\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
? years \par
? | \par
?\par
? Average\par
?growth rates of % \par
? | \par
\par
\par
?| \par
? 1970-79 \par
? | \par
?\par
? 10.0 \par
? | \par
\par
\par
?| \par
? 1980-89 \par
? | \par
?\par
? 0.2 \par
? | \par
\par
\par
?| \par
? 1990-95 \par
? | \par
?\par
? 3.4 \par
? | \par
\par
\par
?| \par
? 96 \par
? | \par
?\par
? 1.4 \par
? | \par
\par
\par
?| \par
? 97 \par
? | \par
?\par
? 1.9 \par
? | \par
\par
\par
?| \par
? 98 \par
? | \par
?\par
? 2.8 \par
? | \par
\par
\par
?| \par
? 99 \par
? | \par
?\par
? -0.8 \par
? | \par
\par
\par
?| \par
? '00 \par
? | \par
?\par
? 4.9 \par
? | \par
\par
\par
?| \par
? '01 \par
? | \par
?\par
? 1.2 \par
? | \par
\par
\par
?| \par
? \par
\par
'02 \par
?1.0 \par
? | \par
\par
\par
?| \par
? Source: EIU Country Profile\par
2004. \par
? | \par
\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
? SR (Saudi\par
?Riyal) billion \par
? | \par
\par
\par
?| \par
? Years \par
? | \par
?\par
? Revenues \par
? | \par
?\par
? Expenditures \par
? | \par
?\par
? Deficits\par
?as % of GDP \par
? | \par
\par
\par
?| \par
? 1980 \par
? | \par
?\par
? 348.1 \par
? | \par
?\par
? 236.6 \par
? | \par
?\par
? - \par
? | \par
\par
\par
?| \par
? 1981 \par
? | \par
?\par
? 368.0 \par
? | \par
?\par
? 284.7 \par
? | \par
?\par
? - \par
? | \par
\par
\par
?| \par
? 1982 \par
? | \par
?\par
? 246.2 \par
? | \par
?\par
? 244.9 \par
? | \par
?\par
? - \par
? | \par
\par
\par
?| \par
? 1983 \par
? | \par
?\par
? 206.4 \par
? | \par
?\par
? 230.2 \par
? | \par
?\par
? 6.4 \par
? | \par
\par
\par
?| \par
? 1984 \par
? | \par
?\par
? 171.5 \par
? | \par
?\par
? 216.4 \par
? | \par
?\par
? 12.8 \par
? | \par
\par
\par
?| \par
? 1985 \par
? | \par
?\par
? 133.6 \par
? | \par
?\par
? 184.0 \par
? | \par
?\par
? 16.1 \par
? | \par
\par
\par
?| \par
? 1986 \par
? | \par
?\par
? 76.5 \par
? | \par
?\par
? 137.4 \par
? | \par
?\par
? 22.5 \par
? | \par
\par
\par
?| \par
? 1987 \par
? | \par
?\par
? 103.8 \par
? | \par
?\par
? 173.5 \par
? | \par
?\par
? 25.3 \par
? | \par
\par
\par
?| \par
? 1988 \par
? | \par
?\par
? 84.6 \par
? | \par
?\par
? 134.8 \par
? | \par
?\par
? 17.6 \par
? | \par
\par
\par
?| \par
? 1989 \par
? | \par
?\par
? 114.6 \par
? | \par
?\par
? 149.5 \par
? | \par
?\par
? 11.2 \par
? | \par
\par
\par
?| \par
? 1990 \par
? | \par
?\par
? 154.7 \par
? | \par
?\par
? 210.4 \par
? | \par
?\par
? 14.2 \par
? | \par
\par
\par
?| \par
? 1991 \par
? | \par
?\par
? 161.9 \par
? | \par
?\par
? 266.4 \par
? | \par
?\par
? 23.6 \par
? | \par
\par
\par
?| \par
? 1992 \par
? | \par
?\par
? 169.6 \par
? | \par
?\par
? 232.5 \par
? | \par
?\par
? 14.4 \par
? | \par
\par
\par
?| \par
? 1993 \par
? | \par
?\par
? 141.4 \par
? | \par
?\par
? 205.5 \par
? | \par
?\par
? 14.4 \par
? | \par
\par
\par
?| \par
? 1994 \par
? | \par
?\par
? 129.0 \par
? | \par
?\par
? 163.8 \par
? | \par
?\par
? 7.7 \par
? | \par
\par
\par
?| \par
? 1995 \par
? | \par
?\par
