Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Accession of Kingdom of Saudi Arabia’s To World Trade
Organization and Its Benefits
Ahmed Bagaresh
1.1 Introduction
In the past, often critics described Saudi Arabia as an open economy but a closed society in many
respects. This is because, Saudi Arabia wanted to modernise its trade system but at the same time
it wanted to maintain the traditional values and power structure of the country. The authority had to
balance these two sides very skilfully. While elite members of the Saudi society wanted to integrate
with global economy, majority of the people were distrustful about it. In this conflicting pressure,
Saudi Arabia applied to become a member of GATT/WTO.1 The aim of this study is to identify some
of the major benefits Saudi Arabia obtained through WTO membership. This essay argues that the
main benefits for Saudi Arabia by becoming a WTO member was the positive changes it brought in
its economic policy, infrastructure, legislation, which ultimately helped strengthen Saudi Economy
and ensured better goods and services to Saudi nationals in a free and competitive market.
Nature and Scope of the Writing
Like many other WTO members, Saudi Arabia also had mixed experience about WTO. Specially,
some of the Islamic law issues relating accession to WTO, for example, forbidden products like,
alcohol and pork, the zakāt tax (an essential Islamic obligation) and some problematic services
relating banking and insurance products became the centre of the debate. 2 Still, Saudi Arabia
remained positive to become a member of WTO. The terms of membership of WTO for the
Kingdom of Saudi Arabia were formally concluded by the WTO General Council on 11 November
2005. However, the process of accession began in 1993 when Saudi Arabia formally submitted its
application for membership with GATT3 the predecessor of WTO.
As mentioned earlier, Saudi Arabia has mixed experience as a member of WTO. After the WTO
membership, although there are some notable improvements in the growth of GDP (during 2005-10:
real GDP grew at 3.2%/year) and private sector, still Saudi Arabia’s main social and economic
challenge is to provide employment to its own citizen.4 However, the aim of this paper is to describe
only some of the major benefits Saudi Arabia gained from WTO membership. This paper used data
published in the WTO Working Party report of 2005, when Saudi Arabia was granted membership.
Mr. Ahmed Bagaresh, Technology of Sydney (Master of international law), 107/14 shoreline Dr, Rhodes NSW 2138
Sydney, NSW 2138, Australia. Email: Ahmedbagaresh@gmail.com,
1
Rodney Wilson, ‘Saudi Arabia’s Role in the Global Economy’ in John W Fox, Nada Mourtada-Sabbah, Mohammed Al Mutawa
(eds), Globalization and the Gulf (Routledge, 2006) 165, 165.
2
Raj Bhala, ‘The Intersection of Islam and the WTO: Three Sharī’a Issues in the WTO Accession of Saudi Arabia’(2003) 21 (1)
Law in Context 152, 152.
3
WTO Accessions: Saudi Arabia (2013) < http://www.wto.org/english/thewto_e/acc_e/a1_arabie_saoudite_e.htm>.
4
Trade Policy Review, Report by the Secretariat: The Kingdom Of Saudi Arabia, WT/TPR/S/256 (21 December 2011) (Trade
Policy Review) vii.
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
The purpose of this approach was to highlight the major economic policy related changes that Saudi
Arabia introduced during the WTO membership negotiation process, which benefitted Saudi society
and economy in different ways. Some data from WTO Trade Policy Review of 2011 is also used
along with other relevant literature.
Some Important Features of Saudi Economy
Saudi Arabia is the largest exporter of oil and one of the biggest producers of oil and natural gas. In
2010, 23.1per cent of its real GDP, 86per cent of total export earning and about 91 per cent of total
government earning came from hydrocarbons. While energy-intensive account for 12.6 percent real
GDP, agriculture represent 4.6 per cent.5
‘Saudi Arabia started applying the Gulf Cooperation Council (GCC) common external tariff in 2003
…. The Saudi Arabian riyal (SAR), the national currency, has been pegged to the U.S. dollar (SAR
3.75 per US$) since 1986. In December 2009, Bahrain, Kuwait, Qatar, and the Kingdom of Saudi
Arabia ratified an agreement to establish a monetary union’.6
Since 1990 Saudi Arabia is trying to reduce its dependency on crude oil. The authority is trying to
encourage downstream industries, improve education and health services and establishing modern
infrastructure. Although a number of steps have been taken to strengthen Saudi private sector,
however, the state-owned oil company, the Saudi Arabian Oil Company (ARAMCO) is still a crucial
part of country’s economy. Annual average inflation rate was over 4.6 percent during 2005-10.
