Saudi Arabia Long Term Prospects
Author - U.S. Department of Commerce
1- COMPUTER SOFTWARE (CSF)
Saudi computer software vendors estimated the software market at $400 million in 1997 with 10 percent growth over the next three years. The following are key factors to the growth of Ssaudi computer software: The Saudi Government commitment to enforce regulations aimed at curbing illegal reproduction of computer software and other IPR products; local establishment of the Business Software Alliance (BSA) to support and train the Ministry of Information personnel on the latest techniques for detection of software piracy; and the ongoing re-engineering process in various sectors of the Saudi economy, which help create demand for information technology in general, and computer software in particular. The advent of Internet service in Saudi Arabia will also impact the demand for software and associated services. Finally, the Y2K millennium bug will also boost the demand for computer systems and software.
Adequate and efficient network solutions are becoming a most important and intriguing aspect among the Saudi information system and business communities. Smaller businesses are experiencing the advantages of acquiring and installing efficient client/server configurations to help them increase work productivity and cut communication costs.
1997(E) 1998(E) 1999(E) a. Total Market Size 400 440 485 b. Total Local Production 19 21 23 c. Total Exports 0 0 0 d. Total Imports 381 419 462 e. Imports from the U.S. 268 295 346 The Saudi market for computers and peripherals remains the largest in the Near East. The Kingdom's computer market was estimated at $240 million in 1997 and expected to grow seven to eight percent annually over the next two years. The expected introduction of Internet service will generate even more opportunities for U.S. hardware and software firms.
IBM-compatible personal computers represent 40 percent of installed units, but only approximately 20 percent of total import value. There are more than 30 brands of PCs available in the Saudi market including: IBM, Zeos, HP, Digital, AST, Acer, Mitac, Siemens Nixdorf, Gateway 2000, Compaq, Dell, Apple, Twinhead, Leo, among others.
Vendors are fighting for better positions in various niches by offering more technologically advanced computers with added features. Several third-country manufacturers, especially from Southeast Asia, are fiercely competing with American firms, while many American manufacturers have set up manufacturing facilities in Southeast Asian countries. There are more than 300 local computer dealers selling various computer brands throughout Saudi Arabia.
Saudi Aramco, the Kingdom's oil company, is considered to be the largest buyer and user of computers in the whole Arabian Gulf region. The company operates more than 10,000 computer units and spends over $3 million a year on new systems and system upgrades annually. Saudi Arabian Airlines, the national carrier, is another major buyer of computers.
In the private sector, banks are considered to be the largest end-users. There are 11 banks with a total of 1200 branches operating throughout the Kingdom. In addition to demand by banking and financial institutions, several other industry sectors are eager to modernize their computer/communication systems. One of them includes the hotel industry, which is trying to upgrade customer services by automating room service, quick check-out systems, payroll and reservation services.
1997(E) 1998(E) 1999(E) a. Total Market Size 240 257 275 b. Total Local Production 0 0 0 c. Total Exports 0 0 0 d. Total Imports 240 257 275 e. Imports from The U.S. 82 87 96 Saudi Arabia is the largest and most sophisticated car market in the Near East. With the projected downturn in the economy, the Commercial Service expects that new car sales will slump and, consequently, car age will increase from five to almost ten years during the next few years. With this increase in automobile life, the market for aftermarket parts is expected to expand, and industry sources estimate a six percent growth.
Imports will be expected to reach $580 million in 1998, excluding tires and tubes. The future composition of Saudi Arabia's car market will, to a large extent, dictate the mix of the auto parts industry. As more car makes and models are introduced, the Saudi spare parts market will expand accordingly. The market is already very competitive, and becoming increasingly so with a growing demand for original and quality spare parts as opposed to counterfeit. Moreover, local and international auto spare parts suppliers are aggressively campaigning against fake and counterfeit automotive parts.
