SAUDI ARABIA

Group Members: Arun Anantha Raman Aruttam Biswas Supriya Gunthey

86

92
102

TRANSPARENCY INTERNATIONAL RATING & AMNESTY INTERNATIONAL

LISTING

TRANSPARENCY INTERNATIONAL RATING

CORRUPTION MEASUREMENT TOOLS

CORRUPTION PERCEPTIONS INDEX (2013)

RANK: 63/177 SCORE: 46/100

BRIBE PAYERS INDEX (2011)

RANK: 22/28 SCORE: 7.4/10

CONTROL OF CORRUPTION (2010)

PERCENTILE RANK: 62% SCORE: 0.145667079

TRANSPARENCY INTERNATIONAL RATING

MEASURING TRANSPARENCY

OPEN BUDGET INDEX (2010)

BUDGET OPENNESS:SCANT OR NONE SCORE:1

TRANSPARENCY INTERNATIONAL RATING

OTHER GOVERNANCE AND DEVELOPMENT INDICATORS

GLOBAL COMPETITIVENESS INDEX (2012-2013)

RANK:18/142 SCORE:5.19/7

HUMAN DEVELOPMENT INDEX (2011)

RANK:56/187 SCORE:0.770 HUMAN DEVELOPMENT:HIGH

PRESS FREEDOM INDEX (2011-2012)

RANK:158/179 SCORE:83.25

TRANSPARENCY INTERNATIONAL RATING

OTHER GOVERNANCE AND DEVELOPMENT INDICATORS (CONTINUED)
JUDICIAL INDEPENDENCE

(2011-2012)

RANK:21/142 SCORE:5.6/7
RULE

OF LAW (2010)

PERCENTILE RANK:60% SCORE:0.161964746

VOICE

& ACCOUNTABILITY (2010)

PERCENTILE RANK:4 % SCORE:-1.76825581

SWOT ANALYSIS

SWOT
Strengths

Largest oil reserves and the biggest oil exporter Ranked 26th in World Banks Doing Business Report Ranked 20th in World Economic Forum's Global Competitiveness Index 201314 Worlds 19th largest economy It's the largest free market in the MENA Has the 7th freest labour market in the world

SWOT
Weakness

Weak and poor administration of education system Burden on the government in times of low oil prices Structure of production is too petroleum centered Restriction on civil liberties Discrimination Issues

SWOT
Opportunities
Potential Oil Supply Economic Cities Diversify into other sectors

SWOT
Threats
Terrorism Succession Instability Depletion of Oil Reserves

ECONOMIC SCENARIO

STATISTICS

Currency: Central Bank: GDP: GDP growth: GDP per capita:

GDP by sector:
Inflation (CPI): Labour force:

Saudi Riyal Saudi Arabian Monetary Agency $906.8 billion (PPP) $727.3 billion (Nominal) 5.13% (2013) $31,275 (PPP) $25,085 (Nominal) Agriculture: 3.2%; Industry: 60.4%; Services: 36.4% 2.90% (2013) 7.63 million (2012) (Note: about 80% of the labor force is Agriculture: 6.7%; Industry: 21.4%; Services: 71.9% (2012) Estimated 10% 26

foreign) Labour force by occupation:

Unemployment: Ease of doing business rank:

PUBLIC FINANCES

Public debt: Revenues: Expenses:

9.4% of GDP $293.1 billion $210.6 billion

Credit rating
Standard & Poor's: AAOutlook: Stable
Moody's: Aa3 Outlook: Stable Fitch: AAOutlook: Stable

ECONOMIC OVERVIEW
The

petroleum sector accounts for roughly 92.5% of budget revenues,55% of GDP, and 90% of export earnings Saudi oil reserves are the largest in the world, and Saudi Arabia is the world's leading oil producer and exporter Proven reserves, according to figures provided by the Saudi government, are estimated to be 260 billion barrels, about one-quarter of world oil reserves More than 95% of all Saudi oil is produced on behalf of the Saudi Government by the state owned giant Saudi Aramco, and the remaining 5% by similar state owned companies 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 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 The government has begun to permit private sector and foreign investor participation in the power generation and telecom sectors

