Manufacturing of Saudi Arabia

The manufacturing sector has expanded widely since 1976, when the government established the Saudi Basic Industries Corporation (Sabic) in order to diversify the economy. Its initial goal was to expand the manufacturing potential of sectors of the economy related to petroleum. Since then manufactures, many associated with Sabic, have included rolled steel, petrochemicals, fertilizers, pipes, copper wire and cable, truck assembly, refrigeration, plastics, aluminum products, metal products, and cement. Small-scale enterprises have included baking, printing, and furniture manufacturing.

Finance

The Saudi Arabian Monetary Agency (SAMA) was established in 1952 as the kingdom’s central money and banking authority. It regulates commercial and development banks and other financial institutions. Its functions include issuing, regulating, and stabilizing the value of the national currency, the riyal; acting as banker for the government; and managing foreign reserves and investments. As an Islamic institution, it has a nonprofit status. Under Islamic law, banks cannot charge interest, but they do charge fees for lending and pay commission on deposits. Money supply and the tempo of business are dominated by government economic activity, though the government has increasingly favoured expansion of the private sector.

A number of commercial banks operate in the country, some of which are joint ventures between Saudi citizens and foreign banks. (Like all enterprises, banks doing business in the country require a Saudi partner.) Others, however, are wholly owned by Saudis. Banking regulations traditionally have not been stringently enforced, and private banks have shown great flexibility and creativity in interpreting Islamic banking regulations. Moreover, despite the ubiquity of banks in the country, large numbers of citizens and expatriates continue to rely on money changers, both for their convenience and for the anonymity that they provide.

Trade

Exports consist almost entirely of petroleum and petroleum products. Major imports are machinery and transport equipment, foodstuffs and animals, and chemicals and chemical products. The principal trading partners are the United States, China, and Japan, and the United Arab Emirates is an increasingly significant source of imports.

Services

The service sector grew dramatically in the second half of the 20th century with the influx of revenue derived from petroleum sales and because of large levels of government spending. Nearly three-fifths of workers are engaged in service-related occupations, including civil administration, defense, wholesale and retail sales, and hospitality and tourism. These sectors of the economy account for roughly one-fourth of GDP.

The hospitality industry has traditionally been strong only in and around the holy cities of Mecca and Medina, with the annual influx of pilgrims. However, in the 1960s, large numbers of expatriates—some with their dependents—began to arrive in the country, and facilities began to spring up to meet their needs. Only in the late 20th century did the government actively seek to attract tourists to Saudi Arabia with the construction of a number of coastal resorts and a relaxation of visa requirements for entering the country. Tourism unassociated with religious observance, however, remains an extremely small part of GDP.

Labour and taxation

The kingdom has traditionally relied on large numbers of foreign labourers, who account for roughly three-fourths of the labour force. Most of these have been unskilled or semiskilled workers from other parts of the Middle East and from South Asia, while Westerners, particularly Americans, have filled the most highly skilled positions in the country. Workers in Saudi Arabia have few legal rights, and they are not permitted to organize and do not have the right to strike.

Rapid population growth since the late 20th century has increased the number of native Saudis entering the labour force. Beginning in the 1990s, the government responded by encouraging a policy of “Saudi-ization” (in which employers were required to hire fewer migrant workers), but highly educated young Saudis seemed unwilling to engage in occupations that had been traditionally filled by expatriates and were therefore considered menial. Female citizens traditionally have had limited employment opportunities outside the home, with most occupations being restricted to men. Many foreign women have been employed as domestic servants.

Roughly two-thirds of government revenues are derived from the proceeds of oil exports. Remaining revenues are raised through tariffs, licensing fees, the proceeds of government investments, and consumption taxes. Foreign companies are required to pay an income tax, and companies that employ more foreign workers than Saudi nationals must pay a fee for each foreign worker, but exemptions are often granted in both cases. Saudi citizens are required to pay the zakāt, an obligatory tax on Muslims that is used to help the less fortunate in society. The country implemented a hefty excise tax on tobacco products and sweetened beverages in 2017. A 5 percent value-added tax was added to most goods and services in 2018 in coordination with other Gulf countries; it was increased to 15 percent in July 2020 to replace some of the revenue lost by plummeting oil prices that same year.

Transportation and telecommunications

The country’s roads are all paved, and the automobile is a common form of transport. Taxis are found in cities and most large towns. Women were not permitted to drive for much of Saudi Arabia’s history—until June 2018, when the ban was lifted. The first coast-to-coast road connection, from Al-Dammām on the gulf to Jeddah on the Red Sea, by way of Riyadh, was opened in 1967; it includes a spectacular descent of the western escarpment from Al-Ṭāʾif to Mecca. A causeway, opened in 1986, connects the kingdom with the island nation of Bahrain. A railroad passing through Al-Hufūf connects Riyadh and Al-Dammām.

Seaport capacity has been greatly expanded. Major cargo ports are Jeddah, Yanbuʿ, Ḍibā, and Jīzān on the Red Sea and Al-Dammām and Al-Jubayl on the gulf. The country has many small airports and airfields. The national airline, Saudi Arabian Airlines (formerly Saudia; founded 1945), provides both domestic and international service. The chief international airports are at Dhahran, Riyadh, and Jeddah.

Radio broadcasts began in the kingdom in 1948, and the first television station was established in 1965. All broadcasts are operated by the state, and programming focuses on religious and cultural affairs, news, and other topics that are viewed as edifying by the government. Radio and television services are widely accessible, as is telephone service. The government has invested significant resources in updating and expanding the country’s telecommunications infrastructure, and large portions of the telephone grid have been digitized. Cellular telephone service is widespread, and access to the Internet is available in all major population centres.