Country Profile:
Saudi Arabia
Saudi Arabia
Given its strong ties to the global oil market – and thus the overall global economy – it was inevitable that Saudi Arabia would feel the impact of the worldwide economic downturn. Indeed, while 2009 has been by no means a year of straightforward progress, the Kingdom has fared relatively well thanks to its buffer of capital reserves built up over the oil-boom years. Moreover, the government has been proactive in warding off the effects of the global crisis – the 2009 budget was the largest in the country’s history and targeted the development of non-oil sectors crucial to long-term development, such as health and education, as well as the funding of expansive infrastructure projects. The government’s proactive fiscal stance has helped the country to continue on its path towards a more diversified economy and growth is expected to rebound quickly in 2010.
ISBN: 978-1-907065-08-8
ISSN: 1756-4190 (Online)
ISSN: 1756-4182 (Print)
TABLE OF CONTENTS
COUNTRY PROFILE
This section provides a quick overview of some facts about the country, its population, religion, culture, language, natural resources, geography, climate and education system.
This chapter features a viewpoint from King Abdullah bin Abdulaziz Al Saud, Custodian of the Two Holy Mosques. It also includes interviews with Prince Khalid Al Faisal, Governor of Mecca; Shinzo Abe, Former Prime Minister of Japan; Mahathir bin Mohamad, Former Prime Minister of Malaysia; Mary Robinson, Former President of Ireland; and Jean Chrétien, Former Prime Minister of Canada.
THE ECONOMY
With its buoyant performance over the past year, the Kingdom of Saudi Arabia has proven that it remains the economic powerhouse of the Arab world, even during difficult global conditions. While its petroleum resources may be the most prominent feature of its economy, it is by no means the Kingdom’s only asset, and the deflated oil market of 2008-09 had an understandable knock-on effect on non-oil sectors. Perhaps one of the Kingdom’s most significant indicators is its population – estimated at about 25m – with its relatively high per-capita GDP, creating an enormous demand for a vast array of products and services, especially in the fields of banking, real estate and leisure. While these sectors may have taken a bump in the downturn, growth is expected to normalise promptly in 2010. Like other Gulf countries, the Kingdom is intent on diversifying its economy – a plan that received a significant boost from 2009’s fiscal expansion programme, funded largely by massive reserves from the five-year oil boom. Devised as a means to combat the effects of the financial crisis and foster the continuing growth of non-oil industries, the latest budget – the largest in the country’s history – focuses on large-scale infrastructure projects and ensuring the continuity of high living standards through health and education investments. Cement, services and telecoms are also areas of heavy government investment and the latter two are expected to post impressive rates of growth – up to 11% – in 2009, according to Riyadh Bank. Meanwhile, the oil sector and related downstream industries are still receiving large amounts of government support in a bid to maximise the country’s enormous petroleum reserves. The housing sector – an area of acute economic malaise in many other countries – remains relatively buoyant in Saudi Arabia, thanks to the large and increasingly wealthy population, as well as historic undersupply in the market. While foreign direct investment (FDI) – long a source of marquee statistics in Saudi’s economic profile – all but evaporated in 2009, increased investment is expected once the global economy rebounds. In a telling sign of reform success, the country moved closer this year to attaining its ambitious goal – set in 2005 by the Saudi Arabian General Investment Authority (SAGIA) – to achieve a top-10 ranking on the World Bank’s annual “Doing Business” report. The Kingdom ranked 16th out of 181 countries in 2009, from 67th just three years ago.
In this chapter OBG sits down with Mansour Al Maiman, Secretary-General, Public Investment Fund; Amr Abdullah Al Dabbagh, Governor, Saudi Arabian General Investment Authority; and Adel Fakeih, Mayor of Jeddah.