? 146.5 \par
? | \par
?\par
? 173.9 \par
? | \par
?\par
? 5.7 \par
? | \par
\par
\par
?| \par
? 1996 \par
? | \par
?\par
? 179.1 \par
? | \par
?\par
? 198.2 \par
? | \par
?\par
? 3.6 \par
? | \par
\par
\par
?| \par
? 1997 \par
? | \par
?\par
? 205.5 \par
? | \par
?\par
? 221.2 \par
? | \par
?\par
? 2.9 \par
? | \par
\par
\par
?| \par
? 1998 \par
? | \par
?\par
? 141.6 \par
? | \par
?\par
? 190.1 \par
? | \par
?\par
? 9.6 \par
? | \par
\par
\par
?| \par
? 1999 \par
? | \par
?\par
? 147.5 \par
? | \par
?\par
? 183.8 \par
? | \par
?\par
? 6.4 \par
? | \par
\par
\par
?| \par
? 2000 \par
? | \par
?\par
? 258.1 \par
? | \par
?\par
? 235.3 \par
? | \par
?\par
? - \par
? | \par
\par
\par
?| \par
? 2001 \par
? | \par
?\par
? 228.1 \par
? | \par
?\par
? 255.1 \par
? | \par
?\par
? 3.6 \par
? | \par
\par
\par
?| \par
? 2002 \par
? | \par
?\par
? 213.0 \par
? | \par
?\par
? 233.5 \par
? | \par
?\par
? 3.0 \par
? | \par
\par
\par
?| \par
? Source: Saudi Arabian Monetary Authority,\par
?2003. \par
? | \par
\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. 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.\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
? YEAR \par
? | \par
?\par
? 1999 \par
? | \par
?\par
? 2000 \par
? | \par
?\par
? 2001 \par
? | \par
?\par
? 2002 \par
? | \par
?\par
? 2003 \par
? | \par
\par
\par
?| \par
? Country \par
? | \par
?\par
? Export \par
? | \par
?\par
? Export \par
? | \par
?\par
? Export \par
? | \par
?\par
? Export \par
? | \par
?\par
? Export \par
? | \par
\par
\par
?| \par
? U.S. \par
? | \par
?\par
? 9916 \par
? | \par
?\par
? 15689 \par
? | \par
?\par
? 12385 \par
? | \par
?\par
? 14270 \par
? | \par
?\par
? 17436 \par
? | \par
\par
\par
?| \par
? Japan \par
? | \par
?\par
? 7599 \par
? | \par
?\par
? 12286 \par
? | \par
?\par
? 10426 \par
? | \par
?\par
? 10393 \par
? | \par
?\par
? 13153 \par
? | \par
\par
\par
?| \par
? Korea \par
? | \par
?\par
? 5448 \par
? | \par
?\par
? 8339 \par
? | \par
?\par
? 6566 \par
? | \par
?\par
? 6883 \par
? | \par
?\par
? 8484 \par
? | \par
\par
\par
?| \par
? India \par
? | \par
?\par
? 2180 \par
? | \par
?\par
? 3419 \par
? | \par
?\par
? 3290 \par
? | \par
?\par
? 3931 \par
? | \par
?\par
? 5548 \par
? | \par
\par
\par
?| \par
? France \par
? | \par
?\par
? 2180 \par
? | \par
?\par
? 3419 \par
? | \par
?\par
? 3290 \par
? | \par
?\par
? 3931 \par
? | \par
?\par
? 5548 \par
? | \par
\par
\par
?| \par
? Italy \par
? | \par
?\par
? 1180 \par
? | \par
?\par
? 1859 \par
? | \par
?\par
? 1766 \par
? | \par
?\par
? 1799 \par
? | \par
?\par
? 2364 \par
? | \par
\par
\par
?| \par
? Britain \par
? | \par
?\par
? 436 \par
? | \par
?\par
? 859 \par
? | \par
?\par
? 898 \par
? | \par
?\par
? 731 \par
? | \par
?\par
? - \par
? | \par
\par
\par
?| \par
? China \par
? | \par
?\par
? 627 \par
? | \par
?\par
? 1501 \par
? | \par
?\par
? 2175 \par
? | \par
?\par
? 2885 \par
? | \par
?\par
? 4098 \par
? | \par
\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