While Saudi Arabia’s economic base continues to be dominated by oil, the Kingdom has taken steps to diversify the economy.
Today, industrial products make up more than 90 percent of the Kingdom’s non-oil exports. Saudi Arabia exports petrochemicals, plastics, metal goods, construction materials and electrical appliances to some 90 countries.
Petrochemical and other oil-based industries are concentrated at industrial cities in major urban centers. These plants use natural gas and natural gas liquids that were previously flared, as well as refined products from the oil industry to manufacture products that would in turn feed non-oil industries.
Concentration on industrial plants in specific areas also facilitates the provision of vital support services, such as water, power and transportation.
The Jubail Industrial City on the Arabian Gulf has dozens of factories and industrial facilities, including a desalination plant, a seaport, a vocational training institute and a college.
The Yanbu Industrial City on the Red Sea has a modern port, refineries, a petrochemical complex and many manufacturing and support enterprises.
The government offered incentives for the establishment of private companies at the industrial cities. The Saudi Arabian Basic Industries Corporation (SABIC), created in 1976, set up non-oil industrial facilities that use as feedstock natural gas and natural gas liquids manufactured by the oil industry.
SABIC is owned 70 percent by the Saudi government and 30 percent by shareholders from the six Gulf Cooperation Council (GCC) countries. SABIC quicly became the backbone of Saudi Arabia’s successful industrialization. By 1994, it had 15 major plants operating in Jubail, Yanbu, and Jeddah, with an annual production of 13 million metric tons. By 2002, total production was 40.6 million tons of basic and intermediate chemicals, polymers, plastics, industrial gases, fertilizers, steel and other metals; this figure is expected to exceed 48 million tons by 2010.
One of the most ambitious economic projects to date is the massive King Abdullah Economic City near Jeddah, which broke ground in December 2005. The residential and commercial megaproject will include a dedicated port, an industrial park, a residential and hotel complex, and educational facilities.
In 2006, Custodian of the Two Holy Mosques King Abdullah launched similar economic cities in Rabigh, Hail and Madinah. Plans are also underway for an economic city in Makkah.