Country’s fiscal balance, as percentage of GDP, was 32.5 percent in 2008, went a deficit of 6.1% in
2009, its first deficit since 2002. At the moment Saudi Arabia is trying to reduce dependency on oil
and diversifying economy and modernise revenue collection from other sources.7
The report of the Working Party on the accession of the kingdom of Saudi Arabia to WTO indicated
that Saudi Arabia introduced a number of important changes in its international trade policies. This
includes change in economic policies, import and export regulations, domestic trade policies, trade
related intellectual property rights, policies relating trade in services, trade agreements and the like. 8
These policy and legislative change are important achievement for Saudi Arabia. Another important
achievement is, now Saudi Arabia is a member of an important international organisation. It is
beneficial for Saudi Arabia’s international trade and economy. Saudi Arabia now can get benefit
from WTO dispute mechanism if this country is in any problem about international trade with other
countries.9 These benefits can be discussed under three major headlines. For example, trade policy
related benefits, legislative benefits and economic benefits. The subsequent sections will describe
these issues further detail.
1.1.1 Trade Policy Related Benefits
Saudi Arabia’s accession to WTO benefitted Saudi Arabia in many ways. One way is trade policy
related benefits. The report of the WTO working party on the accession of the kingdom of Saudi
5
Trade Policy Review, 1.
Trade Policy Review, 1–2.
7
Trade Policy Review, 1–3.
8
See generally Report Of The Working Party On The Accession Of The Kingdom Of Saudi Arabia To The World Trade
Organization , WTO Doc WT/ACC/SAU/61 (1 November 2005)1–99.
9
M A Ramady, The Saudi Arabian Economy: Policies, Achievements, and Challenges (Springer, 2010) 315.
6
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Arabia to WTO said that Saudi Arabia made a number of positive changes in its economic policies
and trade related policies. These changes removed a number of trade related barriers.10
Stable Economic Policies
Before joining the WTO, one of the vital issues for Saudi Arabia was to revise its economic policy
and create environment for healthy competition. Accordingly, Saudi Arabia brought several changes
in its trade related laws and policies. One important issue was to remove the old tradition of giving
one company the right to become sole agent of foreign company. Other issues were to ensure
labour mobility, giving foreign companies the equal right to compete in local Saudi market. These
changes were necessary to obtain WTO membership. Because membership to WTO will allow
Saudi Arabia to expand the market for its petrochemical exports. But membership to WTO would
also pose some challenges. This will require Saudi Arabia to improve its productive efficiency in
order to survive in the open competition.11
Before WTO membership, Saudi Arabia faced serious long term economic policy problem, high rate
of unemployment, rapid population growth and mounting pressure for government spending for
public welfare programme.12 In order to compete in the global market and to become a part of
GATT/WTO Saudi Arabia slowly introduced and then maintained a stable economic policy. The
Saudi Arabian Monetary Agency (SAMA), the institution in charge of Saudi monetary policy, took
necessary steps to maintain stability of the fixed exchange rate of Saudi currency Riyal. For many
years, SAMA monitored Riyal market and took corrective measures against disruptive activities so
that a smooth functioning of Saudi currency is maintained. Since 1986 until 2005 the exchange rate
of Saudi Riyal with US dollars has been maintained at a rate of Saudi Riyal (SAR) 3.75 per US
dollar. This stability for a prolonged period of time helped domestic price remain at a reasonable
level and helped the Saudi economy grow correctly. These attempts improved the life standard of
Saudi people. People get better education, better public service. Saudi Arabia gradually became
included in international trade. This also encouraged foreign investors companies to come and do
business in Saudi Arabia.13 This may be noted that these attempts were preparation for WTO
membership.
