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aircraft maintenance hanger
Financial and technical support from government agencies has enabled the private sector to branch out into new areas, including aircraft maintenance at the airport in Riyadh (above).

As the new millennium approaches, the desert now blooms, the Kingdom's cities are growing and the economy is thriving. The implementation of King Abdul Aziz Ibn Abdul Rahman Al-Saud's vision for Saudi Arabia continues to be carried out through the work of his sons and flourishes today under the stewardship of the Custodian of the Two Holy Mosques King Fahd Ibn Abdul Aziz.

Development on such a large scale, over the relatively short span of six and a half decades, is the result of deliberate planning and well-defined goals, including a growing emphasis on expansion of the private sector. With the First Five-Year Development Plan in 1970, Saudi Arabia started on its well-navigated course to economic achievement. Since then, the Kingdom's steady but dramatic industrial and economic transformation has been accomplished through the careful guidance and active support of the government.

From the outset of development planning, the emphasis on free market principles ensured that private enterprise would be a major component of economic activity in the country. Although the laying down of infrastructure and the expansion of the oil industry during the first three development plans (1970-84) necessitated that the government take the lead in stimulating economic expansion, by the Fourth Development Plan (1985-89), the completion of infrastructure projects had brought about an economic climate conducive to greater integration between the government and the private sector. During the Fifth Development Plan (1990-94), as the nation began to work towards diversifying the economy, opportunities emerged for the private sector in areas traditionally managed by the government, such as the transport and utilities sectors. The Fifth Plan also encouraged the expansion of the private sector and the importance of improving its competitive position in world markets.

construction site

industrial site

Construction and industry are sectors in which private companies have thrived over the past three decades.

Continuing to recognize the large contributions of talent, initiative and capital that the private sector offers, the current Sixth Development Plan (1995-1999) highlights the importance of mobilizing this group's resources for the growth and diversification of the national economy. As a provider of jobs and a developer and consumer of technology, the private sector has significantly enhanced the Kingdom's economy. Increasing the number of small-, medium- and large-scale investment opportunities available to the private sector and expanding their economic involvement is a prime focus of the Sixth Development Plan.

Today there are more than 500,000 private sector establishments in the Kingdom. Most of these are small- and medium-sized enterprises engaged in the agricultural, commercial and industrial sectors. Their contribution to the export market has directly affected the positive growth of the national economy. Exports to other Arabian Gulf countries, Western Europe and Asia include a variety of products - beverages, foodstuffs, building materials, chemical products, paper products, electrical appliances, dairy products, produce and poultry.

Earlier development plans put in place the mechanisms which have fostered the current success of the private sector; Ministry of Finance and National Economy figures put its growth at 3.5 percent in 1995. The provision of long-term soft loans is one of the main instruments of support to the private sector. Specialized credit agencies, established by the government, provide the means by which Saudi entrepreneurs and companies can more effectively function in an increasingly competitive marketplace. Three of the most active agencies are the Saudi Industrial Development Fund (SIDF), the Real Estate Development Fund and the Saudi Arabian Agricultural Bank (SAAB).

Established in 1974 to supply long-term interest-free loans that can be used to finance up to 50 percent of the capital for a new industrial facility or the expansion of an existing one, SIDF has been a major catalyst for the Kingdom's impressive industrial growth. From 1974 through the beginning of 1996, SIDF allocated loans worth 28.25 billion Saudi riyals (7.53 billion U.S. dollars) for the implementation of 1,447 new industrial projects and the expansion of 403 existing plants in different parts of the Kingdom. While the chemical products sector is the leading beneficiary of SIDF loans, assistance has been provided for projects as varied as the building of a soft drink plant in Dammam to the construction of a factory in Riyadh which produces batteries for automobiles. During 1995 alone, the fund awarded 2.41 billion riyals (642.66 million dollars) for the financing of 82 new projects and the expansion of 23 existing ones. This is the highest level of financing extended by the bank in any one year since it was established.

SIDF has helped numerous companies involved in a variety of industries get started on the road to success. As an example, it has assisted in the construction of a plant in Yanbu which produces 100,000 tons of polyester yarns annually. Like so many other SIDF projects, this one has a spin-off effect for other private enterprises. Yarn manufactured at this plant is used by other privately-owned factories to produce high-quality carpets.

cable rolls

product exhibition

Saudi Arabian companies manufacture a wide range of products, from cables to processed foods. As part of the export promotion drive, "Made in Saudi Arabia" exhibits, such as this one in Morocco, are held regularly in other countries.

Another instance of cooperation between the private sector and the government-backed SIDF is the rise of the Saudi Cable Company (SCC). SCC is one of the largest private industrial conglomerates in the Kingdom as well as being the tenth-largest cable manufacturer in the world. When its five founding members established SCC in the late 1970s, they began with 3.5 million riyals (0.93 million dollars) in capital and the goal of bringing light and sound to all corners of the Kingdom. SIDF's financial support made it possible for SCC's manufacturing plant to produce 6,000 tons of electrical cable its first year. After winning several other lucrative contracts and building the company into a strong industry player, SCC, at the urging of SIDF, became a joint- stock company in 1988. It now has more than 1,000 shareholders from the Kingdom and other Gulf Cooperation Council (GCC) countries and has expanded beyond Saudi Arabia, exporting its fiber-optic and telephone cables throughout the Middle East, Western Europe and Africa. Today SCC is a billion-riyal conglomerate of four companies operated under the umbrella of the Saudi Cable Company Group.

