Diversification of the Saudi economy by reducing dependency on crude oil as a major source of income continues to be a key priority under the sixth development plan. Raising non-oil merchandise exports depends on the ability of the Saudi industry to maintain and further improve its competitiveness in domestic and international markets. This can be achieved through higher productivity, aggressive marketing, better quality and competitive prices.

The following is a summary of the development of major Saudi economic sectors during the sixth development plan:

Despite the tremendous challenge of desert farming, the Saudi Arabian agricultural sector has expanded considerably, providing significant amounts of grains, fruits and vegetables, and dairy and poultry products. Through a determined effort by the government to support this sector as a major part of its diversification program, the Kingdom currently exports wheat, and is self-sufficient in the areas of poultry, egg farming, and selected fruits and vegetables.

Continued growth in the agricultural industry will depend upon the careful use of the Kingdom's underground and rain water sources for irrigation. The Saudi Arabian government has already launched an extensive desalination program which includes the world's largest water pipeline from Jubail to Riyadh, supplying the rural areas with fresh water. Prime targets in agricultural development include survey and land classification, increasing land productivity, augmenting the capacity of flour mills and grain silos, and expanding the production of meat.

This sector is expected to grow at an annual rate of 3.1 during the sixth plan (see table 5). Production is expected to shift away from large-scale crop production, using large volumes of scarce water resources, towards high value-added crops produced mainly in areas which have renewable water resources and in greenhouses to meet the rapidly growing demand for fresh fruits and vegetables.

COMMUNITY, SOCIAL AND PERSONAL SERVICES

Domestic household services are the dominant element in this sector. Despite the fact that this sector is relatively small in terms of the value added, it accounts for a significant proportion of total employment in the Kingdom. This sector is expected to grow at an annual rate of 3.4 percent during the sixth development plan.

* Source: Ministry of Planning, Kingdom of Saudi Arabia 

CONSTRUCTION

Rising prices are expected to limit the growth rate of the demand for residential building to less than the growth rate of population. Government investment in non-residential building and infrastructure will provide stimulus to the construction industry only late in the sixth plan period. However, the construction sector is expected to grow at an average annual rate of 4.0 percent.

CRUDE OIL AND NATURAL GAS

Oil remains the leading source of the Kingdom’s income despite considerable economic diversification. The development of oil production can be traced to the Kingdom's first oil exploration contract with the Standard Oil Company of California in 1933. By 1974, the Arabian American Oil Company (ARAMCO), a consortium of four U.S. oil companies, was producing 8.2 million barrels a day and accounted for 96 percent of the country's oil production. Saudi Arabia's interest in ARAMCO evolved from limited ownership and participation to full ownership of the company by 1980 which was accompanied by a change in the name to Saudi Aramco (see ad on page------and appendix XII for listing of sales and marketing offices of crude oil and petroleum products). As a leading member of the Organization of Petroleum Exporting Countries (OPEC), Saudi Arabia has played an important role as moderator in the stabilization of oil prices. The Kingdom has also been at the forefront in advocating unified pricing and adherence to production quotas.

 Moderate prices of oil are expected to prevail through the end of the sixth development plan. Any shortfall in the production of non-OPEC producers due to declining reserves, or any increase in world oil demand arising from the worldwide economic recovery, is expected to be met by OPEC oil. Thus, this sector is expected to grow at an annual rate of 3.8 percent.