Leading Sectors for Exports and Investment

Saudi Arabia seeks to attract capital-intensive and highly automated industries. Other important characteristics are that the projects incorporate technology transfer, import substitution, and transfer of management expertise. The Saudi Ministry of Industry and Electricity, SABIC, and the Saudi Consulting House have identified industrial opportunities for implementation with foreign joint venture partners, and have prepared investment profiles for the following projects:

Agriculture, Food and Food Processing

Automobile Parts

Building Materials and Ceramic Industries

Chemical Industries

Electrical Equipment

Industrial Equipment

Metals

Mining

Paper, Printing and Publishing

Plastics Industries

 Textiles

Wood Products and Furniture

According to the U.S. Department of Commerce’s Country Commercial Guide for Saudi Arabia for fiscal year 2000, the top 15 sectors for U.S. exports and investments in the Kingdom are as follows:

1) Telecommunications Equipment:  The demand for telecommunications equipment is expected to grow rapidly following the government’s actions in 1998 to privatize the sector. The new Saudi Telecommunications Company (STC) is reviewing plans to continue to modernize Saudi Arabia’s telecommunications network. The introduction of Internet service in early 1999 is expected to generate additional market opportunities for U.S. firms supplying telecommunications and computer equipment and parts. Total imports of telecommunications equipment were estimated at $105 million in 1998.

2) Electrical Power Systems: With a rapidly growing population and continuing progress in all industrial fields, demand for electric power is increasing at a rate of about 11 percent a year. The Saudi Government has already approved more than $2.9 billion 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 under way, including the construction of a 1,200 MW power plant in Riyadh (PP9), and a 2,400 MW plant in Ghazlan. In March 1999, a contract was awarded to ABB to construct the Shuaiba power plant in the Western region. Total imports for 1999 are estimated to be more than $1 billion.

3) Water Desalination Equipment: Saudi Arabia’s reliance on desalination to meet its growing demands for water has created many business opportunities, especially for new technologies that can reduce the cost of producing fresh water. Saudi Arabia is the largest desalinated water producer in the world with 25 desalination plants, producing 800 million gallons of water a day. Multi-stage flash and reverse osmosis systems are the most commonly used systems for desalination in Saudi Arabia. Total imports for 1999 are forecast to be $319 million.

4) Computer Software: The Saudi software market was estimated at $400 million in 1997 with 10 percent growth over the next three years. The Saudi Government has taken serious steps to crack down on software piracy and other IPR infringement, and the demand for information technology and computer software in the Kingdom is rising rapidly. Total imports are forecast at $462 million for 1999.

5) Auto Parts and Service Equipment: The composition of the car market in Saudi Arabia has changed in recent years as many buyers have switched to used and reconditioned cars, while others have decided to maintain their own vehicles for longer periods of time. The result of these changes has been an increase in the market for spare auto parts and equipment in the Kingdom. Total imports in the sector are estimated to reach $615 million in 1999, excluding tires and tubes. The market is very competitive, and becoming increasingly so with a growing demand for original and quality spare parts.

6) Computers and Peripherals: The Saudi market for computers and peripherals remains the largest in the Middle East. The Kingdom's computer market is estimated to reach $275 million in 1999. The Internet service is likely to create a wealth of opportunities for U.S. hardware and software manufacturers. Growth in the sector is expected to remain strong and stable as more and more Saudi firms look to modernize their computer and communications systems. Vendors are competing for various niches by offering more technologically advanced computers with added features. There are more than 300 local computer dealers selling various computer brands throughout Saudi Arabia.

7) Medical Equipment: Saudi Arabia is the largest market for medical equipment and supplies in the Middle East. The Ministry of Health is responsible for about 70 percent of all healthcare services, and is responsible for much of the market for medical equipment and supplies. The market is estimated at $265 million in 1998 and is expected to reach a three-year high of $280 million in 1999, an increase of more than five percent over 1998. 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 five percent.

8) Education and Training Services: There is a significant need for manpower training in Saudi Arabia as a result of the Saudization program currently underway as part of the Sixth National Development Plan. As a young and rapidly growing Saudi population enters the job market, opportunities in this sector are likely to increase exponentially. The Government plans to replace 60 percent of the foreign workers with Saudi nationals over the next several years. An increasing number of organizations, both Government and private, now offer business related training courses, either in-house or at specialized institutions. The marketplace is competitive and extremely price conscious.

