{\rtf1\ansi\ansicpg949\deff0\deflang1033\deflangfe1042{\fonttbl{\f0\fmodern\fprq1\fcharset129 \'b1\'bc\'b8\'b2;}} {\*\generator Msftedit 5.41.15.1503;}\viewkind4\uc1\pard\lang1042\f0\fs20 \par \par \par \par \par \par \par \par \par \par Korean Minjok Leadership Academy\par \par \par \par \par \par \par \par \par \par \par \par \par \par
\par \par

Korean\par Minjok\par Leadership\par Academy

\par \par

Middle\par East Research\par Project

\par \par

Prof. Alexander Ganse

\par \par

Kim Hyun Ho

\par \par

 

\par \par

 

\par \par

History of Economic\par Exchange between Saudi\par ?Arabia\par and Korea: Suggestions for Better Collaboration in the\par Future

\par \par

<Abstract>

\par \par

Originally planned to\par show the cultural, economic, commercial, and political exchange between\par Korea\par and the Arab world until today, the research paper narrowed down its focus from\par the Arab world to Saudi\par ?Arabia,\par from various aspects of exchange to economic interaction between the two\par nations.\par Thus, this special research paper was renamed as \ldblquote Development and Globalization\par of Saudi Arabian Economy with Special Analysis of Korean Businesses in\par Saudi Arabia\par and Suggestions for Better Successes in the future.\rdblquote The paper completed under\par the guidance of Professor Alexander Ganse will first investigate the historical\par development of Saudi Arabian economy since 1902 and then specifically analyze\par the economic globalization of Saudi Arabia\par in\par the 1990s based on materials from individually collected Korean newspaper\par articles and few booklets showing statistics related to Saudi Arabian economy.\par

\par \par

 

\par \par

After the paper deals\par with the Saudi Arabian economy, it presents a historical overview of economic\par exchange between the two nations. Then, it would focus on five Korean products\par of\par which Korean enterprises have succeeded in producing and selling vast amounts\par on the Saudi Arabian soil. The paper not only explains the reasons for these\par successes, but also delves further to analyze and give suggestions for better\par economic accomplishments in the future.

\par \par

History of\par Economic Exchange between Saudi\par Arabia and Korea: Suggestions for Better Collaboration in the\par Future

\par \par

 

\par \par

Table of Contents

\par \par

I. Introduction

\par \par

 

\par \par

II. Body

\par \par

1. Development of Saudi Economy since 1902\par

\par \par

2. The Distortion of Saudi Economy since the\par 1980s

\par \par

2.1. The Characteristics of Saudi Economic\par Structure

\par \par

            \par 2.2.\par Stagnation of Economic Growth

\par \par

            \par 2.3.\par Chronic Budget Deficit

\par \par

            \par 2.4.\par Inefficient Public Enterprise Oriented Industrial\par Structure

\par \par

            \par 2.5.\par Distortions in the Labor Market

\par \par

            \par 2.6.\par Massive Outlays on Defense

\par \par

            \par 2.7.\par Protection of Domestic Industry

\par \par

3. The Process of Economic Globalization of\par the 1990s

\par \par

            \par 3.1.\par Meaning of Economic Globalization

\par \par

            \par 3.2.\par Saudi Arabia\rquote s Globalization Strategy: Reducing\par Government Subsidies

\par \par

            \par 3.3.\par Saudi Arabia\rquote s Globalization Strategy: Expanding\par Privatization

\par \par

            \par 3.4.\par Saudi Arabia\rquote s Globalization Strategy: Labor Market\par Reform, Saudization

\par \par

            \par 3.5.\par Saudi Arabia\rquote s Globalization Strategy: Stimulating Open\par Policy

\par \par

            \par 3.6.\par Evaluation of Saudi Economic Globalization

\par \par

                          \par 3.6.1.\par Level of Private Sector\rquote s Activity

\par \par

                          \par 3.6.2.\par Level of Openness

\par \par

4. Saudi Economic Trends in the 2000s and\par Prospects of Saudi Economy

\par \par

5. General Overview of Economic Exchange\par between Saudi\par Arabia and Korea until Today

\par \par

6. Korean Goods in\par Saudi Arabia

\par \par

            \par 6.1.\par Samsung Mobile Phones

\par \par

            \par 6.2.\par Satellite Broadcast Receivers

\par \par

            \par 6.3.\par Air Conditioners

\par \par

            \par 6.4.\par LG Mobile Phones

\par \par

            \par 6.5.\par Hyundai Motors Cars

\par \par

7. Suggestions for More and Better Successes\par in the Future

\par \par

 

\par \par

III. Conclusion

\par \par

 

\par \par

* References

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

I. Introduction

\par \par

 

\par \par

Under the oil dominated economic structure,\par Saudi Arabia has been able to maintain its status as the leading nation in the\par Middle East region based on the enormous amounts of revenue from the chief\par resource. Since oil is a valuable resource for\par Korea and\par Korea is one of the largest oil consuming nations\par in the world, Saudi\par Arabia has been one of the most important trading\par partners over the last fifty years. In order to assess and evaluate the\par relationship between the two nations in the economic perspective, this paper\par will first investigate the development of the Saudi economy since the\par foundation of the Kingdom in 1962 and specially analyze the globalization\par process of the 1990s. Then, the paper would deal with the economic exchanges\par between Saudi\par Arabia and\par Korea. However, since Saudi\rquote s exports and sales to\par Korea had been primarily based on oil and no other\par Saudi goods and corporations have made noticeable profits in\par Korea, the paper would mainly focus on the success\par and advancement of Korean corporations and businesses into the Saudi market\par based on the collected news reports ranging from early 1900s. And among these\par Korean advancements into the Saudi market, the news reports primarily centered\par upon the construction boom of the 1970s and the 1980s, and the recent successes\par of corporations producing electronic devices such as mobile phones and air\par conditioners.

\par \par

 

\par \par

Saudi\par Arabia has carried out seven five-year economic\par development plans since 1970 to develop and amplify infrastructures as well as\par derive various industries based on oil (oil-production, oil-refinery, and\par petrochemical industries). However, due to falling oil prices during the 1980s,\par Saudi economy revealed grave problems related to their economic structure. The\par economic\par growth rate dropped from 10% in the 1970s to an average 1.3% in the 1980s. This\par decline indicated how much the Saudi economy depended on just oil and had no\par other way to sustain their growth and prosperity if not for the chief resource.\par Thus, ensuing economic development plans have included special economic\par policies to diversify the economic structure in order to stabilize the economy\par in face of unpredictable oil prices. Also, since the 1990s under the command\par Crown Prince Abdullah who have been enthroned following the death of King Fahd\par in June this year, Saudi\par Arabia has planned ambitious globalization\par strategies to recover the dynamism of the growth. The Saudi government has been\par implementing a strong structural reform and open policy such as reduction of\par government subsidies, expansion of the private sector, labor market reform and\par stimulation of the domestic market. However, as the paper would later analyze\par these\par globalization strategies, they have not proved to be very effective and\par Saudi\par Arabia has not been able to attain any visible\par accomplishment.

\par \par

 

\par \par

The substantial amount of information and\par statistics could be collected from various newspaper articles and reports about\par economic interactions between the two nations. Based on these reports, the\par paper incorporates various analyses of the Saudi economic structure and the\par economic\par interactions between Saudi\par Arabia and\par Korea. And the paper will finish by giving\par suggestions for more expansive and more mutually beneficial economic exchange\par in the future.

\par \par

 

\par \par

II. Body

\par \par

 

\par \par

1. Historical Development of Saudi Economy since\par 1902

\par \par

In the mid-18th century,\par Saudi\par Arabia\rquote s history unofficially began as a religious\par revolutionary, Muhammad Ibn Abdul Wahhab aligned with Dahriya tribe\rquote s chief,\par Muhammad Ibn Saud. Wahhab movement, which promoted strict and austere religious\par lives, gained support from the Bedouins in the region and succeeded in ruling\par the extensive Middle Eastern territory, now called The Kingdom of Saudi Arabia.\par However, the Ibn Saud tribe was not able to maintain the definite influence\par over the region until 1902, when Abdul Aziz Ibn Saud recaptured\par Riyadh, which was under control of Rashid tribe at\par that time. He formally named the territory The Kingdom of Saudi Arabia in 1932\par and until his death in 1952, he extended the territory further to the west.\par

\par \par

 

\par \par

What is noteworthy about the founder Ibn Saud\par is that he had foreseen the importance of oil for the future of his kingdom and\par set the ground for prospective oil-related projects to boost the economy. Under\par his command, thousands of laborers were sent to\par Hejaz Mountain to dig out precious metals and \ldblquote Saudi\par Arabian Ministry Union\rdblquote was established to develop the gold-mining industry. In\par 1932, he signed a pact with Britain to launch an oil-field development project\par only to be cancelled four years later. Various enterprises attempted to explore\par and develop oil fields later on and Aramco was the foremost company among them,\par which exerted the most persistent effort to the project. And in 1938, the first\par oil was produced by Saudi\par Arabia.

\par \par

 

\par \par

King Faisal ascended to the throne in 1964 as\par the third King of Saudi Arabia. He put forth the first of the 5-year plan\par series, thus commencing the modernization project for his nation. Due to the\par decrease\par in United States oil production along with the increase in\par oil consumption from all over the world during the early 1970s,\par Saudi\par Arabia\rquote s oil producing capacities gradually\par expanded and reached its maximum level. This indisputable oil power provided an\par opportunity for Saudi\par Arabia to elevate their status to the international\par stage.

\par \par

 

\par \par

While the first 5-year economic development\par plan helped establish fundamental infrastructures and enhance human power, the\par second 5-year plan conducted under the rule of King Khalid aimed at overcoming\par obstacles to founding basic industries. Using the enormous wealth obtained from\par oil production, the fourth king of Saudi\par Arabia invested those funds for other key\par industries in order to diminish the economy\rquote s reliance on oil profits. The lack\par of domestic manpower to realize the project left no choice but to welcome many\par foreign laborers to assist them.

\par \par

 

\par \par

King Fahd succeeded to the throne in 1982 and\par carried out the third 5-year economic plan in order to complete the\par establishment\par of key industries. However, the reduction in oil consumption by seven percent\par every year during the early 1980s incurred negative effects to the Saudi\par economy not yet prepared to stand on its own without being influenced by oil\par prices. This distortion of Saudi economy since the 1980s will be thoroughly\par investigated in the next section. The oil industry has been a basis on which\par Saudi\par Arabia could transform from a tribal nomadic\par society into a developing nation. However,\par Saudi\par Arabia still has difficult assignment to do in\par order to make a solid economy not based solely on oil.

\par \par

 

\par \par

2. The Distortion of Saudi Economy since the\par 1980s

\par \par

 

\par \par

2.1. The\par Characteristics of Saudi Economic Structure

\par \par

The most peculiar and evident aspect of Saudi\par economic structure is that oil sector dominates the economy.\par Saudi\par Arabia has the largest oil reserve in the world\par with total proven reserves of 261.8bn barrels, which equals to one quarter of\par the world\rquote s total. Also, statistics released by EIU Country profile last year\par proves that Saudi\par Arabia is the largest producer in OPEC, accounting\par for 26.8% of the combined output of all OPEC members. Since the end of the Gulf\par war in 1991, oil sector has contributed an average of about 35% of Saudi\rquote s\par nominal\par GDP, 75% of government revenue and 85% of export revenues. In addition, most of\par the industrial sector's development has been strongly related to developments\par in the oil industry.