MAIN INDUSTRIES
Crude oil production Petroleum refining Basic petrochemicals Chemicals (Ammonia, Industrial gases, hydroxide) Cement Fertilizer Plastics Metals Commercial ship repair Commercial aircraft repair Construction & real estate

Sodium

DIVERSIFICATION
As of 2007, non-oil manufacturing contributed 10% to Saudi Arabian GDP and less than 6% of total employment Through five-year development plans, the government has sought to allocate its petroleum income to transform the economy into a modern industrial state 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 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

POLITICAL SCENARIO

POLITICAL SCENARIO IN SAUDI ARABIA

Objectives of the Islamic Governance system: Ensuring Justice Guiding to good and warning against evil Preserving the religion through statement and advocating Execution of verdicts Giving due care to others rights Arranging the affairs of life Preservation of public order

THREE PILLARS OF ISLAMIC SYSTEM OF GOVERNANCE

Ideological Foundations Constitutional Foundations Moral Fountains

1. Ideological Foundations Istikhlaf (Vicegerency) Mans responsibility Legislation is for God Honoring the Human Unity of the Muslim Ummah (Nation)

2. Constitutional Foundations Fairness and equity Shoura (Consultation) Bayah (Pledge of allegiance) Listening and obeying in all that are good State responsibility

3. Ethical Foundations Advice Forbearance Mutual respect between the ruler and the ruled

KEY FUNCTIONS OF GOVERNMENT

The Legislative Authority is the lawmaking body, having the power to make new laws The Executive Authority is authority that enforces orders and ensures that they are carried out as proposed The Judicial Authority is the authority that is assigned the task of interpreting and implementing laws

1.

The Judicial Authority Independence of the Judiciary Litigation is a common right for all Judges are to abide by the Law of Islamic shariah

2. The Executive Authority Imamah (leadership) King The Ministry Region or province The official governmental agencies and departments, as well as those independent from the ministries

3. The Regulatory Authority A technical, legislative-form channel A regulatory, procedural-form channel

PUBLIC ANTI-CORRUPTION INITIATIVES

ANTI GRAFT LEGISLATION

Bribery is taken extremely seriously in Islam and is referred to as a sin However, Saudi Arabian corruption laws are not uniformly enforced and punishments are selective Saudi Arabia's Law for Combating Bribery was issued in 1992 by Royal Decree No. M/36 Law for Combating Bribery covers public-topublic and public-to-private bribery, but not privateto-private bribery

Violation of the law can result in prison sentences up to 10 years and fines up to Saudi Riyal 1 million In May 2002, the Saudi Arabian Monetary Agency issued new guidelines for detecting money laundering activities A Law on Combating Money Laundering was enacted in August 2003 Basic Law of Governance 1992 (Art. 79 & 80) stipulates that all state assets and agencies are subject to audits

According to an assessment by Freedom House in 2012 enforcement of anti-corruption laws is limited in Saudi Arabia and occurs mostly behind closed doors Punishments against individuals involved in corruption are selective and usually includes lower-level figures indicted for relatively minor offences Public officials are not subject to financial disclosure laws and no laws provide public access to government information, including ministerial budget The country has signed but still not ratified the United Nations Convention against Corruption (UNCAC)

GOVERNMENT STRATEGIES
In 2007, the Council of Ministers approved a National Strategy for Maintaining Integrity and Combating Corruption However, no recent government corruption strategies were identified at the time of review A set of other state agencies also participate in the fight against corruption in Saudi Arabia

ANTI-CORRUPTION AGENCY

The National Anti-Corruption Commission (Nazaha) was created by way of Royal Order No. (A/65) The decision to create the Commission was taken by the King to "promote transparency and fight against financial and administrative corruption The Commission reports directly to the king and is formally given full financial and administrative independence from the King The Commission's duties include the implementation of orders relating to the public interest to ensure compliance, investigating aspects of financial and administrative corruption in public offices

Freedom House in 2013 reports that administrative obstacles are hinders for the successful operation of the Commission in 2012

PROSECUTION AND INVESTIGATION COMMISSION (PIC)

