JEDDAH, 23 April 2007 -- Private sector role in mega economic, industrial and infrastructure projects across the Kingdom is expanding year after year, lessening the burden on the government, a recent report issued by the Council of Saudi Chambers of Commerce and Industry (CSCCI) said.

According to the report, the sector's investment in large-scale projects, including economic cities, has reached nearly 70 percent.

The report also said that the government participation in mega projects, on the contrary, has reduced to 30.3 percent, adding that its investment came from budgetary allocations. The Kingdom's oil giant Saudi Aramco contributed 28.6 percent of the total investments, especially in oil and gas projects.

The CSCCI attributed the growing private sector participation in welfare and development projects to improved investment climate in the country as well as to the incentives provided by the state to businessmen, by removing obstacles facing them.

The CSCCI called on Saudi companies to merge with one another in order to establish strong entities that can confront the challenges posed by multinational giants. The report highlighted the significance of the economic city projects, saying they would not only bring about balanced development of the Kingdom's regions but also help attract foreign investment and transfer of advanced technology.

The four economic cities in Rabigh, Hail, Madinah and Jizan, which have been launched by Custodian of the Two Holy Mosques King Abdullah, are expected to draw investment worth more than SR300 billion and create more than a million jobs for Saudis.

Amr Al-Dabbagh, governor of Saudi Arabian General Investment Authority (SAGIA), main facilitator of economic city projects, said the new economic cities would contribute $150 billion to the gross domestic product (GDP) by year 2020. They will also provide job opportunities to 1.3 million people, living environment for 4.5 million people and increase per capita GDP from $13,000 to $33,500, he added.

SAGIA licensed 1,389 joint and foreign projects in 2006 with a total value of SR253 billion, a growth of 25 percent compared to 2005. SAGIA plans to attract foreign and joint investment exceeding SR300 billion during 2007.

In order to promote investment in various regions of the Kingdom, SAGIA has signed agreements with the governors of Asir, Tabuk, Hail, Madinah and Jizan to set up investment councils and comprehensive service centers.

In the field of marketing, SAGIA opened offices in Britain, Germany, Japan, Hong Kong and Singapore. Five other offices will be inaugurated in world capitals to attract investment. "We have set a goal to be among the Top Ten Countries in terms of competitiveness by 2010," Dabbagh said.

Last week, the SAGIA chief attended a ceremony in Beijing to mark the signing of agreements between Saudi-based Western Way for Industrial Development Co. (WWIDC) and Chinese companies to establish a large aluminum complex in the Jizan Economic City (JEC) with a total investment of SR15 billion. Dabbagh said SAGIA would continue its efforts to attract large-scale Chinese investment to the Kingdom, by introducing vital Saudi projects to Chinese companies and providing them with all incentives and facilities.

According to a recent report issued by the National Commercial Bank, Saudi Arabia required investment worth $600 billion to achieve its economic objectives. By 2012, the Kingdom will implement 419 projects at a total cost of $267.3 billion, especially in five major sectors: construction, petrochemicals, oil and gas, water and electricity, and industry. New investment projects worth $70 billion are under implementation in crude oil production and oil refining, banking sources said.

Dr. John Sfakianakis, chief economist at SABB, believed that this year the economy would witness strong non-oil private sector growth. "For 2007, we forecast real GDP to increase by 3.7 percent on the back of rising inflation. We also expect non-oil private sector growth of at least six percent, despite the adverse impact of the collapse of the local equity market, and government spending to rise by around five percent. Fiscally the Kingdom is very healthy and spending discipline well maintained," he told a seminar. In the next two-three years, oil prices would be $55 to $65 per barrel for the Kingdom's economy to advance further. "Nominal GDP will be high, but real GDP will be slow due to the stock market correction," he said. The severity of the stock market correction the Kingdom witnessed should have brought the economy to its knees, but this did not happen. The economy has been experiencing high growth rates, tantamount to a boom since 2003 and this cushioned the economy against a severe downside.

"In 2007, we expect the Kingdom to earn SR645 billion in oil income. Thus we maintain a positive outlook for the economy for the year despite the effects the stock market had on consumer spending. We believe that the economy weathered the market collapse very well, avoiding either a currency or a banking crisis. Looking forward, we see government spending, buttressed by high oil prices, offering the incentive for non-oil private sector expansion. Our growth projections for the economy are positive through the present decade," Sfakianakis said.

By P.K. Abdul Ghafour

© Arab News 2007