1997(E) 1998(E) 1999(E) a. Total Market Size 579 613 650 b. Total Local Production 85 87 89 c. Total Exports 51 54 54 d. Total Imports 545 580 615 e. Imports from the U.S. 145 155 165 Saudi Arabia is the largest market for medical equipment and supplies in the Near East. Industry sources estimated the market at $252 million in 1996 and expected it to reach a three-year high of $269 million in 1998, an increase of more than six percent over 1996. U.S. suppliers account for more than half of all Saudi medical imports, and the U.S. share is expected to grow at an average annual rate of three percent.
The growing demand is linked to a rising number of private hospitals and clinics, expansions and upgrades at various medical facilities, and the constant need for advanced equipment.
There are currently 285 hospitals, both general and specialized, with a total capacity of 41,916 beds in Saudi Arabia. Of these hospitals, 175 are run by the Saudi Ministry of Health, 36 by other Government agencies, and 74 are owned by the private sector. In addition, approximately 1,800 primary health care centers and polyclinics are scattered Kingdomwide. The Ministry of Health continues to convert these polyclinics into 30-50 bed general hospitals to gradually replace existing mobile clinics. Approximately 45 percent of the hospitals are located in the Western Region, while 35 and 20 percent are found in the Central and Eastern Regions, respectively.
1997(E) 1998(E) 1999(E) a. Total Market Size 251 265 280 b. Total Local Production 17 18 18 c. Total Exports 0 0 0 d. Total Imports 234 247 262 e. Total Imports from U.S. 140 144 154 The Saudi telecommunication market will continue to expand. The Government is already expanding the telecommunication network under TEP 6 and is evaluating plans for further expansions under TEP 7 and later TEP 8. The cellular network is already functional and is also being expanded. The long-awaited privatization of the Telecommunication Ministry has begun, and the new company will present opportunities for both infrastructural and consumer equipment. The introduction of Internet service, anticipated before the end of 1998, will provide additional market opportunities for U.S. firms supplying telecommunication and computer equipment and parts. The prospects for Saudi Arabia are encouraging and a sustained growth in the demand for telecommunication products up to the year 2000 is likely. Except for fiber optic cables, local manufacturing of telecommunication equipment is non-existent. One license, however, is pending for the assembly of telephone sets and small PBX units. Another factory was awarded a $100 million contract by Lucent Technologies to manufacture circuit boards for TEP 6.
1997(E) 1998(E) 1999(E) a. Total Market Size 96 108 118 b. Total Local Production 0 3 5 c. Total Exports 0 0 0 d. Total Imports 96 105 113 e. Imports from The U.S. 80 89 96 Saudi Arabia is the world's largest producer of desalinated water with 23 plants scattered along the Red Sea and the Persian Gulf. The Kingdom produces 520 million gallons per day (MGD), representing 30 percent of the world's desalinated water capacity.
The Saudi Water Conversion Corporation (SWCC) is the only Government agency responsible for design, construction, operation and maintenance of desalination plants. There are other plants that fall under the jurisdiction of the Ministry of Defense and Aviation and the Royal Commission for Jubail and Yanbu.
Given that water is a scarce resource, the Saudi Government implements a "national water plan". The Ministry of Water and Agriculture is overseeing the plan and the Government has allocated $4.3 billion to be able to provide water to all regions of the Kingdom over the next 10 years.
The Government has already spent $20 billion on desalination projects; and in addition to the $4.3 billion, the Government plans to spend another $3 billion to raise the Kingdom's capacity to 1.3 billion gallons a day.
