Saudi Arabia Joining Wto

INTRODUCTION

Saudi Arabia is currently engaged in negotiations that will result in admission to the World Trade Organization (WTO). This report discusses the impact of WTO accession on the economy of Saudi Arabia. The benefits and negative effects are presented in the report.

1. PROBLEMS AFFLICTING THE SAUDI ECONOMY

1.1 Lack of diversity in sources of GDP

Saudi Arabia: GDP growth since 1997

Lack of diversity in sources of GDP and budgetary revenues continues to impede Saudi economic development. Oil and oil derivatives make up around 90-95% of total Saudi export earnings, 75% of budget revenues and approximately 35-40% of GDP. The government decision in May 2001 to reduce applied tariff rates on most imports to 5% resulted in lower customs receipts accruing to the budget.

Saudi Arabia has 260 billion barrels of proven oil reserves and up to 1 trillion barrels of ultimately recoverable oil. Saudi Arabia is one of the world’s largest producers (currently slightly more than seven million barrels per day), exporters and holders of spare oil production (about 3 million barrels per day). Saudi Arabia’s share of world oil production has declined from 17% in 1980 to approximately 9% currently. OPEC’s decision to maintain production cuts in order to stabilize world oil prices in the $22 to $28 range, has restrained government oil revenues. Despite OPEC’s current success in maintaining oil prices, the long-term price trend (and Saudi government oil revenues) will likely be downward, given rising non-OPEC production, more efficiency in usage, new technologies and conservation. Saudi policy makers must diversify the economy to reduce the domestic impact of oil price fluctuations.[7]

1.2 Unemployment

Saudi Arabia faces serious pressures for job creation over the long term. Although unemployment data are generally not officially available, analysts estimate unemployment among Saudi males ranges from 14% to 20%. Saudi women, hired under strict gender segregation requirements,