Stable Exchange Rate and Payments
Another important attempt of Saudi authority was to maintain a stable exchange rate. This helped
the private sector to grow and foreign investors to invest in Saudi Arabia. SAMA regularly monitored
the economic, trade and balance of payment situation in both in domestic and global market. Since
early 1960 Saudi currency remained fully convertible with no taxes or subsidies. Currency could be
freely bought and sold at local bank at official rates. This liberal approach helped Saudi Arabia’s
balance of payment to improve remarkably over the past few years. This approach not only helped
Saudi Arabia to prepare for membership to GATT/WTO but also helped to improve its trade
policies.14
10
Report Of The Working Party, 4.
Tim Niblock, Saudi Arabia: Power, Legitimacy and Survival (Routledge, 2013) 104.
12
International Energy Agency, World Energy Outlook: Middle East and North Africa Insights 2005 (OECD Publishing, 2005) 489.
13
Report Of The Working Party, 8–9.
14
Report Of The Working Party, 10–11.
11
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Privatisation
Privatisation is an important precondition for economic reform. For Saudi Arabia, it was also an
important issue to attract foreign investment and an important tool to satisfy WTO to become a
member. Privatisation increases the productivity by reducing the role of bureaucratic public sector
and it also increase private sector-led investment growth. Therefore, there was a push for
privatisation, however, only limited privatisation took place. But an important step was taken. The
Supreme Economic Council established a privatisation committee to identify which activities could
be privatised and to develop a strategic plan.15
Although Saudi Arabia has vast oil wealth, still, due to some issues like huge defence spending,
heavy subsidies of various utilities, generous public welfare system for Saudi national, low tax rate
had been the reason of budget deficit during 1983 to 1999. Therefore, privatisation and sale of
government assets to generate revenue and reduce government liabilities was one of the top
priorities.16 Application to WTO membership gave this opportunity to take necessary steps to
privatise national enterprises. During the negotiation process for WTO membership and in the
subsequent period after the accession to WTO, Saudi Arabia took a number of significant economic
reform initiatives. In order to promote its free market economy, Saudi Arabia privatized 20 major
state enterprises.17
In June 2002 Saudi government initiated an ambitious privatisation strategy. This was an important
economic reform programme of Saudi Arabia. This ensured that private sector have more expanded
share in national economy. This helped to transfer certain economic activities in the private sector.
As part of this process Saudi Supreme Economic Council approved privatisation of a number of
services including water and sewage, telecommunication, aviations, railways, roads, airport services
and postal service, municipal services and health services. The legal basis of these changes was
the Council of Ministers Resolution No. 60 of 1.4.1418H (5 August 1997). New privatisation strategy
encouraged foreign and domestic investment, helped to develop regulatory framework in private
sector.18 This approach not only helped Saudi to become ready for WTO membership, but also
helped local and international consumers to get better services and goods. Today private sectors
account for 48 percent of Gross Domestic Product (GDP) in Saudi Arabia.19
Introduction of a Favourable Investment Regime
In order to be member of GATT/WTO Saudi Arabia introduced a more favourable investment
regime. This change was made in order to match with similar international changes in many
countries. The new investment regime made it possible for the investors of Gulf Cooperation
Council (GCC) States to get the same facilities as Saudi nationals. Saudi Arabia removed the
minimum capital investment (for example, SAR 5 million for industrial projects) requirement for
15
Above n 11.
Ibrahim Akoum, Privatization in Saudi Arabia: Is Slow Beautiful? (2009) 51 (5) Thunderbird International Business Review 427.
17
Anthony Shoult, 'Privatization and Economic Reforms' in Anthony Shoult (ed) Doing Business with Saudi Arabia (GMB
Publishing Ltd, 2006) 73, 79.
18
Report Of The Working Party, 15–7.
19
Royal Embassy of Saudi Arabia, About Saudi Arabia: Economy and Global Trade (1 January 2005)
<http://www.saudiembassy.net/about/country-information/economy_global_trade/>.
16
Proceedings of 23rd International Business Research Conference
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foreign investors. 20This helped Saudi Arabia to bring more foreign investment in Saudi Arabia.