1997(E) 1998(E) 1999(E) a. Total Market Size 340 357 375 b. Total Local Production 67 70 73 c. Total Exports 16 17 17 d. Total Imports 289 304 319 e. Total Imports from U.S. 116 121 127 Demand for electrical power is increasing at an average annual rate of 11-12 percent. More than $2.9 billion has already been approved by the Ministry of Industry and Electricity for various electricity projects up to the year 2000. Overall power generation capacity rose from 4,000 MW in 1977 to 22,311 MW in 1997. A number of power projects are taking place, including the construction of a 1200 MW power plant in Riyadh (PP9), and a 2400 MW plant in Ghazlan, while a decision on the Shuaiba plant in the Western region is expected soon. An additional six new major projects are expected to be awarded in the next two years, for a total capacity of 4480 MW. Other expansion projects are also under way including the Shoaiba expansion for an additional 1800 MW capacity, and the Shuqaiq expansion with an additional capacity of 1200 MW.
1997(E) 1998(E) 1999(E) a. Total Market Size 1082 1104 1124 b. Total Local Production 99 104 109 c. Total Exports 11 12 13 d. Total Imports 994 1012 1028 e. Imports from the U.S. 270 275 280 A number of factors help to keep Saudi Arabia a growing and promising market for U.S. apparel manufacturers/suppliers, namely, an above-average population growth figure of about 3.5 percent, visits to Islam's holy sites in Makkah and Medina by an average of two to three million pilgrims every year, and two annual religious celebrations, the "Eid Al-Fitr" at the end of the holy month of Ramadan and the "Eid Al-Adha" at the end of the Hajj rituals.
A slower economy will negatively affect Saudi per capita GDP, which is expected to fall from $7,200 in 1997 to $6,200 in 1998. Similarly, consumer spending will be hit by lower disposable income, and apparel sales in the mid-to-upper range will be affected. Apparel imports will not grow as much as they did in previous years, a modest three percent over the next two years. Still, the market is large. Although the U.S. share of the Saudi apparel market is low compared to European and Southeast Asian suppliers, U.S. apparel exports to Saudi Arabia are expected to grow by an average four percent annually.
1997(E) 1998(E) 1999(E) a. Total Market Size 920 947 975 b. Total Local Production 70 75 78 c. Total Exports 12 13 14 d. Total Imports 862 885 911 e. Imports from the U.S. 79 82 85
Urban development and industrial growth have compounded Saudi Arabia's environmental problems. Population growth, a significant construction market, continuing growth of Saudi Arabia's oil, gas and petrochemical industry, the rising level of ground water, an insufficient sewage system, increasing air pollution and solid waste, have all contributed toward making the Saudi environmental technology market a promising one.
Saudi Arabia's environmental technology market size was estimated at $42 million in 1997, and expected to grow by an average of ten percent annually over the next two years.
Although it is still a small market by world standards, the Saudi Government is actively working to implement and enforce a number of guidelines to help reduce the levels of pollution and damage to the environment. Once those guidelines are implemented, the Saudi market is expected to expand tremendously; outfitting and refurbishing of industrial facilities alone will cost billions of dollars.
The best prospects include recycling systems and equipment, waste water treatment systems, sewage systems, solid waste equipment and systems, equipment and treatment systems for marine pollution, air pollution control equipment and monitoring devices.
There is no local industry for any environmental equipment in the Kingdom except for waste water treatment plants, membrane manufacturing, and some solid waste compacting.
1997(E) 1998(E) 1999(E) a. Total Market Size 42 46 50 b. Total Local Production 5 6 7 c. Total Exports 0 0 0 d. Total Imports 38 40 43 e. Imports from the U.S. 12 13 14 Manpower training requirements are expected to double over the next two to three years as a result of the Saudiization program being implemented by the Government. There are an estimated four million foreign workers, and the Government intends to replace 60 percent of these with Saudi nationals over the next several years. In 1996, the Saudi Government published a regulation requiring each company with over 20 employees to include a minimum of five percent Saudi nationals, and to increase the number of Saudi nationals by annual increments of 5 percent. In addition, certain job positions may no longer be held by non-Saudis. These rulings are now being implemented and companies are being penalized for non-compliance.
