Saudi Arabia country overview

The economy of Saudi Arabia

Geography, People, Culture, and Economic Profile

Saudi Arabia information index

Industry of Saudi Arabia

This growth in the manufacturing sector has not only contributed to diversifying the country’s economy but has also created numerous job opportunities for Saudi nationals. The establishment of Sabic paved the way for technological advancements and knowledge transfer in various industries, leading to increased productivity and competitiveness in the global market. Furthermore, with the government’s support and investment in infrastructure, the manufacturing sector has seen a steady increase in exports, boosting the country’s overall GDP. The development of these industries has also led to the localization of production, reducing the country’s reliance on imports and enhancing its self-sufficiency. In addition to the economic benefits, the growth of the manufacturing sector has also had a positive impact on society. The emergence of small-scale enterprises has provided opportunities for local entrepreneurs to start their own businesses and contribute to the country’s economic development. Overall, the continued growth and diversification of the manufacturing sector in Saudi Arabia have played a crucial role in driving the country’s economic growth and creating a more sustainable and resilient economy for the future.


The Saudi Arabian Monetary Agency (SAMA) was established in 1952 as the central authority for money and banking in the kingdom. Its responsibilities include regulating commercial and development banks, as well as other financial institutions. SAMA’s key functions involve issuing, regulating, and stabilizing the value of the national currency, the riyal. It also serves as the government’s banker and manages foreign reserves and investments. As an Islamic institution, SAMA operates on a nonprofit basis. According to Islamic law, banks are not allowed to charge interest, but they can impose fees for lending and offer commissions on deposits. While government economic activity largely influences the money supply and business pace, there has been a growing emphasis on expanding the private sector.

The country hosts several commercial banks, some of which are joint ventures between Saudi citizens and foreign banks. It is important to note that all banks operating in the country require a Saudi partner. However, there are also banks that are fully owned by Saudi individuals. Historically, banking regulations have not been strictly enforced, allowing private banks to demonstrate flexibility and creativity in interpreting Islamic banking regulations. Despite the widespread presence of banks, a significant number of citizens and expatriates still rely on money changers for their convenience and the anonymity they offer.


The economy of the country relies heavily on exports of petroleum and petroleum products, which account for a significant portion of its GDP. These exports are crucial in generating revenue for the country and driving economic growth. On the other hand, major imports include machinery and transport equipment, foodstuffs and animals, as well as chemicals and chemical products, which are essential for supporting various industries and meeting domestic demands. The United States, China, and Japan are the primary trading partners of the country, with whom it conducts significant trade activities. These countries play a vital role in influencing the country’s economy and shaping its trade relationships. Additionally, the United Arab Emirates has emerged as an increasingly important source of imports for the country.

One of the key factors driving the growth of trade between the United Arab Emirates (UAE) and other countries is the country’s push for diversification in its import market. With a heavy reliance on petroleum exports for revenue, the UAE is keen on expanding its trade relationships to reduce its dependence on a single source of income. This diversification strategy not only helps to mitigate risks but also opens up new avenues for growth and development. The UAE’s strong partnerships with key trading partners have also played a significant role in shaping its trade dynamics. These partnerships have allowed the country to tap into new markets, access new technologies, and participate in global value chains. By leveraging these relationships, the UAE has been able to strengthen its position in the international market and secure a competitive edge. As the global economy undergoes rapid changes, the UAE will need to adapt to evolving trade patterns to remain competitive. This means exploring new opportunities for growth and development, identifying emerging markets, and adapting to shifts in global demand. By staying flexible and proactive in its approach to trade, the UAE can position itself as a key player in the international market and continue to drive economic growth and prosperity.


