Saudi Arabia On the road to sustainable growth

To achieve sustainable rapid economic growth in Saudi Arabia, capitalizing on the Kingdom’s competitive strengths as the global capital of energy, and as a major hub between East and West. VISION

v Energy v Transportation v Knowledge Based Industries v Regional Development Focusing on Four Strategic Sectors

Energy: Positioning Saudi Arabia as Energy Capital of the World Petrochemicals Downstream to Petrochem Minerals Power & Water

Transportation: Positioning KSA as Regional Launch Pad to 250 MM Market Railways Roads Air/Seaports Logistics

KBI: Transforming KSA to a Knowledge-Based Society Healthcare Life Sciences Education ICT

Regional Development: Creating Economic Cities Kuwait Tabouk Ras Azoor Dammam PABMEC KEC Riyadh KAEC Oman Jeddah Jazan Sudan Ethiopia UAE

Why invest in Saudi Arabia § Kingdom's political and economic stability. § Adoption of open market economic policies. § Largest consumer market in the Middle East. § Strategic geographic location between regional and international markets. § Modern infrastructure. § Abundance of natural resources. § Global leader in oil reserves and oil exports. § Leading exporter/importer country in the Middle East.

Saudi Arabia’s Trade Profile § § § § § 12 th largest global exporter 22 nd largest global importer Trade totals $ 282 billion in 2006, equivalent to 81 percent of GDP (Global trade is 17 percent of global GDP) Trade surpluses in 9 of last 10 years Main sources of imports: US, China, Germany, Japan, Italy, UK Main buyers of exports: Japan, US, South Korea, China , India Average tariff on imports: 4 percent Main exports: oil Main imports: electric power equipment, autos, building materials

Why invest in Saudi Arabia § Kingdom houses more than 6% of world's petrochemical production (giant based international petrochemical companies with investments in excess of US$50 billion). § Modern and well equipped industrial cities. § Rental of industrial sites for long periods and at nominal charges. § Provision of basic utilities (electricity, water, …) at reasonable rates.

Why invest in Saudi Arabia § Incentives provided under the protection and promotion of National Industries Act: I. Exemption from customs duties of machinery and equipment, imports of raw materials and spareparts if imported for industrial use. II. Preferential treatment for national products in governmental procurements. § Access to soft capital and commercial financing from lending governmental institutions. § Support for Saudi manpower employment from the Human Resources Development Fund (HRDF).

Why invest in Saudi Arabia • SME's Loan-Guarantee Programme (established within the Saudi Industrial Development Fund "SIDF"). • Recent considerable increase in the capital of the Saudi Credit Bank "SCB" with the additional assignment to support and finance SMEs. • New economic sectors that are poised for substantial growth. • Promotion of Saudi non-oil exports of products and services by the Saudi Export Development Centre (established under the umbrella of the Council of Saudi Chambers).

Why invest in Saudi Arabia § Energy intensive industries can enjoy access to cheap fuel. § Strategic location that straddles two continents. § The largest market for desalinated water in the world accounting for approximately 30% of world production. § Growing domestic demand due to increasing population. § Stable exchange rate for Saudi Riyal. § Free movement of capital.

Why invest in Saudi Arabia § Saudi oil related exports have increased from $68 bn in 2001 to $195 bn in 2006. What was more impressive is that non-oil exports during the same period almost tripled from $7. 21 bn to $22. 6 bn. § As the world’s largest oil exporter Saudi Arabia benefited substantially from the sharp rise in oil prices since 2002. Per capita incomes have increased 68% since 2002.

Why invest in Saudi Arabia § The once-large debt burden has now largely been repaid and Saudi Arabia has accumulated a large net foreign asset position suggesting vulnerability to any future declines in the oil price is now low. § Diversification strategies are well underway and starting to bear fruit. The non-oil sector grew by a healthy rate of 7. 9% in 2006. § Many Saudi ministries and government agencies are adopting Private Public Partnership (PPP) frameworks that allow the private sector to take an active partnership role in developing infrastructure projects.

Why invest in Saudi Arabia § The involvement of some of the large government managed funds like the Pension Fund and the Social Security Fund in financing key development projects. § Strong economic reform movement with its cornerstones the diversification of the economy and enabling the private sector to become the main engine of economic growth for the country. Dozens of new laws were introduced and several ministries were restructured and new government agencies were created to give support to the reform initiatives.

Why invest in Saudi Arabia § High market liquidity and good access to capital finance. § Vivid and growing domestic stock market. § Stable, strong and advancing banking system. § No personal Tax. § On going privatization process of public entities.

Why invest in Saudi Arabia In 2002, KSA announced its plan to privatize enterprises in different sectors, such as: • telecommunication • civil aviation • Desalination • highways management • Railways • sports clubs • government hotels • municipal services • social service centers • Saudi employment services • health services • education services • agricultural services • cleaning and waste management • construction and management of abattoirs • public parks and recreation centers

Fields of Major Investment § Petrochemicals and downstream industry. § Mining. § IT & Telecommunications. § Power generation/ Desalination. § Municipal Projects. § Aviation § Railways. § Tourism. § Higher education § Health & bio Technology

Impact of reforms and economic prosperity on attracting FDI Licenses Issued by SAGIA As of April. 10 th 2007 Activity Number Total Finance (US$ Billion) Industrial 1478 113. 7 Non-Industrial 2630 59. 3 Total 4108 173

Impact of reforms on world ranking Saudi Arabia for the second year running has been selected by the World Bank as the best among the Arab Countries in the ease of doing business ratings. Its 2007 Global ranking was 38 th ahead of some European countries like Spain and Portugal.