As companies replace trained expatriates with semi- or untrained Saudis, they find it increasingly necessary to provide training. The private sector, with the added problem of a high attrition rate among Saudi employees (estimated at 70 percent, considerably more than the 20 percent experienced in the Government sector), is particularly hard pressed to keep up with training needs, but has the least funds available for training purposes. An increasing number of organizations, both Government and private, now offer business related training courses, either in-house or in training institutions. The market is highly fragmented because of an effort to cater to numerous different customer groups. Many ready-made training courses are not suitable for Saudi Arabian culture and must be adapted. Distance learning is being explored with interest being shown in the possibilities provided by the Internet, when this becomes available in Saudi Arabia (expected by the end of 1998). The marketplace is competitive and price conscious. While no estimates of this maturing market are currently available, the statistics below represent a guide to potential market size.
Estimated number of job seekers entering market during current 6th 5-Year Plan (1995-2000) 660,000 No. of SAG training institutions 87 Estimated private training institutions 260 Training centers for in-house company use N.A. Average annual growth of school/university graduates 30% (1996-2000)
Saudi Arabia produces 8.4 million barrels of crude oil per day, and 90 percent of that is exported. The Kingdom's state-owned oil company, Saudi Aramco, plans to carry out the following projects in the oil and gas sectors:
- Build a grassroots gas treatment plant in Hawiya; auxiliary facilities; sulphur recovery facilities; and utilities. The cost of this project is $2 billion. The expected completion year is 2001. - Upgrade and expand Rabigh Oil Refinery. The cost of this project is $1.8 billion. The expected completion year is 2002.
The cost to undertake the above projects is projected at $5 billion. U.S. companies active in the following sectors should have good prospects in bidding on those projects:
- Design engineering. - Project management. - Construction.
Other U.S. manufacturers/suppliers of materials, equipment and parts related to the oil and gas sectors along with service providers will also stand a good opportunity from these projects. Some of the needed equipment and materials will range from tubulars, casings, valves, compressors, pumps, chemicals, turbines, drilling rigs (onshore, offshore), to computers and software, telecommunication equipment, industrial process controls, fire fighting and safety equipment, refinery equipment and parts, and storage monitoring systems, among others.
(Millions U.S. dollars) HS Code Product 1996 1997(E) 1998(E)
7304 Iron/steel line pipe and casing 56.7 59.5 62.4 7305 Iron/steel line pipe or drill pipe 15.6 16.3 17.1 7306 Other line pipe used for oil/gas 457.5 480.3 504.3 9025 Floating instruments & parts 8.9 9.3 9.7 9026 Flow measurement instruments 56.9 59.7 62.6 9027 Gas/smoke analysis apparatus Chromatographs & electrophoresis instruments 21.5 22.5 23.6 8413 Liquid pumps & parts 145.9 153.1 160.7 8411 Gas turbines & parts 205.3 215.5 226.2
(Note: The above figures, except for HS 7305 and 7306, are import figures which cover a number of sectors including the oil and gas sectors.)
Commercial Service Saudi Arabia estimates a five percent annual growth for oil and gas equipment and materials in 1998 and 1999. The demand for oil and gas products and services fluctuates yearly with the world price of oil; however, operation and maintenance of facilities require ongoing parts and materials plus services.
Saudi Arabia is the region's dominant producer of petrochemicals. The Saudi Basic Industries Corporation (SABIC), the largest Government parastatal company, is one of the largest petrochemical companies in the world. SABIC is already undertaking its third major expansion program, which will increase its total output to 28 million tons a year by 2000. The company produces basic petrochemicals such as methanol, ethylene, propylene, butane, benzene, butadiene and xylene. Toluene will be produced in the year 2000.
Capacity at SABIC's plants increased four percent in 1996 to about 23 million metric tons. Its latest annual report revealed that close to 74 percent of its capacity was exported as follows: petrochemicals and chemicals (49 percent), fertilizers (16 percent), plastics (13 percent), industrial gases (5 percent) and polyester (1 percent).