BANKING
Banks took a number of steps to ensure that they remained well capitalised in 2008 and although they suffered some erosion of asset values as a result of minimal exposure to toxic assets, they were in a position to put aside more than adequate reserve provisions to cover any losses. The sector is regulated by the Saudi Arabian Monetary Agency (SAMA), which also acts as Saudi’s central bank. The new mortgage law – expected to pass either in 2009 or 2010 – is the only major regulatory change in sight for the short term, and its progress is being watched closely in the banking industry as it has the potential to unlock strong pent-up demand. When compared regionally and internationally, the health of the banking sector seems relatively robust – total domestic assets reached $347bn at the end of 2008, an increase of 21%. Despite these strong fundamentals, lending has contracted since November 2008. Risk sensitivity has remained high since the onset of the financial crisis in the West in late 2008, while some local projects and expansion plans have been delayed or put on hold until stability increases, contributing to the lending drop. In the meantime, Saudi banks are expected to continue to support their key domestic relationships. The sector’s loan-to-deposit ratio has declined since reaching a peak of 91% in 2008 – well above SAMA’s 85% statutory limit – and is in the range of 80-85% in 2009. Foreign banks were first permitted to enter the market in the form of branches in 2002 but have a relatively low market share in terms of retail banking. Instead, they have had made their presence in Saudi felt through project financing, though this has slowed in light of the financial crisis as international banks focus on their home markets. Significant opportunities remain – in the under-banked consumer sector and massive government infrastructure projects, for example – even during uncertain times.
This chapter includes a viewpoint from Muhammad Al Jasser, Governor, Saudi Arabian Monetary Agency; and an interview with Eisa Al Eisa, Managing Director & CEO, Samba Financial Group.
CAPITAL MARKETS
The Saudi economy may have escaped the bluntest effects of the financial crisis, but the stock market, the Tadawul, has been hit considerably harder than one might imagine – and for reasons that are not immediately obvious. As the crisis sunk in, the Tadawul All Share Index (TASI) fell from average levels of 9500 for most of 2008 to settle in a range of 4000-5000 in early 2009. As economic fundamentals remain strong, the cause of the Tadawul downturn may be more closely related to radical fluctuations in sentiment. Unprecedented access to information the world over means that markets – and market sentiment – is more closely connected than ever before. In Saudi Arabia there is a high proportion of retail investors, estimated at around 90%, whose sentiment is the primary market driver and who are heavily influenced by falling oil prices and the US stock market. In the wake of the US meltdown, the Capital Market Authority (CMA) has taken strong steps to monitor and regulate any kind of manipulative investor activity. Signs of market recovery were emerging in mid-2009 and the Saudi stock market is generally considered to be undervalued, presenting a good opportunity for investment. Indeed, despite complicated market conditions bonds were brought to market, becoming tradable on the Tadawul in June of 2009. The Saudi primary, secondary and bond markets are all well set for development and, as the global environment improves and investors become more sophisticated, the country could mature into an important regional financial centre.
Included in this chapter are interviews with Abdullah AlSuweilmy, CEO, Saudi Stock Exchange; Maha Al Ghunaim, Chairperson and Managing Director, Global Investment House; and Osama M Shaker, Managing Director and Head of Investments, HSBC Saudi Arabia. HSBC provides an analysis of selected stock and bonds from the Tadawul.
ISLAMIC FINANCIAL SERVICES
Islamic financial products may have received their first spotlight moment courtesy of the global financial crisis, as the international media touted the sector as a more risk-averse means of investment, but in Saudi Arabia and the GCC sharia-compliance has been a prominent and rapidly growing trend for a number of years. Islamic products dominate Saudi Arabia’s financial services market in the retail sector and increasingly in the corporate sector. Saudis, according to documented surveys, are more likely than other GCC investors to demand Islamic products. Local banks that are not already totally sharia-compliant have opened Islamic windows, as have a number of foreign banks. Broadly speaking, Islamic products tend to be more expensive and harder to implement than conventional products – a tendency which comes down to the fact that conventional products have been made more efficient over one to two hundred years; sharia-compliant products are only five to seven years old. As Islamic financing options become more refined, they are closing the gap on the benefits of conventional products. Increased innovation is expected in the fields of Islamic derivatives and mortgage products, which will receive a boost from the new mortgage law, expected in either 2009 or 2010.
