saudi Arabia is today by far the largest projects market of the Middle East, both
by the value of contracts awarded in 2012 and in terms of the pipeline of future
projects. As such, for most companies involved in the projects market, it is the
number one priority in the region.
� The kingdom‘s rise has been regular. Until 2009, its projects market was
eclipsed by the sheer scale of the Dubai real-estate boom and subsequently by the
Abu Dhabi energy sector. However, with the UAE‘s projects market now in steep
decline, Saudi Arabia has come into its own, doubling in size over the past three
years. Of the $110bn-worth of contracts awarded in the GCC in 20112, just under
half – $50bn – were placed in Saudi Arabia.
� Admittedly, the kingdom remains somewhat challenging for non-local
contractors. Outside the hydrocarbons and utilities process sectors, the market is
dominated by local contractors, with international firms frequently having to
partner with local companies in order to be successful. Nonetheless, such is the
scale of Saudi Arabia‘s current and future ambition that its projects market is one
that no one can continue to ignore.
� Saudi Arabia remains the region‘s largest projects market, with $50bn worth of
contracts awarded in 2012, and a further $375bn worth of projects planned;
� However, the market suffered a large drop in activity in 2012 compared with the
$70bn worth of deals compared in 2011. In most instance projects have not been
cancelled. Rather, the fall can be largely accounted for by public sector clients
finding it difficult to process all their project plans. There is some evidence to
suggest that the contractor market is aggressive to deal with the large workflow;
� Longer term, we anticipate the overall market will remain stable around the
$70bn mark, plus or minus 10 per cent.
� Future emphasis will be multi-pronged. Social infrastructure in the form of
affordable housing, schools and hospitals will see an upsurge in investment as
702
Riyadh seeks to provide the necessary infrastructure to meet population growth and
negate pressure for political reforms. This will be supported by an additional $50bn
in extra-budgetary spending commitments made in the immediate aftermath of the
Arab Spring;
� Infrastructure will be key. Substantial investments in airports, roads, ports and
rail will be made as the government looks to increase capacity to cope with the
rising population. Metro schemes especially will take the spotlight as the
government looks to award projects in Riyadh, Jeddah and Mecca. As the
population grows, so too does the need to create jobs and diversify the economy.
Investments in downstream manufacturing will be critical for the country‘s
economic prospects;
� After half a decade of investment targeted primarily at upstream oil and gas
production projects, the local hydrocarbons sector will be dominated over the next
two to three years by downstream investment focused on the refining sector. The
integration of refineries with new petrochemical facilities will also be a major
influencing factor over the period;
� The construction sector has historically been the largest sector followed by oil
and gas, power and chemicals. The kingdom is notable for the fact that there is
substantial activity across all sectors rather than just a few;
� The main drivers of the market continue to be high oil prices, the need to
diversify the economy, job creation, and demographic growth;
� The MEED Insight forecast is for just under $70bn worth of contracts to be
awarded in 2013, a 40 per cent increase in the 2012 stature. The largest sector will
construction followed by transport and power.
� On the contracting side, the market remains dominated by Saudi Binyamin
Group which, with more than $40bn-worth of contracts under execution, is by far
the largest contractor both in the kingdom and the region as a whole.
703
� The foreign contracting community is now dominated by South Korean firms, of
which there are five among the top 10 largest contractors in the kingdom. The
success of Korean firms lies largely with their willingness to take on risk and their
competitive pricing, and there is little sign that their dominance will end any time
soon;
� Future projects market growth in Saudi Arabia will be underpinned by strong
economic fundamentals. In 2012, the local economy grew by more than 8.5 per
cent to $621bn in nominal terms, lifted by a combination of record crude oil
production and record oil prices;
� According to the ninth development plan, which covers the period up to 2014,
the government intends to spend $385bn on its capital projects programme, a 67
per cent increase on the eighth development plan. This does not include the $120bn
of extra-budgetary outlay on social measures announced in 2011.
� When considering Saudi Arabia‘s economic fundamentals and its projects plans,
it is difficult to see the kingdom losing its mantle as the number one projects
opportunity in the region. And with its projects market only really gaining energy
over the past five years, there is still plenty of room for it to continue growing,
which should ensure it remains the number one priority for many contractors,
suppliers and consultants alike.
� Saudi Arabia since the discovery of its oil in 1938 has grown to be amongst the
wealthiest nations of the world. The Kingdom has the largest proven oil reserves in
the world outside the United States and the Soviet Union. The considerable
increase in world oil prices in 1973quadrupled oil revenues and enabled the
Kingdom to embark upon a massive development program.
� The diversification strategy of the Kingdom, especially through enhancement of
the private industrial sector has paid dividends in expanding the economy by
broadening the industrial base.
� The oil and gas industry remains vital to the economy of Saudi Arabia. The
growth of the private sector, however, has made a significant contribution to the
704
economic diversification strategy of the Kingdom, resulting in a substantial
increase of that sector's share of the Gross Domestic Product over the years.
� Saudi Arabia permitted only to Saudi and Gulf Cooperation Council nationals to
engage in trading activities and to register as commercial agents. To attract more
foreign investors to do business in the country, Saudi Arabia eased recently its
restrictions to allowed foreign individuals and companies to engage in trading
activities through a joint venture partnership with a Saudi individual or entity.
� Since its adhesion to the World Trade Organization (WTO), Saudi Arabia has
liberalized the wholesale, retail, and franchise sectors. Saudi Arabia allows foreign
investors to establish joint ventures and retain a 51% share.
� The foreign partner‘s capital requirement is set at USD 5.3 million and his
equity share can be increased to 75% after 3 years from the contract date. For
industrial activities, foreign investors are allowed to establish a 100% foreign
company and can also trade in the products they manufacture.
� A Saudi joint-venture partner is a requirement for any entity or individual to
practice individual professions, such as law, medicine, accounting and financial
services, architect and engineers, and other similar professions.
� Moreover, Aramco has a strongly stated preference under its „Saudi ‟ policy
for local procurement. 20% of its goods and services are purchased currently
through Saudi companies; this figure will double within the next two years. Direct
sale by foreign companies is becoming increasingly difficult and Manufacture
under license, joint venture or establishing a local company is becoming the more
viable route to achieving business with Aramco.
� With the third highest daily per capita water consumption in the world, at about
280 litters, after the United States and Canada coupled with its desolate desert
environment, water-scarcity issues, the rapid development of cities, massive
urbanization and industrialization, Saudi Arabia is forced to take drastic measures
in reviewing its water policies.
705
� The 30 government-run desalination plants on the Red Sea and the Arabian Gulf
coasts supply 60-70 % of the Saudi water needs and the rest met by ancient
underground aquifers (23%) and the remaining come from wastewater recycling.
� Some local experts estimate that around USD60 billion will be spent on
expanding Saudi Arabia‟ s water supply and distribution networks. These projects
include USD14 billion for building 16 new desalination facilities in 17 years. Saudi
Arabia aims substantially to in-crease its desalination water production8.