List of Planned Expansion Projects at SABIC Facilities as of December 1996:
Name of Company Product Expansion Completion Year (1000 M.T.)
National Industrial Gases Oxygen 438 1999 Nitrogen 500 1999 Saudi Arabian Fertilizer Ammonia 500 1999 Urea 600 1999 Eastern Petrochemical Co. Ethylene glycol 500 2000 LLDP 300 2000 National Chem. Fert. Co. Sulfuric acid 887 2000 Phosphoric acid 265 2000 Aluminum fluoride 16 2000 Saudi-Yanbu Petrochemical Co. Ethylene 800 2000 Propylene 250 2000 Polypropylene 260 2000 PE 535 2000 Ethylene glycol 410 2000 Arabian Petrochemical Co. Ethylene 800 2000 Propylene 275 2000 Saudi-European Petrochem. Co. Polypropylene 200 2000
In the private sector, Saudi companies are also moving forward with a number of projects to manufacture solvents, butadiene, formaldehyde, polystyrene materials, polyester and epoxy resins, latex and titanium dioxide. The Saudi private sector has undertaken additional projects to produce propylene, polypropylene, para-xylene, soda ash, linear alkyl benzene (LAB) and maleic anhydride. Industry sources estimate total investment of the Saudi private sector in petrochemical industries to reach $2 billion.
Despite the high charges of U.S. visas for Saudi Arabian applicants ($245), travel to the United States has increased substantially in recent years. In order of priority, Saudis travel to the United States principally for tourism, business, education and medical treatment purposes. The market potential for travel and tourism services, including sales of organized tour service to new destinations in the U.S., is promising.
A combination of relatively high disposable income, a long summer break coupled by hot and harsh climate, and a well developed international travel infrastructure, all help to make Saudi Arabia a good market for reverse travel to the United States. Moreover, the U.S. Government is hopeful that Saudi authorities will soon agree to issuance of multi-year, multiple-entry visas on a reciprocal basis.
1997(E) 1998(E) 1999(E) a. Spending on Foreign Vacations 220 246 275 b. Spending on Domestic Vacations 60 72 86 c. Total Spending 280 318 361 No concrete data are available on the size of the Saudi franchising market. The Saudi franchise market still presents good potential for U.S. companies and is virtually untapped in many sectors, especially non-food. Recently, a number of boutique-type retail outlets have emerged in Saudi Arabia which specialize in particular brands. This "franchise" type of selling appears to be a good model for other American manufacturers wishing to establish a presence in the market. The "branded" apparel boutiques are mushrooming, especially for French and Italian designers.
Non-food franchises account for 55 to 60 percent of the total Saudi franchise market with total sales estimated at $274 million in 1997. That sector is expected to grow between 9-10 percent annually over the next two years. Best opportunities exist for business services, telecommunications, automotive products and services, printing and graphic design, mail and packaging, courier services, hotels and motels.
1997(E) 1998(E) 1999(E) a. Total Sales 214 231 249 b. Sales by Local Outlets 60 69 75 c. Sales by Local Outlets 60 69 75 d. Sales by foreign outlets 214 231 249 e. Sales by U.S. outlets 150 161 174 Best Prospects for Agricultural Products Livestock and poultry farming are growing steadily in Saudi Arabia. The two largest poultry producers, Al Watania and Al Fakieh, completed expansion projects in 1996, causing broiler output to jump 30 percent. As a result, U.S. corn exports to Saudi Arabia rose 25 percent in value from 1996 to 1998. The United States accounts for nearly 95 percent of imported corn, and the market is expected to increase as small to medium size farms also increase production. Despite the increase in output, Saudi Arabia remains a significant importer of frozen broilers; hence there remains much room for expansion.