This chapter features a round table interview with Abdullah Sulaiman Al Rajhi, Managing Director and CEO, Al Rajhi Bank; Abdulmohsen Al Fares, CEO, Alinma Bank; and Khalid Al Jasser, CEO, Bank Albilad.
INSURANCE
Local awareness of the benefits of insurance is rapidly increasing on the back of new legislation requiring companies to insure all expatriate workers (Saudi nationals are already covered) and making third-party motor insurance obligatory. Another factor that is bringing insurance into the mainstream is the slew of huge projects planned by the government – insurance coverage will be required in order for private developers and contractors to complete these projects. The Saud Arabia Monetary Agency (SAMA) – the sector regulator – issued a number of new regulations including anti-money laundering and counterterrorism legislation, and new rules on risk management. Anti-fraud measures were tightened in December 2008, and a major new regulation on reinsurance is expected soon. A market code of conduct was also issued in August 2008 and SAMA established a completely new framework for the industry, with many therefore calling 2009 the real beginning of the Saudi insurance sector. Some consolidation amongst providers is expected as the market becomes more crowded – as of August 2009 there were 34 insurance companies in operation. However, notwithstanding this, the sector is set for significant expansion.
This chapter includes a viewpoint from David Anthony, Director, Standard & Poor’s, London.
TRANSPORT
All aspects of transport infrastructure in Saudi Arabia – including road networks, cargo facilities and its nascent railway system – are undergoing comprehensive expansion. While the Kingdom already boasts what is possibly the region’s most extensive road network in the Middle East, major projects are under way, including the reconstruction of the Mecca-Jeddah highway and 8000 km of new roads. Comparatively, railway networks have only recently come to the fore. There is only one line currently – a link between Riyadh and Dammam – but the state is eager to lay tracks to capitalise on the demand potential for passenger transport and goods freighting. The most ambitious plan is the east-west Landbridge, which will link Jeddah with the Riyadh-Dammam line. The North-South Railway that will link state mining facilities is proceeding under the management of the Saudi Railway Company and is expected to be completed by 2012 at a cost of up to $6.7bn. The 2009 budget expanded funding to the transportation and telecommunications sector, to $5.1bn (from $3.2bn the previous year), the bulk of which will go to road construction. Substantial as this amount is, it does not fully reflect the extent of the government’s commitment to the sector, as the majority of large infrastructure projects fall under the auspices of other bodies, like the Public Investment Fund (PIF). Under the Kingdom’s Eighth Development Plan (2005-10), a total of $9.5bn had been budgeted towardss the expansion of transport and logistics infrastructure, and the maintenance of existing infrastructure. The Ministry of Transport is currently in the process of creating the new National Transportation Strategy, which will set the agenda for the government’s future development of the sector over the next 10 to 15 years. Shipping and maritime transport in general is likely to be a major area of focus under the new plan. The Kingdom has long been a leader of shipping in crude oil and petrochemicals but container shipment is more of a recent development. A new market in dry bulk shipping will be created at Ras Az Zawr, which will be integrated into the North-South rail line. A massive new container port is planned for King Abdullah Economic City and the Jeddah Islamic Port will see its container capacity increase to 5.5m TEUs a year by the end of 2009. Meanwhile, the air travel segment has seen increasing levels of privatisation in recent years, with some elements of Saudi Airlines’ (Saudia) supply chain being divested; the entry of two new budget airlines, Sama and Nas Air; and the possibility of a privately managed airport in the new economic city at Hail. Given the international and regional traffic through Saudi Arabia, the government is well aware of the aviation industry’s massive potential for growth and announced plans in 2008 to liberalise airports. Another area targeted for further development is urban public transport. Given the massive swelling of urban centres like Riyadh and Jeddah, government officials recognise a need to establish a strategy for government-subsidised public transport.
In this chapter OBG sits down with Khaled Ahmed Bubshait, President, Saudi Ports Authority; Abdullah Mohammed Rehaimi, President, General Authority of Civil Aviation; and Tom Enders, President and CEO, Airbus.