Investment Opportunities

Investment Climate in Saudi Arabia n Stable exchange rate for Saudi Riyal. n Free movement of capital n Excess liquidity seeking investment opportunities. n Largest financial sector in the GCC. n “A well-managed and well-supervised banking sector” (the IMF Public Information Notice, Dec. 2003)

In late 2004 SAGIA the Saudi General Investment Authority estimated that Saudi Arabia will need investments in excess of $600 bn until the year 2020 to meet its growth needs. The following table shows a breakdown of the sectors where these investments are needed.

$624 Billion Investment Market $140 billion physical infrastructure $92 billion petrochemical expansions $90. 7 billion electric power generation $88 billion water desalination $70. 7 billion telecom and IT $53. 5 billion tourism and leisure development $50 billion natural gas production $28. 3 billion agricultural expansion $10. 7 billion educational and training

$624 Billion Investment Market

Investment Opportunities Saudi Railways

Opportunities… (Saudi Railways) Three new railways will be constructed: 1. Saudi Landbridge: linking Jeddah to Dammam via Riyadh (approx. 950 km) 2. Makkah Madinah Rail Link: linking Makkah, Jeddah, Madinah and Yanbu (approx. 600 km) 3. North-South Railway: linking Jalamid to Jubail via Riyadh and Dammam (115 km).

In addition to the three railway projects that have been approved by the Saudi Government a Saudi Company is exploring the reactivation of the Hijaz railway which started from Istanbul and ended in Madinah Munawarah.

Investment Opportunities Energy

ARAMCO and its partners are planning to invest $70 Billion in expanding and updating the oil and gas capacity of Saudi Arabia over the next five years. This will also include increasing the refining capacity by 2 million barrels one million of which will be in facilities inside Saudi Arabia.

ARAMCO has doubled the gas reserves of Saudi Arabia over the last decade and doubled its gas production and processing over the last five years. It has improved its global ranking from fifth to fourth in gas reserves in the last few years. Furthermore its efforts are ongoing to bring Saudi Arabia to the forefront of Global gas producers. It is important to note that only 15% of Saudi Arabia has been explored for gas by the end of 2005.

Petrochemicals n n Saudi Arabia is planning to double its global market share of petrochemical production from the present 6. 5% to 13% in five years. SABIC the leading regional petrochemical company and one of the Global 500 companies has announced plans to spend $25 bn over the next five years to increase its production from 47 million tons to 130 million tons.

Examples of Investment Opportunities Water and Electricity

n The Saudi Ministry of Water and Electricity is undertaking a huge expansion and upgrading of the Saudi water and electricity capacity in cooperation with the private sector based on a public private partnership (PPP) framework. The first of its large projects was the Shuaiba Desalination plant which was awarded last year to a consortium of companies from Saudi Arabia and Malaysia at a cost of around $1. 3 bn.

The Ministry of Water and Electricity has already announced plans to spend approx. $18. 7 bn over the next five years on water resource projects. n Spending on electricity projects will be between $4. 5 -6. 0 bn per annum over the next five years. n Experts estimate that Saudi Arabia needs to spend $100 bn on water projects in Saudi Arabia and $117 bn on electricity projects over the next 20 years. n

Examples of Investment Opportunities Mining

n Maaden the government owned mining company has announced its intention to privatize within the next five years, and has started investing in a new industrial mining complex in Ras Alzour in the Eastern Province of Saudi Arabia. It intends to invest approximately $10 bn over the next five years in that complex which will include an aluminum smelter and a phosphate processing plant.

Opportunities… (Mining)

Examples of Investment Opportunities Knowledge Based Industries

Examples of Investment Opportunities in the IT Sector n Driving forces behind the expansion of the IT sector include: n Largest market in the middle east, with an average growth rate of 15 percent per annum. n Growth in the business world and private sector demand for telecommunication services. n Government initiatives n Significant internet potential.

Real Estate Sector In 2004, the value of real estate transactions including sales of existing units amounted to SR 900 billion. The real estate sector is driven recently by domestic demand not by speculation. Strong economic and demographic fundamentals are the core drivers of growth in real estate.

Real Estate Sector Through 2010 the forecast is that total new real estate construction in the Kingdom will reach $129 billion. In order to meet demand, through 2020 a total of 2. 62 million housing units will be built, at an average rate of 163, 750 units per annum. Through 2020, total new investment in housing will amount to $320 Billion.

Real Estate Sector Economists believe that the real estate demand is sustainable and expect a strengthening of the current set of favorable circumstances with the likely introduction of mortgage products in the next few years. The housing sector is at the center of the Kingdom’s growth in real estate activity. In value terms the housing sector comprises 75 percent of all real estate activity in the Kingdom. $20 billion per annum will be required to meet annual housing demand in the Kingdom through 2020.

Some of the major projects announced n n The General Authority for Civil Aviation is planning to spend $8 bn to expand the Jeddah, Madinah and Tabouk airports in Saudi Arabia over the next five years. Four of six planned Special Economic Zones with investments expected to exceed $100 bn. The ICT center in Riyadh. The Financial center in Riyadh.

Major projects announced recently n n n The Sudair Industrial City in Riyadh with a total area of 160 square kilometers. The formation of the Jeddah Development company fully owned by the Jeddah Municipality to partner with the private sector in developing the city of Jeddah starting with the Jeddah Central Business District. The development of the Abha Central Business District.

Thank you and alsalamu alaykum