Saudi Arabia

Politics:

• Analysis

  Saudi Arabia politics: Quick View - Saudi Arabia steps up arming of Syrian

  Event

  Saudi Arabia is stepping up its embrace of the leading political umbrella of Syrian opposition groups, the Syrian National Coalition (SNC), amid increasing press reports of its role in channelling arms supplies to rebel fighters.

  Analysis

  The Saudi crown prince, Salman bin Abdel-Aziz al-Saud, attended the Arab summit in Doha, Qatar this week, where the SNC was for the first time the official Syrian representative. Saudi Arabia's ostensibly independent al-Arabiya satellite channel, based in Dubai but which has strong Al Saud connections, carried the speech of the leading SNC figure (and until recently its president), Moaz al-Khatib, live. The summit was notable as it was the first time that the Arab League had formally consented to the arming by its members of the Syrian rebels (although it has long been reported that such clandestine activity is taking place). Reinforcing this message, Prince Salman's speech in effect rejected any sort of diplomatic solution, thus firmly ruling out any sort of negotiated compromise involving the Syrian president, Bashar al-Assad.

  A host of press articles in the US this week, including in the New York Times, have provided more information about the role of Saudi Arabia, Qatar and Jordan in the supply of arms from Croatia to Syrian rebels via Jordan and Turkey. Some of these arms have allegedly been used in the southern Syrian city of Deraa, close to the Jordanian border. Saudi Arabia remains concerned that such arming should not benefit al-Qaida type groups such as Jabhat al-Nusra, which has grown in strength inside Syria. The dangers of "blowback" along the lines that Saudi Arabia suffered in the mid-2000s, when radicalised Saudis who had fought in Iraq switched to targeting the Saudi establishment, are well understood. This week the Ministry of Interior said it would arrest Saudi fighters returning from Syria. However, allegedly, these concerns do not prevent individual and quite high-level Saudis funding a wide variety of Syrian groups, including armed Islamists.

  March 27, 2013

• Background

  Saudi Arabia: Political forces at a glance

  Political outlook: Political forces at a glance

  Present government. Executive and legislative power is vested in the king, also called the Custodian of the Two Holy Mosques. The king must be a direct male descendant of Abdel-Aziz al-Saud, the founder of modern Saudi Arabia. Abdullah bin Abdel-Aziz al-Saud came to power in August 2005 on the death of his half-brother, King Fahd. The king makes key decisions in co-ordination with a small coterie of advisers, including senior princes. Weekly meetings of the cabinet, which the king chairs as prime minister, and the Consultative Council, an appointed advisory body, provide additional, but usually not decisive, input.

  Government factions: The overarching priority for the king will remain the maintenance of a broad consensus among the senior Al Saud princes. There are no formal factions, but senior princes have their own networks of supporters and allies. Some hold key cabinet posts and other influential public offices, including as provincial governors, and in the areas of security and defence. Many princes are also active in major businesses and non-governmental organisations, and the Saudi media is largely owned by them. Senior Al Saud princes often give key positions within their own ministries to their sons. The king has to consider the residual strength of the remaining "Al Sudairi brothers", the sons of King Abdel-Aziz al-Saud's favourite wife, Hassa al-Sudairi. Genuine political parties are almost certain to remain illegal.

  Extra-parliamentary forces: The king needs to consider the opinion of the conservative ulema, or Sunni Islamic clergy, who have a centuries-old alliance with the Al Saud, supporting royal political projects in return for consultation, status, salaries and privileges, and a strong influence in areas such as justice and education. A younger generation of "unofficial" clerics and Islamic intellectuals, some inspired by the Muslim Brotherhood, can be more critical of the Al Saud. The king has backed some socially liberalising reforms, which risks creating a conservative backlash within the clerical establishment. However, he has been equally careful during the recent regional unrest to appease the clergy, notably by handing out huge sums for the renovation of mosques and to expand the religious police. The threat of dissent will lead the authorities to police mosques tightly. The authorities will continue to make sporadic arrests of suspected militants. Various Saudi militant cells have been loosely associated with an umbrella group, al-Qaida in the Arabian Peninsula, but appear to operate independently of any centralised command. Their support base is thought to be narrow. The opposition will be tightly repressed and internally divided. Liberal critics tend to come under more pressure than those with a clearer Islamic mantle. There are also Islamist critics based outside the country, but exiled groups have limited credibility with the domestic audience. Tribal and religious leaders will remain important.