The service sector has played a crucial role in the economic development of the country, especially in the latter half of the 20th century. This growth can be attributed to various factors, including the increase in revenue from petroleum sales and substantial government spending in areas such as civil administration, defense, wholesale and retail sales, and hospitality and tourism. Today, approximately 60% of the country’s workforce is employed in service-related occupations, highlighting the significant impact of this sector on the overall economy. These occupations not only provide employment opportunities for a large portion of the population but also contribute significantly to the country’s GDP, accounting for around 25% of total economic output. The service sector encompasses a wide range of industries and businesses, from government agencies and defense contractors to retail stores and hotels. The diversity and breadth of this sector make it a vital component of the economy, driving growth and creating opportunities for both businesses and individuals. Overall, the service sector’s growth and contribution to the economy highlight the importance of diversifying the country’s economic base and investing in industries beyond traditional sectors like manufacturing and agriculture. By continuing to support and promote the service sector, the country can ensure sustainable economic development and prosperity for its citizens.

The hospitality industry in Saudi Arabia has a long history, with its roots deeply embedded in catering to the annual pilgrimage to the holy cities of Mecca and Medina. Over time, however, the landscape of the industry has evolved to include a wide range of services to accommodate the diverse needs of both locals and expatriates in the country. In the 1960s, a significant number of expatriates began arriving in Saudi Arabia, bringing with them not only their skills and expertise but also their families. This influx of foreigners created a demand for new and improved hospitality facilities, prompting the development of hotels, restaurants, and other amenities to cater to their needs. Despite the long-standing tradition of hospitality in the region, it was only in the late 20th century that the Saudi government actively began promoting tourism as a means to diversify the economy. This initiative led to the construction of coastal resorts, the relaxation of visa requirements, and the development of tourist attractions to attract visitors from around the world. While religious tourism continues to be a significant driver of the hospitality industry in Saudi Arabia, there has been a concerted effort to promote tourism unrelated to religious observance. However, this sector remains a minimal contributor to the country’s GDP, highlighting the challenges and opportunities that lie ahead for the industry as it continues to grow and evolve.

Labour and taxation

The transportation infrastructure in Saudi Arabia is known for being well-developed, with an extensive network of paved roads that span throughout the country. These roads make it easy for residents and visitors alike to travel from one city to another, ensuring that transportation is efficient and accessible. One of the most common modes of transport in Saudi Arabia is the automobile, with many residents owning their own vehicles for daily commutes and longer road trips. Additionally, taxis are readily available in cities and most large towns, providing a convenient option for those who prefer not to drive themselves. In a historic move, the ban on women driving in Saudi Arabia was lifted in June 2018, marking a significant step forward for gender equality in the country. This change has had a positive impact on women’s ability to move freely and independently, allowing them to participate more fully in society and the workforce. Overall, the transportation infrastructure in Saudi Arabia continues to evolve and improve, making it easier for residents and visitors to get around the country. With the lifting of the ban on women driving, there is now even greater freedom of movement for all individuals in Saudi Arabia.

In terms of road connections, the first coast-to-coast route was established in 1967, marking a significant milestone in the transportation infrastructure of Saudi Arabia. This route spans from Al-Dammām on the gulf to Jeddah on the Red Sea, with Riyadh serving as a strategic midpoint along the way. The journey along this route offers travelers a unique experience, as they descend the western escarpment from the city of Al-Ṭāʾif to the holy city of Mecca. The breathtaking views and diverse terrain make this route a popular choice for both locals and tourists exploring the kingdom. In addition to this coast-to-coast route, Saudi Arabia saw another major development in its transportation network with the opening of a causeway in 1986. This causeway links the kingdom with the island nation of Bahrain, providing a vital link for trade and tourism between the two countries. The ease of travel facilitated by this causeway has strengthened the economic and cultural ties between Saudi Arabia and Bahrain, further enhancing their bilateral relationship. Furthermore, the kingdom has made significant investments in railway infrastructure, with a railroad passing through Al-Hufūf connecting Riyadh and Al-Dammām. This railway not only improves connectivity between these two major cities but also contributes to the overall efficiency of transportation within the kingdom. The modern and efficient rail system plays a crucial role in supporting the country’s growing economy and meeting the transportation needs of its residents and businesses. Overall, these developments in road and rail connections underscore Saudi Arabia’s commitment to enhancing its transportation infrastructure and promoting economic growth. As the kingdom continues to invest in expanding and improving its transportation networks, it is poised to further strengthen its position as a regional hub for trade and commerce.

