RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/SAU/54
4 April 2003
(03-1842)
Working Party on the
Accession of the Kingdom of Saudi ArabiaOriginal:  English
ACCESSION OF THE KINGDOM OF SAUDI ARABIA
Highlights of Economic Reform and Restructuring
in the Kingdom of Saudi Arabia (March 2003)
The following information on the Highlights of Economic Reform and Restructuring in the
Kingdom of Saudi Arabia (March 2003) has been received from the Ministry of Commerce of the
Kingdom of Saudi Arabia and is reproduced hereunder.
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INTRODUCTION
Over the last 30 years, coping with massive socio-economic changes, Saudi Arabia has
emerged as a strong developing economy based increasingly on the private sector participation with
up-to-date sophisticated infrastructure.  This transformation has largely depended on the utilisation of
the Kingdom's oil and gas reserves.  The availability of these resources has given rise to an economycharacterised by a major concentration of exports on a single product and a high propensity to import.
Since its inception, the Kingdom had adopted a free market economy philosophy, ensuring
that private enterprises will always be the main focus of economic activity, while establishing an
indicative planning approach to economic and social development based on Islamic values and
principles, which guide the development in a coordinated balanced direction.  Economic planning in
the Kingdom provided an appropriate conceptual , practical and organizational framework for the
development process, with all of its economic, social and institutional dimensions.
In addition to this underlined vision, the consecutive five year plans aspired to achieve a
number of focused goals.  These include diversific ation of economy, particularly through laying more
emphasis on industry and agriculture, developing mi neral resources, improvement of living standards
and quality of life, achievement of balanced growth through all regions of the Kingdom, strengthening
the role of the private sector, through encouraging its participation in various socio-economic projects,accelerating social and economic integration among GCC countries, and support economic
cooperation with Arab, Islamic and other friendly countries.
Other objectives include development and sustenance of the Kingdom physical infrastructure,
protection of the environment, development and utilisation of human resources through increasing the
absorptive capacity of educational institutions.  Over the past three decades, non-oil GDP increased
more than fivefold and private investment increased sevenfold.  While the total population tripled
over the same period, infant mortality rate dropped by over 80 per cent and the ratio of physicians per
person improved by more than 95 per cent.  Saudi Arabia maintains one of the most liberal exchange
and trade systems in the world.  Of the top 40 trading countries in the WTO, Saudi Arabia ranked
sixth in the growth of trade over the last three decades.  Indeed, per every unit of GDP, Saudi Arabiatrades four times more than most countries in the world.
(a) Self-Imposed Economic Reform Strategy
As a developing country, where the oil sector represents the major component of the
Kindgom's GDP and more than 85 per cent of its total exports, Saudi Arabia, in its endeavour to
achieve sustainable development, has focused since 1998 on a self-imposed economic reform and
restructuring strategy to facilitate the implementation of bold decisions through concerted efforts,
aiming at diversifying its economic base throug h the creation of new productive stream to our GDP.
The mainstay of this strategy aims at unleashing the vigour and vitality of the private sector through
privatizsation, foreign investment, service industries and further liberalisation of our trade policy.
Today, this strategy is focused on accelerating growth and reducing vulnerability of
macroeconomic imbalances to oil price fluctuations.  To achieve this objective the following reforms
were implemented:
1. Supreme Council for Petroleum and Mineral Affairs (SPMC)
Created by a Royal Decree on 27 September 1420H (1999), SPMC was entrusted with the
development of a five year master plan for the Kingdom petroleum, gas and other hydrocarbon
resources.  This includes deciding the policies and strategies for petroleum, gas and other hydrocarbonWT/ACC/SAU/54
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materials in the light of the national circumstances and interests and determining the size of
production, and pricing plans of different fuel sources in the Kingdom.
One of the important decisions taken by SPMC was the Gas Initiative, which is based on the
adoption of the value-chain concept whereby the ever growing demand for power generation and
water desalination could be fulfilled.  It is also expected to stimulate development and employment inthe other sectors.  The Gas Initiative is aimed at the development of natural gas fields and associated
power and desalination plants, transmission pipelines and petrochemical projects.  Eight multinational
oil companies could invest up to more than US$25 billion over the next five years, in gas exploration
and production, as well as power generation, water desalination and petrochemical industries, which
will be a major boost to the economy, increasing employment and future government revenues.