ENERGY & UTILITIES
With the largest oil reserves in the world, Saudi Arabia has an obvious impact on global markets and has, to a large extent, centred its energy policy on ensuring both short-term and long-term supply is sufficient for projected needs. The government has committed to maintaining high levels of capital expenditure – $100bn has been allocated over the next five years for the oil and gas exploration and refining sectors alone – in a bid to ensure production can meet world demand once growth returns to more normal levels. In response to falling oil prices Saudi Arabia, along with other OPEC countries, has been cutting back on production levels to comply with the organisation’s quotas. Total production in 2008 averaged about 10.2m barrels per day (bpd) – slightly under capacity, at between 10.5m and 11m bpd – but this was cut back to approximately 8m bpd by mid-2009. The world oil market began to show signs of stabilisation in the second half of the year and the government remains committed to capacity expansions. The sector is dominated by the fully state-owned Saudi Aramco, the largest oil company in the world in terms of reserves and production. The firm has complete responsibility for exploration and handles the bulk of production and refining programmes. Saudi Aramco’s reliance on international oil companies has decreased as it has developed – the company has now taken full control of the upstream sector, which was controlled by US companies in the first half of the 20th century. Within the utilities sector, electricity supply has emerged as a concern for long-term development alongside the expanding industrial base and ever-growing population. The Saudi government is also on a drive to boost the production of natural gas. Rapid growth in the demand for electricity is necessitating the roll-out of a massive programme to increase power generation. The imminent privatisation of the Saudi Electricity Company (SEC) could emerge as a viable solution to long-term energy requirements of the Kingdom.
Included in this chapter are interviews with Ali Al Barrak, President and CEO, Saudi Electricity Company; Noe van Hulst, Secretary-General, International Energy Forum; and a viewpoint from Waheeb Linjawi, Group President and Managing Director, Saudi Cables Company.
REAL ESTATE & CONSTRUCTION
While no sector has been immune to the global economic downturn, Saudi Arabia’s real estate market has had considerable resistance by way of the sheer volume of domestic demand. Total population is estimated at 25m, nearly 40% of which is under the age of 15 and the vast majority under the age of 30. This has had an enormous impact on growth and demand for new housing, compounded by a slow process of sociological change that calls for an increased focus on nuclear families – rather than traditional extended family models – thereby increasing the number of needed units. Strong pent-up demand has both caused prices to rise over recent years – making real estate one of the biggest contributors to overall inflation – especially in the areas of Mecca and Medina, which tends to attract international interest. But the market’s supply-demand balance has also helped to shield the Kingdom from real estate bubbles seen elsewhere in the region. The sector is set for brisk invigoration when the long-awaited mortgage law – expected in either 2009 or 2010 – is passed. In anticipation of the law, a number of funds and real estate companies have already begun work in the Kingdom, illustrating the level of confidence inspired by market fundamentals. The Saudi Real Estate Financing Company (Refco), for example, announced at the start of 2009 its plans to begin providing mortgage loans upon the law’s enactment. State bodies also play an important role in home financing, with the Real Estate Development Fund (REDF) providing some 60-65% of total loans, mainly to low-income recipients. Meanwhile, sharia-compliant mortgage products are steadily expanding, adding to the growing pool of finance options in the Kingdom.
Like most countries in the Gulf, the construction sector is a prominent plank in the overall economic diversification plan and the travails of 2008 and 2009 have certainly thrown up some challenges. The global downturn may have made private investors more cautious, but the Saudi government has not been deterred by a loss of global economic confidence and an array of vast infrastructure, industry and education projects are moving apace. Over the next five years some $400bn in investments has been earmarked by the Saudi Arabian authorities, with the bulk of this going into construction and construction-related projects. There are more than a dozen new cities planned, including the expansion of two massive industrial zones – Jubail Industrial City, likely to attract over $80bn and Yanbu Industrial City on the Red Sea, likely to see $30bn in capital investments. Headline-making projects in transport infrastructure are also under way. In the rail sector the long-awaited Saudi Landbridge, which will connect Jeddah and Riyadh, is currently under construction along with a major project – the first part of which was contracted to a Chinese engineering firm in 2009 – running along the south-western part of the peninsula. Extensive road improvements are also under way throughout the Kingdom.