� The Saline Water Conversion Corp. (SWCC) continues to study the introduction
of 20 new saline water conversation projects to be implemented in the near future
to meet the demand increase for drinking and used water. The 20 new projects9
will include constructing new plants and expanding existing ones.
� Saudi Arabia has a very fast growing economy. GDP growth in 2011 is expected
to reach 6%, compared with 3.3% in 2007 and 4.4% in 2008. The booming
economy is creating great opportunities for both exporters and investors. These are
further boosted by moves to diversify the economy away from dependence on oil
and gas, economic reform, market liberalization and a growing private sector.
� Saudi Arabia represents the largest construction market in the Middle East, and
one of the fastest growing construction markets in the world. They key areas that
are currently being focused on are improving infrastructure, transport, education
and real estate all of which will require construction related activity.
� Saudi Arabia is the region's largest IT market with strong growth in consumer
and enterprise end markets. Huge public investments on infrastructure, health and
education have paved the way for advanced technology and security systems in the
country with the government planning for the industry to raise its contribution to
the GDP by 20 percent by 2020.
� The IT market in the country is valued at $3.6 billion in 2011 and expected to go
up to $4.9 billion by 2014. Significant unmet demands for web-based and mobile
services and increased enterprise and government commitment for web-based
services provide large-scale opportunities for contractors and service providers.
� Saudi Arabia has major manufacturing plants for dairy products, meat
processing, snack foods, beverages, bread, biscuits and confectionery. Many
foreign companies export to Saudi Arabia through the UAE. Swiss made products
706
enjoy a strong reputation among imported foodstuffs. Last may, Nestlé Middle
East launched its direct sales and distribution operations in Saudi Arabia, marking
a new phase of expansion in the region.
� The business system in Saudi Arabia does not appear transparent from the
outside. A minimum understanding of the religious traditions and customs of Saudi
Arabia is required because of the influence of Islamic law on business and social
life.
� Generally, business will only be conducted after a degree of trust and familiarity
has been established. Considerable time may be spent exchanging courtesies, and
several visits may be needed to establish a business relationship. Business visitors
should arrange their itineraries to allow for long meetings as appointments are not
highly respected in the private sector.
� Although many Saudi businessmen have been educated and/or have travelled
widely in the West and are sophisticated in dealing with western, many cultural
differences remain. As a conservative society, it is advisable to respect local
traditions, i.e. not to offer or receive an object with the left hand and sitting
crossed-legged with a foot pointing towards the other person is considered
offending.
� The annual revenues of the world's oil producing countries rose by US$ 400
billion between 2003 and 2005. Oil producing countries and their sovereign wealth
funds are now investing more in hedge funds and private equity than, as they
traditionally did, in US banks and treasury.
� Although industrialization is relatively recent, in Saudi Arabia, it has witnessed
a steady development, during which distinguished accomplishments were
achieved.
� These are attributed to the importance of the industrial sector and the support it
receives from the government owing to its role in achieving strategic and economic
goals of the country.
� The government has attached great importance to the industrial development by
providing all kinds of supports and facilities to the industrial sector.
707
� As a result, the Saudi industry has made significant progress that was clearly
manifested in the growth of industrial investment since the establishment of Saudi
Industrial Development Fund (SIDF).
� Providing modern industrial cities is an additional form of support the
government for the national industries. The Ministry of Commerce & Industry, has
constructed and developed several industrial cities in the various regions of the
Kingdom and provided them with all required services and utilities.
� To upgrade the quality of services provided by the industrial cities, the Saudi
Industrial Property Authority (Modon) was established in 2001, as an independent
public agency to supervise the establishment and management of industrial cities
and technology zones, in addition to the operation, maintenance and development
of theses cities in collaboration with the private sector.
� The revenues from the integrated up and downstream operations of
ExxonMobil, Shell, BP and Chevron generate far higher returns than those of the
national oil companies. In November 2007, the James Baker Institute calculated
that ExxonMobil, BP, Chevron, Shell and Con -coco Phillips used 56% of
increased operating cash flow on share buybacks.
� 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.
� The Saudi government continues to invest intensively in construction projects
that will boost and diversify the economy. The construction and engineering sector
is mainly boosted by government-led infrastructure development plants and the
new housing.
� 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
708
loans and support services and facilities. In addition, chambers of commerce and
industry in the major cities and regions promote commercial ventures.
� 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.
� 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. In November 2005, SAGIA
announced plans to open offices abroad, including in China, the United States,
Britain and Germany to attract investment in infrastructure projects.
� 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.
709
� 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 neigh boring countries.
Part –II
710
Construction sector of
Saudi Arabia
INDEX
Chapter SUB.
No.
No.
Particular
PART - 1
711
P.NO.
PREFECE
ACKNOWLEGEMENT
EXECUTIVE SUMARRY
PART - 2
OVERVIEW
OF
THE
CONSTRUCTION 16SECTOR IN SAUDI ARABIA
18
Chapter - 1
1
1.1
Role in the Economic of
Sector of Saudi Arabia
1.1.1
Saudi Arabia Steel Industry Preview
1.1.2
Saudi Arabia‘s $385 billion construction boom
1.1.3
Oil and Gas Continues to be the Pivotal Industry
1.1.4
Saudi Arabia accounts for 75% of GCC
Construction 20
21
22
23
24
petrochemical production
Chapter - 2
2
India's trade:
of exports, imports and 34
partner countries
Import
Export
2.1.1 India-Saudi Arabia Business Relations
37
39
40
Introduction
a)
Main Indian exports
42
b)
India Major‘s Import
42
712
c)
d)
Indian Manpower
Indian Investment and Joint Ventures
43
43
e)
Saudi investment in India
43
Policies and Norms of Saudi Arabia:
50
Evolution of Indian Construction Industry
52
2.1
2.2
53
Construction Sector and Indian economy
2.3
Key drivers of growth of construction industry
54
2.4
Construction industry-specific lending norms
55
2.5
Import Export Policy of India
56
3
Chapter - 3
Doing Business of Saudi Arabia
60
60
4
Chapter - 4
Potential for Import and Export in India 69
Markets.
4.1
Cement industry in India
70
Introduction
4.2
The import export in Gujarat Market
72
a)
Demand of the products
72-73
b)
Potential of the products for export
Conclusion
Bibliography
713
OVERVIEW OF THE CONSTRUCTION SECTOR IN
SAUDI ARABIA
The construction sector in Saudi Arabia is the largest and fastest growing market in
714
the Gulf region. Ongoing construction projects in the Gulf are valued at $1.9
trillion (SR7.1 trillion), and one-quarter of the developments are located in Saudi
Arabia. A number of positive economic, demographic, and geographic factors, as
well as continued government support, have combined to help Saudi Arabia
weather the current economic downturn better than most of its Gulf neighbours.
According to industry experts, in the first two quarters of 2009, 34 contracts, each
with a value over $500 million (SR1.9 billion), were awarded. These contracts
represent a combined worth of $50.1 billion (SR187.9 billion), which represents a
decrease from the total value of the 49 contracts awarded during the same period in
2008, which had a total worth of $63.5 billion (SR238 billion).