\par \par

 

\par \par

Saudi economic structure\rquote s another major\par characteristic is that the public sector controls the economy.\par Saudi\par Arabia is rather a public sector-oriented economic\par system than a market-oriented one. Private business heavily depends on public\par expenditure and most of the domestic producers have not been able to function\par without subsidies from the government. Economic development plans could be\par noted as the main means through which the state has been reshaping the economy\par by\par enormous public spending. Based on the vast oil revenues, Saudi government has\par been administering seven five-year economic development plans since the first\par one launched back in 1970. The first and the second five year economic\par development plan in 1970s had aimed at propelling industrialization and\par building oil-oriented industries and infrastructures. The third to the current\par seventh plan since 1980s have attempted to amplify non-oil sectors, increasing\par the role of private sectors, exporting more non-oil products, and opening job\par opportunities to Saudis.

\par \par

 

\par \par

Furthermore,\par Saudi\par Arabia possesses a substantial public sector that\par has expanded tremendously since the oil boom. During the 1970s and by the\par mid-1980s, more than thirty public organizations were established in the areas\par of services, education and training, and public economic corporations. In\par addition to that, Saudi economy differs from other typical nations that the\par degree of reliance upon foreign trade and government consumption is very high.\par Exports of goods and services usually occupy the largest percentage of GDP,\par accounting for 40.8% of GDP back in 2002. And as the public sector controls the\par economy, it is inevitable that the government consumption accounts for more\par than one quarter of GDP.

\par \par

 

\par \par

2.2.\par Stagnation of Economic Growth

\par \par

The\par Saudi\par Arabia's special aspect of the macro-economic\par trends is that slow growth rates have been the norm since early 1980s. Thanks\par to the 1970s oil boom, Saudi government was able to set a five-year development\par plans to strengthen the infrastructure as well as derive industries based oil\par production, oil refinery and petro-chemicals. As a result,\par Saudi\par Arabia sustained a high 10% GDP growth per year\par from 1970 to 1980. In fact, Saudi\par Arabia was once a wealthy country. In 1981, Saudi\par oil revenues amounted to approximately $131 billion, making it possible for per\par capita GDP to be one of the highest in the world at that time. However, due to\par the 1980s low oil price period, oil revenues reduced and budget deficits began\par to accumulate every year since 1983. In consequence, domestic debts have\par increased rapidly over these years and this led to low levels of commercial\par credit, as well as significant problems in the private\par sectors.

\par \par

 

\par \par

Hence, the real GDP growth rate fell to an\par unbelievable\par average of 1.3% per year during eighteen long dreadful years from 1981 to 1998.\par Despite the recovery of oil prices in 1999, real GDP growth rate even contracted\par by 0.8% (Chosun.com, 1999). The 4.5% growth rate achieved in 2000, which was an\par outcome of a buoyant oil sector was the highest since 1991. Also, the growth in\par 2001-2002 decreased from 1.2% to 1%. This reduction resulted as September\par 11th\par attack in 2001 exacerbated the economic slowdown and decreased the oil\par output.

\par \par

 

\par \par

Table 1:\par Saudi\par Arabian GDP growth from 1970 to 2002

\par \par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par ?\par \par \par ?\par \par \par ?\par \par
\par ?

years

\par ?
\par ?

Average\par ?growth rates of %

\par ?
\par ?

1970-79

\par ?
\par ?

10.0

\par ?
\par ?

1980-89

\par ?
\par ?

0.2

\par ?
\par ?

1990-95

\par ?
\par ?

3.4

\par ?
\par ?

96

\par ?
\par ?

1.4

\par ?
\par ?

97

\par ?
\par ?

1.9

\par ?
\par ?

98

\par ?
\par ?

2.8

\par ?
\par ?

99

\par ?
\par ?

-0.8

\par ?
\par ?

'00

\par ?
\par ?

4.9

\par ?
\par ?

'01

\par ?
\par ?

1.2

\par ?
\par ?

           \par \par '02                           \par ?1.0

\par ?
\par ?

Source: EIU Country Profile\par 2004.

\par ?
\par \par

 

\par \par

2.3.\par Chronic Budget Deficit

\par \par

Due to the considerable welfare spending and\par wasteful government expenditures, Saudi budget, the core of the Saudi economy,\par has resulted in chronic deficits. Having declined to enfranchise the Saudi\par people, the royal family has felt obliged to compensate the citizens in other\par various\par ways. The most important method has been to provide a diverse network of\par consumer services such as electricity, water and, fuel as well as many economic\par benefits such as free education and medical services. In the late 1990s this\par spending\par occupied approximately one fifth of the personal income of every single Saudi.\par As Daryl Champion wrote in the book about Saudi Arabian Kingdom, the Saudi\par economic structure has settled down as \lquote the rentier-distributive system' after\par the\par 1970s.

\par \par

 

\par \par

Also the Saudi Arabian government nationalized\par the biggest oil company, Saudi Aramco, which accounted for 30% of the Saudi GDP\par from 1973 to 1980, and established state-owned enterprises (Chosun.com, 1975).\par Furthermore,\par as a result of the establishment of state-owned SABIC (Saudi Basic Industries\par Corporation) and PETROMIN (Public Organization for Petroleum and Minerals)\par leading over thirty heavy industrial and public organizations, approximately\par 40% of Saudi Arabia's workforce were once employed by government sector in 1998\par (Enav, Peter, 2000).

\par \par

 

\par \par

Due to the oil boom in the 1970s, the budget\par deficit did not appear to be a critical problem to\par Saudi\par Arabia during that era. However, with the advent of\par the 1980s low oil price period, chronic budget deficits took place as the\par current expenditures took up 87% of the total budget. Despite its enormous oil\par revenues, Saudi\par Arabia's budget ran at a deficit from 1983 to 1999,\par largely owing to high defense spending, government subsidies of utilities, low\par tax rates, and finally lower oil prices and production levels. The following\par table effectively demonstrates Saudi\rquote s growing budget deficits beginning with\par the year 1983.

\par \par

 

\par \par

Table\par 2: Saudi budgetary outlays, 1980-2002

\par \par \par \par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par \par \par ?\par \par
\par ?

SR (Saudi\par ?Riyal) billion

\par ?
\par ?

Years

\par ?
\par ?

Revenues

\par ?
\par ?

Expenditures

\par ?
\par ?

Deficits\par ?as % of GDP

\par ?
\par ?

1980

\par ?
\par ?

348.1

\par ?
\par ?

236.6

\par ?
\par ?

-

\par ?
\par ?

1981

\par ?
\par ?

368.0

\par ?
\par ?

284.7

\par ?
\par ?

-

\par ?
\par ?

1982

\par ?
\par ?

246.2

\par ?
\par ?

244.9

\par ?
\par ?

-

\par ?
\par ?

1983

\par ?
\par ?

206.4

\par ?
\par ?

230.2

\par ?
\par ?

6.4

\par ?
\par ?

1984

\par ?
\par ?

171.5

\par ?
\par ?

216.4

\par ?
\par ?

12.8

\par ?
\par ?

1985

\par ?
\par ?

133.6

\par ?
\par ?

184.0

\par ?
\par ?

16.1

\par ?
\par ?

1986

\par ?
\par ?

76.5

\par ?
\par ?

137.4

\par ?
\par ?

22.5

\par ?
\par ?

1987

\par ?
\par ?

103.8

\par ?
\par ?

173.5

\par ?
\par ?

25.3

\par ?
\par ?

1988

\par ?
\par ?

84.6

\par ?
\par ?

134.8

\par ?
\par ?

17.6

\par ?
\par ?

1989

\par ?
\par ?

114.6

\par ?
\par ?

149.5

\par ?
\par ?

11.2

\par ?
\par ?

1990

\par ?
\par ?

154.7

\par ?
\par ?

210.4

\par ?
\par ?

14.2

\par ?
\par ?

1991

\par ?
\par ?

161.9

\par ?
\par ?

266.4

\par ?
\par ?

23.6

\par ?
\par ?

1992

\par ?
\par ?

169.6

\par ?
\par ?

232.5

\par ?
\par ?

14.4

\par ?
\par ?

1993

\par ?
\par ?

141.4

\par ?
\par ?

205.5

\par ?
\par ?

14.4

\par ?
\par ?

1994

\par ?
\par ?

129.0

\par ?
\par ?

163.8

\par ?
\par ?

7.7

\par ?
\par ?

1995

\par ?
\par ?

146.5

\par ?
\par ?

173.9

\par ?
\par ?

5.7

\par ?
\par ?

1996

\par ?
\par ?

179.1

\par ?
\par ?

198.2

\par ?
\par ?

3.6

\par ?
\par ?

1997

\par ?
\par ?

205.5

\par ?
\par ?

221.2

\par ?
\par ?

2.9

\par ?
\par ?

1998

\par ?
\par ?

141.6

\par ?
\par ?

190.1

\par ?
\par ?

9.6

\par ?
\par ?

1999

\par ?
\par ?

147.5

\par ?
\par ?

183.8

\par ?
\par ?

6.4

\par ?
\par ?

2000

\par ?
\par ?

258.1

\par ?
\par ?

235.3

\par ?
\par ?

-

\par ?
\par ?

2001

\par ?
\par ?

228.1

\par ?
\par ?

255.1

\par ?
\par ?

3.6

\par ?
\par ?

2002

\par ?
\par ?

213.0

\par ?
\par ?

233.5

\par ?
\par ?

3.0

\par ?
\par ?

Source: Saudi Arabian Monetary Authority,\par ?2003.

\par ?
\par \par

 

\par \par

The Saudi government tried to finance the\par budget\par deficit through domestic borrowing. However, this decision incurred a rapid\par rise in public domestic debts from 52% of GDP in 1992 to 118% in 1999. The\par percentage level fell to 87.2% in 2000 owing to the recovery in GDP and the\par turnaround of the deficit to surplus. By 2001, this had increased to 91.2% of\par GDP because falling oil prices reduced the oil revenues. In 2002, the ratio of\par public\par domestic debt to GDP rose to 97% because of a higher budget deficit.\par (Chosun.com, 2002)

\par \par

 

\par \par

2.4.\par Inefficient\par Public Enterprise Oriented Industrial\par Structure

\par \par

Saudi government has settled down public\par enterprises oriented industrial structure by two ways. Firstly, the\par government nationalized the Saudi Aramco,\par Saudi\par Arabia\rquote s largest oil company. Secondly, the Saudi\par government established SABIC leading Saudi petro-chemical industry and held 70%\par of the industry\rquote s share in 1976 (Chosun.com, 1978). In addition to the two\par occurrences noted above, Saudi government has established over thirty public\par organizations including power, water resources, and banks in the course of the\par 1970s\par through the mid-1980s. Although these sectors were established to enlarge the\par industry and to diversify the economy by building stable infrastructures, some\par evaluate these moves as motivated by the desire to redistribute the increasing\par income in the form of services and public utilities to the citizens.\par Furthermore,\par wealthy groups, or king families, deposited lots of floating assets in overseas\par or arranged the budget to initiate independent entrepreneurial activities and\par political demands voluntarily without government intervention.\par

\par \par

 

\par \par

According to statistics from Chosun article,\par twenty-seven\par public organizations, including Saudi Arabian Airlines and Pension Fund, were\par allocated the possession of about 18%, or SR 41.2 billion among the overall\par Saudi government budget of SR 228.1 billion back in 2001 (Chosun, 2001). In\par other words, about one fifth of the overall government budget was put into these\par public sectors.

\par \par

 

\par \par

Meanwhile, wage ratio of the public sector had\par increased from 18% of GDP, 53% of government budget and 71% of oil revenues in\par 1994 to 23%, 60% and 92% respectively in 1999. On the other hand, labor\par productivity of the public sector measured by output/labor ratio had decreased\par to one half of 1983 (Chosun.com, 2002).  The simultaneous rise in wage\par percentage and decrease in labor productivity, not only brought about an\par inefficient public sector management system, but also lessened the dynamism of\par growth by reducing the investment among government expenditure. The investment\par expenditure among the government expenditure has decreased from 16.0% in 1993\par to 7.8% in 2000.