In addition to expanding its seaport capacity, Saudi Arabia has made significant investments in its transportation infrastructure to support its growing economy. Major cargo ports are strategically located in key cities such as Jeddah, Yanbuʿ, Ḍibā, Jīzān on the Red Sea, and Al-Dammām and Al-Jubayl on the gulf, ensuring efficient import and export operations. Moreover, the country boasts a network of small airports and airfields, facilitating connectivity across various regions. The national airline, Saudi Arabian Airlines (formerly Saudia), plays a crucial role in enhancing the country’s accessibility by offering a wide range of domestic and international flight options. The main international airports located in Dhahran, Riyadh, and Jeddah serve as important hubs for travelers from around the world. As Saudi Arabia continues to develop its transportation infrastructure, it is poised to further strengthen its position as a key player in the global logistics and aviation sectors. With a strong focus on enhancing connectivity and efficiency, the country is committed to facilitating seamless movement of goods and people both domestically and internationally.

Since the inception of broadcasting services in Saudi Arabia in 1948, the country has made remarkable strides in modernizing and expanding its telecommunications infrastructure. What began with radio broadcasts has now expanded to include television stations, telephone services, cellular telephone service, and access to the Internet in all major population centers. The government plays a central role in overseeing all broadcasts, with a primary focus on religious and cultural affairs, news, and educational topics. This control ensures that the content being disseminated aligns with the government’s values and objectives. In recent years, the government has invested heavily in digitizing large portions of the telephone grid, making it more efficient and accessible to the general population. This modernization effort has contributed to the widespread availability of cellular telephone service and Internet access throughout the country. Overall, the broadcasting landscape in Saudi Arabia continues to evolve and adapt to the changing technological landscape. With a strong emphasis on education and cultural preservation, these services play a vital role in shaping the country’s media landscape and connecting its citizens to the wider world.

Transportation and telecommunications

The majority of the labor force in the kingdom has traditionally been comprised of foreign laborers, making up approximately three-fourths of the workforce. These workers, mainly from other parts of the Middle East and South Asia, have primarily been unskilled or semiskilled, while Westerners, particularly Americans, have occupied the highly skilled positions. It is important to note that workers in Saudi Arabia have limited legal rights, as they are not allowed to organize or strike.

In recent years, there has been a significant increase in the number of native Saudis entering the labor force due to rapid population growth. To address this shift, the government introduced a policy known as “Saudi-ization” in the 1990s, which aimed to reduce reliance on migrant workers. However, many highly educated young Saudis have shown reluctance to take up occupations traditionally held by expatriates, considering them to be menial. Historically, female citizens have had limited employment opportunities outside the home, with most occupations being restricted to men. As a result, many foreign women have been employed as domestic servants.

The kingdom derives approximately two-thirds of its government revenues from oil exports. The remaining revenues come from tariffs, licensing fees, government investments, and consumption taxes. Foreign companies are required to pay income tax, and companies that employ more foreign workers than Saudi nationals must pay a fee for each foreign worker. However, exemptions are often granted in both cases. Saudi citizens are obligated to pay the zakāt, a mandatory tax for Muslims that aims to assist the less fortunate in society. In 2017, the country implemented a significant excise tax on tobacco products and sweetened beverages. Additionally, a 5 percent value-added tax was introduced in 2018 for most goods and services, in coordination with other Gulf countries. In July 2020, this value-added tax was increased to 15 percent to compensate for the revenue loss caused by the sharp decline in oil prices that same year.

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