Saudi Arabia is in the middle of an economic transformation. Long known as the oil capital of the world, the kingdom is now focusing its economic policies on manufacturing and other non-oil activities as it tries to move away from oil dependence and build on its other competitive advantages.
Economic planners first recognised the need for diversification back in the 1970s, when they recommended building industrial cities specifically tailored to the oil and petrochemical industries at Jubail and Yanbu. Additionally, the government founded the Saudi Basic Industries Corporation (Sabic) to build the kingdom’s petrochemical base. Today, both industrial cities are well-known success stories and Sabic is a world leader in petrochemical production.
More recently, Saudi Arabia’s seventh five-year plan in 2000 laid the groundwork for the kingdom’s latest diversification initiative. However, it was not until the eighth five-year plan in 2006 that specific guidelines for the creation of a significant private sector and diversified economy were established. The plan outlines growth targets of 7.3% and 6.7% annually for the petrochemical and manufacturing sectors through 2024.
Manufacturing was the second fastest growing segment of the non-oil sector in 2007, recording a 6.5% increase. Last year, manufacturing, which includes petrochemicals, was predicted to grow 7.6%, according to Jadwa Investment, a Riyadh-based financial consultancy. The firm estimates the segment will grow a total of 9.4% from 2007 through 2010.