\par \par

 

\par \par

2.5.\par Distortions in the Labor Market

\par \par

CIA estimates that the population of\par Saudi\par Arabia totaled 24.29 millions in July 2003 and out\par of the total population, 77% which is estimated to be 18.71 million are Saudi\par natives\par and 23% which is about 5.58 million are foreigners. 42.3% of the population is\par 15 year-old and below, 54.8% from 15 to 64 years old and the elders above 65\par years of age comprise approximately 2.9% of the population. And the population\par growth rate was measured to be about 3.3% between the years 1996 and 2002 (CIA\par 2003, 2).

\par \par

 

\par \par

Thus, the age group of 15 and below account\par for 42.3% of the population and the labor force is increasing at an average rate\par of 4% every year. However, only about one quarter of total Saudi entrants to\par the job market are able to find jobs every year. On the other hand, the wage\par difference between Saudi nationals and non-Saudi people, who normally get paid\par one third of the Saudi wage, ended up in rapidly increasing unemployment of\par Saudi nationals.[1] This wage differential\par system contributes much to the generally poor work ethic of the local Saudis,\par who tend to eschew productive employment in favor of comfortable government\par jobs.\par The Saudi labor problem is further complicated by the limitation of Saudi\par educational system, which emphasizes the study of religious texts rather than\par study of the technical skills necessary to help Saudis adjust to the global\par market and raise their competitiveness in the world. According to SAMBA (Saudi\par American Bank) with its records of the government, the unemployment rate\par reached 15.25% in 2001 (SAMBA, 2002).

\par \par

 

\par \par

2.6.\par Massive Outlays on Defense

\par \par

Saudi\par Arabia's economic distortion is also related to the\par massive Saudi defense budget. Saudi\par Arabia has an extensive military infrastructure and\par the nation is by far the highest military spender among the\par Middle East countries.[2]\par Since the 1950s, Saudi\par Arabia has turned to the\par United\par States for most of its arms purchases. Since the\par Gulf conflict, Saudi\par Arabia government justified the nation\rquote s high\par defense expenditure inevitable because of the dangerous and explosive\par environment\par in the region. EIU country report showed that the kingdom has ordered military\par hardware totaling about $30 billion from\par United\par States since 1990 (EIU,\par 2004).  

\par \par

 

\par \par

In consequence, for the most of the 1990s,\par the Saudi defense sector accounted for about 35% of Saudi overall budgetary\par expenditures. This did not include expenditures on foreign weapons systems,\par which were usually camouflaged in Saudi current account. Together the two\par defense expenditure categories pushed per capita Saudi defense spending to\par about $2,000-one of the highest defense expenditures in the world (Enav Peter,\par 92).

\par \par

 

\par \par

2.7.\par Protection of Domestic Industry

\par \par

Although Saudi has been trying to promote\par open economic policies, the task has been very difficult because of the\par existence of many systems aimed at protecting national goods and industries. The\par high corporate taxes for foreign partners in Saudi joint venture, the high\par tariffs on foreign imports that are competitive with goods from the Saudi\par region, and the strict agency laws which compel foreign companies to work only\par through local partners are the obstacles that lie on the path to the open\par economy. Due to these issues, Saudi\par Arabia\rquote s attempts to join WTO since 1993 have ended\par in total failures.

\par \par

 

\par \par

3. The Process of Economic Globalization of the\par 1990s

\par \par

 

\par \par

3.1.\par Meaning of Economic Globalization

\par \par

As globalization includes multi-dimensional\par factors such as politics, economy, society, culture and etc., it has various\par definitions\par and meanings. Thus, trying to define globalization in a single sentence is a\par very controversial and sophisticated work. Mr. Han Yong Heuy, an Economics\par teacher at Korean Minjok Leadership Academy, defined globalization economically as the\par integration of world markets into a single one. In other words, it means a\par virtual elimination of national boundaries.

\par \par

 

\par \par

The global economy would promote free\par movement of goods or services, technology, factors of production such as\par capital, labor and other resources such as knowledge and information. This\par would promote more effective production of goods by raising the productivity,\par the\par phenomenon which was made possible by the information communication technology\par or ICT. In terms of economic perspective, the meaning of globalization is\par largely\par divided into two categories among the economists. One group defines the\par globalization as a process of colonization and blames the globalization as\par fostering\par inequality, domination and exploitation. On the other hand, most economists\par define the concept of globalization as a process of improving international\par division of labor and integrating national economies through trade of goods and\par services, cross-border corporate investments, financial flows, decrease in the\par burdens of government sectors through cutting of government subsidies, and the\par privatization state-owned enterprises (Hong, Sung Min, hopia.net, 2002).\par Therefore, they accept the globalization as synonymous in meaning with\par 'liberalization' and focus on the globalization\rquote s benefits such as the rise in\par productivity\par and growth rate. In order to analyze the economic globalization of Saudi\par Arabian economy since the 1900s, this paper would adopt the latter point of\par view adopted by the majority of economists.

\par \par

 

\par \par

The driving idea behind globalization is\par free-market capitalism. The more we set free the market forces and the more we\par open our economy to free trade and competition, the economy will grow more\par efficient and dynamic. Therefore, globalization means the spread of free-market\par capitalism to other countries in the world. Also, globalization opens,\par deregulates\par and privatizes the economy in order to make it more competitive and attractive\par to various foreign investments. Thus, the economic development strategies in\par the globalization process could be considered as consisting of three\par interconnected elements: national market liberalization; integration with\par global markets; market-supportive legal rules and political\par institutions.

\par \par

 

\par \par

The first element of globalization strategies\par is the national market liberalization. During the Cold War period, many\par developing countries adopted economic development strategies based on the idea\par that government could control and direct economic activity. But with the end of\par the Cold War, many of these countries have made efforts to adopt the market\par economy as an essential part of their economic development strategies. To\par liberalize the productive behavior of private sectors, economic development\par strategies have to reduce government involvement or interference in the economy\par and create space in which private sectors can freely carry out their\par transactions in the market. Therefore, key tactics in the national market\par liberalization are privatization of state-owned enterprises and deregulation of\par economy to cut down the burdens of government interference imposed on productive\par and capable private enterprises.

\par \par

 

\par \par

The second element of globalization\par strategies is global openness. The establishment of national market\par liberalization is reorienting economies to be open to international trade and\par foreign investment. As mentioned above, globalization blurs traditional\par distinctions between the national and international economy. In addition,\par technological advances such as computer and information technologies have\par permitted the establishment of transnational networks in production, trade, and\par finance. In this global environment, global openness means an export-oriented\par economic growth along with attempts to attract and keep foreign investment. As\par novel technologies are providing companies and people with enlarging\par opportunities to connect with the rest of the world, global openness will\par continue\par to be boosted in the future.

\par \par

 

\par \par

The third element of globalization strategies\par is the reform of legal and political infrastructure. If the government does not\par enact the proper legal rules and establish political institutions that would\par help to sustain effective economic development along with globalization,\par national market liberalization and global economic openness would not occur and\par would not be maintained. Therefore, economic development strategies in the era\par of globalization definitely require a certain kind of favorable environment\par provided by the legal and political systems. In other words, if the legal rules\par are in harmony with the objective of facilitating global economic networks, the\par globalization process would be much sweeter and fruitful.

\par \par

 

\par \par

3.2.\par Saudi\par Arabia\rquote s Globalization Strategy: Reducing\par Government Subsidies

\par \par

Due to continued stagnation since the 1980s,\par Crown Prince Abdullah, who effectively led the Saudi government from 1995 to\par King Fahd\rquote s death in June 2005, officially announced that the oil boom era of\par the 1970s had come to an end (Chosun.com, 2000). He adopted globalization\par strategies led by IMF, World Bank and WTO. The globalization strategies include\par the reduction of the government sector through a cutback in subsidies,\par expansion of privatization in order to activate the private sector, labor\par market reform, and the enlargement of economic opening in order to recover the\par economic growth. This section will first deal with the first strategy,\par reduction in government subsidies.

\par \par

 

\par \par

Since 1995, the government has reformed its\par economic system by reducing subsidies, increasing public charges and fees,\par discontinuing a free medical system, and raising an electricity charge. The\par 1995 budget sharply raised rates for electricity and water for both businesses\par and private consumers in a bid to encourage greater efficiency. A further rise\par in price for electricity was introduced in 2000, within the framework of\par preparations to privatize the electricity industry. These increases were\par short-lived, however, band were rescinded six months later in response to heated\par public protests on electricity bills when air-conditioning requirements were at\par their peak.

\par \par

 

\par \par

Saudi\rquote s wheat subsidies were initiated in the\par 1970s when the government decided to spread the financial benefits of oil boom\par to\par provinces that do not produce oil (Chosun.com, 1973). According to this policy,\par Saudi wheat farmers received three times the world market price for their crops\par even into the early 1990s. And by 1993, Saudi had become the sixth largest\par wheat producer in the world. Nevertheless, as the government experienced\par hardships\par related to difficulties in balancing the budget, subsidies of wheat farmers\par also had been dramatically cut back since the Gulf War because of the immense\par cost of war. But these subsidies have been increasing again since 1995 as wheat\par production has decreased. That is to say, subsidies of agriculture sector\par decreased from SR 1.5 billion in 1984 to SR 22 million in 1995, but these have\par risen\par back to SR 287 million in 2000 (Kingdom of Saudi Arabia Ministry of Planning,\par 2002).\par This recent enlargement of subsidies for agriculture acts as a great barrier\par for Saudi Arabia in its attempt to join WTO.\par

\par \par

 

\par \par

Public utilities charges and fees that formed\par 40~50 percent of revenue of non-oil sector had decreased from SR 24.8 billion\par in 1997 to SR 20.8 billion in 2000, while government subsidies had increased\par from SR 4.8 billion in 1997 to SR 5.9 billion in 1999. Along with failure of\par subsidy cut-back policy, due to the increase of the wage share by expanding\par pubic sector and growth of rigid expenditure such as enlargement of interest\par expenditure on debts of the government, attempts to improve the chronic budget\par deficit also failed to realize. Wage share of the public sector out of total\par expenditure had grown 46.7% in 1997 to 56.2% in 1999, and the share of\par interests for debts of the government also increased from 11% in 1997 to 14.6%\par in 1999 (EIU, 1999). Therefore, the government budget had inevitably revealed\par deficit since 1995, except for the year 2000 when oil prices sharply mounted up\par to $27 per barrel (SAMBA, 2002).

\par \par

 

\par \par

3.3.\par Saudi\par Arabia\rquote s Globalization Strategy: Expanding\par Privatization

\par \par

Since 1995, the Saudi government has\par championed privatization in order to increase opportunities for the private\par sector and to enhance economic efficiency as well as competitiveness of the\par national\par economy. Also privatization would help to rationalize public expenditure and\par alleviate burdens on the budget. In 2002, twenty sectors were identified for\par privatization, including telecommunication, electricity, industrial parks,\par postal services, water, railroad, education, and air transportation (EIU,\par 2003). The Saudi government has made an effort to privatize the Saudi airlines\par since 1994, Saudi Port authority since 1997, the telecommunication\par sector and the Saudi electricity company since 1998, Royal Commission for\par Jubail and Yanbu that offer electricity and water into these regions in 1999,\par and Postal Utility and Saudi Railway Organization (SRO) in 2002. As you can\par see, privatization has been a recurring theme throughout Saudi development\par plans.\par However, actual achievements have been relatively minimal so far. Small-size\par companies\par such as Saudi Port authority and Royal Commission for Jubail\par and Yanbu did successfully come under private management (Kingdom of Saudi\par Arabia Ministry of Planning, 2002). Nevertheless, large scale companies such as\par Telecommunication companies and Electricity companies had been prepared to\par become\par privatized for a long time, but still could not be carried out because of\par undecided\par plans for further restructuring, valuation of assets and the preparation of\par audited accounts. Also, a consortium of banks has been appointed to draft\par proposals for privatizing the national Saudi Arabian Airlines, but due to\par market anxiety about other national airlines, this privatization project has\par delayed\par as well.

