Higher oil prices expected to stimulate Saudi economy
Higher oil prices linked to economic reform are expected to boost growth in Saudi Arabia's GNP (Gross National Product) to 5.3 percent, a Saudi banking report said Tuesday. Saudi Arabia also expects a $12 billion surplus in running cost expenditures. The report predicts that the GDP to reach 632 billion riyal ($169 billion), a 20 percent increase and the highest since 1991. The kingdom expects an annual GDP growth of 3.16 percent by 2005.
However, the report cautioned from over optimism, saying that the growth was due a three-time increase in oil prices this year. The report pointed out the non-petroleum sectors only registered a 3 percent growth, not sufficient to absorb the many people looking for jobs. Unemployment among Saudi men is expected to reach 14 percent, and unemployment among men aged 20-29 is expected to reach 20 percent.
Saudi Arabia launched an ambitious economic reform program that includes new legislation on foreign investment to activate the private sector and decrease reliance on crude oil prices. The report stressed that the reforms have not progressed enough in terms of generating actual growth in the private sector and called on the government to continue with the reforms and use the increase in oil prices to improve its monetary system.
Sources in Saudi Arabia said that among the reforms, the kingdom has opened the door to foreign investment. Some 12 foreign companies have presented investment proposals worth over $100 in the field of energy. Mobile, Exxon, Chevron, Texaco and Philips are among eight American companies that have submitted proposals.
Four European companies have also submitted proposals. Saudi Arabia is expected to announce the projects in October. The source said most foreign investors are interested in gas and petrochemical projects, but that there were proposals to building electric and water purification stations. Companies that invest in petroleum will work injunction with ARAMCO, the government owned company that has a monopoly over oil digging and marketing.
Crown Prince Abdullah said Saudi Arabia was keen on accepting projects that fulfill the needs of Saudi Arabia. All proposals will be presented to the Higher Petroleum Council chaired by King Fahad and whose members are the crown prince and defense ministers. Saudi Foreign Minister Prince Faisal will supervise the negotiations. –(Albawaba-MEBG)
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