The PIC investigates cases of corruption against public service officials and reports to the Council of Minister It monitors the performance of all government employees and investigates those accused of bribery, forgery and abuse of public funds The PIC identifies instances of forgery, bribery and public mistreatment, among others

AUDITOR GENERAL
The General Auditing Bureau (GAB, in Arabic), under the Council of Ministers, is tasked with public auditing in Saudi Arabia The GAB is responsible for the execution of postauditing of state revenues, expenditures, current and fixed assets Moreover, it carries out performance and financial audits

To act on the findings of the GAB, the Auditing and Investigation Commission (AIC) has been established The AIC's jurisdiction covers the audit and investigation of all matters concerning public officials abuse of office The objective is to ensure an effective and efficient level of administrative performance, both within public agencies and public corporations

The objective is to ensure an effective and efficient level of administrative performance, both within public agencies and public corporations The AIC's jurisdiction also covers crimes of forgery, bribery and embezzlement of government funds The GAB reports its findings and results directly to the king The head of the GAB can only be discharged by the king

PUBLIC PROCUREMENT
There is a heightened risk of corruption within Saudi Arabian public procurement, especially largescale government contracts The Government Tendering and Procurement Regulations of 2006 has improved transparency within the government procurement regime through publication of tenders Tenders can now be found on several ministerial websites, although most of them are only published in Arabic

Companies should note that normal tender requirements to not apply to all sectors, including defense Companies that have committed acts of bribery in order to win a public contract risk having the contract withdrawn or of being temporarily or indefinitely barred from participating in future procurement with the government

WHISTLE BLOWING
The Board of Grievances, under the Ministry of Justice, is the only formalized mechanism available to act on claims of public abuse of power The Law for Combating Bribery incentivizes people to act as whistleblowers and report acts of bribery by rewarding them monetarily Reports of administrative corruption can be given to the Ministry of Interior by phone, fax or e-mail

EASE OF DOING BUSINESS IN THE COUNTRY( WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

Doing

Business 2014 Rank : 26 Doing Business 2013 Rank : 22 Change in Rank: -4

Doing

Business 2014 DTF (% points): 72.85 Doing Business 2013 DTF (% points): 72.90 Improvement in DTF (% points) : -0.05

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

Topics Starting a Business Dealing with Construction Permits Getting Electricity Registering Property Getting Credit Protecting Investors DB 2014 Rank 84 17 15 14 55 22 DB 2013 Rank 81 17 15 12 52 21 Change in Rank -3 No Change No Change -2 -3 -1

Paying Taxes
Trading Across Borders Enforcing Contracts Resolving Insolvency

3
69 127 106

3
61 124 109

No Change
-8 -3 3

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

EASE OF DOING BUSINESS IN THE COUNTRY (WORLD BANK 10 PARAMETERS)

INVESTMENT AND TRADE

REGIME

INVESTMENT REGIME IN SAUDI ARABIA

Regulatory Framework: New Foreign Investment Law introduced which is more conducive to privatization and globalization of the Economy Saudi Arabian General Investment Authority (SAGIA) was inducted as the implementing authority Government to privatize public undertakings and to allow more foreign investment

WHY SAUDI ARABIA?

Political & Economic stability A well established infrastructure Well-defined open market trade policies A strong banking sector Friendly Tax regime Easy access to primary & secondary raw materials Market entry simplified through assistance from SAGIA

SECTORS TO BE PRIVATIZED
1. 2. 3. 4. 5. 6.

7.
8. 9. 10.

Water and Sewerage Facilities Desalination of sea water Telecommunication services Aviation and allied services Railways Roads Maintenance & Construction Airport Services Postal Services Flour mills and grain silos Sea port services

ACTIVITIES EXCLUDED FROM FOREIGN INVESTMENT

a.
b.

c.

Industrial Sector: Oil Exploration, drilling and production Manufacture of military equipment, devices and uniforms Manufacture of civilian explosives

 a. b. c. d. e.

f.
g. h. i. j. k. l. m.