  July 11, 2012

• Structure

  Saudi Arabia: Political structure

  Official name

  Kingdom of Saudi Arabia

  Legal system

  Based on sharia (Islamic law) and the Basic Law (1992); no written constitution

  National legislature

  There is no elected legislature. A Majlis al-Shura (Consultative Council) was appointed in August 1993 and held its inaugural session in December that year

  Head of state

  The king, Abdullah bin Abdel-Aziz al-Saud, acceded to the throne in August 2005 on the death of King Fahd bin Abdel-Aziz al-Saud, who had ruled since 1982. Prince Salman bin Abdel-Aziz al-Saud became crown prince after the death of Prince Nayef bin Abdel-Aziz al-Saud in June 2012

  National government

  Council of Ministers, headed by the king, who holds the post of prime minister. The Council of Ministers exercises both legislative and executive powers

  Main political parties

  Political parties are not permitted

  Council of Ministers

  Prime minister: King Abdullah bin Abdel-Aziz al-Saud

  First deputy prime minister & defence minister: Salman bin Abdel-Aziz al-Saud

  Second deputy prime minister: Muqrin bin Abdel-Aziz al-Saud

  Key ministers

  Agriculture: Fahd bin Abdel-Rahman Balghnaim

  Civil service: Abdul Rahman al-Barrak

  Commerce & industry: Tawfiq al-Rabiah

  Culture & information: Abdel-Aziz al-Khoja

  Economy & planning: Mohammed al-Jasser

  Education: Faisal bin Mohammed al-Saud

  Finance: Ibrahim Abdel-Aziz al-Assaf

  Foreign affairs: Saud al-Faisal bin Abdel-Aziz al-Saud

  Health: Abdullah Rabia

  Higher education: Khaled bin Mohammed al-Anqari

  Housing: Shuwaish al-Duwaihi

  Interior: Mohammed bin Nayef bin Abdel-Aziz al Saud

  Islamic affairs: Saleh bin Abdel-Aziz al-Sheikh

  Justice: Mohammed al-Eissa

  Labour: Adel Fakieh

  Municipal & rural affairs: Mansour bin Mitab al-Saud

  Petroleum & mineral resources: Ali bin Ibrahim al-Naimi

  Pilgrimage: Bandar al-Hajjar

  Social affairs: Abdel-Mohsen bin Abdel-Aziz al-Akkas

  Telecoms & information technology: Mohammed bin Jamal al-Mulla

  Transport: Jabara bin Eid al-Seraisry

  Water & electricity: Abdullah al-Hussayen

  Key officials

  Chairman of the Consultative Council: Abdullah bin Mohammed al-Sheikh

  Head of National Security Council: Bandar bin Sultan bin Abdel-Aziz al-Saud

  President of the Board of Grievances: Ibrahim al-Hokail

  President of the Supreme Judicial Council: Saleh bin Abdullah bin Humaid

  Central bank governor

  Fahad bin Abdullah al-Mubarak

  March 07, 2013

• Outlook

  Saudi Arabia: Key developments

  Outlook for 2013-17

  • Although its hold over the country is set to remain secure, the ruling Al Saud family will face a number of challenges in 2013-17, including a potentially fractious succession process and demands for political reform.
  • With the youngest surviving son of the kingdom's founder now installed as second deputy prime minister (and in effect second in line to the throne), the scene is set for the passing of the reins of power to the next generation.
  • The government will remain sensitive to fluctuations in global oil demand, as well as possible interruptions to Iranian oil supply. We expect oil output to decline in 2013, before picking up slowly as global demand growth accelerates.
  • We expect the fiscal account to move into deficit from 2015 as the long-term impact of the spending measures announced in 2011, combined with only slow oil revenue growth, is felt.
  • Saudi Arabia's real GDP growth is forecast to slow to 4.1% in 2013 as oil production declines. However, growth should pick up thereafter, buttressed by strong domestic demand.
  • We expect Saudi Arabia to return current-account surpluses over the forecast period, supported by rising petrochemical exports. However, the surplus will narrow gradually as imports increase rapidly.