\par \par

 

\par \par

Arguably the most important candidate for\par future privatization is the Saudi Basic Industries Corporation (SABIC), a\par petrochemical group in which the government holds a 70% share. But because SABIC\par subsidiaries have borrowed on a large scale from the corporation and some of\par them have still a great deal of debts to repay, the plan of privatization has\par entered\par into rescheduling arrangements without further progress.

\par \par

 

\par \par

3.4.\par Saudi\par Arabia\rquote s Globalization Strategy: Labor Market\par Reform, or Saudization

\par \par

One of the most important economic reforms is\par the labor market reform. It aims at significantly reducing the number of\par foreign workers in the kingdom. According to statistics from CDS (Saudi\par government\rquote s Central Department of Statistics), there were approximately five\par million non-Saudi population and three million of them were part of the labor\par force and employed. An unemployment rate among non-Saudi workers was 0.83%.\par According to reliable estimates, this non-Saudi labor force repatriates some\par $15bn annually (Enav Peter, 98). At the same time, the prevalence of so many\par skilled foreign workers has done much to erode the local Saudis work ethic. On\par the other hand with jobs being created for only about one-quarter of the total\par number of Saudi entrants to the job market every year, the government is\par redoubling its efforts to curb the number of expatriates.

\par \par

 

\par \par

To solve this foreign worker problem, the\par Saudi government has introduced the so-called 'Saudization' policies, under\par which the number of foreign workers in the kingdom is meant to be cut by 60%, to\par about two million. The Saudi government has carried out the task by stopping\par the issuance of work visa to foreigners in certain jobs, by increasing\par vocational training for Saudi nationals, and by tying government loans to Saudi\par private sector companies to minimum hiring quotas for Saudi nationals.\par

\par \par

 

\par \par

But under current situation where Saudi\par employers, who benefit from the significant wage differences between foreigners\par and Saudis, are strongly against the plan and poor work ethic of local Saudis\par who tend to escape from productive employment is prevailing, the progress of\par Saudization is very slow. Experts view that the key to Saudization's success\par lies\par on the improvement of the Saudi educational system to cast off its traditional\par pattern of religious oriented learning and commit itself to inculcating\par technical\par skills.

\par \par

 

\par \par

3.5.\par Saudi\par Arabia\rquote s Globalization Strategy: Stimulating Open\par Policy

\par \par

In the meantime, the Saudi government expanded\par its openness in order to improve the environment characterized by strict trade\par and investment. In order to introduce free trade, the Saudi government has\par joined\par GCC Customs Union in early 2005 and has lowered customs from 12% to 5% since\par 2001. Furthermore, on behalf of existing foreign investment law established in\par 1979, new foreign investment law has been endorsed in 2000.

\par \par

 

\par \par

Saudi government established SAGIA (Saudi\par Arabian General Investment Authority) with this law. The government has decided\par to permit 100% foreign ownership in the sectors such as gas, electricity,\par water, and petro-chemistry and cut the corporation tax of foreign investment\par from 45% to 30%. And it gave foreign businesses the right to own land and\par sponsor their own employees. Also, if a company introduces an advanced\par technology, Saudi would give a financial support, which can lend 50% of total\par investment at a low interest rate in the long term from SIDF (Saudi Industrial\par Development Fund).

\par \par

 

\par \par

But Saudi still imposes a tariff of 20% on\par imports of foreign goods that are competitive with goods from Saudi regions in\par order to encourage local industries, and a tariff of 100% on some farm products\par such as wheat. Saudi bans the import of some goods because religious reasons.\par Some\par sectors considered as strategically or religiously significant were closed to\par foreign investment. Most important of all, the government has retained control\par over the upstream oil sector. And because of the restrictive agency law,\par foreign companies are still required to work through Saudi business\par entities. 

\par \par

 

\par \par

Also, even though Saudi people pay 2.5% of a\par religious tax, zakat, by themselves, foreigners or foreign companies must still\par pay a very high rate of taxes although the rate has been cut from 45% to 30%\par since a new foreign investment law was enacted. To solve an unemployment\par problem, Saudi has tried to carry out a policy hiring Saudis, a policy that\par requires\par both Saudi and non Saudi companies to hire Saudis to at least 5% of the total\par employees. Because Saudis are less productive and receive more wages than\par non-Saudis,\par this policy is undermining the competition of foreign companies in\par Saudi\par Arabia.

\par \par

 

\par \par

In order to join WTO, Saudi has appeased the\par government\par sponsor system and opened the door for member countries of GCC, and made an\par environment such as the establishing of a new foreign investment law. But\par because of the barriers such as agricultural subsidies, rigid foreign\par investment provisions on some business and rigid regulations for intellectual\par property rights protection, Saudi\rquote s attempts to join WTO has been\par unsuccessful.

\par \par

 

\par \par

3.6.\par Evaluation of Saudi Economic Globalization

\par \par

The extent of Saudi economic globalization can\par be evaluated by looking at whether the government has succeeded in activating\par the private sector and the openness of the economy to foreign markets. In this\par section, the globalization of Saudi will be examined by measuring both these\par level of activation of private sector and openness based on recent statistics\par and calculations introduced by the Kingdom of Saudi Arabia Ministry of Planning\par and the World Bank in recent years.

\par \par

 

\par \par

- 3.6.1. Level of Private Sector\rquote s Activity

\par \par

The level of activation of a private sector\par can be inspected by comparing the early 1990s (1990~1995) with the late 1990s\par (1996~2001)\par since the strategy of globalization has been enacted throughout the last decade\par of the 20th century. To assess the level of activity of the private\par sector, the share of GDP of non-oil private sectors, non-oil government\par sectors, oil-sector along with the average growth rate of investment of non-oil\par private sectors should be considered altogether. First of all, non-oil private\par sectors\rquote share of GDP has decreased by 0.5%, from 49.5% during the first half\par of the 1990s to 49% during the last half. Non-oil government sectors\rquote share of\par GDP has increased by 0.2%, from 18.7 % to 18.9%, and oil-sector has increased\par from 31.8% to 32.1%. The average growth rate of investment in non-oil private\par sectors during the first half of 1990s is 5.5% and the second half 4.2%.\par According to these data, although the Saudi government has attempted to promote\par private sectors throughout the 1990s, the progress has been very weak and\par minimal.

\par \par

 

\par \par

- 3.6.2. Level of Openness

\par \par

The indicators measuring the level of\par openness are the ones that denotes the degree of integration with the global\par economy, such as trade ratio (trade in goods as a share of nominal GDP), trade\par in goods as a share of goods GDP, change in trade as a share of GDP, Growth in\par real trade less growth in real GDP, Gross private capital flows, Gross foreign\par direct investment. The data to measure them comes from statistic data of World\par Bank.

\par \par

 

\par \par

The trade in goods is the first basic link\par with the rest of the world, and it is the obvious manifestation of global\par economic connections promoted and supported by capitalism. Therefore, trade\par ratio calculated as a ratio of trade in goods (the sum of merchandise exports\par and imports) to nominal GDP is the most meaningful and significant indicator for\par the extent of world economy integration. In case of\par Saudi\par Arabia, it is shown that it has reduced from 64% in\par 1990 to 53.3% in 2001, which means that the integration with world economy\par weakened\par despite the globalization policies.

\par \par

 

\par \par

Trade in goods as a share of goods GDP is the\par sum of export and import of goods divided by the value of GDP after subtracting\par service GDP from nominal GDP. As service GDP increases, the percentage of trade\par in goods\rquote share of the goods GDP would thus increase. Moreover, this increase\par in the percentage indicates that service trade, which is deemed as an important\par element of global integration, is expanding to some extent. The percentage of\par trade in goods for Saudi has decreased from 106.3% in 1990 to 92.7% in\par 2001.

\par \par

 

\par \par

The difference between growth rate of real\par goods and services and real GDP growth rate is an indicator to demonstrate the\par trade liberalization, the mitigation of barrier for foreign investment, and the\par labor shifting in order to gain competitive advantage in the labor-intensive\par manufacturing and service sectors. Based on the results from 1990 to 2001, the\par average growth rate of real goods and services of 1990-1995 was 3.9%, slightly\par larger than the real GDP growth rate 3.8% by 0.1%. On the contrary, the average\par growth rate of the services and goods of 1996-2001 was 4.3%, whereas real GDP\par growth rate at that time was 2.4%. Therefore, these differences in growth rates\par demonstrate that the trade liberalization, the mitigation of barrier for\par foreign investment, and labor shifting have improved to some extent, but\par otherwise\par stayed at a low level as before.

\par \par

 

\par \par

The change in trade as a share of GDP which\par has been calculated every decade shows how effectively the trade policy has\par operated. It can be compared with gross GDP versus the share of import and\par export in the 1980s and 1990s. Saudi has decreased from 65.5% in the 1980s to\par 54.5% in the 1990s. This indicator shows that Saudi has not effectively coped\par with globalization in terms of its trade policy.   \par

\par \par

 

\par \par

Economic openness can also be measured by\par considering indicators of capital flow, such as gross private capital flows and\par gross foreign direct investment. Gross private capital flow is the value\par calculated by extracting the sum of assets and debts of the government and\par monetary authorities from the sum of investment inflows and outflows such as\par portfolio investment, direct investment, and other forms of investment. It is\par calculated as a ratio to GDP. As for Saudi, gross private capital flows have\par decreased from 9.8% in 1990 to 9.3% in 2001. And gross foreign direct\par investment is the sum of the absolute value of inflows and outflows of foreign\par direct investment. It includes equity capital, the reinvestment of income,\par long-term\par and short-term capital also calculated as the ratio of GDP. World Band\par statistics show that Saudi\rquote s gross foreign investment has not changed from 0.3%\par of 1990 to 0.3% of 2001.

\par \par

 

\par \par

As various indicators of the level of private\par sectors activity and economic openness shows, the progress of globalization has\par not happened despite government efforts and policies. It appears that most of\par globalization strategies since the middle of 1990s have failed.\par

\par \par

 

\par \par

4. Saudi Economic Trends in the 2000s and\par Prospects of Saudi Economy

\par \par

Thanks to rise in oil prices in 2000,\par Saudi\par Arabia enjoyed the first budget surplus in 19 years\par and achieved 4.9% GDP growth that year. High oil prices seemed to continue into\par the next year when 9/11 attack occurred to shock the world. Since that day, the\par contraction of world economy caused oil prices to drop again, thus GDP growth\par that year decreased to low 1.2%, and Saudi\par Arabia had another year of budget deficit in just\par one year of time.

\par \par

 

\par \par

Since March 2003 when the\par Iraq war began,\par Saudi\par Arabia has regained a better GDP growth of 6.4% in\par that year despite ferociously growing political troubles in the\par Middle East. However, that increase resulted only from\par the rise in oil prices after the war and does not denote that Saudi economy has\par improved to stand on its own regardless of oil prices. Reduction in direct\par foreign investment, chronic budget deficit, high dependence on oil, heavy\par interests on enormous public debts, low investment on equipment are few of the\par problems that are still thwarting the Saudi economy.

