High oil prices and increases in Saudi Arabia's oil output have improved the health of Saudi Arabia's fiscal position, and in turn provided a boost to domestic demand. Foreign investment has also strengthened, driven by the development of Saudi's gas, petrochemicals, power and water supply projects. Against this background, the Saudi economy grew by an estimated 5.4% in 2006, and is expected to further expand by 5.3% in 2007.Except 2000, Saudi Arabia had recorded fiscal deficits from 1983 to 2002. In order to contain the deficits, the Saudi government had exercised restraints on its spending. Helped by a strengthening of oil prices, the government has recorded budget surplus since 2003. The budget surplus is expected to continue in 2007 amid the still high oil prices, as the majority of the government revenue comes from oil earnings.On the external front, over three quarters of Saudi's exports are oil and energy products, such as petrochemicals, plastics and related raw materials. Leading export destinations are the US, Japan, South Korea, India and China. Meanwhile, major import items include machinery, transport equipment, foodstuffs, metals, minerals, textiles and clothing. Principal suppliers are the US, Japan, Germany, China and the UK.
In December 2005, Saudi Arabia became the 149th member of the WTO after over 12 years of negotiations. In 1993, when Saudi Arabia first applied for membership of the General Agreement on Tariff and Trade (GATT), the predecessor of the WTO, 75% of Saudi's tariffs on imports were at 12%. Since 2003, 85% of tariffs have been lowered to 5% or less.Saudi Arabia's WTO commitments provide for foreign participation in its wholesale and retail trade. Upon accession, foreign companies can hold up to 51% of the equity in a wholesale or retail business. The limit will be increased to 75% by December 2008.However, some products remain restricted from entering Saudi Arabia for religious, health or security reasons. Prohibited items include alcoholic beverages, pork, non-medical drugs, non-Islamic religious materials, weapons and weapon-related electronic equipment. In addition, foreign companies that are deemed to support Israel in one way or another are blacklisted because of the Arab League boycott of Israel, to which Saudi Arabia is a participant.Tariffs are mostly ad valorem. The tie between Saudi Arabia and its fellow members of the Gulf Co-operation Council (GCC) -- Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates -- is strong. In November 1999, the GCC agreed to form a customs union. The customs union took effect from 1 January 2003. The accord establishes a single tariff of 5% on 1,500 imported items from non-member countries. It also provides a list of other essential items that can be imported duty-free. Under the accord, goods imported into the GCC area can be freely transported subsequently throughout the region without paying additional tariffs.
Hong Kong's Trade with Saudi Arabia^
Hong Kong's total exports to Saudi Arabia during January-November 2006 surged by 22% to US$335 million, after a 2% growth to US$300 million in 2005. Major export items to Saudi Arabia during January-November 2006 included watches and clocks (18% of the total), telecommunications equipment and parts (13%), women's or girls' wear of textile fabrics (10%), other apparel articles (7%) and footwear (4%).On the other hand, Hong Kong's imports from Saudi Arabia increased by 7% to US$442 million during January-November 2006, after a 17% growth to US$435 million in 2005. Major import items from Saudi Arabia during January-November 2006 included polymers of ethylene in primary forms (41% of the total), hydrocarbons (30%), other plastics in primary forms (9%), alcohols and phenols (6%) and non-electric engines and motors (5%)