  Review

  • In something of a surprise, Prince Muqrin bin Abdel-Aziz, the former head of foreign intelligence, has been made second deputy prime minister-a position viewed as denoting the next in line to the throne after the crown prince.
  • Prince Khalid bin Bandar, a former head of the Saudi army, has been appointed governor of Riyadh following the death of his uncle. This resumes the prior pattern of allocating senior positions to the next generation.
  • According to the International Energy Agency, Saudi oil output, including output from the Neutral Zone shared with Kuwait, fell to 9.36m barrels/day (b/d) in December from 9.65m b/d in November and over 10m b/d mid-year.
  • According to the latest labour force survey by the Ministry of Labour, unemployment among Saudis rose to 12.2% in 2012. The reason for the rise was a substantial increase in female joblessness.
  • It has been revealed that Saudi Arabia has hosted a CIA drone base for two years; however, a public backlash is unlikely.
  • Saudi Aramco, the national oil company, has announced that it is aiming to commission the giant offshore Manifa oilfield in March. Production will start at 500,000 b/d, before ramping up to 900,000 b/d by late 2014.

  March 07, 2013

Economy:

• Background

  Saudi Arabia: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	28.9	Population growth	3.2
  GDP (US$ m; market exchange rate)	749,732b	Real GDP growth	4.3
  GDP (US$ m; purchasing power parity)	855,883	Real domestic demand growth	8.9
  GDP per head (US$; market exchange rate)	25,941	Inflation	5.9
  GDP per head (US$; purchasing power parity)	29,614	Current-account balance (% of GDP)	17.1
  Exchange rate (av) SR:US$	3.8b	FDI inflows (% of GDP)	4.9
  a The Economist Intelligence Unit estimates. b Actual.

  Download the numbers in Excel

  Background: Saudi Arabia was formed in 1932 by King Abdel-Aziz al-Saud. The support of the clerics and the maintenance of a conservative interpretation of Sunni Islam (unofficially known as Wahhabism after a leading 18th-century cleric, Mohammed ibn Abd al-Wahhab) are the traditional cornerstones of the Al Saud family's legitimacy. Since the beginning of large-scale oil production, the distribution of oil revenue has also become a key factor underpinning the Al Saud's maintenance of power. Saudi Arabia is the world's leading oil exporter and has the largest proven crude oil reserves.

  Political structure: Formally, the monarchy has absolute executive power, although the king's legislative power is constrained by the need for legislation to be compatible with Islamic law. Under the 1992 Basic Law, the Quran and the Prophet's sunna (tradition) are the official constitution. In practice, the king requires support from the clerical establishment (ulema). The king is also prime minister, appoints the Council of Ministers and chairs the Supreme Economic Council, which advises ministers. The Consultative Council has advisory powers. Municipal councils were partly elected by male nationals in 2005. The next elections were postponed but finally took place in September 2011. Political parties are illegal.

  Policy issues: The government is expanding the oil and gas industry while trying to diversify the economy into non-oil sectors, including manufacturing and services. It seeks to encourage development of the private sector, notably in services and utilities, but is mindful of the unrest that has swept the region, and so it will raise social spending and provide more public-sector jobs. Reducing unemployment among Saudi nationals is a priority; the government imposes quotas (which vary by sector) on employment of expatriates, who nonetheless make up the vast majority of the private-sector workforce.

