[Source: NUSACC's U.S.-Arab Trade Outlook 2013]
In September 2010, the Export Promotion Cabinet released a report on the National Export Initiative (NEI) to President Obama that identified Saudi Arabia as one of a handful of “next tier” markets for the United States. The ambitious plan of H.M. King Abdullah bin Abdulaziz Al Saud to establish Saudi Arabia as one of the world’s most competitive nations and to diversify his nation’s economy away from hydrocarbons has opened up a wealth of new opportunities for foreign direct investment (FDI).
According to the United Nations Conference on Trade and Development (UNCTAD), Saudi Arabia is the largest destination in the Arab world for FDI, attracting approximately $147.1 billion over the past two decades. American investors accounted for $5.8 billion in FDI between 2007 and 2009, followed by Kuwait ($4.3 billion), France ($2.6 billion) and Japan ($2 billion).
“Saudi Arabia is embarking on an historic development project, and American companies have the expertise and the resources to help Saudi Arabia reach these ambitious goals,” commented U.S. Secretary of Commerce Gary Locke during his keynote address at the 2010 U.S.-Saudi Business Opportunities Forum in Chicago, Illinois.
"We need what the United States has to offer – products and technology,” agreed Sheikh Abdul Rahman Al-Jeraisy, Chairman of the Riyadh Chamber of Commerce and Chairman of the Al-Jeraisy Group. “Our economic vitality is not a temporary condition. The opportunities will be long-term.”
In addition to Saudi Arabia’s investment potential, the Kingdom’s consumer market is growing faster than expected, opening the door for increased U.S. exports of goods and services. Saudi Arabia’s Central Department of Statistics released preliminary figures from the 2010 census which confirmed a total population of 27.1 million – approximately 20 percent larger than 2004 and reflecting a 3.1 percent average annual growth in population.
According to the nation’s ninth Five-Year Development Plan, Saudi Arabia plans to invest $385 billion in infrastructure, health and education projects through the year 2015. Tatweer, the King Abdullah Project for Developing Public Education, has an unprecedented budget of $2.4 billion (SR 9 billion). Due to what Moody’s, the international ratings agency, described as the Kingdom’s “solid state of government finances” and its foreign reserves in excess of $400 billion, Saudi Arabia is well-situated to finance current and future mega-projects – in schools and education and a host of other infrastructure projects.
Construction of four of the six new economic cities is underway with the involvement of regional and international companies. These cities are expected to contribute over $150 billion to Saudi Arabia’s GDP and create 1.3 million jobs. Dr. Fahad Al Sultan, Secretary General of the Council of Saudi Chambers of Commerce and Industry, noted recently that there is a “gold rush of opportunities” in education, infrastructure, telecommunications, agriculture, transportation and health, to name just a few. Furthermore, a new trend in Saudi Arabia’s industrialization program involves building industrial clusters that focus on specialized sectors such as automotive parts or electronics.
Saudi Aramco’s 2009 annual report confirms increases in oil production capacity to 12 million barrels per day (bpd). Saudi Aramco also states that 2 – 4 million of that 12 million bpd is spare capacity to fulfill Saudi Arabia’s global responsibility as the largest and most reliable swing supplier. The Kingdom is committed to spending $120 billion during the 2010 – 2014 period, much of it to expand refining capacity from 2.2 million bpd to 3.2 million bpd.
The U.S. Energy Information Administration estimates that Saudi Arabia pumped 10.2 million bpd in 2010. Against this backdrop, according to the Minister of Petroleum and Mineral Resources, H.E. Ali Al-Naimi, the Kingdom will invest in 80 new petrochemicals projects by the year 2015, moving Saudi Arabia to the third largest producer of basic petrochemicals in the world.
Saudi Arabia’s third Industrial Oil and Gas Exhibition, held in October 2010, underscored the Kingdom’s drive to become the world’s foremost petrochemical producer. Greater percentages of hydrocarbon reserves are now being shipped as high value-added petrochemicals – such as ethylene – rather than as crude oil. By mid-2011, Saudi Aramco and U.S. partner Dow Chemical Company expect to finish the engineering and design of a $20 billion petrochemicals, chemicals, and plastics plant in the industrial hub of Jubail on Saudi Arabia’s East Coast. Dow expects the plant to be fully operational by 2015.
Saudi Arabia – with one quarter of the world’s proven petroleum reserves at 264 billion barrels had a surplus capacity of approximately four million bpd in 2009. The Kingdom’s Manifa field is expected to start producing 500,000 bpd by 2013, increasing to 900,000 bpd by 2024. The Kingdom also possesses the world’s fourth largest gas reserves. Saudi Aramco exploration projects have added more than 12 trillion cubic feet to its natural gas reserves, with 2009 reserves topping 275 trillion cubic feet (tcf) compared to 181 tcf in 1990.
Saudi port capacity – currently around 20 percent of Arabian Gulf traffic – is likely to continue growing in coming years, especially when the country’s new railway systems are completed. The new Red Sea Gateway Terminal at the Jeddah Islamic Port, valued at over $500 million, was launched in January 2010.
In 2010, border instability and tensions over Iran’s nuclear program generated fighter jet and aircraft purchase orders from the United States estimated at up to $67 billion. The proposed arms bundle is expected to include 84 new F-15 jet fighters and upgrades to another 70 Royal Saudi Air Force F-15S fighters. This also includes three distinct categories of helicopters: 70 Boeing AH-60 Apache attack helicopters, 72 Sikorsky UH-60 Black Hawk troop transports, and 36 MH-6 Little Bird rotor-craft. The Royal Saudi Navy is also evaluating a potential $30 billion upgrade for inshore patrol vessels and littoral combat ships.