Background

Riyadh, the capital city of the Kingdom of Saudi Arabia, rivals any modern city in the world in the splendour of its architecture. Broad highways sweep through the city, passing over or under each other in an impressive and still growing road network. Today the city extends for 600 square miles and has a population of more than 5.8 million.

The name Riyadh is derived from the Arabic word meaning a place of gardens and trees ("rawdah"). With many wadis (a former water course, now dry) in the vicinity, Riyadh has been since antiquity a fertile area set in the heartland of the Arabian peninsula.

Of all the Kingdom's developmental achievements, Riyadh is perhaps the most obvious and accessible to the foreign visitor. From the moment they lands at the King Khalid International Airport, itself a marvel of design wedding the traditional Arab style with the best of modern architecture, the traveller is aware that they have reached a city that is clearly one of the wonders of modern times.

Economy

Riyadh is an oil-based economy with strong government controls over major economic activities. Saudi itself possesses more than 20 per cent of the world's proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC.

High oil prices through mid-2008 have boosted growth, government revenues, and Saudi ownership of foreign assets, while enabling Riyadh to pay down domestic debt. The government is encouraging private sector growth - especially in power generation, telecommunications, natural gas exploration, and petrochemicals - to lessen the dependence on oil exports and increase employment opportunities for the swelling population, nearly 40 per cent of which are youths under 15 years old.

Unemployment is high in Riyadh, and the large youth population generally lacks the education and technical skills the private sector needs. Riyadh has substantially boosted spending on job training and education, infrastructure development, and government salaries. As part of its effort to attract foreign investment and diversify the economy, Saudi Arabia acceded to the WTO in December 2005 after many years of negotiations. The last five years of high oil prices have given Riyadh ample financial reserves to manage the impact of the global financial crisis, but tight international credit, falling oil prices, and the global economic slowdown will reduce the capacity for the economy to grow in 2009.

Investment climate and opportunities

In the World Bank and International Finance Corporation’s Doing Business 2009 report, Saudi Arabia ranked 1 in the MENA region and 16 globally for ease of doing business. It is now easier than ever to start a start a business in Riyadh due to the continuing simplification of formalities for commercial registration and reducing registration fees by 80 per cent, and reducing the time to start a business by 3 days.

There are also positive signs for the forthcoming year. The 2009 Saudi budget is the country’s largest to date, with expenditures at $126.6bn. More than a quarter of the budget will be spent on human resources development, including higher education, technical and vocational training. Additionally, one of the main focus’ of the budget will be to boost scientific research and technological development by establishing new research centres at Saudi universities, including those in Riyadh. The budget entails the construction of more than 2,000 new schools, seven technical institutes for girls, and 16 vocational training centres. Moreover, it includes the construction of eight new hospitals and 250 primary care centres, among other projects.

Being the world’s largest producer and exporter of crude oil, Saudi Aramco, the national oil company, is planning to invest $90bn over the next five years (2008-2012) to expand crude and refining capacity. By the end of 2009, Saudi Arabia’s sustainable oil production capacity is supposed to grow around 12 million barrels per day, and the company’s worldwide refining capacity will almost double from three to about six million bpd. This expansion in output - which is, of course, subject to fluctuating global conditions - looks set to increase further the prospects of Riyadh as a trading and investment destination.

As an offshoot to the expansion in the oil and gas sector, the Saudi petrochemicals industry is also enjoying an unparalleled boom. Saudi Aramco, which is headquartered in Riyadh, is investing, for the first time, in a $10bn petrochemical project on the Red Sea. Likewise, Riyadh-based SABIC, the state-owned petrochemical company, is investing in three massive petrochemical projects due to come on stream in 2009.