  Taxation: Citizens and Saudi businesses pay no tax on income and are only liable for zakat (an Islamic tax on wealth) of 2.5% of net worth per year. Non-Saudi businesses are subject to corporation tax up to a maximum of 20% (with the exception of profits in the hydrocarbons sector, which are taxed on a sliding scale between 30% and 85%). There is no value-added tax.

  Foreign trade: Exports are dominated by oil and, to a lesser degree, by petrochemicals and plastics. Falling oil revenue pushed the current-account surplus down to 4.8% of GDP in 2009, but it subsequently bounced back. Crude oil production rose to an average of 9.3m barrels/day (b/d) in 2011 and 9.9m b/d in 2012 as Saudi Arabia boosted its output, initially to compensate for outages in Libyan exports, and subsequently to cover for falling Iranian oil exports.

  Major exports 2011	% of total	Major imports 2011	% of total
  Mineral products	87.2	Machinery & transport equipment	38.4
  Chemicals	4.5	Foodstuffs	14.0
  Plastics	3.9	Chemical & metal products	7.5
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  Japan	13.9	China	12.8
  China	13.7	US	11.9
  US	13.4	Germany	7.1
  South Korea	10.2	South Korea	6.0

  Download the numbers in Excel

  Download text file (csv format)

  March 07, 2013

• Structure

  Saudi Arabia: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 07, 2013

• Outlook

  Saudi Arabia: Country outlook

  Saudi Arabia: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The rule of the Al Saud family is expected to remain secure in 2013-17, and thus far the kingdom has remained largely untouched by the Arab Spring. Arguably the greatest challenge confronting the Al Saud will be managing the succession. After the death of two crown princes in just eight months, Salman bin Abdel-Aziz al-Saud was appointed as the next in line in June, with the youngest surviving son of King Abdel-Aziz, the kingdom's founder, Prince Muqrin bin Abdel-Aziz al-Saud, made second deputy prime minister (and in effect second in line) in February. Although both appointments were smoothly handled, the steady depletion of the ranks of the sons of King Abdel-Aziz makes the task of transferring power to the next generation ever more urgent.

  ELECTION WATCH: There is unlikely to be any democratic reform or any move to an elected parliament before the end of the forecast period, and political parties are expected to remain illegal. The king appoints the Council of Ministers and the Majlis al-Shura (Consultative Council), which has advisory powers. There are no parliamentary elections. In a sop to liberals, the country's second municipal elections, originally scheduled for 2009, finally went ahead in September 2011. However, the councils continue to have only an advisory role, and the election generated little enthusiasm. Although a higher turnout is likely in the next election--reflecting plans for women to be given the vote for the first time--more radical proposals are being tentatively discussed within the Consultative Council about setting up a new, elected merged body that would take on many of the responsibilities of the municipalities. Although it would also have only an advisory role, the creation of such a body would represent a significant expansion of the elected component of government.

  INTERNATIONAL RELATIONS: Saudi Arabia will pursue a sporadically active foreign policy, focused on promoting regional stability. As demonstrated by its decision to send troops into Bahrain in March 2011 (at the invitation of the Bahraini king), Saudi Arabia will take an active role in countries it deems to be within its sphere of interest, even if this occasionally runs counter to the wishes of the US (its most important strategic partner). This interventionist approach will extend to neighbouring Yemen, where the presence of al-Qaida in the Arabian Peninsula (comprising the Saudi and Yemeni wings of the group) is causing particular concern. These worries will have been only further heightened by the assassination of a Saudi diplomat in the Yemeni capital, Sanaa, in late November.

  POLICY TRENDS: The government will remain a major force in the economy, and the long-term drive to boost the role of the private sector will be tempered by the urgent political needs to provide employment for the mass of young unemployed and raise living standards. With this in mind, the government will remain sensitive to developments on the international oil markets (as oil revenue comprises 80-90% of fiscal earnings). It boosted output for most of 2012 to cover for the slump in Iranian oil exports, but reduced production sharply around the end of the year in response to rising output in, among others, Iraq and the US, as well as lower seasonal domestic demand. The Economist Intelligence Unit expects that this cut will be maintained into 2013, but that output will rise from 2014 as the global economic recovery picks up pace. Meanwhile, the kingdom will maintain its long-term strategy of using its energy resources as feedstock for value-added, energy-intensive industries (notably petrochemicals, plastics and aluminium).