The Saudi Government, however, is intent on fuelling the sector‘s growth.
According to Saudi Government officials, the Kingdom will spend an estimated
$400 billion (SR1.5 trillion) on large infrastructure projects over the next five
years. In the period between October 2008 and April 2009, industry experts
estimate that the Saudi Government invested nearly $137 billion (SR513.8 billion)
on construction projects. The figure is more than twice the estimated value of
projects that have been delayed ($62 billion) during this same period.
715
Government-driven infrastructure projects will be important in reviving the Saudi
construction sector. In fact, H.E. Amr Al Dabbagh, Governor of Saudi Arabian
General Investment Authority (SAGIA), believes that the economic slowdown has
benefitted the Saudi ―The global economic slowdown has presented a great deal of
opportunities including depressed prices of building materials and surplus
capacities in construction companies, equipment and human capital. All these
challenges were there six months ago but now we are talking about a cost
advantage for construction between 30 and 40 percent. Now the challenge is how
much we can do in 24 hours a day, seven days a week.‖ Further, despite the current
economic climate, according to Trade Arabia News Service in June 2009, only 4
percent of Saudi real estate projects worth a total of $543 billion (SR2 trillion)
have been cancelled or delayed. Indeed, 30 projects have been cancelled, while 25
have been delayed, out of a total of 812 projects in real estate, leisure, and
infrastructure. Approximately 460 projects worth an estimated $289 billion (SR1.1
trillion) are currently in the construction phase. Among the remaining projects, the
majority is being planned, designed, or is in the bidding stage.
716
The construction sector has great potential for growth, as demand rises for
residential, commercial, housing and institutional construction. The housing sector,
in particular, is likely to grow, as the Saudi population is rising at a rate of 2.5
percent a year. Construction will also play a large part in the Kingdom‘s massive
industrial expansion through the National Industrial Cluster Development Program
as well as in the completion of six Economic Cities. Saudi Arabia‘s government
budget reflects the importance of ongoing growth in the construction sector.
Government spending is likely to remain aggressive in the sector, as the prices of
commodities decrease due to the global economic downturn. Furthermore,
according to industry experts, a revival in the Saudi economy in general, and in the
construction sector in particular, is likely, as demand for projects continues to
increase and as the financial climate improves.
717
Chapter – 1
1.1 Role in the Economic of Construction Sector of
Saudi Arabia
1.1.1) Saudi Arabia Steel Industry Preview
The kingdom of Saudi Arabia has become one of the favourite destination for the
steel major due to thriving construction sector demand; over the past few year, the
rapid economic development has led to skyrocketing growth in the construction
and infrastructure booming investment in real estate cheap and reliable
gas/
energy supply which has boosted steel demand in the country and caught global
steel giants.
With the industry‘s immense growth potential, according to ― Saudi Arabia Steel
Industries Forecast to 2013‖ Economic growth has substantially to raise domestic
steel consumption by accelerating business activities. In fact, the impact of
economic slowdown on the real estate projects was minimal. Out of the total real
estate projects worth US$ 543 Billion, mere 4% have been cancelled or delayed.
Hence, all these factors have fuelled the consumption of iron and steel in the
Kingdom to reach around 14.8 Million Metric Tons in 2009 and will boost to over
26 million to by 2015. The steel consumption in the Kingdom will grow 14%
CAGR during 2012-2015.
At present, the steel industry in Saudi Arabia is highly import oriented. However,
the situation is expected to reverse in future with the escalation of domestic
718
production. The share of imported steel will see a downward trend in coming years
as several major capacity expansion plans of manufacturers under pipeline.
The factors which will drive growth in Saudi Arabia‘s steel industry during the
forecast period and it will become the fastest steel producing and consuming nation
in the Middle East region. The increase real estate projects in different parts of the
country are currently the key boosters, and this trend coupled with government
initiatives will play a greater role in promoting reforms and increasing
competitiveness.
Known for its richness in petroleum resources, Middle East region is now
emerging as a strong contender for steel industry as not only government-backed
projects but also independents have been heavily investing in the steel capacities
that is poised to change the recognition of the region from oil pocket to steel hub in
coming years.
1.1.2)
Saudi Arabia‟s $385 billion construction boom
Saudi Arabia comprises the largest construction market in the whole of the Middle
East with multi-billion dollar projects under way and many more in the planning
stage by both the public and private sectors.
In 2009, it has invested on the infrastructure and public sector building $80 billion
with planned spending $385 billion between 2011- 2015. Plans include building
600 new factories, schools, doubling desalination capacity, increasing electrical
generation and distribution. Some 600,000 new homes are to be built in the next
four years with many more planned.
719
The growth is primarily likely to be led by residential development and mixed use
projects apart from infrastructure projects fuelled by the large demand supply gap
in the residential segment and the large disposable incomes of the predominantly
native and largely urbanizing young population of the Kingdom.
1.1.3)
Oil and Gas Continues to be the Pivotal Industry
The world‘s largest producer of oil and an important world player in natural gas,
with an oil output of nearly 8 million barrels per day and holding gas reserves of
up to 230 trillion cubic feet as of 2010, Saudi Arabia continues to be a dominant
player in the world oil and gas markets in spite of its efforts to diversify and
encourage greater contributions of other sectors to its GDP.
As of 2010, the oil and gas sector contributed nearly half of the country‘s GDP.
Due to its strategic importance not only in funding its ambitious diversification
programmes, but also its role in regulating global oil prices, this sector continues to
be dominated by government owned corporations. While the government has plans
to spend nearly US$400 billion in various oil and gas projects across the kingdom,
it also aims to attract global investment in the sector to the tune of US$1 trillion
over a period of fifteen to twenty years in bolstering this cash rich sector. The
estimated value of construction contracts expected to be awarded in the oil and gas
sector between the years 2008 – 2013 in Saudi Arabia is valued at over US$ 108
billion. However, high regulations and fluctuating oil prices continue to be the key
challenges towards the government achieving these goals.
720
1.1.4)
Saudi Arabia accounts for 75% of GCC petrochemical
production
Petrochemical industry is the second largest industry in Saudi Arabia. In recent
years investment in petrochemicals have increased aiming to exploit the great
potential of the sector. There were large players in this sector for decades, such as
the state owned Saudi Aramco and the Saudi Basic Industries Corporation
(SABIC). These companies are ranked among the world‘s largest petrochemical
producers. In Saudi Arabia there are large proven deposits of hydrocarbons,
chemical compounds, ethylene and propylene, benzene and xylems isomers that
gives great prospects to the country and the region industrially.
The Middle East is probably the most important influence on the global
petrochemical industry and Saudi Arabia accounts 75% of GCC petrochemical
production, A major part is exported and it is mainly concentrated in the industrial
cities of Jubail and Yanbu. The Kingdom‘s petrochemical industry enjoys a natural
competitive advantage due to the availability of low cost feedstock on account of
vast crude oil and natural gas resources.