\par \par

 

\par \par

As you can see,\par Saudi\par Arabia is the foremost oil producing nation as well\par as the nation whose economy is dominated and swayed by unsteady oil prices.\par Another\par serious problem for Saudi is that although they have experienced a booming\par population growth over the last thirty years, manufacturing industries have not\par developed to accommodate that growth, causing reduction in per Capita GDP.\par Saudi GDP now is less that one-third of the GDP twenty years ago. However\par despite all these problems to be solved by the Saudi government, oil prices are\par currently soaring to more than $60 a barrel (Chosun.com, 2005). Relieved Saudi\par government should use this chance to ameliorate the economic situations and\par prove\par to be a solid nation in the future. A recent report showed that SAGIA (Saudi\par General Investment Agency) declared to invest seven hundred billion dollars to\par the industrial project for the next twenty years (Chosun.com, 2004). Main\par investment will be made on electricity, along with water, refined oil, and other\par key industries. Also, Saudi\par Arabia is planning to promote many ambitious\par policies in order to attract foreign investments that will contribute to higher\par GDP growth rate and reduce the nation\rquote s dependence on oil (Chosun.com,\par 2005).

\par \par

 

\par \par

Saudi\par Arabia\rquote s basic economic policies in the current\par year are as follows. First of all, the economy is in pursuit of a stable\par long-run oil policy that would definitely stabilize the economy. Stable\par economic growth is the aim of the second policy. As they have learnt a lesson\par from the experience of negative growth from 1993 to 1995, the budgets would not\par be spent carelessly on massive public construction projects. Third, the Saudi\par government is aiming to diversify the economic structure to reduce the\par dominating share of GDP accounted for oil-related industries. To promote this\par diversity, its fourth policy is to activate the private sector through the\par seventh 5-year economic development plan (2000~2005). Fifth policy is to\par continue the Saudization that started since 1988. To provide jobs for one\par hundred thousand new entrants to the job market every year, the Saudi\par government would try to reduce and limit the number of foreign laborers in the\par country.

\par \par

 

\par \par

5. General Overview of Economic Exchange\par between Saudi\par Arabia and Korea until Today

\par \par

Since the establishment of diplomatic\par relationship between the two nations in 1962, the first genuine economic\par interactions occurred in the 1970s and 1980s through the so-called construction\par boom in the Middle East. As the third and fourth economic development plans under King Khalid\par attracted many foreigners to Saudi\par Arabia, quite a number of Koreans were among them\par to seek jobs and wealth in the promising land of the Middle East. Saudi Arabia back then had no solid basic infrastructure\par and technology to carry out these construction projects, thus had to rely on\par foreign nations to do it for them. And Korean construction corporations advanced\par into the country to grab this opportunity in order boost the Korean economy\par (Chosun.com,\par 1987). Out of ten original construction corporations that advanced into the\par Saudi market, only four survived until today: Daewoo Corp. Riyadh Branch since\par 1975, Daelim Saudi Arabia Construction Corp. since 1773, and LG Engineering\par & Construction Corp. since 1881. As Hyundai Construction Co. Riyadh Branch\par joined them since 1995, there are currently four construction corporations\par still actively conducting construction projects and raising profits.\par

\par \par

 

\par \par

Thanks to this construction boom in the\par Middle East, Korean corporations were able to reap great\par oil dollars from Saudi\par Arabia. Some economic experts argue that if the\par boom had not happened, Korea then would have suffered a terrible economic\par slowdown comparable to IMF crisis of the late 1990s (Chosun.com, 2005).\par Approximately\par 150,000 Korean workers had flied to Saudi\par Arabia during the two decades of construction boom\par to assist the building of the infrastructure.

\par \par

 

\par \par

However, as\par Saudi\par Arabia equipped itself with a solid infrastructure\par thanks to Korean construction corporations, they have changed their demand to\par industrial plants construction, which requires a much higher level of\par technology.\par Thus, the construction profits made by Korean construction companies have\par diminished because of heavy competition from abroad. But, Koreans have sought\par other ways to reap benefits. Korea\rquote s export items to\par Saudi\par Arabia gradually increased in number and today,\par exports mainly consist of cars, textiles, electronic products such as mobile\par phones and air conditioners, steel, and chemical goods. Among them, textiles\par and fibers are the primary export items to\par Saudi\par Arabia. Textiles are used to make thobes for men\par and abayas, a traditional dress that covers the entire body, for women; fibers\par are indispensable in producing blankets for prayers on their pilgrimage to\par Mecca (Chosun.com, 2003).

\par \par

 

\par \par

Pic 1: Thobe and Abaya mostly made by Korean export items, textiles\par and fibers

\par \par

  (Source: Mina Traveling agency,\par 2003)

\par \par

 

\par \par

On the other hand, Koreans import mainly\par petroleum (79% of all imports from Saudi\par Arabia) from\par Saudi\par Arabia. Due to huge amount of petroleum\par Korea consumes every year,\par Korea is currently the third largest importing\par country after United\par States and\par Japan.

\par \par

 

\par \par

Table 3:\par Saudi\par Arabia\rquote s export to countries (unit: 1 million US\par dollars)

\par \par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par \par ?\par ?\par ?\par ?\par ?\par ?\par \par
\par ?

YEAR

\par ?
\par ?

1999

\par ?
\par ?

2000

\par ?
\par ?

2001

\par ?
\par ?

2002

\par ?
\par ?

2003

\par ?
\par ?

Country

\par ?
\par ?

Export

\par ?
\par ?

Export

\par ?
\par ?

Export

\par ?
\par ?

Export

\par ?
\par ?

Export

\par ?
\par ?

U.S.

\par ?
\par ?

9916

\par ?
\par ?

15689

\par ?
\par ?

12385

\par ?
\par ?

14270

\par ?
\par ?

17436

\par ?
\par ?

Japan

\par ?
\par ?

7599

\par ?
\par ?

12286

\par ?
\par ?

10426

\par ?
\par ?

10393

\par ?
\par ?

13153

\par ?
\par ?

Korea

\par ?
\par ?

5448

\par ?
\par ?

8339

\par ?
\par ?

6566

\par ?
\par ?

6883

\par ?
\par ?

8484

\par ?
\par ?

India

\par ?
\par ?

2180

\par ?
\par ?

3419

\par ?
\par ?

3290

\par ?
\par ?

3931

\par ?
\par ?

5548

\par ?
\par ?

France

\par ?
\par ?

2180

\par ?
\par ?

3419

\par ?
\par ?

3290

\par ?
\par ?

3931

\par ?
\par ?

5548

\par ?
\par ?

Italy

\par ?
\par ?

1180

\par ?
\par ?

1859

\par ?
\par ?

1766

\par ?
\par ?

1799

\par ?
\par ?

2364

\par ?
\par ?

Britain

\par ?
\par ?

436

\par ?
\par ?

859

\par ?
\par ?

898

\par ?
\par ?

731

\par ?
\par ?

-

\par ?
\par ?

China

\par ?
\par ?

627

\par ?
\par ?

1501

\par ?
\par ?

2175

\par ?
\par ?

2885

\par ?
\par ?

4098

\par ?
\par \par

(Source: Saudi Arabian Monetary Authority,\par 2003)

\par \par

 

\par \par

Thus, for\par Saudi\par Arabia, Korea is also one of the most important trading\par partners\par for them. But other than the exports of oil, no Saudi business has been able to\par take a firm root and make profits on the Korean soil. Thus, in the next section\par of the paper, I will focus on Korean businesses in\par Saudi\par Arabia and analyze how five Korean corporations\par achieved great successes in Saudi\par Arabia through local\par production.

\par \par

 

\par \par

Also, some interesting anecdotes related to\par the economic exchange could be found while going through decades of newspapers.\par Some export items from Korea have been denied access because in the past,\par some Korean companies failed to take into account distinct characteristics of\par the Islamic world. In 1883, news article from Chosun.com reported that Korean\par noodle company\rquote s efforts to export Korean noodles to\par Saudi\par Arabia for the first time was rejected because pork\par was included in the list of ingredients. Also, Korean liquor companies failed\par to advance into the Saudi market because the government strictly bans the\par import of alcoholic drinks due to the Sharia, Islamic Law.

\par \par

 

\par \par

6. Korean Goods in\par Saudi Arabia

\par \par

 

\par \par

6.1.\par Samsung\par Mobile Phones

\par \par

Among the current nineteen local producing\par corporations, Samsung Electronics Co. has most successfully built a trustful and\par powerful brand image of Korean product: Samsung mobile phone. After they have\par won the confidence of Saudi consumers on Samsung phones, the competition with\par Japan and other global mobile companies proved to\par be Samsung\rquote s victory. Also, since 1998, Samsung has produced mobile phones\par equipped with voice-dialing function, taking into account that\par Saudi\par Arabia is one of the few nations that do not yet\par prohibit telephoning while driving the car (Chosun.com, 1998). Thanks to this\par new technology that no other corporations were able to produce, Samsung\par Electronics Co. has consolidated its place on the top.

\par \par

 

\par \par

Also, considerable efforts and money spent\par for effective advertisements played its role (Chosun.com, 1998). It showed that\par in the remote market in the Middle East region, the first task is to spread and\par convince the natives of the quality of Korean products. For example, Samsung\par has made an ad showing a young girl hopelessly lost in the desert. However, she\par had a Samsung mobile phone with her and in the midst of the vast desert, she was\par able to get rescued by telephoning her parents.

\par \par

 

\par \par

6.2.\par Satellite Broadcast Receivers

\par \par

Another successful locally produced good is a\par satellite broadcast receiver. This success also could be achieved because the\par corporation had accurately grasped and sensitively paid attention to changes in\par the inclinations and needs of the Saudi people and used that research to cut\par into the market promptly. A satellite receiver was originally a prohibited\par product in Saudi\par Arabia because the government viewed the item as\par contradictory to Islamic customs. However, Saudis were greatly attracted by the\par product, which allowed them to connect with the entire world just by sitting in\par the living room. In 1991, the start of the Gulf war brought satellite receivers\par secretly into Saudi market (Chosun.com, 1991). Koreans sensed this change and\par foreseeing that the government would lift the ban on the item in near future,\par they started selling receivers to Saudis at low prices in order to first to\par familiarize Saudi consumers with Korean products. SK networks since 1982 and\par Taihan Electric Wire Co. since 1984 are the local corporations still producing\par Korean satellite receivers which now dominate approximately 80% of all sales in\par Saudi Arabia (Chosun.com, 2001). However, in order to\par maintain their substantial market share, experts argue that Korean corporations\par must keep renovating and improving the designs and capacities of the products to\par suit the needs of Saudi consumers.

\par \par

 

\par \par

6.3. Air\par Conditioners

\par \par

LG Electronics Corporation has also been very\par successful in producing the electronic device indispensable to Saudis: air\par conditioners. Since 1883, they have advanced into the Saudi market that is\par deemed as the inevitable test place for air conditioner companies from all over\par the world. Through careful and thorough market surveys and researches, LG\par Electronics has seized the desires of Saudi consumers and incorporated those\par wanted\par features to original air conditioners being sold in\par Korea. They have took into account the Saudi\par climate which is steaming hot almost a year long and the characteristic of the\par Saudi society that is rather a closed one where women are not allowed to go out\par whenever they wish. Thus, they put many useful functions to the air conditioner\par that will give Saudis fresh and fragrant air that will be good for the health\par of people who will turn on the air conditioners almost whole day (Chosun.com,\par 2002).

\par \par

 

\par \par

Advertisements also helped them to raise\par their sales. They have used lots of money into extensive ads of all kinds from\par newspapers to standing billboards on the highway to attract Saudis to buy their\par products. Thanks to these efforts, LG Electronics are currently dominating the\par air conditioner market by selling approximately 30% of the total sales\par (Chosun.com,\par 2005). However, a noticeable difference in their success is that they\par maintained a high price tactic unlike other Korean corporations selling their\par products at cheap prices. This tactic along with high quality of their products\par convinced the Saudi consumers and attracted them by large\par numbers.