  ECONOMIC GROWTH: The government has given a provisional estimate for real GDP growth in 2012 of 6.8%; however, we consider this figure to be unrealistic given that the economy grew by an average of just 5.8% in the first three quarters of the year, and economic output in the fourth quarter will have been hindered by a dip in oil production. As a result, we retain our estimate that real GDP growth reached a still impressive 5.7% in 2012, on the back of rising oil output, continued fiscal stimulus and rising investment in a host of industrial and infrastructure projects. However, growth is expected to slow to 4.1% in 2013, in line with a reduction in our projection for oil production that year. Nonetheless, the rate of economic expansion should remain robust, supported by strong domestic demand growth and a host of planned industrial projects. In addition, the impact of the two far-reaching fiscal spending packages announced by the king in early 2011, worth a combined 30% of GDP, will also be felt in the coming years, with the US$67bn affordable homes programme likely to boost the construction sector throughout the forecast period.

  INFLATION: Saudi consumer price inflation is expected to remain manageable throughout the forecast period, in large part reflecting the maintenance of price subsidies on a range of basic goods, such as foodstuffs and electricity. Inflation was lifted in 2012 by rising rents-which rose by an average of 9% over the year as a whole-as supply shortages persisted. However, the coming-on-stream of new properties helped consumer price inflation ease markedly over the second half of the year. More recently, however, core inflation has begun to pick up (rising to 4.2% in January from 3.9% at end-2012), raising concerns that the continuing tightening of the Saudiisation programme, including new measures to compel companies to hire (more expensive) Saudi employees, is causing companies to pass their higher costs on to customers. Overall, though, we believe that inflation will average a relatively low 3.9% in 2013-14 as global commodity prices decline and the dollar strengthens, before picking up to an average of 4.7% in 2015-17 as these trends reverse.

  EXCHANGE RATES: Saudi Arabia, Bahrain, Kuwait and Qatar remain committed to plans for a Gulf monetary union, despite the withdrawal from the project of the UAE and Oman. A joint monetary council has been set up, and this is likely to evolve into a central bank. However, the countries still need to agree on various technical issues, and the euro area's current problems will deter them from proceeding for the time being; we do not expect a single GCC currency to be set up until after the forecast period.

  EXTERNAL SECTOR: We expect Saudi Arabia to return large but narrowing current-account surpluses as strong domestic demand sucks in imports. High international oil prices, combined with elevated oil production and surging petrochemical and aluminium exports, should keep the trade balance comfortably in surplus, although it will narrow steadily. These surpluses will offset persistent deficits on the services and current transfers accounts. Income from investments abroad was sustained through the global economic slowdown, and we expect the income account to return wide surpluses over the forecast period (assisted by rising global interest rates after 2015). Overall, we forecast that the current-account surplus will narrow markedly from an estimated 20.5% of GDP (or US$154bn) in 2012 to 3.6% of GDP in 2017.