The Real Estate Development Fund, also established in 1974, offers interest- free loans repayable over 25 years to citizens and property developers. Through the beginning of 1996, the fund had extended 425,206 personal loans amounting to 111.7 billion riyals (29.79 billion dollars). These loans were used for the construction of more than half a million housing and thousands of commercial units across the Kingdom.

Loans from the fund may be used for a variety of housing projects. Individuals may borrow to build a home or developers may seek loans for larger community development. During the planning of the industrial cities of Jubail and Yanbu, several districts were set aside for private sector development. Although the Royal Commission for Jubail and Yanbu was responsible for construction of the initial homes necessary to support the workers in the industrial cities, the success of this industrial center quickly led to the need for more apartments and villas to house the rapidly growing working population. Many of the additional homes were built by private sector developers and contractors with assistance from the fund.

The Saudi Arabian Agricultural Bank (SAAB) was established in 1963 to provide short-, medium- and long-term interest-free loans as well as technical consulting services. From its founding through 1995, SAAB extended 366,270 loans amounting to more than 28 billion riyals (7.46 billion dollars) through its 70 branches in the Kingdom for the establishment of agricultural projects, purchase of farm machinery and the requirements of production.

The Saudi dairy industry is one of the success stories of public and private sector cooperation. SAAB has underwritten several of the Kingdom's private and joint venture dairy farms. Such assistance has allowed private sector enterprises to combine quality cattle and advanced technology for processing, packaging and distribution, with efficient management that has resulted in the development of a capital-intensive dairy sector. Saudi dairy farms are expanding and have begun exporting their products to other GCC countries.

In addition to providing the necessary funds, consultation and support services, the government also offers private enterprise access to information services as well as priority in public contracts to locally manufactured products and to Saudi companies. Through these and other services, Saudi Arabia has managed to nurture a thriving private sector that is now active in different industrial, commercial and service sectors.

manufacturing plant

There are now more than 2,300 factories in Saudi Arabia, producing consumer and industrial products for the domestic market and for export to 70 countries worldwide.

The scope of the Kingdom's private sector can be extended to include those establishments of mixed public and private ownership which operate as joint-stock companies according to the rules of the market. Such companies include: Saudi Arabian Basic Industries Corporation (SABIC), Saudi Cement Company, Saudi Ceramic Company, Tabuk Agricultural Company and the National Agricultural Development Company (NADEC). The private sector's ownership in these companies ranges from 30 percent in the case of SABIC to 99 percent in Saudi Cement Company.

The National Industrialization Company (NIC) is an example of a joint stock company which was established to allow smaller investors to participate in various economic ventures. Founded in 1985, NIC is dedicated to industrial investments in fields that complement the activities of larger established private and public operations. NIC's mission is to provide investment opportunities for Saudi citizens, facilitate the transfer of technology to Saudi Arabia and the Arab world, enhance the Kingdom's self- sufficiency in industry and develop job opportunities for young Saudis entering the workforce.

manufacturing plant

With active support from the government, the private sector plays a central role in the national effort to achieve self-sufficiency in the production of most industrial and consumer goods and make Saudi Arabian products competitive in world markets.

During its 12 years of operation, NIC has participated in 43 highly sophisticated industrial projects throughout the Kingdom. More than 60 percent of its 7,000 employees are Saudis, 73 percent of whom hold technical positions. And in its efforts to continually improve and better train its personnel, NIC formed the National Company for Technical Resources Development (TADREEB), in order to harness local talent and provide it with vocational and technical training to support industrialization in the Kingdom.

Another key to the success of the private sector has been the increasing participation of the Kingdom's women in the national work force. According to a recent report by King Abdul Aziz University in Jeddah, during the Sixth Development Plan the number of Saudi female graduates entering the job market is anticipated to be 78,000 compared with 30,000 during the Fifth Development Plan. Private sector enterprises are welcoming this additional source of talent. The Al-Babtain Group, which supports a network of 13 companies in the electrical, home appliance and telecommunications sector, is one of the many such businesses that actively recruits Saudi women to work in a variety of jobs. With 3,000 employees, Al-Babtain says it plans to train and integrate female workers at different levels within its structure. Women continue to find a variety of positions available to them in all sectors of business, particularly the health, banking, retail and teaching fields.

The growing strength of the private sector during the last two decades has been impressive. The number of operating companies increased from 1,473 with a total capital of seven billion riyals (1.86 billion dollars) in 1975 to 7,643 companies with capital of 108.7 billion riyals (28.98 billion dollars) by 1995. Over this same period, this sector's contribution to the gross domestic product (GDP) rose from 21 percent to more than 35 percent. In 1996, the private sector grew by 3.5 percent, accounting for approximately 72 percent of the Kingdom's non-oil GDP, as well as being a major provider of jobs, employing more than 88 percent of the Kingdom's 6.9 million workers. Today, private investment has gained a momentum covering most sectors of the national economy, and its growth has exceeded earlier expectations. At the end of the Fifth Development Plan in 1995, private investment was estimated at 46 billion riyals (12.26 billion dollars), an average growth rate of 13 percent since the establishment of the First Develop-ment Plan in 1970.

The achievement of the Sixth Development Plan's goals depends on the full participation of the private sector in mobilizing its resources and technology to secure the investment which is needed to ensure the steady growth and prosperity of the national economy. Government agencies are dedicated to opening up opportunities to the private sector in all fields of production. It is no wonder then, that the private sector is expected to grow by five to six percent over the next several years and is now leading economic development in the Kingdom. The private sector has demonstrated its ability to adapt to external and internal changes, and its role in national development is becoming paramount.

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