1997(E) 1998(E) 1999(E) a. Total Market Size 260 270 281 b. Total Local Production 9 5 5 c. Total Exports 0 0 0 d. Total Imports 251 265 276 e. Imports from the U.S. 239 251 261 Soybean meal is used principally in poultry output and to a lesser extent in livestock rations, The recent increase in local poultry production resulted in a 30 percent increase in the value of soybean meal imports by the Kingdom in 1998 compared to two years earlier. With nearly 85 percent market share, the United States is the dominant supplier of soybean meal to Saudi Arabia, followed by India. As with corn, U.S. exports of soybean meal will continue to increase as small to medium size poultry producers expand production.
1997(E) 1998(E) 1999(E) a. Total Market Size 180 187 190 b. Total Local Production 0 0 0 c. Total Exports 0 0 0 d. Total Imports 180 175 176 e. Imports from the U.S. 153 159 162 The market for rice in Saudi Arabia is large and growing. The country relies on imports to cover all of its needs for this product. Though the United States is a major player in the rice market, competition is stiff. India is the dominant force in this market with about 60 percent market share followed by the United States with about 20 percent. Indian rice competes aggressively with U.S. rice both on price and promotional activities. Other competitors include Pakistan, Thailand and Australia.
The Saudi population is growing at 3.4 percent a year and more than 80 percent of Saudi and most of the expatriates in the Kingdom consume rice daily. Recently, major Saudi rice importers started importing bulk rice and bagging them for re-export to nearby African and Arab countries. U.S. rice is shipped in bulk to a modern packing plant in Jeddah and a percentage is transhipped as well. There are opportunities for the United States to regain market share, but U.S. exporters must be price competitive and aggressive.
1997(E) 1998(E) 1999(E) a. Total Market Size 350 364 379 b. Total Local Production 0 0 0 c. Total Exports 0 0 0 d. Total Imports 370 385 404 e. Imports from the U.S. 67 68 70 The demand for processed fruits and vegetables in Saudi Arabia is substantial. The growth of supermarket food sales is helping to broaden the market, and good market growth is expected to continue. Local production of canned fruit and vegetables has increased over the past five years; however, 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. About 60 percent of the local production reported in this section is for dates which are locally produced and processed.
1997(E) 1998(E) 1999(E) a. Total Market Size 335 348 362 b. Total Local Production 210 230 251 c. Total Exports 5 6 7 d. Total Imports 125 118 111 e. Total Imports from U.S. 25 25 24 The last official census indicated that more than 60 percent of the Saudi population is in its teens, and as a group is a heavy user of snack foods. Local production has dramatically increased in recent years. Leading organizations have realized the market potential for snacks and have launched massive production units. There is a general decline in imports of corn and wheat-based snacks. Candies and chocolates are also being manufactured on a large scale. However, scopes for quality branded chocolates and snacks still exist. Exporters may also look into supplying raw materials for the fast growing snack industry. The United States has a strong positive image in the market, since U.S. products are associated with quality. Products focusing on Saudi trade preferences, which tend to favor sweeter items, generally find better market reception.
1997(E) 1998(E) 1999(E) a. Total Market Size 110 114 119 b. Total Local Production 65 70 75 c. Total Exports 10 12 13 d. Total Imports 45 44 44 e. Total Imports from U.S. 20 19 18 The United States has been the market leader in this sector. However, Kellogs (Germany) and other breakfast cereals from Europe have brought down U.S. market share significantly. However, the demand for breakfast cereals is on the rise.
Promotion and advertising efforts are particularly important to acquaint potential consumers with these non-traditional products in order to gain wider consumer acceptance.
1996(E) 1997(E) 1998(E) a. Total Market Size 37 38 40 b. Total Local Production 4 5 6 c. Total Exports 0 0 0 d. Total Imports 31 33 34 e. Total Imports from U.S. 15 17 18
Major Investment Opportunities The economic slowdown in 1998 will highlight the need for and the challenge of economic reforms the Saudi Government is pursuing. The Saudi Government is promoting further expansion of the private sector in hopes that it will create jobs for the large number of young Saudis. Moreover, the Government is taking a number of needed steps to promote diversification and competitiveness, including pursuing accession to the World Trade Organization, revising its foreign investment regime, and taking initial steps toward privatization of telecommunications, electric power generation, and civil aviation.