TELECOMS & IT
The past few years have been a time of great change in the Saudi telecoms market, with the liberalisation of fixed and mobile sectors bringing new entrants and a range of new services to consumers. The sector is likely to keep growing at a steady pace in the years to come. Liberalisation began eight years ago with the Telecom Act of 2001, which also put in place the Communications and Information Technology Commission (CITC) – the body responsible for implementing the policies created by the Ministry of Communications and Information Technology (MCIT). Since then the state-owned operator, now known as the Saudi Telecom Company (STC), has been joined by Etihad Etisalat (Mobily) and, most recently, Zain in the mobile segment. Both licence sell-offs hit record high prices at the time, illustrating the immense potential inherent in ICT growth in the Kingdom. With a population of 25m – most of whom are under the age of 30 – it is the largest market in the Gulf and income levels are generally high. Moreover, the rate of mobile and fixed-line penetration has been historically low, indicating room for growth. The mobile penetration rate has markedly risen as a result of the liberalisation effort – from 12% in 2001 to 144% in 2008 – and market focus is moving towardss meeting the demands of a relatively tech-savvy population, which has fostered an environment of innovation and competition. Penetration in the fixed-line segment has remained relatively constant at 15-17% of total population (or around 70% of households) since 2001, indicating that the fixed-to-mobile migration pattern has been more pronounced in Saudi than other countries. In 2009 competition is set to increase in both segments and while the Kingdom is not immune to the global downturn, there remains a fair amount of optimism about the prospects for future revenue growth through a shift towards improving data services.
The Kingdom is fast emerging as not only one of the region’s largest consumers of IT products, but as an international leader in terms of market growth rates. The National Communications and Information Technology Plan (NCITP) – the government’s sector development strategy – was passed in June of 2008 and has already resulted in a raft of new regulations gaining the approval of the Council of Ministers. These include an e-transaction law, an anti-cyber crime law and an e-government transactions programme. The ultimate goal is to ensure that all those living in Saudi – no matter how remote the area – will have access to the best ICT services available. Considering the country covers 80% of the Arabian Peninsula and is primarily desert, this is no small feat, but authorities are determined to press ahead with the upgrading and expanding of IT infrastructure. The government’s economic development strategy is also vital to the IT sector as it includes the construction of a range of entirely new cities, all of which are to be “smart”. Meanwhile, broadband penetration has been steadily expanding over recent years from around 5% in 2000 to just over 30% in 2008. These figures are sent to surge further as infrastructural expansions continue and prices drop. Along with the expansion of internet subscriptions there has naturally been a rise in hardware sales, with multinationals such as Dell and HP growing their retail profile in the Kingdom. Further development of the sector will depend on home-grown IT solutions, a goal the government hopes to meet with ongoing roll-out of IT training facilities.
In this chapter OBG speaks with Saudi bin Majed Al Daweesh, Group CEO, Saudi Telecom Company; and Ismail Fekri, Chief Operating Officer, Zain Saudi Arabia; as well as Carl-Henric Svanberg, Global Chief Executive Officer, Ericsson.
