NCB Capital Research Department June 2009 Economic Research Dr Jarmo T Kotilaine Saudi Arabia Factbook [email protected] Equity Research Pravin L Rajendran Gateway to the Kingdom [email protected] Farouk Miah [email protected] Ahmed Al-Qahtani [email protected] Tariq Al-Alaiwat [email protected] Reem Al Khalifa [email protected] Production Please refer to last page for important disclaimer Martin K Arokiaraj [email protected] We look for more THIS PAGE IS INTENTIONALLY LEFT BLANK JUNE 2009 SAUDI ARABIA FACTBOOK 2 KSA ECONOMY AND NATION 5 Outlook and direction 6 Gulf renaissance 6 KSA remains an attractive proposition 6 Oil price a short-term concern 7 Global recessionary fears 9 Economic performance 10 Strong hydrocarbons fundamentals 15 Beyond oil 18 International trade 22 SAUDI STOCK EXCHANGE 25 History and overview 26 The leading GCC equity market 26 Market composition 29 Market regulation and supervision 32 Execution of trades 32 Tadawul’s performance in 2008 33 Comparison with Global Emerging Markets 35 SECTOR PERFORMANCE 37-107 COMPANY PROFILES 109-259 Contents THIS PAGE IS INTENTIONALLY LEFT BLANK JUNE 2009 THE SAUDI FACT BOOK 4 KSA: Economy and Nation Searching growth beyond oil • Capital – Riyadh • Population – 28.1mn (July 2008E) • Land area – 2.3m sq km • Climate – Hot and dry with mild winters • Language – Arabic • Currency – Saudi Riyal (SR) 1 = 20 qirsh = 100 halalas. The Saudi Riyal (SR) is pegged to the US Dollar (USD) at the rate of USD1=SR 3.745 • Nominal GDP 2007 – USD381.5bn • Nominal GDP 2008E – USD467.5bn • Time – GMT + 3:00 Hrs • Fiscal year – Calendar year (January – December) • Tadawul (stock market) market capitalization – USD246.5bn (as on 31 December 2008) • Oil reserves – 264.3bn barrels; nearly 25% of the world’s proven oil reserves Outlook and direction A Gulf renaissance Rapid growth pushes GCC Rapid economic growth over the past few years has made the Gulf Cooperation Council (GCC) further up the global economic region an increasingly significant bloc in global emerging markets. The GCC’s nominal GDP has ladder; the region had the tripled in value since 2002 and is expected to have exceeded USD1trn in 2008. High oil prices eighth-largest GDP in the in 2003-2007 fueled the expansion of the regional economy at an average annual rate of 7.4% emerging world in 2007 in real terms. This marked a dramatic acceleration over the 1998-2002 average of 2.5% and went hand in hand with the strategy to invest the petrodollar windfall in sustainable development. Diversification and greater global integration established themselves as key themes of Government policy. Infrastructure spending emerged as a particular priority, particularly in the areas of transportation, water desalination, and energy. At the same time, the investment environment underwent a dramatic improvement as ambitious regulatory reforms came to complement the region’s traditional macroeconomic stability. After a string of golden years, when talk of a super-cycle began to generate expectations of the irreversibility of the boom, the near-term outlook has changed completely. The intensifying economic turmoil globally led to a sharp fall in oil prices, significantly tighter credit conditions, and lower confidence. According to April-09 IMF projections, Middle East is expected to grow by 2.5% and 3.5% in 2009 and 2010 respectively. We expect that the Saudi economy will almost certainly not exceed 1.0% real growth in 2009; and the IMF now projects a 0.9% real decline in GDP. However, higher oil prices should push growth back to trend in 2010. The situation in the rest of the GCC will be largely comparable, with Kuwait and the UAE (particularly Dubai) especially hard hit. KSA remains an attractive proposition KSA’s strategy of The Kingdom of Saudi Arabia (KSA) is by far the largest economy in the Middle East. It diversification is strengthening accounts for nearly half of the GCC’s GDP and more than a third of the Middle East and North its business climate Africa GDP. As the world’s largest producer and exporter of oil, KSA has been a leading beneficiary of buoyant crude prices in recent years, earning approximately USD548.5bn from oil exports during 2003–07. Saudi authorities have also endorsed the need to capitalize on the windfall to foster economic diversification and sustainable growth. The authorities have anchored these steps in greater global integration, not least the country’s accession to the WTO in Dec 05. This move has encouraged foreign investment in various sectors such as telecommunications, banking, infrastructure, tourism, metals, and mining. Liberalization of the telecom sector resulted in the entry of new companies in KSA’s fixed-line telephone and mobile segments. The Saudi Government further raised the ceiling on foreign ownership in domestic banks to 60% from 40% in 2007 and opened the insurance sector to greater foreign investment. The