Services Sector: Military Catering services Security and detective services Real estate investment in Makkah & Madinah Haj & Umrah tour guide services Real estate brokerage Recruitment & employment services Printing & publishing Audio-visual services Land & air services Satellite transmission Space projects Blood banks Fisheries

PRIORITY AREAS OF INVESTMENT

All sectors are open for foreign investment with specific exclusion of those stated above Government is more keen on foreign investments in the sectors given below: a. Mining b. Water Desalination c. Power Generation d. High Technology projects

ROLE OF SAGIA
To oversee investment affairs in Saudi Arabia Propose and Implement policies that encourage investment Issue of Investment Licenses Framing recommendations for improvement of investment environment Evaluation and Follow up of potential investment opportunities Act as an interface between global investors and Government agencies

INCENTIVES OFFERED TO FOREIGN INVESTORS

Pre-Investment assistance Duty free import of goods & equipment Duty free export and preferential treatment for products in Government procurement Availability of land in industrial cities at nominal charges Ownership of real estate directly connected to a project Benefits of all bilateral & multilateral agreements related to taxation and investment Repatriation of capital & profits Freedom of movement of shares between partners Sponsorship of licensed project to the foreign investor Availability of loans at nominal charge Carry-forward of losses into later years for tax purposes

SAUDI INDUSTRIAL DEVELOPMENT FUND (SIDF)

To provide medium & long term loans to industrial projects for upto 50% of total project costs along with marketing and financial consultancy. Maximum loan term is 15 years Minimum promoters equity of 25% required Maximum loan that can be granted is US$ 106.7 million for a joint stock company The financing of used equipment and machinery is proscribed

TRADE POLICIES IN SAUDI ARABIA

Saudi Arabia became a full WTO Member on 11 December 2005 Saudi Arabia has improved its business environment since its WTO accession, although this sometimes is not as apparent to the outside world as it should be Trade policies framed to encourage more private sector (local and foreign) participation in the economy and create more employment opportunities for all Saudi nationals Saudi Arabia has been taking steps to improve the protection of intellectual property rights

TRADE STATISTICS
Ranked 12th among world merchandise exporters Ranked 21st among world merchandise importers It is the 8th biggest recipient of FDI in the world Ranked 11th in ease of doing business (up from 67th in 2005) Exports in 2013: US$ 388 billion Imports in 2013: US$ 156 billion

EXPORTS IN SAUDI ARABIA

Saudi Arabia's economy is highly dependent on oil exports (87 percent of total exports) and the stateowned firm Aramco is the world's largest oil producing and exporting company. Main export partners are: United States (14 percent of total exports), Japan (13 percent), China (12 percent), South Korea (10 percent) and India (8 percent). Others include: United Arab Emirates, Bahrain, Singapore and Twain

IMPORTS IN SAUDI ARABIA

Saudi Arabia main imports are: machinery, mechanical appliances and electrical equipment (27 percent of total imports), transport equipment (16 percent), base metals (13 percent), chemicals and related products (9 percent) and vegetables (6 percent). Import partners are China (13 percent of total imports), United States (12.6 percent), Germany (7 percent) and Japan (6 percent), South Korea, United Arab Emirates, France and Italy.

SAUDI ARABIA COMPETITIVENESS

Competitiveness?? Competitiveness depends on the productivity with which a nation uses its human, capital, and natural resources. a. Productivity sets the standard of living (wages, returns on capital, returns on natural resources) that a country can sustain b. It is not what industries a nation competes in that matters for prosperity, but how productively it competes in those industries c. Productivity in a national economy depends on a combination of domestic and foreign firms d. The productivity of local or domestic industries is fundamental to competitiveness, not just that of export industries

MACROECONOMIC COMPETITIVENESS
1. Social Infrastructure and Political Institutions a. Basic Human capacity Education, Health care b. Political Institutions Political Freedom, stability, accountability c. Rule of law Judicial Independence, legal framework, civil rights 2. Macroeconomic Policies a. Fiscal Policies Surplus/Deficit, Debt b. Monetary Policy Inflation, Interest rate

MICROECONOMIC COMPETITIVENESS
1.

2.
3. 4. 5.

Access to high quality business inputs Availability of suppliers and supporting industries Sophistication of local customers and needs Local competition Local rules and incentives that encourage investment and productivity

THANK YOU !