\par \par

 

\par \par

6.4. LG\par Mobile Phones

\par \par

LG mobile phone is the product that is raising\par the most sales these days. The Koreans dispatched from LG Electronics have\par researched and pondered upon the features to add to locally produced mobile\par phones and they have invented a special phone just for Arabs. They have added\par an alarm function that notifies Muslims of the praying time along with a\par function that shows Qibla, the direction in which which Muslims pray six times\par a day (Chosun.com, 2002). These features have won the hearts of devout Muslims\par in the nation where Mecca and Medina are located. Saudis who pray anywhere no\par matter what but had difficulty in finding the direction toward Mecca in places\par such as airplanes and deserts, LG mobile phones have become an indispensable\par item they must buy. Due to this original and novel idea of combining the Arab\par custom of praying with the portability of the mobile phone, LG is speedily\par catching up on the percentage sales of Samsung and Nokia phones that have\par dominated the market for a long time (Chosun.com, 2002).

\par \par

 

\par \par

\ldblquote We are confident. We will beat them in a few\par years,\rdblquote says a LG Electronics manager in Jeddah office to a reporter from\par Seoul (Chosun.com, 2003). As LG is preparing\par large-scale ads to raise their sales, dispatched workers are saying that they\par are feeling a difference in Saudi\par Arabia. Saudis have come to view Koreans\par differently with respect for selling such high quality electronic devices in\par the markets. If this stream of large sales maintains its pace, experts\par anticipate that Koreans will reap approximately five hundred million dollars\par just\par from selling mobile phones (Chosun.com, 2004).

\par \par

 

\par \par

6.5.\par Hyundai Motors Cars

\par \par

Hyundai Motors is currently the third largest\par car selling company after Toyota and GM motors in\par Saudi\par Arabia (Chosun.com, 2005). However, the prospects\par for the future seem excellent. Hyundai Motors will be building a local factory\par and branch office this year and dispatch several able Korean managers to\par oversee the process and start full-scale projects to boost up their sales. But\par prior\par to Hyundai\rquote s decision to locally produce and sell the cars, Hyundai cars have\par been popular all along in Saudi\par Arabia. \ldblquote It is very common to see Korean cars from\par Hyundai and Daewoo here,\rdblquote says a Korean student studying in Jeddah (Chosun.com,\par 2005). Comparatively low price and high quality of imported Korean cars have\par been attracting Saudi consumers even though no substantial efforts were made to\par raise the sales. Now that Hyundai Motors have decided to advance into the\par market for real, there seems to be a bright future ahead.

\par \par

 

\par \par

With these high car sales, three tire\par producing corporations have also made their mark in the Saudi market: SSangyong\par corporation since 1983, Kumho Tire corporation since 1981, and Hankook Tire\par corporation since 1986 (Chosun.com, 2004). All these three corporations have\par made a branch office in the city of Jeddah and have been raising consistent profits\par along with car companies.

\par \par

 

\par \par

7.  Suggestions for More and\par Better Successes in the Future

\par \par

For better and expanded Korean exports and\par sales in Saudi\par Arabia, some improvements will have to be made.\par Currently, there is no genuine or reliable Middle East expert in\par Korea. This is partly because of lack of support\par from the government and corporations. The government should invest in\par establishing an advanced research center to systemically conduct researches and\par analyze the Saudi market. Then, the process of finding out a breakthrough for\par Korean products into the Saudi market will be very much facilitated.\par

\par \par

 

\par \par

Secondly, Korean corporations must equip\par their products with better and improved technology to suit the needs of Saudi\par consumers and attract them among the heavy competition with other global\par corporations. This suggestion stems the lesson learned from the 1970s\par construction boom in the Middle East. Even though Korean construction companies have achieved huge profits\par during that era, Koreans have failed to maintain the level of sales because the\par development and improvement of construction technology was comparatively slow\par compared to other companies that equipped themselves with competitive technology\par to snatch our profits away.

\par \par

 

\par \par

Third, the Koreans must try to alter many\par Saudi\par Arabians\rquote unfavorable opinions about them and forge a closer relationship with\par the nation. The image of Koreans to Saudis is not very pleasant or agreeable\par because Saudis tend to think of Koreans as Asians who only seek profit from\par their land. They believe that Koreans are only after money and have no other\par interests in diplomatic or cultural exchanges. These negative views against\par Koreans would serve as a great obstacle to future successes of Korean\par businesses in Saudi\par Arabia. Thus, the government and nongovernmental\par organizations should promote more intimate and friendly relationship with the\par Saudis by organizing various means of cultural exchange. Thanks the so-called\par Korean wave presently spread throughout entire Asia, many popular Korean actors and singers are\par winning favorable images of Koreans in countries like\par Thailand, Vietnam, Philippines, and\par Taiwan. If we could export Korean movies or dramas\par to the Middle\par East and\par spread the Korean wave farther into the region, the Arabs would come to have\par more intimate and pleasant opinions about Koreans, thus favor and consume Korean\par products instead of others.

\par \par

 

\par \par

Also, Koreans should correct their distorted\par attitudes or views against Saudi\par Arabia. Because of the 9/11 attack and Kim Sun Il\par murder in June 2003, many Koreans have come to view all Arabs, specially Saudi\par Arabians, as unmerciful terrorists who should not be dealt with. However, only\par small number of Muslims in the Arab world approve of the terrorist acts\par committed by groups such as Al-Qaeda because their actions do not conform to\par Islamic Law and Islam teachings. Unless Koreans discard these negative\par prejudices, mutual economically beneficial interactions would be very difficult\par to expand in the future.

\par \par

 

\par \par

III. Conclusion

\par \par

 

\par \par

Saudi\par Arabia is currently facing difficult tasks of\par globalization. If\par Saudi\par Arabia tries to continue the globalization strategies mentioned\par earlier in the paper quickly and effectively using all the resources available,\par it seems very much possible that the nation will escape from a vicious circle\par of low growth in near future. However, some experts anticipate that the\par thorough globalization would still require about two more decades since\par Saudi\par Arabia is one of the most conservative Islamic countries in the\par world. Along with this process of globalization, economic exchange between\par Korea and Saudi\par Arabia will be going through a new phase. Until now, main\par economic exchanges have been from Korea to Saudi\par Arabia, except for vast amount of oil imported from\par Saudi\par Arabia to Korea. The lessons and experiences gained from the 1970s\par construction boom and comparatively recent successes of Korean electronic\par corporations should be very valuable data for future successes of Korean\par businesses in Saudi\par Arabia.

\par \par

 

\par \par

Saudi\par Arabia is currently the largest oil producing nation and there\par still exists vast amount of oil buried under the Saudi Arabian soil. Experts\par anticipate that oil will continue to be produced at least for another 83 years.\par Thus, the effective economic interactions based on favorable diplomatic\par relationship\par will continue to be very crucial for the future of both\par economies.

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

 

\par \par

References

\par \par

-\par Newspaper articles,\par reports

\par \par

at\par Chosun.com (Internet news site) from CHOSUN ILBO

\par \par

 

\par \par

-\par \'bb\'e7\'bf\'ec\'b5\'f0 \'be\'c6\'b6\'f3\'ba\'f1\'be\'c6,\par 1999\'b3\'e2 \'c0\'af\'b0\'a1\par \'c8\'b8\'ba\'b9\'bf\'a1\'b5\'b5 \'ba\'d2\'b1\'b8,\par \'b0\'e6\'c1\'a6 \'b9\'df\'c0\'fc\par \'b8\'b6\'c0\'cc\'b3\'ca\'bd\'ba 0.8% \'b1\'e2\'b7\'cf.

\par \par

Despite the recovery of oil prices in 1999,\par real GDP growth rate even contracted by 0.8% (Chosun.com, 1999).   p.10

\par \par

 

\par \par

-\par \'bb\'e7\'bf\'ec\'b5\'f0 \'be\'c6\'b6\'f3\'ba\'f1\'be\'c6\par 1975\'b3\'e2 \'bb\'e7\'bf\'ec\'b5\'f0\par \'be\'c6\'b6\'f7\'c4\'da \'bc\'ae\'c0\'af\par \'c8\'b8\'bb\'e7 \'b1\'b9\'bf\'b5\'c8\'ad\'c7\'cf\'b4\'d9.

\par \par

Also the Saudi Arabian government\par nationalized the biggest oil company, Saudi Aramco... (Chosun.com, 1975)     p.\par 11

\par \par

 

\par \par

-\par 2002\'b3\'e2 \'b1\'b9\'b0\'a1\par \'bf\'b9\'bb\'ea \'c0\'fb\'c0\'da\'b7\'ce\par \'c0\'ce\'c7\'d8 \'b0\'f8\'c3\'a4\'b0\'a1\par \'b4\'d9\'bd\'c3 GDP\'c0\'c7\par 97%\'b7\'ce \'bf\'c3\'b6\'f3.

\par \par

\ldblquote In 2002, the ratio of public domestic debt to\par GDP rose to 97% because of a higher budget deficit.\rdblquote (Chosun.com, 2002)            \par p.13

\par \par

 

\par \par

- \'bb\'e7\'bf\'ec\'b5\'f0 \'c1\'a4\'ba\'ce SABIC \'bc\'bc\'bf\'f6, \'bc\'ae\'c0\'af\'c8\'ad\'c7\'d0 \'bb\'ea\'be\'f7\'c0\'c7 70% \'c2\'f7\'c1\'f6.

\par \par

the Saudi government established SABIC\par leading Saudi petro-chemical industry and held 70% of the industry's share in\par 1976 (Chosun.com, 1978).   page\par 13

\par \par

 

\par \par

- \'bb\'e7\'bf\'ec\'b5\'f0 \'c7\'d7\'b0\'f8\par \'b5\'ee 27\'b0\'b3 \'b0\'f8\'b0\'f8\par \'b4\'dc\'c3\'bc\'b5\'e9 2\'c1\'b6281\'be\'ef SR\par \'b1\'b9\'b0\'a1 \'bf\'b9\'bb\'ea \'c1\'df 18%,\par 412\'be\'ef SR \'b9\'de\'be\'c6\'a1\'a6

\par \par

the twenty-seven public organizations,\par including\par Saudi Arabian Airlines and Pension Fund, were allocated the possession of about\par 18%, or SR 41.2 billion among the overall Saudi government budget of SR 228.1\par billion back in 2001 (Chosun.com, 2001)    page\par 14

\par \par

 

\par \par

- \'bb\'e7\'bf\'ec\'b5\'f0 \'b0\'f8\'b0\'f8\par \'bb\'ea\'be\'f7 \'bb\'fd\'bb\'ea\'c0\'b2, 1983\'bf\'a1 \'ba\'f1\'c7\'d8 \'b9\'dd\'c0\'b8\'b7\'ce \'c1\'d9\'be\'ee.

\par \par

On the other hand, labor productivity\par of the public sector measured by output/labor ratio had decreased to one half\par of 1983 (Chosun.com, 2002).       page\par 16

\par \par

 

\par \par

- \'be\'d0\'b5\'d1\'b6\'f3 \'bf\'d5\'bc\'bc\'c0\'da\par 2005\'b3\'e2 \'b5\'e5\'b5\'f0\'be\'ee\par \'b1\'b9\'bf\'d5\'c0\'b8\'b7\'ce \'c1\'ef\'c0\'a7.