9) Oil and Gas Equipment and Services: At the end of July 1998, Saudi Aramco successfully commissioned the Shaybah oil field, a $1.83 billion project in the Rub-al-Khali. Projects are also underway to upgrade its oil refineries at Ras Tanura, Riyadh, Jeddah, Rabigh and Yanbu. In addition, Aramco is expanding its production capacities at its gas facilities in Shedgum, Uthmaniya and Berri. U.S. companies are by far the largest suppliers to the oil and gas industry in the Kingdom, controlling 60 percent of the market for engineered equipment and 50 percent of the program management/engineering and design market. The Commercial Service Saudi Arabia estimates a five percent annual growth for oil and gas equipment and materials in 1999.

10) Pollution Control Equipment: Rapid population growth, the declining level of ground water, increasing air pollution and solid waste, a significant construction market, continuing growth in the oil, gas, and petrochemical industries, and an insufficient sewage system have all combined to expand opportunities in the Saudi environmental technology market. Saudi Arabia's environmental technology market size is expected to be $50 million in 1999. 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.

11) Franchising: It is difficult to estimate the exact size and composition of the Saudi franchising market. However, the market is already home to a significant number of U.S.-based fast-food restaurants, and rapid population growth and esteem for American products in the Kingdom indicate that many opportunities will be available, particularly for the non-food sectors. A number of boutique-type retail outlets have experienced success in specializing in particular brands. Non-food franchises account for 55 to 60 percent of the total Saudi franchise market, with total sales estimated at $274 million in 1997. The best opportunities exist for business services, telecommunications, automotive products and services, printing and graphic design, mail and packaging, courier services, hotels and motels.

12) Security and Safety Equipment: Imports of industrial security items in 1998 are estimated to have risen by 10 percent, reaching $102.9 million. Expansion is expected to continue at a rate of 10 percent over the next year, possibly slowing slightly towards the end of 2000. American products continue to hold an approximate 70 percent market share.

13) Mining Equipment: Saudi Arabia has the largest mineral deposits in the Gulf. The Deputy Ministry for Mineral Resources (DMMR) has located 1,273 sites of precious metals, and 1,171 sites of non-precious metals. Over 30 minerals have already been identified in the Kingdom, with at least 15 industrial minerals that could be successfully exploited by investors. The DMMR has identified more than 64 mining projects that offer investment opportunities for private investors. The Saudi Arabian Mining Company (Ma'aden) is responsible for regulating the mining sector, and rebuilding Government mining projects on a commercial basis in partnership with the private sector. As of mid-1997, total investment in the mining sector reached $6.67 billion.

14) Apparel: High population growth and relatively high disposable income make Saudi Arabia an attractive market for manufacturers of apparel. 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 of four percent annually, as more U.S. branded stand-alone boutiques are opened. Total market size for 1999 is estimated at $906 million.

15) Insurance: The insurance market in Saudi Arabia is growing rapidly. Insurance premiums in Saudi Arabia amounted to $760.5 million in 1997, a 5.1 percent growth over the previous year. There are about 70 insurance companies in Saudi Arabia. Motor insurance accounted for more than 23 percent of written premiums, followed by medical at around 18 percent, and fire at 14 percent. Insurance premiums covering oil facilities, major projects, marine and aviation represented 44.4 percent of total premiums.

In addition, according to the U.S. Department of Commerce, the best prospects for agricultural products are:

1) Corn:  Both livestock and poultry farming are growing rapidly in Saudi Arabia. Producers in these sectors are the major consumers of imported corn in the Kingdom, and several poultry producers underwent major expansion projects in 1996. As a result, the value of U.S. corn exports increased 25 percent between 1996 and 1998. The U.S. accounts for nearly 95 percent of imported corn, and the market is expected to increase as small to medium sized farms also increase production. Total imports are forecast to be $276 million in 1999.

2) Soybean Meal:  Soybean meal is a common ingredient in both poultry and 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 the last two years. With nearly 85 percent market share, the U.S. is the dominant supplier of soybean meal to Saudi Arabia. As with corn, U.S. exports of soybean meal will continue to increase as small to medium sized poultry producers expand production. Total imports in 1998 were estimated at $175 million.

3) Rice:  The market for rice in Saudi Arabia is large and expanding. The Kingdom does not produce rice domestically, and relies entirely on imports to meet its needs for the product. The market is extremely competitive, but opportunities do exist to increase the U.S. market share.

4) Processed Fruits and Vegetables:  There is substantial demand for processed fruits and vegetables in the Kingdom. Imports were estimated at $118 million for 1998. The market is expected to broaden and grow with increased sales of supermarket food. Dates constitute more than half of Saudi Arabia’s local production in this sector.

5) Snack Foods (Excluding Nuts): (Excluding Nuts): Although local production of snack foods has increased dramatically, there are still significant opportunities for potential exporters in this sector, especially for quality branded chocolates and other sweeter items. U.S. products in the market are generally viewed positively and associated with high quality.

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