Saudi Arabia, which has had a good year in terms of oil revenues and is seeking to expand its sources of income, has nonetheless attracted outspoken criticism from its own ministers, senior officials and businessmen about what they say is tardiness in implementing reforms and in luring badly-needed foreign investments into the country.

While Riyadh has attracted foreign investments worth $12.5 billion in the four years since it decided to remove investment barriers, much needs to be accomplished to bring investment procedures and reforms up to expectations. The shortcomings have triggered some tough talk. Minister of Trade and Industry Hashem Yamani remarked at a recent economic seminar in Jeddah that “we can no longer have progress without change.” And Planning Minister Khalid Al Ghosaibi accused the government of lacking efficiency in business decisions.
Saudi Arabia’s population is among the world’s fastest growing, and consumption is rising along with unemployment. Economists have called for greater privatisation to attract investments, reduce public debt, create competition and employment, raise efficiency and the quality of services and register greater profits.
But, as Prince Abdullah bin Faisal bin Turki, the country’s investment chief pointed out, none of the big sectors had opened up yet and in the case of sectors taken off the “negative list” public sector monopoly holders were “preventing new investors from coming into the market.”
The foreign investments already announced are said to be unsatisfactory considering the size of the Saudi market and the fact that Riyadh had already opened up 20 vital sectors to local and foreign investors.   Prince Abdullah blamed “blimps” from the bureaucracy for hampering privatisation despite the process having won approval from the highest levels of government.
Last year he called for government departments “to get out of the way” so sectors including water desalination, air transport, airport services, construction, seaport services and oil refineries could draw unfettered investments from local and foreign businessmen.
Overseas investments accounted for 82.8 per cent of the total capital of $15.4 billion pumped into more than 2,110 projects covering industry, farming and services. Manufacturing benefited the most, some $8.6 billion going there, including $3.7 billion in chemicals. Manufacturing areas that also received funds were engineering, construction, food and other light products. Services, covering contracting and other fields, received nearly $6.4 billion.
Saudi Arabia will need cumulative investment of about $900 billion in the next 20 years, and economists have said an infusion of foreign funds would greatly help in realising the projects planned in different fields. Housing and services need investments of $78.1 billion; infrastructure $138.6 billion, electricity $114.6 billion, petrochemical projects $92 billion and water projects $88 billion.
Saudi businessmen have watched with interest the UAE’s phenomenal success in attracting investors within and outside the country by reducing red tape. They wonder why the exercise could not be repeated in their homeland
Abdul Mohsen Al Hokair, who heads Al Hokair Group, which has major investments in tourism and leisure projects, called for opening up the country to overseas funds “like the outside world opened its doors for us.”
The difficulty in getting Saudi licences has forced Saudi nationals to set up more than 2,500 firms in Dubai for industrial and commercial projects, he pointed out recently. “I feel extreme sorrow when I see Saudi industries running away from the kingdom. We have to co-operate and work together to repatriate Saudi funds and attract foreign investment,” he said in remarks published in a section of the Saudi media.
One area of opportunity he refers to is tourism. More Saudi tourists go abroad for their vacations than any other nationality in the Arab World, and they spend some $6.6 billion annually while there. Al Hokair said some of that amount would have been spent in the kingdom itself had adequate tourism and entertainment facilities been provided for their enjoyment.
He also called for imbibing the work ethic and having more women in the workforce.
Saudi economists would also like to see Riyadh generate more trust among overseas companies in its procedures and intentions.
Confidence took a hit when Riyadh cancelled the original $25 billion Gas Initiative last year, and among those voicing concern was Prince Al Waleed bin Talal, Saudi Arabia’s top businessman and international investor. He described the Gas Initiative comedown as a “farce” and “a grave mistake”, asking whether it was right that agreements signed in the presence of the King and Crown Prince should have been left to “some employees to put obstacles.”
The handling of the initiative by the Ministry of Oil and Saudi Aramco had hurt the kingdom’s commercial and contractual reputation abroad and discouraged fresh foreign investments, he said after oil majors Royal Dutch/Shell and Total signed a landmark deal to find and pump gas in the country. Up to $2 billion could be invested in developing a 210,000 sq km block in the southern part of Saudi Arabia’s Rub Al Khali or Empty Quarter, but Prince Al Waleed termed it a “token deal”. “We missed a major opportunity not only in gas, pipelines, electricity and water but also in many other fields,” he is reported to have remarked.
The initial Gas Initiative agreement had been signed with a consortium led by Exxon and Mobil, who were to pump some $15 billion for developing more than six trillion cu m of gas. Another $10 billion would possibly have been invested for launching associated industries including domestic distribution of gas supplies, petrochemicals and desalination plants.
There was some cheer for those concerned about foreign investments. Saudi Arabia’s Shura Council approved a proposal to bring down taxes on international investors to 20 per cent from 30 per cent.  The tax is levied on the profits of foreign investments, or the foreign share of a joint venture.  The tax had been reduced from 45 per cent to 30 per cent in 2000 when the kingdom set up the Saudi Arabian General Investment Authority (Sagia).
Riyadh has said diversification of the economy is a top priority, but oil income continues to be crucial with export revenues from petroleum having fetched about $81 billion in 2003.  The ensuing budget surplus of $12 billion helped to pay off some of the public debt, believed to be around $178 billion, and arrears to firms, individuals and farmers.
The company that has best utilised hydrocarbon gases as raw material for manufacturing chemicals, polymers and fertilisers was among the good news.
Saudi Basic Industries Corporation (Sabic) posted record profits of $1.79 billion in 2003, a 136 per cent increase from the $750 million it recorded a year earlier.  Its vice-chairman and CEO Mohamed Al Mady said continued expansions and new production programmes were responsible for the achievement.