2. Supreme Economic Council (SEC)
The establishment of SEC on 12 January 1421H (2000) was a major step towards
reorganising the Governments economic decision-making process.  Its main purpose is to coordinate
economic policy, speed up decision-making and follow up on the implementation of economic reform
that has already been initiated.  The Council since its establishment has taken some far-reaching
important decisions for the benefit of the Saudi economy.
3. Supreme Tourism Authority (STC)
Another facet of economic diversification is the promotion of tourism in Saudi Arabia.  The
Kingdom has a great potential in this field as it offers many tourist attractions including a sampling of
our rich cultural heritage and traditions.  The establishment of STC on 22 April 1420H (1999)
 was a
major step in promoting tourism in Saudi Arabia.  It has been entrusted with the responsibility for the
development of tourism in the Kingdom, to enhance the role of this sector in the economy and removeobstacles impeding its growth.  The private sector is  expected to play a major role in investment in
tourism facilities.
4. Saudi Arabian General Investment Authority (SAGIA)
A milestone on the road to restructuring the national economy was the newly enacted Foreign
Investment Law and the establishment of SAGIA.  With the enjoyment of a full national treatment,100 per cent foreign equity investments and other numerous benefits including reduction in tax rates,
property ownership rights, etc., the new law wi ll contribute to speeding up the process of
diversification of the industrial base through tr ansfer of technology and expertise from developed
economies.  As a "one-stop-shop" operation, SAGIA provides a very attractive and rewarding
investment-friendly environment.  Since its founding in 2001, SAGIA has approved nearly
US$11.3 billion, in foreign investment activity in Saudi Arabia.
5. Food and Drugs Authority
On 10 March 2003, the Council of Ministers set up a higher authority for the food and
medicine sectors.  The supervisory body will ensu re the safe use of food, medicine, medical devices,
chemicals, cosmetics and insecticides as well as electronic products.
6. Reduction of Applied Customs Duties
Saudi Arabia's current tariff policy is quite liberal.  Average simple weighted duties are
estimated at approximately 15 per cent for all goods and 17 per cent for agricultural goods.  In a
recent liberalisation effort, all the 12 per cent and seven per cent applied rates were reduced to
five per cent effective from 25 March 1422H (2001).  Currently, 92 per cent of all tariff line items areWT/ACC/SAU/54
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subject to applied tariff rates of five per cent.  Some essential goods are not subject to any import duty
and only a small number of sensitive goods are subject to a 20 per cent customs duty mainly for the
protection of infant industries.  Saudi Arabia does not maintain any tariff quota system on imports or
exports at present.
7. Privatization
A major plank of restructuring the economy is the decision of privatization, aimed at
continued expansion of the role of the private sector in economic activity.  The new privatization
strategy which was announced in early 1423H (2002), aims to establish legal and institutional
framework in order to facilitate the implementation of privatization.  Revenues from the sale of state
enterprises will be used to reduce government debt.
(i) Saudi Telecommunications Company
The Saudi process of privatizing this sector has already started.  While 30 per cent of STC
shares has recently been sold to the private sector, more shares will be offered to the public in the
future.
(ii) Postal Services
The Saudi postal authority will be made autonomous under an independent joint public-
private sector board of directors.  On 29 March 1423H (2002) the Government has permitted theprivate sector to invest in postal agencies.  At present, all surface and mobile operations are carried
out by national private firms and are supervised and followed by the Postal Directorate.  Contracts
were also awarded to the private sector for the maintenance of postal buildings and equipment.
(iii) Privatization of General Railway Organization
The government is planning to construct railway network through the participation of the
private sector on BOT basis.  The Privatization Committee has studied the project and the Public
Investment Fund has prepared the necessary implementation program in coordination with the
Ministry of Transport, Ministry of Finance and Na tional Economy, Ministry of Planning and General
Ports Authority.
(iv) Privatization of Saudi Arabian Airlines (Saudia)
Saudia has embarked on a privatization process with the idea of converting its ownership to
the private sector.  Contracts with appropriate firms to study the privatization of the state owned
airlines have already been signed in early 1421H (2000).
(v) General Ports Authority
The Genera Ports Authority (GPA) has awarded 21 projects to the private sector involving all
types of services provided at the Kingdom's eight seaports such as handling of goods and providing
maritime services.  The private sector has been granted the right to utilise and operate the assets oncommercial basis.  King Fahd Vess el Repair Yards and two areas for re-exports at Jeddah Islamic Port
and King Abdulaziz Port in Dammam have also been leased to the private sector.  All contracts signed
with the private sector included investment programmes, exceeding two billion riyals, for the supply
of equipment and machinery, ownership of which will be converted to the Ports Authority at the end
of the contracts.WT/ACC/SAU/54
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(vi) Petroleum Service Company
A Petroleum Service Company was set up in 1422H  (2001) as a joint-stock holding company
with private sector participation to serve the majo r sectors such as oil, gas, petrochemicals and
utilities.
