Ibrahim Al-Assaf

Finance Minister Saudi ArabiaOil revenues unemployment

Managing an economic boom in the world’s largest oil exporting economy is not necessarily that easy. Oil revenues are forecast to top $200bn in 2006, a 25% increase on 2005, and even with a 20% growth in spending, the government is forecast to have a $67bn budget surplus. But despite a booming economic environment, the kingdom faces high unemployment of 8%-9% of its labour force and the country’s stock market suffered a significant correction during 2006, losing almost half its value since the start of the year.

While the Saudi economy may appear to be the envy of all, there are still significant challenges at hand and it has been the task of the finance minister Ibrahim Al-Assaf to maintain overall momentum and efficiency and avoid the waste and mismanagement that has occurred in previous booms.

While oil remains the anchor of the Saudi economy, the government has been at pains to diversify and create a number of megaprojects that not only create much-needed employment opportunities for nationals, but also help develop a wide range of industries beyond the traditional hydrocarbon, crude oil, refining and petrochemical staples. Bank economists note that the current major project activity consists of 37 megaprojects that are under way or have a high likelihood of implementation over the next several years with a total value of a staggering $283bn.

Contrary to the view that economic reform slows as the oil price rises, Mr Al-Assaf and the government have powered ahead with reforms in recent years with Saudi Arabia joining the World Trade Organization (WTO) in December 2005, while in the process implementing 42 trade-related laws and introducing nine new regulatory bodies. The government has also promoted the private sector with about half the megaprojects mentioned financed by the private sector.

This diversification is being driven by the launch of six economic areas, led by the largest private sector investment in Saudi Arabia, the King Abdullah Economic City, with estimated investment of $26.7bn. These zones will focus on various business sectors and cover cities such as Rabigh, Hail, Jizan, Medina and Tabuk, helping to channel foreign investment throughout the kingdom.

While investors may have had a hard time in 2006, the kingdom’s four-year boom continued and looks likely to continue despite lower oil prices. Managing the process, maintaining efficiency and low inflation can be challenging and have its pitfalls but the experienced Mr Al-Assaf has been able to keep the boom going and provide creative investment opportunities to provide necessary employment and essential growth.

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