721
Economic overview
The petroleum sector accounts for roughly 92.5% of budget revenues,[14] 55% of
GDP, and 90% of export earnings. About 40% of GDP comes from the private
sector. Roughly five and a half million foreign workers play an important role in
the Saudi economy, for example, in the oil and service sectors. The government is
encouraging private sector growth to lessen the kingdom's dependence on oil and
increase employment opportunities for the swelling Saudi population. The
government has begun to permit private sector and foreign investor participation in
the power generation and telecom sectors. As part of its effort to attract foreign
investment and diversify the economy, Saudi Arabia acceded to the WTO in 2005
after many years of negotiations. With high oil revenues enabling the government
to post large budget surpluses, Riyadh has been able to substantially boost
spending on job training and education, infrastructure development, and
government salaries.
Harr-economic trend
Saudi Arabia was an economy based on subsistence agriculture by a population
that was largely nomadic until the discovery of oil in the 1930s. It was not until the
1973 oil crisis that the country saw rapid growth, and GDP per capita soared by
1,858% in the 1970s (although that growth was concentrated with the ruling elite).
GDP per capita shrank by 58% in the Eighties with slower growth and a growing
population. However successful diversification efforts helped register a growth of
20% in the Nineties.
722
This is a chart of trend of gross domestic product of Saudi Arabia at market prices
estimated by the International Monetary Fund (and other sources[15]) with figures in
millions of Saudi Arabian Riyals.
Year
Gross Domestic
Product
1970
22,565
1975
163,670
1980
546,602
1985
376,318
1990
437,334
1995
533,504
2000
706,657
2005
1,152,600
US Dollar Exchange
Inflation
Per Capita
Index
Income
(2000=100) (as % of USA)
4.50 Saudi Arabian
Riyals
3.52 Saudi Arabian
Riyals
3.59 Saudi Arabian
Riyals
3.62 Saudi Arabian
Riyals
3.74 Saudi Arabian
Riyals
3.74 Saudi Arabian
Riyals
3.74 Saudi Arabian
Riyals
3.74 Saudi Arabian
Riyals
723
95
43.84
92
49.33
91
33.13
101
28.29
100
26.50
100
32.53
For purchasing power parity comparisons, the US Dollar is exchanged at 3.75.
Saudi Arabian Riyals only. Mean wages were $14.74 per man-hour in 2009.
As of August 2009 it was reported that Saudi Arabia is the strongest Arab
economy, according to World Bank.
Saudi oil reserves are the second largest in the world, and Saudi Arabia is the
world's leading oil producer and exporter. Oil accounts for more than 90% of the
country's exports and nearly 75% of government revenues. Proven reserves,
according to figures provided by the Saudi Government, are estimated to be 260
billion barrels (41 km3), about one-quarter of world oil reserves.
More than 95% of all Saudi oil is produced on behalf of the Saudi Government by
the parastatal giant Saudi Aramco, and the remaining 5% by similar parastatal
companies as of 2002. In June 1993, Saudi Aramco absorbed the state marketing
and refining company (SAMAREC), becoming the world's largest fully integrated
oil company. Most Saudi oil exports move by tanker from oil terminals at Ras
Tanura and Ju'aymah in the Persian Gulf. The remaining oil exports are transported
via the east-west pipeline across the kingdom to the Red Sea port of Yanbu. A
major new gas initiative promises to bring significant investment by U.S. and
European oil companies to develop non-associated gas fields in three separate parts
of Saudi Arabia. Following final technical agreements with concession awardees in
December 2001, development should begin in 2002.
Due to a sharp rise in petroleum revenues in 1974 following the 1973 Arab-Israeli
war, Saudi Arabia became one of the fastest-growing economies in the world. It
724
enjoyed a substantial surplus in its overall trade with other countries; imports
increased rapidly; and ample government revenues were available for
development, defence, and aid to other Arab and Islamic countries.
But higher oil prices led to development of more oil fields around the world and
reduced global consumption. The result, beginning in the mid-1980s, was a
worldwide oil glut, which introduced an element of planning uncertainty for the
first time in a decade. Saudi oil production, which had increased to almost 10
million barrels (1,600,000 m3) per day during 1980-81, dropped to about 2 million
barrels per day (320,000 m3/d) in 1985. Budgetary deficits developed, and the
government drew down its foreign assets. Responding to financial pressures, Saudi
Arabia gave up its role as the "swing producer" within OPEC in the summer of
1985 and accepted a production quota. Since then, Saudi oil policy has been guided
by a desire to maintain market and quota shares.
However, beginning in late 1997, Saudi Arabia again faced the challenge of low oil
prices. Due to a combination of factors—the East Asian economic crises, a warm
winter in the West caused by El Niño, and an increase in non-OPEC oil
production—demand for oil slowed and pulled oil prices down by more than onethird.
Saudi Arabia was a key player in coordinating the successful 1999 campaign of
OPEC and other oil-producing countries to raise the price of oil to its highest level
since the (Persian) Gulf War by managing production and supply of petroleum.
That same year, Saudi Arabia established the Supreme Economic Council to
formulate and better coordinate economic development policies in order to
accelerate institutional and industrial reform.
725
Saudi Arabia has announced plans to invest about $46 billion in three of the
world‘s largest and most ambitious petrochemical projects. These include the $27
billion Ras Tanura integrated refinery and petrochemical project, the $9 billion
Saudi Kayan petrochemical complex at Jubail Industrial City, and the $10 billion
Petro Rabigh refinery upgrade project. Together, the three projects will employ
more than 150,000 technicians and engineers working around the clock. Upon
completion in 2015-16, the Ras Tanura integrated refinery and petrochemicals
project will become the world‘s largest petrochemical facility of its kind with a
combined production capacity of 11 million tons per year of different
petrochemical and chemical products. The products will include ethylene,
propylene, aromatics, polyethylene, ethylene oxide, chlorine derivatives, and
glycol.
SABIC
The Saudi Arabian Basic Industries Corporation SABIC was established by a royal
decree in 1976 to produce chemicals, polymers and fertilizers. In 2008, SABIC
was Asia's largest (in terms of market capitalization) and most profitable publicly
listed non-oil company, the world's 4th largest petrochemical company, ranked
186th as world's largest corporation on the Fortune Global 500 for 2009, the
second largest producer of ethylene glycol and methanol in the world, the third
largest producer of polyethylene and overall the fourth largest producer of
polypropylene and polyolefin. Standard and Poor's and Fitch Ratings claimed
SABIC to be the world's largest producer of polymers and the Persian Gulf region's
largest steel producer for 2005 and assigned SABIC 'A' corporate credit rating. In
726
2008, Fortune 500 ranking records SABIC revenues at $40.2 billion, profits at $5.8
billion and assets standing at $72.4 billion.