Saudi authorities have taken impressive steps to create an attractive business climate and the progress to date has been recognized by external observers and foreign investors alike. The World Bank has identified Saudi Arabia as a leading reformer globally and the Kingdom has risen from 67th to 16th position in the World Bank’s Ease of Doing Business Index in less than three years. It is now the highest-ranked Middle Eastern country. The improved business environment has triggered an unprecedented FDI boom in recent years. At home, the development of the financial sector has facilitated ambitious investments by Saudi corporations and significantly boosted the role of non-oil sectors as well as private entrepreneurship in the economy. These efforts have in turn fueled rapid growth with the country’s real GDP expanding JUNE 2009 SAUDI ARABIA FACTBOOK 6 OUTLOOK AND DIRECTION at a CAGR of 5.0% in 2002-2007. GDP growth in 2008 accelerated to 4.2% from the previous year’s 3.5%, despite a sharp slowdown in the second half of the year. KSA’s impressive economic The progress of regulatory and institutional reforms has complemented the established robust profile is supported by three macroeconomic health of KSA. Saudi Arabian Monetary Agency (SAMA), the Kingdom’s central main factors bank, has been highly successful in ensuring price stability, while fiscal policy has built on • Regulatory and cautious assumptions about the oil price. For years, the Saudi Government has used its largely institutional reforms oil-driven surpluses to pay down the country’s external and public sector debt burden, which • Large petrodollar reserves was accumulated during the period of low oil prices of 1980s and 90s. Domestic Government • Strong demographic debt in 2008 declined to 13.5% of GDP, compared with a peak of 119% in 1999. profile Although Saudi Arabia was a key beneficiary of the global imbalances that accumulated during the recent boom, it was relatively successful in preventing the mounting surpluses from derailing its macroeconomic stability. The greatest source of concern was the takeoff in inflation in 2006- 2008, partly because the dollar peg limited SAMA’s autonomy in countering the price pressures. Otherwise, with some 90% of budget revenues coming from oil, the petrodollar windfall largely translated into large fiscal surpluses, which peaked at SR590bn, or 33.7% of GDP in 2008, compared with a surplus of 12.5% of GDP in 2007. The reserves amassed by SAMA and other entities have placed the Saudi economy well, preparing it to weather even severe economic turbulence in the near future. SAMA’s net foreign assets reached SR1,702bn at the end of Nov 08 from SR1,171bn in 2007. An important driver of the attractiveness of the Saudi economy is its sheer size and regional importance. For instance, with a market-cap of USD246.5bn as on 31 Dec 08, Tadawul accounts for more than 45% of GCC’s aggregate market capitalization. From the perspective of investors, the Kingdom boasts the largest market in the region – a young population of just under 30 million – and some of the largest corporate houses. Major new infrastructure projects with increased private-sector participation are under way, particularly in power, water, housing, transport, roads, and railways. Oil price a short-term concern Oil prices went on a roller- Until recently, the rally in oil prices seemed almost unstoppable with especially emerging market coaster ride, touching the peak demand – typically less price sensitive due to price controls and subsidies – looking extremely of USD147 per barrel and then robust. Nonetheless, since an all-time high of USD147 per barrel of oil in July 08, the oil market dropping to USD40 per barrel dynamic had experienced a complete reversal. Heightened levels of uncertainty about the during 2008 extent and duration of the global crisis have weighed on market sentiment. As a result, oil prices temporarily dipped below the USD40 mark. However, recent months have been characterized by a relative stabilization and even a recovery of the oil price. Slow replacement and Even if we see a relatively severe and drawn-out global economic crisis, we believe that the oil challenging topographies for market downturn will be limited in duration. A number of structural factors are pointing to rapidly oil extraction point towards a tightening markets. In the current environment, insufficient investments are being made into oil possible rebound in oil prices production globally to replace the production lost from mature fields, which are currently declining at the rate of 5% or more a year. The International Energy Agency (IEA) recently found that even with stable demand for oil up to 2030, production capacity would have to be increased by 45mn barrels per day. Problematically, much of the new production is in areas that are remote and in challenging geographic or climatic conditions.