\par \par

Crown Prince Abdullah, who effectively\par led the Saudi government since 1995 until 2005 when King Fahd died, officially\par announced that the oil boom era of the 1970s had come to an end (Chosun.com,\par 2000).            \par page\par 21

\par \par

 

\par \par

- \'bb\'e7\'bf\'ec\'b5\'f0 \'b9\'d0 \'bb\'ea\'be\'f7\'bf\'a1 \'b4\'eb\'c7\'d1 \'c1\'a4\'ba\'ce\par \'ba\'b8\'c1\'b6\'b1\'dd \'bf\'c3\'c7\'d8\'ba\'ce\'c5\'cd \'bd\'c3\'c0\'db.

\par \par

Saudi's wheat subsidies were initiated\par in the 1970s when the government decided to spread the financial benefits of\par oil boom to provinces that do not produce oil (Chosun.com, 1973).  \par page 22

\par \par

 

\par \par

- \'c0\'af\'b0\'a1 \'b6\'c7 \'c3\'d6\'b0\'ed\'c4\'a1 \'b0\'bb\'bd\'c5. $60\'b4\'de\'b7\'af\par \'b5\'b9\'c6\'c4.

\par \par

However despite all these problems to\par be solved by the Saudi government, oil prices are currently soaring to more\par than $60 a barrel (Chosun.com, 2005)        \par page\par 31

\par \par

 

\par \par

- SAGIA \'c7\'e2\'c8\'c4 20\'b3\'e2\'b0\'a3\par 7000\'be\'ef \'b9\'cc\'c8\'ad\par \'b4\'de\'b7\'af \'bb\'ea\'be\'f7 \'b4\'d9\'be\'e7\'c8\'ad\par \'c7\'c1\'b7\'ce\'c1\'a7\'c6\'ae\'bf\'a1 \'c5\'f5\'c0\'da \'b0\'e8\'c8\'b9

\par \par

A recent report showed that SAGIA\par (Saudi General Investment Agency) declared to invest seven hundred billion\par dollars to the industrial project for the next twenty years (Chosun.com,\par 2004)     page 31\par

\par \par

 

\par \par

- \'bb\'e7\'bf\'ec\'b5\'f0 \'bb\'ea\'be\'f7\par \'b4\'d9\'be\'e7\'c8\'ad \'c0\'a7\'c7\'d8 \'bf\'dc\'b1\'b9\par \'c5\'f5\'c0\'da \'c0\'af\'c4\'a1 \'b1\'e2\'c8\'b9.

\par \par

Also,\par Saudi Arabia is planning to promote many ambitious policies in order to\par attract foreign investments that will contribute to higher GDP growth rate and\par reduce the nation's dependence on oil (Chosun.com, 2005).        page\par 32

\par \par

 

\par \par

- \'c7\'d1\'b1\'b9 \'b0\'c7\'bc\'b3\par \'b1\'e2\'be\'f7\'b5\'e9, \'c1\'df\'b5\'bf\'c0\'b8\'b7\'ce \'b0\'c7\'bc\'b3\'ba\'d5\par \'c1\'b6\'bc\'ba.

\par \par

Korean construction corporations\par advanced into the country to use this opportunity to boost the Korean economy\par (Chosun.com, 1983).       page\par 33

\par \par

 

\par \par

- \'b4\'eb\'bf\'ec \'b8\'ae\'be\'df\'b5\'e5\par \'c7\'f6\'c1\'f6 \'c1\'d6\'c0\'e7 \'c8\'b8\'bb\'e7\par 1975\'b3\'e2, \'b4\'eb\'b8\'b2\par \'bb\'e7\'bf\'ec\'b5\'f0 \'b0\'c7\'bc\'b3 \'c8\'b8\'bb\'e7\par 1773\'b3\'e2, \'bf\'a4\'c1\'f6\par \'b0\'c7\'bc\'b3 \'c8\'b8\'bb\'e7 1881\'b3\'e2 \'c1\'f8\'c3\'e2\'a1\'a6

\par \par

Daewoo Corp.\par Riyadh\par Branch since 1975, Daelim Saudi Arabia Construction Corp. since 1773, and LG\par Engineering & Construction Corp. since 1881.  (Chosun.com, 2003)          \par page\par 33

\par \par

 

\par \par

- \'c7\'f6\'b4\'eb \'b0\'c7\'bc\'b3\par \'c7\'f6\'c1\'f6 \'c1\'d6\'c0\'e7 \'c8\'b8\'bb\'e7\par 1995\'b3\'e2 \'c1\'f8\'c3\'e2\'b1\'ee\'c1\'f6\par \'c6\'f7\'c7\'d4\'a1\'a6

\par \par

As Hyundai Construction Co. Riyadh\par Branch joined them since 1995...  (Chosun.com, 2003)    page 33

\par \par

 

\par \par

- \'c1\'df\'b5\'bf\'bf\'a1\'bc\'ad \'c0\'cf\'be\'ee\'b3\'ad\par \'b0\'c7\'bc\'b3\'ba\'d5\'c0\'cc \'be\'c6\'b4\'cf\'be\'fa\'b4\'d9\'b8\'e9 \'c7\'d1\'b1\'b9\'c0\'ba\par IMF\'bf\'a1 \'b9\'f6\'b1\'dd\'b0\'a1\'b4\'c2 \'b0\'e6\'c1\'a6\par \'c0\'a7\'b1\'e2\'b8\'a6 \'c0\'cc\'b0\'dc\'b3\'bb\'be\'df \'c7\'df\'c0\'bb\par \'b0\'cd\'c0\'cc\'b4\'d9.

\par \par

Korea\par then would have suffered a terrible economic slowdown comparable to IMF crisis\par of the late 1990s (Chosun.com, 2005).  \par page\par 34

\par \par

 

\par \par

- \'c1\'f7\'b9\'b0 \'b8\'de\'c4\'ab\'b7\'ce\par \'b8\'f0\'bf\'a9\'b5\'e5\'b4\'c2 \'bc\'ba\'c1\'f6 \'bc\'f8\'b7\'ca\'b0\'b4\'b5\'e9\'c0\'bb\par \'c0\'a7\'c7\'d1 \'b4\'e3\'bf\'e4\'b7\'ce \'b4\'dc\'bf\'ac\par \'c0\'ce\'b1\'e2

\par \par

fibers are indispensable in producing\par blankets for prayers on their pilgrimage to Mecca\par (Chosun.com, 2003).  page 34\par

\par \par

 

\par \par

- \'c7\'d1\'b1\'b9 \'b6\'f3\'b8\'e9\par \'c8\'b8\'bb\'e7 \'bb\'e7\'bf\'ec\'b5\'f0 \'bc\'f6\'c3\'e2\'c7\'cf\'b7\'c1\'b4\'d9\par \'b8\'c1\'bd\'c5\'b4\'e7\'c7\'d8\'a1\'a6

\par \par

Korean noodle company's efforts to\par export Korean noodles to Saudi Arabia was rejected because pork was included in the list of ingredients\par (Chosun.com, 1883)   page 35\par

\par \par

 

\par \par

- \'c7\'d1\'b1\'b9 \'bc\'fa \'c8\'b8\'bb\'e7 \'bb\'e7\'bf\'ec\'b5\'f0 \'b8\'b6\'c4\'cf\'c0\'b8\'b7\'ce\par \'c1\'f8\'c3\'e2 \'bd\'c7\'c6\'d0.

\par \par

Korean liquor companies failed to\par advance into the Saudi market because the government strictly bans the import\par of alcoholic drinks due to the Sharia, Islamic Law.

\par \par

(Chosun.com, 1884)   page 35

\par \par

 

\par \par

- \'bb\'e7\'bf\'ec\'b5\'f0\'b0\'a1 \'bf\'ee\'c0\'fc\'c1\'df\par \'c5\'eb\'c8\'ad\'b0\'a1 \'be\'c6\'c1\'f7 \'b0\'a1\'b4\'c9\'c7\'d1\par \'b1\'b9\'b0\'a1\'b7\'ce\'bc\'ad \'c0\'cc\'b8\'a6 \'c0\'cc\'bf\'eb\'c7\'d1\par \'c7\'d1\'b1\'b9 \'c7\'da\'b5\'e5\'c6\'f9 \'bb\'ea\'be\'f7\par \'bc\'ba\'b0\'f8\'a1\'a6

\par \par

Saudi Arabia is one of the few nations that do not yet prohibit telephoning\par while driving the car (Chosun.com, 1998).            \par page\par 36

\par \par

 

\par \par

- \'b9\'e6\'b4\'eb\'c7\'d1 \'b1\'a4\'b0\'ed\'b7\'ce\par \'c0\'ce\'c7\'d1 \'bc\'f6\'c0\'cd \'c1\'f5\'b0\'a1\'bf\'b4\'b4\'d9\'b0\'ed\par \'c0\'cc\'c0\'af\'b8\'a6 \'bc\'b3\'b8\'ed\'c7\'d1\'b4\'d9\'a1\'a6

\par \par

considerable efforts and money spent\par for effective advertisements played its role (Chosun.com, 1998).      page 36\par

\par \par

 

\par \par

- \'b0\'c9\'c7\'c1 \'c0\'fc\'c0\'ef\'c0\'bb\par \'b0\'e8\'b1\'e2\'b7\'ce \'bb\'e7\'bf\'ec\'b5\'f0 \'b8\'b6\'c4\'cf\'bf\'a1\par \'c0\'a7\'bc\'ba \'b9\'e6\'bc\'db \'bc\'f6\'bd\'c5\'b1\'e2\par \'b4\'eb\'b7\'ae \'bc\'f6\'c3\'e2\'a1\'a6

\par \par

In 1991, the start of the Gulf war\par also\par brought satellite receivers secretly into Saudi market (Chosun.com, 1991).   page 37

\par \par

 

\par \par

- SK \'b3\'d7\'c6\'ae\'bf\'f6\'c5\'a9, \'b4\'eb\'c7\'d1\par \'c0\'fc\'b1\'e2 \'c8\'b8\'bb\'e7 \'c7\'d1\'b1\'b9\par \'c0\'a7\'bc\'ba \'b9\'e6\'bc\'db \'bc\'f6\'bd\'c5\'b1\'e2\par \'c7\'f6\'c1\'f6 \'bb\'fd\'bb\'ea, \'b8\'b7\'b4\'eb\'c7\'d1\par \'bc\'f6\'c0\'d4\'bf\'c3\'b7\'c1\'a1\'a6

\par \par

SK networks since 1982 and Taihan\par Electric Wire Co. since 1984 are the local corporations producing Korean\par satellite receivers which now dominate approximately 80% of all sales in\par Saudi Arabia (Chosun.com, 2001).        \par page\par 37

\par \par

 

\par \par

- \'bb\'e7\'bf\'ec\'b5\'f0 \'c7\'f6\'c1\'f6\par \'bb\'fd\'bb\'ea \'bf\'a1\'be\'ee\'c4\'c1, \'c7\'f6\'c1\'f6\par \'bb\'e7\'b6\'f7\'b5\'e9\'c0\'c7 \'c0\'d4\'b8\'c0\'bf\'a1 \'b8\'c2\'b0\'d4\par \'b4\'d9\'be\'e7\'c7\'d1 \'b1\'e2\'b4\'c9 \'c7\'d5\'c7\'d8\par \'bc\'ba\'b0\'f8\'a1\'a6

\par \par

they put many useful functions to the\par air conditioner that will give Saudis a fresh and fragrant air with various\par functions that will be good for the health of people who will turn on the air\par conditioners almost whole day (Chosun.com, 2002).  page 38

\par \par

 

\par \par

- LG \'b8\'f0\'b9\'d9\'c0\'cf \'c7\'f6\'c1\'f6\par \'c8\'b8\'bb\'e7 \'c7\'f6\'c1\'f6 \'c6\'c7\'b8\'c5\'c0\'b2\par 30%\par \'b0\'bb\'bd\'c5.