Expansion operations and investments are projected to amount to USD20 billion in
2007 and USD70 billion until 2020. The overall total production in 1985 was 6.3
million metric tons (mmt); by the end of 2008 it had reached 56 mmt and by 2020,
SABIC intends to produce over 135 mmt per year. SABIC established in June
2006 "SABIC Sukuk Company" to issue Islamic bonds (Sukuk) that are estimated
to range between SAR1 billion (USD266.67 million) and SAR3 billion (USD800
million).
Net profits of SABIC in 2008 touched SR 22 billion (US$ 5.86 billion), while total
assets stood at SR 272 billion (US$ 72.5 billion) at the end of 2008 and the value
of current assets at the end of 2008 stood at SR 95 billion (US$ 25 billion.
Ma'aden (company)
Ma'aden was formed as a Saudi joint stock company on 23 March 1997 for the
purpose of facilitating the development of Saudi Arabia‘s mineral resources.
Ma'aden's activities have focused on its active gold business which has grown in
recent years to include the operation of five gold mines: Mahd Ad Dahab, Al
Hajar, Sukhaybarat, Bulghah, and Al Amar. Ma'aden is now expanding its
activities beyond its gold business with the development of its Phosphate Project,
Aluminium Project, and Other Projects. In addition, since its formation, Ma'aden
(through the Ministry of Petroleum & Mineral Resources) has collaborated with
the Government and local legislators to develop a regulatory framework for the
governance of the mining industry.
727
On 20 December 2009, Ma'aden signed an agreement with US aluminium giant
Alcoa to build a $10.8 billion aluminium complex. Under the agreement, the two
firms will build a 1.8 million tonnes per year aluminium refinery and a 740,000
million tonnes per year smelter in Ras Azzour. The smelter is slated to start
production in 2013 while the refinery would come online in 2014.
Trade
In recent years, Saudi Arabia sought to join the World Trade Organization.
Negotiations have focused on the degree to which Saudi Arabia is willing to
increase market access to foreign goods and services and the timeframe for
becoming fully compliant with World Trade Organization obligations. In April
2000, the government established the Saudi Arabian General Investment Authority
to encourage foreign direct investment in Saudi Arabia. Saudi Arabia maintains a
negative list of sectors in which foreign investment is prohibited, but the
government plans to open some closed sectors such as telecommunications,
insurance, and power transmission/distribution over time. As of November 2005,
Saudi Arabia was officially approved to enter World Trade Organization.
List of trade organizations
1. World Trade Organization (WTO)
6. International Monetary Fund (IMF)
7. International Chamber of Commerce (ICC)
8. International Organization for Standardization (IOS)
9. World Customs Organization (WCO)
728
10. Gulf Cooperation Council (GCC)
Doing business
The Kingdom of Saudi Arabia has been rated as the 22nd most economically
competitive country in the world, according to the International Finance
Corporation (IFC)-World Bank annual "Doing Business" report issued for 2013.
Since 2004, the Kingdom has advanced its overall Doing Business rankings, from
67th to 22nd.
Saudi Arabian companies dominate 2009's "MEED 100", with companies listed on
the Tadawul accounting for 29 out of the region‘s 100 biggest publicly quoted
companies ranked by market capitalisation. Just three of the 20 companies that
have dropped out of the top 100 over the past year are listed on the Saudi stock
exchange.
Diversification
As of 2007, non-oil manufacturing contributed 10% to Saudi Arabian GDP and
less than 6% of total employment.
Through 5-year development plans, the government has sought to allocate its
petroleum income to transform its relatively undeveloped, oil-based economy into
that of a modern industrial state while maintaining the kingdom's traditional
Islamic values and customs. Although economic planners have not achieved all
their goals, the economy has progressed rapidly. Oil wealth has increased the
standard of living of most Saudis. However, significant population growth has
strained the government's ability to finance further improvements in the country's
standard of living. Heavy dependence on petroleum revenue continues, but
729
industry and agriculture now account for a larger share of economic activity. The
mismatch between the job skills of Saudi graduates and the needs of the private job
market at all levels remains the principal obstacle to economic diversification and
development; about 4.6 million non-Saudis are employed in the economy.
Saudi Arabia's first two development plans, covering the 1970s, emphasized
infrastructure. The results were impressive — the total length of paved highways
tripled, power generation increased by a multiple of 28, and the capacity of the
seaports grew tenfold. For the third plan (1980–85), the emphasis changed.
Spending on infrastructure declined, but it rose markedly on education, health, and
social services. The share for diversifying and expanding productive sectors of the
economy (primarily industry) did not rise as planned, but the two industrial cities
of Jubail and Yanbu built around the use of the country's oil and gas to produce
steel, petrochemicals, fertilizer, and refined oil products were largely completed.
In the fourth plan (1985–90), the country's basic infrastructure was viewed as
largely complete, but education and training remained areas of concern. Private
enterprise was encouraged, and foreign investment in the form of joint ventures
with Saudi public and private companies was welcomed. The private sector
became more important, rising to 70% of non-oil GDP by 1987. While still
concentrated in trade and commerce, private investment increased in industry,
agriculture, banking, and construction companies. These private investments were
supported by generous government financing and incentive programs. The
objective was for the private sector to have 70% to 90% ownership in most joint
venture enterprises.
The fifth plan (1990–95) emphasized consolidation of the country's defences;
improved and more efficient government social services; regional development;
730
and, most importantly, creating greater private-sector employment opportunities
for Saudis by reducing the number of foreign workers.
The sixth plan (1996–2000) focused on lowering the cost of government services
without cutting them and sought to expand educational training programs. The plan
called for reducing the kingdom's dependence on the petroleum sector by
diversifying economic activity, particularly in the private sector, with special
emphasis on industry and agriculture. It also continued the effort to "Saudiize" the
labour force.
The seventh plan (2000–2004) focuses more on economic diversification and a
greater role of the private sector in the Saudi economy. For the period 2000-2004,
the Saudi Government aims at an average GDP growth rate of 3.16% each year,
with projected growths of 5.04% for the private sector and 4.01% for the non-oil
sector. The government also has set a target of creating 817,300 new jobs for Saudi
nationals.
Advertising expenditures have reached new peaks due to emphasis on value-added
manufacturing. As part of its diversification, Saudi Arabia has been inking major
refinery contracts with Chinese and other companies.
Investment
Saudi Arabia has one stock exchange the Tadawul and its financial markets are
regulated by the Capital Market Authority (Saudi Arabia). The stock market
capitalisation of listed companies in Saudi Arabia was valued at $646 billion in
2005 by the World Bank.
731
Chapter - 2
2.1 India's trade: of exports, imports and partner countries
Cameron has spent the week in India discussing trade relations with Britain. What
are India's main exports and imports, and who are its key trading partners?
Exports
A publication on India's trade and investment by Exim bank highlights the trend in
exports moving towards southern countries, particularly in the Asia and Africa
regions. Asia is a key destination of India's exports - in 2001-02 Asia's share stood
at 40.2% but in 2011-12 it grew to to 51.6%. Europe, however has seen a decline
in its share, down to 19% in 2011-12 from 24.8% in 2001-02.
