Emerging Markets – Opportunities & Threats: Saudi Arabia

by Sterling J. Scott, Marketing Communications Coordinator, MHI | @mhi_sterling

Saudi Arabia’s economy has grown 6.8% on average since 2010 and actually experienced economic growth during he global financial crisis of 2008. The country’s oil-based economy makes it the largest exporter of petroleum. Saudi Arabia has 16% of the world’s petroleum reserves. The Saudi government is trying to diversify the economy through expanding education and job training opportunities as well as investing in other sectors such as chemicals and telecommunications.

As with any natural resource-based economy, Saudi Arabia’s economy is vulnerable to fluctuations in demand; however, as the largest exporter in the world, the country wields great influence on prices and supply. A larger threat looms on the borders of Saudi Arabia. The country shares a border with Iraq, which is in the middle of an armed conflict with an extremist organization that is waging open war in both Iraq and Syria. Saudi Arabia has strengthened defense along the border in response. The country also sits across the Persian Gulf from Iran and across the Red Sea from Sudan. Somalia flanks the Gulf of Aden, which provides access to the Red Sea. Saudi Arabia and Iran have a cold relationship, Sudan is experiencing violent conflict, and Somalian prates roam in the waters that act as shipping lanes for Saudi Arabia. If any of these conflicts escalates, it could negatively affect the Saudi economy.

Saudi Arabia has a wealthy, oil-based economy and is actively reinvesting the wealth generated into diversifying the economy. The country faces security threats on all sides; however, it has managed to protect it’s people and interests. Saudi Arabia is an attractive country to investors seeking to tap into large government investments in energy, chemicals, and telecommunications. The oil wealth also means a strong consumer culture.

More information on supply chain trends, recommended strategy, and innovations that drive supply chains are available in the 2014 MHI Annual Industry Report which can be downloaded at www.mhi.org.