\par \par

Thanks to these efforts, LG\par Electronics\par are currently dominating the air conditioner market by selling approximately\par 30% of total sales (Chosun.com, 2005).  page 38

\par \par

 

\par \par

- \'bb\'e7\'bf\'ec\'b5\'f0\'b5\'e9\'c0\'bb \'b0\'dc\'b3\'c9\'c7\'d1\par \'b1\'e2\'b5\'b5 \'bd\'c3\'b0\'a3\'c0\'bb \'be\'cb\'b8\'ae\'b4\'c2\par \'be\'cb\'b6\'f7 \'b1\'e2\'b4\'c9\'b0\'fa \'b1\'e2\'b5\'b5\par \'b9\'e6\'c7\'e2 \'b0\'a1\'b8\'a3\'c4\'d1\'c1\'d6\'b4\'c2 \'b1\'e2\'b4\'c9\par \'c7\'da\'b5\'e5\'c6\'f9\'bf\'a1 \'b3\'d6\'be\'ee \'b8\'b7\'b4\'eb\'c7\'d1\par \'bc\'ba\'b0\'f8\'a1\'a6

\par \par

They have added an alarm function that\par notifies Muslims of the praying time and a function that shows Qibla, the\par direction to which Muslims pray six times a day (Chosun.com, 2002).  page\par 38

\par \par

 

\par \par

- LG\'b0\'a1 \'bb\'ef\'bc\'ba\'b0\'fa\par \'b3\'eb\'c5\'b0\'be\'c6\'b0\'a1 \'be\'d0\'b5\'b5\'c0\'fb\'c0\'ce \'c1\'a1\'c0\'af\'c0\'b2\'c0\'bb\par \'c0\'da\'b6\'fb\'c7\'cf\'b4\'f8 \'bb\'e7\'bf\'ec\'b5\'f0 \'b8\'b6\'c4\'cf\'bf\'a1\par \'be\'df\'bd\'c9\'c2\'f9 \'b5\'b5\'c0\'fc\'c0\'e5\'a1\'a6

\par \par

LG is speedily catching up with the\par percentage sales of Samsung and Nokia phones that have dominated the market for\par a long time (Chosun.com, 2002).  page 39

\par \par

 

\par \par

- \ldblquote \'b2\'c0 \'c0\'cc\'b7\'e7\'be\'ee\par \'b3\'bb\'b0\'da\'bd\'c0\'b4\'cf\'b4\'d9. \'bb\'ef\'bc\'ba\'c0\'bb \'b5\'fb\'b6\'f3\'c0\'e2\'c0\'bb\par \'bc\'f6 \'c0\'d6\'be\'ee\'bf\'e4,\rdblquote LG \'c7\'f6\'c1\'f6\par \'c6\'c4\'b0\'df \'b8\'c5\'b4\'cf\'c0\'fa\'a1\'a6

\par \par

"We are confident. We will beat\par them in a few years," says a LG Electronics manager in Jeddah office to a\par reporter from Seoul (Chosun.com, 2003).  page\par 39

\par \par

 

\par \par

- \'c7\'da\'b5\'e5\'c6\'f9 \'bc\'f6\'c3\'e2,\par \'c7\'f6\'c1\'f6 \'bb\'fd\'bb\'ea \'c6\'c7\'b8\'c5\'b8\'b8\'c0\'b8\'b7\'ce\'b5\'b5\par \'bb\'e7\'bf\'ec\'b5\'f0\'bf\'a1\'bc\'ad 50\'be\'ef \'b4\'de\'b7\'af\par \'bc\'f6\'c0\'d4 \'bf\'c3\'b8\'b1 \'bf\'b9\'bb\'f3\'a1\'a6

\par \par

experts anticipate that Koreans will\par reap approximately five hundred million dollars just from selling mobile phones\par (Chosun.com, 2004).  page 39\par

\par \par

 

\par \par

- \'c7\'f6\'b4\'eb\par \'c0\'da\'b5\'bf\'c2\'f7 \'bb\'e7\'bf\'ec\'b5\'f0\'bf\'a1\'bc\'ad \'c7\'f6\'c0\'e7\par \'b5\'b5\'bf\'e4\'c5\'b8, \'c1\'f6\'bf\'a5 \'b4\'d9\'c0\'bd\'c0\'b8\'b7\'ce\par \'c6\'c7\'b8\'c5\'c0\'b2 \'c0\'da\'b6\'fb.

\par \par

Hyundai Motors is currently the third\par largest car selling company after Toyota and GM motors (Chosun.com, 2005).  page 40\par

\par \par

 

\par \par

- \ldblquote \'bb\'e7\'bf\'ec\'b5\'f0 \'c7\'f6\'c1\'f6\'bf\'a1\'bc\'ad\par \'c7\'d1\'b1\'b9 \'c2\'f7\'b8\'a6 \'b8\'f1\'b0\'dd\'c7\'cf\'b4\'c2\par \'b0\'cd\'c0\'ba \'b4\'f5 \'c0\'cc\'bb\'f3\par \'c8\'e7\'c7\'d1 \'b1\'a4\'b0\'e6\'c0\'cc \'be\'c6\'b4\'d5\'b4\'cf\'b4\'d9,\rdblquote

\par \par

"It is very common to see Korean\par cars from Hyundai and Daewoo here,"says a Korean student studying in\par Jeddah (Chosun.com, 2005).  page 40

\par \par

 

\par \par

- \'c7\'d1\'b1\'b9 \'c5\'b8\'c0\'cc\'be\'ee\par 3\'b0\'b3 \'c8\'b8\'bb\'e7, \'c7\'d1\'b1\'b9\par \'c2\'f7 \'bc\'f6\'c3\'e2 \'bf\'c0\'b8\'a7\'b0\'fa\par \'b5\'bf\'bd\'c3\'bf\'a1 \'c7\'f6\'c1\'f6 \'bb\'fd\'bb\'ea,\par \'bb\'e7\'bf\'ec\'b5\'f0 \'b8\'b6\'c4\'cf \'c1\'f8\'c3\'e2\'a1\'a6

\par \par

three tire producing corporations have\par made their mark in the Saudi market: SSangyong corporation since 1983, Kumho\par Tire corporation since 1981, and Hankook Tire corporation since 1986\par (Chosun.com, 2004).  page 40

\par \par

 

\par \par

- Other sources

\par \par

 

\par \par

Ahmad, Ishtiaq, The Concept of on Islamic State: An Analysis of the Ideoiogical\par Controversy in Pakistan, Stockholm: University of Stockholm Press, 1985.

\par \par

 

\par \par

CIA (2003). The World\par Factbook,\par Saudi\par Arabia

\par \par

http://www.cia.gov/cia/publication/factbook/print/sa.html.\par

\par \par

 

\par \par

Champion, Daryl. (2003). The\par Paradoxical Kingdom : Saudi Arabia and the Monentum of Reform,\par New\par York, Columbia University Press.

\par \par

 

\par \par

Dodge Toby and Higgot\par Richard(eds.)(2002). Globalization and the Middle East, London , Royal\par Institute of International Affairs.

\par \par

 

\par \par

EIU. (2002). Country Profile :\par Saudi Arabia

\par \par

EIU. (2004). Country Profile :\par Saudi Arabia

\par \par

*EIU: Economic Intelligence Unit

\par \par

 

\par \par

Emerick, Yahiya, The Complete\par Idiot\rquote s\par Guide to Understanding Islam, New\par ?York: Alpha Books,\par 2002.

\par \par

 

\par \par

Enav, Peter(2000). The Saudi\par Oil\par Dilemma, London, Financial Times Business Limited. 

\par \par

 

\par \par

Hourani Albert, Khoury Philip S. & Wilson\par Mary, The Modern Middle East, London: Tauris Readers, 1993.

\par \par

 

\par \par

Kanovsky, Eliyahu.(1994). The\par Economy of Saudi\par ?Arabia:\par troubled present, grim future,\par Washington,\par D.C : The Washington Institute for Near East Policy.

\par \par

 

\par \par

Kingdom of Saudi Arabia Ministry\par of\par Planning (2002). Achievement of Development Plans: Facts and\par Figures(1970-2002), Riyadh, Kingdom of Saudi Arabia Ministry of Planning.\par

\par \par

 

\par \par

Kingdom of Saudi Arabia Ministry\par of\par Planning (2002). Seven Development Plan (2000-2004),\par Riyadh,\par Kingdom of Saudi Arabia Ministry of Planning.

\par \par

 

\par \par

Saudi American\par Bank(SAMBA)(1).(2002).\par The Saudi Economy in 2002, Riyadh, Saudi American Bank Publication.\par

\par \par

 

\par \par

Saudi American\par Bank(SAMBA)(2).(2002).\par Saudi\par Arabia's Employment Profile, Riyadh, Saudi\par American Bank Publication.

\par \par

 

\par \par

Saudi American Bank(SAMBA) (2000).\par Saudi Arabia's New Foreign Investment Law,\par Riyadh, Saudi American Bank Publication.

\par \par

 

\par \par

William Phils, Glodstein Denald M., and\par Shafrity Jay M. Saudi Arabia in the 1980s\par Foreign Policy, Security, and Oil, Washington: The Brookings Institution,\par 1981.

\par \par

 

\par \par

World Bank(2003). World\par Development Indicators, Washington, D.C, World Bank.

\par \par

World Bank(2002).\par Globalization,\par Growth, and Poverty: Building an Inclusive World Economy, A Copublication\par of the World Bank and Oxford University Press.

\par \par

 

\par \par

www.ustr.gov/html/2001-gcc.pdf(Foreign\par Trade Barriers 147 Gulf Cooperation Council Trade Summary)\par

\par \par

 

\par \par

Kotra, www.kotra.go.kr

\par \par

* Kotra:\par Korea Trade

\par \par

Mofat, www.mofat.or.kr

\par \par

* Mofat: Ministry of Foreign Affairs and\par Trade

\par \par

 

\par \par

Saudi American Bank,\par www.samba.com.sa/findex.html.

\par \par

Saudi Arabian Monetary Agency,\par www.sama.gov.sa.

\par \par

 

\par \par

World History at KMLA,\par www.zum.de/whkmla

\par \par

 

\par \par

*Table\par 1: Saudi Arabian GDP growth from 1970 to 2002

\par \par

Source:\par EIU Country Profile 2004

\par \par

 

\par \par

*Table\par 2: Saudi budgetary outlays, 1980-2002

\par \par

Source:\par Saudi Arabian Monetary Authority, 2003

\par \par

 

\par \par

*Pic\par 1: Thobe and Abaya made by Korean export items, textiles and\par fibers

\par \par

(Source:\par Mina Traveling agency, 2003)

\par \par

 

\par \par

*Table 3: Saudi Arabia\rquote s export to countries (unit: 1 million US\par dollars)

\par \par

(Source:\par Saudi Arabian Monetary Authority, 2003)

\par \par
\par \par

\par \par
\par \par \par \par
\par \par

[1]   According to data of SAMBA (Saudi\par American Bank), compensation for Saudis is on average 3 times that of\par non-Saudis with the same level of education. The average annual compensation\par for Saudis is SR 84,516($22,538), while the average annual compensation for\par non-Saudis is SR 28,248($7,532).

\par \par

 

\par \par
\par \par
\par \par

[2]   \par Saudi\par Arabia military forces consist of the armed forces commanded by\par the\par minister of defense and the National Guard commanded by the Crown Prince\par Abdullah. The total active armed forces were estimated in late 2003 to number\par 201,500 (EIU, Country Profile:  Saudi Arabia, 2004).\par

\par \par

 

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