India's key exports in 2012 were petroleum products which generated $56bn,
followed by gems and jewellery with $47bn. Pharma products, transport
equipment, machinery and readymade garments are also big exports for India.
The 2012 data shows that the United Arab Emirates (UAE) was India's biggest
export market, closely followed by the USA. The latest data available from the
Indian Government's Ministry of Commerce and Industry covering AprilSeptember 2012, shows the US to have slightly overtaken the UAE. Explore the
graphic above to see India's imports and exports by value and year. The UK is the
eighth biggest export market for India and held 2.9% of the market share in AprilSeptember 2012.
732
Imports
Crude petroleum is India's biggest import with $155bn spent on it in 2012. Imports
of gold and silver amounted to $62bn and electronic goods and pearls and precious
stones are also top import items for the country.
India's top import source is China followed by the UAE, Switzerland and Saudi
Arabia. The UK came in at 21st place in 2011-12 with India importing a total of
$7.7bn. In the six months recorded so far for 2012-13, the UK has dropped a place
and has a 1.4% share of the India's import sources.
The table below shows India's imports and exports by country including the share.
The downloadable spreadsheet also has data on the top import and export products
for the country. What can you do with this data?
Data summary
Top ten exporters to India, by value of trade in US$m and share of total
Country
2012-2013 (Apr- Sep) %Share (2012-2013 (Apr- Sep)
CHINA
28025.57
11.92
UAE
19622.81
8.35
SAUDI ARABIA 16094.83
6.85
USA
12208.05
5.19
SWITZERLAND 10779.45
4.59
IRAQ
9803.79
4.17
QATAR
8144.45
3.47
733
Top ten exporters to India, by value of trade in US$m and share of total
Country
2012-2013 (Apr- Sep) %Share (2012-2013 (Apr- Sep)
KUWAIT
8134.73
3.46
GERMANY
7154.41
3.04
INDONESIA
6944.86
2.95
Top ten importers from India, by value of trade in US$m and share of total
Country
2012-2013 (Apr- Sep) %Share (2012-2013 (Apr- Sep)
USA
19704.05
13.87
UAE
18601.71
13.09
SINGAPORE
6652.77
4.68
CHINA
6417.32
4.52
HONG KONG
6137.9
4.32
SAUDI ARAB
4636.29
3.26
NETHERLANDS 4458.24
3.14
UK
4112.26
2.89
GERMANY
3491.77
2.46
BRAZIL
3042.64
2.14
734
2.1.1) India-Saudi Arabia Business Relations
Introduction
India and Saudi Arabia are old business partners: their trade relations go back
several centuries in time. Today, the bilateral business ties are being steadily
expanded and further strengthened by continuous interaction and cooperation,
including regular exchange of business delegations. Besides being a major trade
partner, India sees the Kingdom as an important economic partner for investments,
joint ventures, transfer of technology projects and joint projects in third countries.
Trade
Saudi Arabia is the 4th largest trading partner for India: The value of the two-way
trade between the two countries in 2011-12 exceeded US$ 36 billion. Saudi Arabia
is the 14th largest market in the world for Indian exports and is destination of more
than 1.86% of India‘s global exports. On the other hand, Saudi Arabia is the source
of 6.35% of India‘s global imports (Source: www.dgft.gov.in).
For Saudi Arabia, India is the 5th largest market for its exports, accounting for
7.55% of its global exports. In terms of imports by Saudi Arabia, India ranks 9 th
and is source of around 3.27% of Saudi Arabia‘s total imports (2011 figures)
735
(Source: Saudi Arabian Monetary Agency (SAMA) Annual Report– 2011,
www.sama.gov.sa, extracted from import, export statistics published by Central
Dept. of Statistics & Information, Ministry of Economy & Planning, Saudi
Arabia).
Trade figures for the last six years are as follows:
Indo-Saudi Trade (in million US $)
Year
( April March)
Imports from
Saudi Arabia
Exports
Saudi
Arabia
to
Total
trade
Increase in Increase in Increase in
bilateral
Indian
Indian
trade
imports
exports
2006-2007 13,355.33
2,590.77
15,946.10 …….
……
……
2007-2008 19,470.30
3,711.16
23,181.46 45.37%
45.79%
43.25%
2008-2009 19,972.74
5,110.38
25,083.12 8.20%
2.58%
37.70%
2009-2010 17,097.57
3,907.00
21,004.57 -16.26%
-14.40%
-23.55%
2010-2011 20,385.28
4,684.40
25,069.68 19.35%
19.23%
19.90%
2011-2012 31,060.10
5,683.29
36,743.40 46.57%
52.37%
21.32%
Source: Department of Commerce, GOI. ; www.dgft.gov.in(as on 29.09.2012)
736
Indo-Saudi Trade (in million US $)
December 2011
Imports
from
Saudi Arabia
Exports to Saudi
Arabia
Total
December
2012
April-
April-
December
December
2011
2012
% increase
2681.25
2781.19 23028.47
24803.52
7.71
396.23
693.64
6776.67
72.01
3077.48
3474.83 26968.17
31580.19
17.10
3939.70
Source: DGCI & S, Ministry of Commerce, GOI (as on 31.1.2013)
Main Indian exports
Main Indian exports include Mineral Fuels, mineral oils and products thereof;
cereals; nuclear reactors, boilers; electrical machinery and equipment; Iron and
steel; organic chemicals; meat and edible meat offal; articles of Iron or steel;
articles of apparel and clothing accessories; etc.
India‟s major imports
India‘s major imports from Saudi Arabia are Mineral Fuels, mineral oils and its
737
products; organic chemicals; plastic and its articles; inorganic chemicals;
fertilisers; aluminium and its articles; iron and steel; copper and its articles;
miscellaneous chemical products; raw hides and skins (other than furskins) and
leather; etc.
Indian Manpower
Approximately 2.0 million Indians are at present working in Saudi Arabia, over
70% are in the blue-collar category. These people have made immense
contribution to Saudi economy, and they play an important role in strengthening
the Indo-Saudi bilateral relations.
Indian Investment and Joint Ventures
The bilateral investment between the two countries is growing steadily. Since mid2000, a number of Indian firms have taken advantage of the new Saudi laws and
established joint venture projects or wholly-owned subsidiaries in the Kingdom.
According to Saudi Arabian General Investment Authority (SAGIA), as of
31.01.2006 to 31.12.2010 it has issued 426 licenses to Indian companies for joint
ventures/100% owned entities, which are expected to bring total investment of
US$ 1624.60 million in Saudi Arabia (as per latest figures available). These
licenses are for projects in diverse sectors such as management and consultancy
services, construction projects, telecommunications, information technology,
pharmaceuticals, etc. Moreover, several Indian companies have established
738
collaborations with Saudi companies and are working in the Kingdom in the areas
of designing, consultancy, financial services and software development. On
12.12.12, Tata has signed a letter of intent to establish factory in Saudi Arabia to
produce 50,000 Land Rovers a year by 2017. The initial investment is estimated at
US$1.2 billion.