INDUSTRY & RETAIL
An abundance of feedstock coupled with sustained investment has made Saudi Arabia the industrial heavyweight of the Middle East, while stalwarts such as Saudi Basic Industries Corporation (SABIC) and Saudi Aramco have risen to become true global players. The petrochemicals sector has shown particularly strong growth figures and total petrochemicals production is expected to top 120m tonnes a year by 2015. Other segments earmarked for future growth include aluminium, steel, fertiliser and paper products. The Saudi government entered possibly its largest period of industrial expansion just as the credit crunch was beginning to strike financial markets in the West. This timing has certainly presented some challenges – especially since the government is looking more towardss private capital – but any private financial shortfall can be easily met with public funds. Major projects are under way in Jubail and Yanbu – the country’s largest industrial cluster zones – with the Jubail 2 Project expected to double the size of the existing city. The Royal Commission for Jubail and Yanbu hopes to attract $56bn in investment for expansions at both cluster zones, which are expected to be completed by 2015. Some 14 further industrial cities are also under construction – with their infrastructure already completed – under the supervision of the Saudi Industrial Property Authority (MODON). Meanwhile, the Saudi Arabian General Authority (SAGIA) is planning and building at least four new economic cities, a few of which also have an industrial component. In contrast to the 1970s industrial surge – which produced Jubail and Yanbu and was heavily state sponsored – the new generation of industrial cluster zones rely much more strongly on partnership with foreign capital. MODON has relatively few resources committed to development; rather it acts as an intermediary for sourcing and channelling domestic and foreign private capital towardss industrial development. As part of Vision 2020 – the economic roadmap released in 2008 – industry is a vital component of the Kingdom’s future growth prospects and rather than singlehandedly fund the sector, the government is looking to lay the groundwork for growth, enhance competitiveness and streamline the legal and regulatory framework for business development.
Valued at an estimated $24bn, Saudi Arabia’s retail market is the largest in the Middle East and has very high potential for growth considering its large population base, high per-capita GDP and increasingly brand-conscious youth. The Kingdom’s demographics point towards a sustainable growth profile – over 60% of the population is under 30 years old. Moreover, international retailers are being steadily integrated into Saudi Arabia, especially in the dense urban areas of Riyadh and Jeddah. Branded consumer goods such as clothing and electronics are the fastest-growing segments of the retail market. Meanwhile, some of the bigger corporations are beginning to introduce novel payment methods – such as prepaid cards, gift cards and store cards – in order to increase turnover. While there is a significant amount of existing retail real estate – Riyadh boasts 2.5m sq metres of gross leasable area, more than in Dubai – industry analysts believe there is still considerable room for expansion thanks to a population density CAGR as high as 28% in Jeddah and 18% in Riyadh between 2002 and 2008.
This chapter features interviews with HH Prince Saud bin Abdullah bin Thanyyan Al Saud, Chairman, Royal Commission for Jubail and Yanbu; Abdullah ibn Ahmed Zainal Alireza, Minister of Commerce and Industry; Mohamed Ben Salem Al Dobaib, Acting Director-General, Saudi Industrial Development Fund; Jamal Malaikah, President, National Petrochemical Industry Company; Khaled Juffali, Chairman, Mercedes-Benz Saudi Arabia; and Mohamed Abdul Qader Al Fadl, Chairman, Saudi Council of Chambers of Commerce and Industry, Chairman, Jeddah Chamber of Commerce and Industry.
TOURISM
While visitor numbers in Saudi Arabia are high and growing quickly – 11.5m people came to the Kingdom in 2007, up 34% on 2006 – leisure tourism makes up a very small percentage of the market. Religious pilgrims taking part in Hajj or Umrah to the holy cities of Mecca and Medina account for over half of inbound visits and, within Saudi Arabia, these visitors are classified to be under the jurisdiction of ministries outside of tourism. Leisure visitors currently account for just 5% of the total, but the state is starting to build the necessary infrastructure to promote and expand the segment. A major tenet of the government’s expansion programme is encouraging domestic tourism, in a bid to retain the estimated $5bn Saudis spend on holidays abroad each year. To this end Vision 2020, a comprehensive framework for developing domestic tourism, was launched in November 2008 under the Saudi Commission for Tourism and Antiquities (SCTA), the sector regulator. The ambitious plan aims for sector growth of at least 5% annually, reaching 16% of non-oil GDP by 2020. The SCTA is focusing on developing various attractions around the Red Sea as well as the country’s heritage offerings, with the construction of seven new museums under way and licences issued for a further 34. There are also plans to develop the old centre of Jeddah into a potential World Heritage site. The Kingdom attracts many business travellers and analysts see the five-star market as having the highest potential for growth. In all, additional hotel capacity currently under construction is estimated at close to 10,000 rooms, the second highest in the region.