  March 11, 2013

• Forecast

  Saudi Arabia: Country forecast summary

  Country forecast overview: Highlights

  • The rule of the Al Saud family will face a number of challenges in 2013-17, including a potentially fractious succession process and wider demands for political reform. Small groups may mobilise to protest on specific issues, such as youth unemployment or Shia rights, while refraining from directly challenging the position of the Al Saud.
  • The succession remains a source of uncertainty-two crown princes died in the space of eight months, and the present incumbent, Salman bin Abdel-Aziz al-Saud, is 76. The former intelligence chief, Muqrin bin Abdel-Aziz al-Saud, was made second deputy prime minister, and, unofficially, second in line, in February; however, given that he is the youngest of the current generation of Al Saud, the passing of power to the next generation after him appears inevitable.
  • The government will seek to minimise the destabilising impact of the Arab Spring on its "near abroad", intervening politically and, occasionally, militarily. The potential for an escalation in tensions over Iran's nuclear programme will remain a particular source of anxiety, and Saudi Arabia will remain uneasy about perceived Iranian meddling both in the kingdom and in its near abroad (notably in Bahrain). The instability in Yemen will also be a concern, as an offshoot of al-Qaida has gained a foothold there.
  • Steady population growth will put pressure on infrastructure, housing and services over the forecast period. The private sector will remain overwhelmingly dependent on cheap and motivated foreign workers-a fact that will bring it into conflict with the government's drive to force companies into hiring more Saudi nationals. In an effort to appease popular disquiet, the government will boost public-sector recruitment and embark on a huge house-building programme.
  • Despite earlier plans to rein in subsidy outlays, the government, fearful of sparking unrest in the wake of the Arab Spring, will retain subsidies on a host of everyday goods and services-helping push the fiscal account into deficit from 2015. Real GDP growth is forecast to average 4.7% a year in 2013-17, boosted in large part by the expansionary fiscal stance. Oil will remain the mainstay of export earnings and of government revenue, leaving the economy vulnerable to external shocks.
  • Growth in the public sector is likely to remain strong, owing to major social spending programmes announced in early 2011. However, non-oil private-sector growth will be the main driver of economic expansion, boosted by the growing role of private firms in infrastructure and industry projects. Investment will focus on natural gas and refined oil, infrastructure and energy-intensive industries such as petrochemicals.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	5.7	4.1	4.9	5.0	4.8	4.8
  Consumer price inflation (av; %)	4.5	4.4	3.3	4.3	4.7	5.1
  Budget balance (% of GDP)	12.7	4.3	1.2	-0.1	-0.8	-2.5
  Current-account balance (% of GDP)	20.5	13.3	10.1	7.9	5.6	3.6
  3-month deposit rate (av; %)	1.1	1.0	1.2	1.3	1.9	2.9
  Exchange rate SR:US$ (av)	3.75	3.75	3.75	3.75	3.75	3.75

  Download the numbers in Excel

  Download text file (csv format)

  March 07, 2013

View detailed map

Country Briefing

Land area

2.15m sq km

Population

27.1m (2010, Central Department of Statistics and Information)

Key provinces

Population in '000 (2004 census, Ministry of Economy and Planning):

 Mecca: 5,449

 Riyadh (capital): 4,730

 Eastern: 3,009

 Asir: 1,637

 Medina: 1,379

 Jizan: 1,083

 Qassim: 980

Climate

Hot and dry, milder in the winter months

Hottest month: July, 26-42°C (average daily minimum and maximum); coldest month: January, 8-12°C; driest months: July, September, October, 0 mm average rainfall; wettest month: April, 25 mm average rainfall

Language

Arabic

Measures

Metric system

Currency

The Saudi riyal (SR) = 20 qirsh = 100 hallalas. The riyal is pegged to the US dollar at a rate of SR3.745:US$1

Time

3 hours ahead of GMT

Fiscal year

Calendar year

Public holidays

All Muslim holidays are observed in accordance with the Islamic or hijri calendar, based on the lunar year, which is about 11 days shorter than the Gregorian year. The weekend is Thursday-Friday. The month of Ramadan (July 20th-August 19th 2012) is not a public holiday but significantly shortens the working day. Eid al-Fitr (marking the end of Ramadan—August 19th 2012) and Eid al-Adha (Feast of the Sacrifice—October 26th 2012, the tenth day of the haj, or pilgrimage) are public holidays. The country's national day is September 23rd and is sometimes a public holiday. Travelling in the kingdom is particularly affected during the haj period, which lasts for about a month, as well as on Eid al-Adha and during the school summer holidays, which last until mid-September

January 10, 2013