Saudi investment in India
On the other hand, Saudi Arabia is the 46th biggest investor in India with
investments from April 2000 to December 2012 amounting to US$ 40.90 million.
There are a number of Indo-Saudi joint ventures or Saudi owned companies in
India, in diverse fields such as paper manufacture, chemicals, computer software,
granite processing, industrial products and machinery, cement, metallurgical
industries, etc. (source: www.dipp.nic.in)
Indian Business delegations to Saudi Arabia
During last couple of years, a large number of Indian trade and industry
delegations have visited Saudi Arabia to explore the opportunities for long-term
partnerships and cooperation, including joint ventures. These delegations received
warm and enthusiastic response from the Saudi business community. Indian and
Saudi companies regularly take part in trade fairs in each other‘s country. The
important recent bilateral visits from India include the historical official visit of
Hon‘ble Prime Minister Dr. Manmohan Singh, from 27 Feb-March 1, 2010.
739
List of recent visits is as follows:
An eight member delegation from the Chemicals and Allied Products Export
Promotion Council of India (CAPEXIL) visited Riyadh from 28-30 January, 2011
to hold Buyer-Seller Meet (BSM) with the Saudi businessmen. The BSM was held
on 29th January, 2011.
A 16-member business delegation from Synthetic & Rayon Textiles Export
Promotion Council (SRTEPC) visited Saudi Arabia and held a BSM/ Exhibition in
Riyadh Chamber of Commerce & Industry from September 13th to 14th, 2011. The
BSM/ exhibition in Riyadh drew several businessmen including importers and
suppliers of textile items. The SRTEPC also held a similar BSM/ Exhibition in
Jeddah from September 17th to 18th, 2011.
A 13-member delegation from the Confederation of Indian Industries (CII) visited
the Kingdom (December 10-18, 2011). The delegation was made up of
representatives from sectors like engineering and auto components; rubber
moulded and extruded products; infrastructure; hospitals; IT Consulting including
business process outsourcing; construction; communication technology; process
plants in fields like fertilizers, ammonia scrubbing etc.; management consultancy;
and engineering solution provider in sectors like energy and environment. The
delegation had business meetings in the Chambers of Commerce & Industry in
Jeddah, Riyadh and Dammam. The delegation also met some prominent
740
businessmen in the cities of Jeddah and Riyadh. The visit of the CII delegation is
yet another testimony to the growing business interaction between India and the
Kingdom of Saudi Arabia.
4. A Tourism Road Show was held in the cities of Dammam, Riyadh and Jeddah
(January 7-12, 2012). The tourism delegation, comprising representatives from
State Tourism, including the Tourism Minister from the State of J&K; tour
operators, representatives from airline industry; and officials from the India
Tourism Office, Dubai participated in the Road Show. The delegation was led by
Secretary, Tourism, Mr. R.H. Khwaja. The delegation had meetings with their
opposite numbers in all the three cities.
5. A 3-member delegation from the Gems & Jewellery Export Promotion Council
(GJEPC) of India visited Riyadh and Jeddah from 27th to 29th May, 2012. The
delegation organized Road Shows in the cities of Jeddah and Riyadh.
6. A seven member business delegation consisting of growers and exporters of
Cardamom, headed by the Director (Marketing) Spices Board of India visited
Riyadh and Jeddah from 3rd to 5th June, 2012 and held Buyer-Seller- Meets (BSM)
with Saudi businessmen at the premises of Riyadh and Jeddah Chambers of
Commerce and Industries.
A five member high level official delegation led by the Secretary (Economic
Affairs), Ministry of Finance, Government of India, accompanied by senior
741
officials from Ministry of Commerce, Reserve Bank of India and the Securities and
Exchange Board of India visited Riyadh on 10th June, 2012 and organized a Road
Show on ‗‗Investment Opportunities in India‘ at Al Faisaliah Hotel, Riyadh. The
delegation also had interactive meetings with senior officials of Saudi Arabian
Monetary Agency (SAMA) and Saudi Arabian General Investment Authority
(SAGIA).
Mr. Satyan Sharda, Director and Mr. M.P. Singh, Director (cost) from Ministry of
Commerce & Industry, New Delhi, India visited Saudi Arabia. The delegation
visited facilities and had meetings with officials of Saudi Basic Industries
Corporation (SABIC) and Saudi Petrochemical Company (SADAF) in Riyadh and
Jubail respectively from 30th June to 4th July, 2012.
A two member delegation comprising Shri Shashank Goel, Joint Secretary
Ministry of Heavy Industries and Public Enterprises and Shri A.K. Verma,
Director Finance of Engineering Projects (India) Limited (EPI), a Central Public
Sector Enterprise under the administrative control of Department of Heavy
Industry visited Saudi Arabia from 14.07.2012 to 16.07.2012.
ITPO participated in Saudi Agro Food 2012 in Riyadh from September 24-27,
2012 at Riyadh International Convention & Exhibition Center. 38 Indian
companies including APEDA participated in the Exhibition under the ITPO
banner.
A three member delegation led by Shri Sanjay Singh, Secretary (East) visited
742
Riyadh on 23.12.2012 to participate in the 9 th India-Saudi Joint Commission
Review Meeting.
12.
An 11 member business delegation from CAPEXIL held Buyer Seller Meet
in Riyadh Chamber of Commerce & Industry on 27.02.2013.
Proposed Indian delegations and Commercial events during 2012/
early 2013
1. India Food Festival at Elaf Jeddah Hotel from 20-28 March, 2013 by
Consulate General of India, Jeddah.
2. Catalogue Show of Indian Companies at Bisha Chamber of Commerce and
Industry from 25-26 March 2013.
3. Catalogue Show of Indian Companies at Yanbu Chamber of Commerce and
Industry from 29-30 April 2013.
4. Incredible India Tourism Road Show is planned at Jeddah (19th May 2013),
Riyadh (21st May, 2013) and Dammam (23rd or 24th May, 2013).
743
5. ITPO would be participating in Saudi Agro Food 2013 in Riyadh from 15-18
September 2013 at Riyadh International Convention & Exhibition Center.
6. Embassy of India Riyadh has proposed to Ministry of Commerce & India
Trade Promotion Organisation (ITPO) to organise an India Trade Fair in
December 2013 / early 2014.
7. The 3rd Round of FTA negotiations between India and GCC to be held in
India (date to be decided).
8. 4th GCC-India Industrial Conference is scheduled to be held in Jeddah, Saudi
Arabia from 25-27 May, 2013.
9. A delegation of Overseas Indian Facilitation Centre (OIFC) – {A not-forprofit initiative of MOIA & CII} is planning to visit Saudi Arabia for a two
day meet to ‗expand the economic engagement of the NRIs/PIOs in the
Kingdom of Saudi Arabia with India‘ and is likely to be held with GCCIIndia Industrial Conference.
744
Saudi Business delegations to India
In recent times, the number of Saudi businessmen and delegations visiting India
has grown substantially, indicating a growing interest in emerging business
opportunities in India.