This chapter includes an interview with Prince Sultan bin Salman bin Abdulaziz Al Saud, Chairman of the Board and President, Saudi Commission for Tourism and Antiquities.
EDUCATION
Two major themes dominate the education sector: first, the need for constant expansion in capacity to teach the nation’s growing young population; second, the vital role earmarked for the sector in providing the skills necessary to further diversify the Kingdom’s economy. The sector has received a huge funding increase under this year’s budget and now accounts for a quarter of total spending, or $32.6bn. Education is dominated by the public sector, with over 90% of students enrolled in government schools. This is an impressively high proportion, considering the rapid rate of population growth. In the two years leading up to 2008, nearly 3600 schools were added to the nation’s inventory, bringing the total to almost 32,000. A significant percentage of the government’s education outlay is committed to modernising the Kingdom’s curricula and teaching environment – under the purview of the King Abdullah Project for General Education Development (Tatweer) – in a bid to develop into a 21st-century “knowledge economy”. The government is making a concerted effort to tailor educational output to the needs of the private sector. The year 2008 witnessed the opening of the Kingdom’s first private university, Al Faisal University, while plans are under way to create major new training programmes for the government’s new economic cities. Meanwhile, tertiary education continues to expand both in capacity and enrolment, with high-profile expansion projects under way at King Saud University and King Abdullah University of Science and Technology, among others.
Featured in this chapter is an interview with Khalid S Al Sultan, Rector, King Fahd University for Petroleum and Minerals.
HEALTH & LIFE SCIENCES
The expansive budget of 2009 – the largest in the country’s history – illustrates the government’s commitment to the health care sector. It allocates 11% of total spending, or $14bn, to the industry, marking an increase of over 50% on the previous year’s budget. The progress can already be seen on the ground: some 43 new or renovated hospitals are slated to open in 2009, and almost 100 new hospitals – totalling nearly 12,000 beds – are currently under construction. The sector has traditionally been dominated by the Ministry of Health (MoH) but it is now opening up, with other agencies, including the military and the National Guard, providing independent health care for their own staff. The health insurance industry has expanded significantly over the past two years as the government has sought to increase the role of private sector health care provision. Under the Saudi Health System Law of 2003 the decision was taken to gradually introduce a cooperative health insurance system as part of a broader sector reorganisation plan. This process continues as the country seeks to more efficiently manage a rapidly growing sector. In 2008 the government announced a plan was under consideration to decentralise management in the MoH’s 225 hospitals, giving them more administrative and financial independence, though they would likely remain under state control. Saudi Arabia remains at the forefront of specialist medical treatment in the Middle East – with institutions such as the King Faisal Specialist Hospital and Research Centre – and is also consolidating its research and development capacity in the field of life sciences. Including sizeable increases in 2009’s budget for King Abdulaziz City for Science and Technology (KACST) – the government body in charge of research – state funding for research in the Kingdom has more than doubled in the past six years.
In this chapter OBG sits down with Dr Abdullah Al Rabeeah, Minister of Health.
THE BUSINESS GUIDE
In conjunction with KPMG, OBG furnishes a thorough account of the ins and outs of tax regulations in the Kingdom, including updates on the Company Law, minimum capital requirements, accounting procedures and an introduction to the Capital Market Authority. KPMG also provides a briefing on zakat (religious levy), corporate income tax information and the GCC Customs duties regime, among other topics.
In the legal section Al Jadaan & Partners Law Firm provides an overview of the Kingdom's legal framework, including a look at the general principles of Islamic law. The legal guide also provides information on the court system and the judiciary, as well as on how banking and foreign disputes are resolved and how arbitration agreements are handled.
This section features viewpoints from Abdullah Al Fozan, Senior Partner, KPMG Saudi Arabia; and Mohammed Al Jadaan, Managing Partner, Al Jadaan & Partners Law Firm.
THE GUIDE
This chapter serves as a practical manual for visitors to the Kingdom, including extensive hotel information for Riyadh, Jeddah and several other cities; a listing of important telephone numbers; and general information on everything from etiquette to travel logistics. It also includes a travel piece on the Nabataen city of Madain Saleh.