The 1998 budget is relatively austere, slowing the rate of growth in all major categories of expenditure. Already, the Government has sought to reduce spending levels and is taking steps aimed at keeping the deficit from growing dramatically. Major impacts will be felt across the economy, particularly among those companies that depend heavily on business with the Saudi Government.
Nevertheless, a number of sectors will exhibit good growth potential in the years ahead, namely:
Petrochemicals: Petrochemicals account for 42 percent of Saudi Arabia's non-oil exports, and the Saudi Basic Industries Corporation (SABIC) remains the backbone of the Saudi petrochemical industry. The company has achieved considerable growth and currently exports to more than 75 countries. SABIC operates mainly through joint venture partnerships with international companies.
The company is currently implementing an ambitious expansion program which will increase its annual production capacity to 28 million metric tons by the year 2000. In addition, by the year 2002, SABIC will have three world-scale ethylene crackers on stream. Nine SABIC ventures are undergoing expansions. Investment opportunities in those projects will be in billions of U.S. dollars.
Saudi private sector petrochemical plants produce solvents, butadiene, formaldehyde, polystyrene materials, polyester and epoxy resins, latex and titanium dioxide. The Saudi private sector has undertaken additional projects to produce propylene, polypropylene, p-xylene, soda ash, linear alkyl benzene (LAB) and maleic anhydride. The total investment of the Saudi private sector companies in planned petrochemical projects will be around $2 billion.
Mining: Saudi Arabia has substantial commercial deposits of minerals, including 20 million tons of gold, 60 million tons of copper, 10 billion tons of phosphate, and millions of tons of various other minerals. As part of the Saudi Government's policy to prioritize the development of non-oil resources, the Ministry of Petroleum and Mineral Resources is actively seeking foreign investors to establish mining joint-ventures in the mineral sector. New investment opportunities are continuously being created by the completion of feasibility studies regarding the mining of precious and base metals, as well as industrial minerals. To attract investors to these projects, the Saudi Government provides incentives, such as a tax exemption for five to 10 years and a 30 year extraction concession.
In April 1997, through the issuance of a royal decree, Saudi Arabia established the state-owned Saudi Arabian Mining Company, Ma'aden (Arabic for minerals). The company was established to organize the Saudi mining sector, promote its development, and consolidate all mining projects in which the Saudi Government is involved. Ma'aden would operate under the same mining code applied to all companies seeking concession rights in Saudi Arabia and the company would not have monopoly rights over all mining areas in the Kingdom. Although Ma'aden would not release gold concessions to foreign mining interests, there would be no similar restrictions on other mining deposits. Once the company turns a profit, shares in it will be floated for public subscription. Since its inception, the Saudi Government has begun to issue a series of tenders for a range of mining concessions. A tender for bauxite has just been released, with others for copper and silica sands expected shortly. The potentially most important concession, for phosphates, despite expectations to the contrary, has still not been released for tender. The mining sector is expected to grow at an average annual growth of nine percent up to the year 2000.
Insurance: Saudi Arabia is the largest insurance market in the Arab world. Estimated at $2 billion, the Kingdom's insurance market is bound for more growth. The Government diversification and industrialization program will open new avenues in both personal and commercial insurance, especially against fire and theft. Medical and automotive insurance premiums now account for 60 percent of the business. That sector of the insurance market is expected to grow tremendously as soon as the Government enacts mandatory medical insurance for private sector employees. Foreign involvement in this sector is complicated by the absence of a formal regulatory structure. The Saudi Arabian Monetary Agency is currently reviewing proposed business structures case by case. At present, a Government-owned insurance cooperative is the only entity legally authorized to sell insurance products.
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