List of recent visits is as follows:
A 33 member Saudi business delegation led by Dr. Abdulrahman Alrabiah,
Chairman of the Saudi-Indian Business Council (SIBC): (set up by Council of
Saudi Chambers of Commerce and Industry) visited India during February 2011 to
attend the 3rd India-Saudi Joint Business Council Meeting held in New Delhi in
February, 2011. The delegation had interactive meetings with FICCI, CII and
ASSOCHAM and Indian businessmen representing various sectors. MOUs/JVC
agreements between India and Saudi Companies were also signed during the visit.
A six member Saudi technical team from Saudi Arabia under Saudi Food & Drug
Authority (SFDA) visited India during May- June, 2011 for inspection of meat
processing plants in India for approval of the exports of meat and meat products to
Saudi Arabia.
3. A 11-member business delegation from Saudi Arabia led by a prominent Saudi
businessman, Dr. Tawfiq Al-Swailem, Vice Chairman of SIBC visited India in
745
September, 2011 and had a business seminar in Mumbai on September 26th, where
they met up with members of the CII/ FICCI/ Indo-Arab Chamber of Commerce.
A 40-member Saudi business delegation led by Dr. Abdulrahman Alrabiah,
Chairman of the SIBC visited India during January 2012 to attend the 4th IndiaSaudi Joint Business Council Meeting held on the sidelines of the 9 th Joint
Commission Meeting (January 4-5, 2012). The Saudi delegation also had a
meeting with members of the CII during their visit.
A 13 member Saudi-Indian Business Network (SIBN) delegation headed by Ghazi
Binzagr visited India from 22-30 November, 2012. The delegation visited Delhi,
Agri, Bangalore and Mumbai. It met Minister of State for External Affairs E.
Ahamed and Minister of State for Ministry of Commerce S. Jagathrakshakan. The
delegates visited Indian Institute of Management (IIM) in Bangalore, Tata Institute
of Social Sciences (TISS) in Mumbai, Indian Islamic Cultural Center (IICC) in
New Delhi and the Energy and Resources Institute (TERI). The delegation also had
meeting with top members of the Confederation of Indian Industry (CII) and
toured the campuses of leading Indian IT firms such as Infosys and Wipro.
A Saudi business delegation led by Dr. Abdulrahman Al Rabiah, Chairman of the
Saudi India Business Council (SIBC) visited India from 4.03.2013 to
08.03.2013. The delegation visited Hyderabad, Delhi and Lucknow and held wide
ranging meetings. It also hold 5th Joint Business Council in New Delhi on 6.3.2013
with Federation of Indian Chambers of commerce and Industry (FICCI).
746
Overview
Indo-Saudi relations have received fresh impetus in recent years following two
very important State-level visits. The ‗Delhi Declaration‘ signed during the visit of
His Majesty King Abdullah bin Abdul Aziz al-Saud to India in January 2006
followed by the ‗Riyadh Declaration‘ signed in the course of the Indian Prime
Minister‘s visit to Saudi Arabia in February-March, 2010 have both given a fillip
to an increased level of interaction between the two countries on areas ranging
from oil and gas; science & technology; to energy, banking & investment. Saudi
Arabia and India have established a number of institutional mechanisms for
bilateral economic cooperation. These include the Saudi-India Joint Business
Council; the Indo-Saudi Joint Commission Meetings; the Joint Working Groups on
Hydrocarbons etc. India and Saudi Arabia are also actively engaged with each
other in forums like India-GCC Industrial Conference and the India-GCC Free
Trade Agreement Talks. Progress on these and finalization of tariff lines are
expected to provide further thrust to bilateral trade between India and Saudi
Arabia. Earlier, the two countries had signed the Bilateral Investment Protection
and Promotion Agreement (BIPPA) and Double Taxation Avoidance Agreement
(DTAA) during the historic visit of King Abdullah bin Abdul Aziz Al-Saud to
India in January, 2006.
India‘s bilateral trade with Saudi Arabia has been steadily rising. Saudi Arabia is
the 4th largest trading partner for India. India imports almost 16.17% of its crude
oil from Saudi Arabia. Both countries are committed to elevate the current buyer747
seller relationship into strategic energy cooperation. Saudi Arabia is the 46 th
biggest investor in India with investments from April 2000 to December 2012
amounting to US $ 40.90 million. There are a number of Indo-Saudi joint ventures
or Saudi owned companies in India, in diverse fields such as paper manufacture,
chemicals, computer software, granite processing, industrial products and
machinery, cement, metallurgical industries, etc. There is considerable scope for
diversification and further strengthening of the economic ties especially in the field
of investments. Saudi investors are also looking at raising the levels of investment
in India including in sectors like infrastructure and real estate.
Many Indian companies are operating in/from Saudi Arabia. According to The
Saudi Arabian General Investment Authority (SAGIA) Indian companies /entities
have invested a sum of US$ million 1624.60 in Saudi Arabia from January 2000 to
December, 2010. Saudi companies are also looking at India as an attractive
investment destination.
`
There are opportunities for Indian businessmen and companies in sectors like
construction industry, petro-chemicals and health & pharmaceuticals in Saudi
Arabia while similarly attractive opportunities are there for Saudi businessmen and
companies in sectors like infrastructure and real estate in India.
748
Officials from the Saudi and Indian sides met at New Delhi from January 4-5, 2012
for deliberations marking a successful 9th Joint Commission Meeting between the
two sides. The Saudi delegation, led by the Commerce & Industry Minister, Dr.
Tawfiq Bin Fawzan Al-Rabiah, comprised 76 officials and businessmen. The
Chairman from the Indian side was the then Hon‘ble Minister for Finance, Mr.
Pranab Mukherjee. A whole range of issues were discussed at great length and this
Meeting is expected to provide even further thrust and momentum to the ongoing
bilateral co-operation between the two countries.
9th Joint Commission Review Meeting took place on 23 rd December, 2012 in
Riyadh. The Indian delegation was led by Mr. Sanjay Singh, Secretary (East),
Ministry of External Affairs, GOI. Both sides discussed the progress made and to
decide on actions to be taken.
The 4th Joint Business Council met on the sidelines of the 9 th JCM. The 5th Joint
Business Council was held on 6th March 2013 in Delhi.
749
India - GCC Relations
Introduction
The Gulf Cooperation Council (GCC) as a collective entity has tremendous
significance for India. The Gulf constitutes the ―immediate‖ neighborhood of India
separated only by the Arabian Sea. India, therefore, has a vital stake in the
stability, security and economic well-being of the Gulf. As a group, the GCC has
been increasingly determining the economic, political, and security policies of its
member States. The GCC countries are moving ahead rapidly with their economic
integration efforts. The GCC has emerged as a major trading partner for India; it
has vast potential as India‘s investment partner for the future. The GCC‘s
substantial oil and gas reserves are vital importance for India's energy needs. The
GCC countries are collectively host to a large Indian expatriate community. In
short, the GCC offers tremendous potential for cooperation in trade, invest