8. GCC Customs Union
A momentous decision was taken by the GCC summit in December 2001 to establish a
Customs Union starting from the beginning of 2003.  The Summit also adopted the Common external
Tariff of five per cent for most goods, with zero per cent for essential foodstuffs and pharmaceuticals.
The decision will further integrate the economies of GCC member states, revitalise their industries
and create an outward-looking block, benefiting the GCC economies as well as its major trading
partners.
(b) Legislative Progress
In pursuance of the Kingdom's self-imposed socio-economic reform program, a number of
trade-related laws and regulations have already been enacted.  Those were as follows:
1. Import Licensing Guidelines.  Issued by the Council of Ministers under No. 84 dated
1 April 1421H (2000);
2. Sanitary and Phytosanitary Measures.  Issued by the Council of Ministers under No. 85
dated 1 April 1421H (2000);
3. The Law "On Ownership of Real Estate and Investment thereof by non-Saudis".  Issued
by the Council of Ministers under No. 89 dated 8 April 1421H (2000);
4. SASO Technical Directives.  Issued by the Board of Directors under No. 104 dated
16 April 1421H (2000);
5. Shariah Procedural Law.  Issued by the Council of Ministers under No. 115 dated
14 May 1421H (2000);
6. Approval of the Kingdom's accession to the Rotterdam Convention on Prior Informed
Consent Procedures for Certain Hazardous Chemicals and Pesticides in International
Trade.  Issued by the Council of Ministers under No. 124 dated 21 May 1421H (2000);
7. Press and Publication Law.  Issued by the Council of Ministers under No. 211 dated
1 September 1421H (2000);
8. Private Colleges Implementing Regulations.  Issued by the Council of Ministers under
No. 212 dated 1 September 1421H (2000);
9. Negative List Excluded from Foreign Investment.  Issued by the Supreme Economic
Council under No. 17-23 dated 1 December 1423 (2002);
10. Accession to the Commission on Genetic Origins of Food and Agriculture.  Issued by the
Council of Ministers under No. 43 dated 6 February 1422H (2001);
11. Telecommunications Law and the approval of Saudi telecommunication governorate
regulating authority.  Issued by the Council of Ministers under No. 74 dated
5 March 1422H (2001);
12. Nullification of the relationship between foreign contractors and their Saudi agents.
Issued by the Council of Ministers under No. 142 dated 20 May 1422H (2001);
13. Patents Law in the GCC.  Issued by the Council of Ministers under No. 159 dated
1 June 1422H (2001);
14. Law of Practice of Law.  Issued by the Council of Ministers under No. 199 dated
14 July 1422H (2001);
15. Industrial Estates and Technology Parks Regulating Authority.  Issued by the Council of
Ministers under No. 235 dated 27 August 1422H (2001);WT/ACC/SAU/54
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16. Electrical Services Regulating Authority.  Issued by the Council of Ministers under
No. 236 dated 27 August 1422H (2001);
17. Trade Law on Agricultural Authority.  Issued by the Council of Ministers under No. 35
dated 2 February 1423H (2002);
18. Private Accredited Laboratories Law.  Issued by the Council of Ministers under No. 88
dated 25 January 1423H (2002);
19. Import Licensing Procedures.  Issued by the Council of Ministers under No. 88 dated
6 April 1423H (2002);
20. Amendments of Trade Marks Law.  Issued by the Council of Ministers under No. 140
dated 26 May 1423H (2002);
21. Approval of the Kingdom's accession to the Vienna Conventions on Treaties Law
in 1969.  Issued by the Council of Ministers under No. 165 dated 24 June 1423H (2002);and
22. Trade Information Law.  Issued by the Council of Ministers under No. 94 dated
13 April 1423h (2002).
Moreover, other laws and regulations under different stages in the legislative process are:
1. Competition Law;
2. Anti-dumping, Countervailing and Safeguard Measures Law;
3. Sanitary and Phytosanitary Unified Procedures;
4. Patents, Industrial Designs, Plant Varieties and Integrated Circuits Unified Law;
5. Copyright Law; and
6. Customs Measures Guidelines.
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