Foreign Direct Investment/FDI is an effective way of introducing new ideas, technologies and
business in a country.21
A Favourable Framework for Making and Enforcing Policies
Saudi Arabia gradually introduced a favourable framework so that new policies can be made and
enforced easily and quickly. As a general rule, if any Saudi law and policy was found conflicting with
international trade laws, then Saudi Arabia will quickly amend that law (if it is not against religious
rules). They do this so that inconsistencies are removed and business operation remains smooth.22
This is an important change. This approach helps a country to remain open to new change. This
approach helps to grow local law.
Changes in Policies Affecting Trades in Goods and Services
Industries are not the only area where Saudi Arabia looked to employ many of its nationals. Service
industries and distributorship are also important area where Saudi Arabia could employ many
people. This is because, the businesses that sell to the people also need marketing personnel,
customer service providers, advertisers. But Saudi Arabia did not have skilled personnel in these
areas that required outgoing persons and skill in foreign language like, English.23 In order to
develop this service sector and also to create more job, Saudi Arabia took a number of important
steps so that foreign investors and service providers can start and continue business easily.
Saudi Arabia’s to WTO accession also helped this country to make many important and positive
changes in policies affecting trade in goods and services. For example, registration as a commercial
agent is not necessary to export or import goods, except agricultural machineries. Any foreign or
Saudi company registered in Saudi Arabia could export or import good easily without further
permission. At the same time, it was also easy for registered business to amend their article of
association and include new commercial activities, except prohibited activities. If certain
requirements are fulfilled, normally no business will be denied to registration. This simplified process
of registration and amendment to article of association is very important for small businesses. This
ensures the trading rights of the people.24 At the same time, Saudi Arabia imposed very few fees
and charges for port clearance, customs processing, and export-import licensing and other related
service.25 Import license processing takes only 30 days of application in most cases.26 This helped
foreign export and import process easier for the companies in Saudi Arabia. All these are beneficial
for Saudi Arabia.
Technical Barrier to Trade (TBT) Regime
20
Report Of The Working Party, 27.
Khalid Alkhathlan and Md Tarique, Foreign direct investment in Saudi Arabia-an economic development perspective (2009) 9 (2)
Journal of International Business and Economics 95, 95.
22
Report Of The Working Party, 32–3.
23
Thomas W Lippman, Saudi Arabia on the edge (Potomac Books Inc., 2012) 104.
24
Report Of The Working Party, 37–40.
25
Report Of The Working Party, 43.
26
Report Of The Working Party, 47.
21
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Another important achievement for Saudi Arabia in its attempt to become a WTO member was to
introduce a TBT regime. The Saudi Arabian Standards Organization (SASO) is dedicated for
standards and technical regulations. They ensure that imported and domestically produced goods
meet the technical regulations.27 New standardisation regime ensures that products are of certain
quality. There are voluntary and mandatory standards. It also introduced post-market surveillance. It
helps authorities to monitor standards are maintained.. It also helps authorities to check if any
goods or services are risky for public health.28
Trade Related Intellectual Property Regime
In order to provide adequate protection to all categories of intellectual property in conformity with
Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), Saudi Arabia took a
number of important actions. This action has helped Saudi Arabia to protect the intellectual
properties of this country. This also ensures that foreign business investing in Saudi Arabia is able
to protect their rights. This is very important. If foreign companies feel that their intellectual property
will not be protected, they may not invest. Therefore, this initiative helped both foreign investment
and trade and also helped Saudi Arabia to protect its own intellectual properties. If Saudi Arabia
complies with TRIPS agreement, this will also help Saudi Arabia to develop its own intellectual
property related law.
Saudi Arabia has established a number of important institutions and passed a number of laws (royal
decrees) related to trade related intellectual properties. For example, the Ministry of Commerce and
Industry is responsible for implementing the Trademarks Law and for formulating and implementing
the Competition Law, and the King Abdulaziz City for Science and Technology (KACST) is
responsible for implementing the New Law on Patents. The Ministry of Culture and Information is
accountable for implementing the Copyrights Law. Also, Saudi Arabia became a member of many
international agreements, including the Convention Establishing the World Intellectual Property
Organization (WIPO), the Paris Convention for the Protection of Industrial Property, the Universal
Copyright Convention, the Arab Regional Copyright and Related Rights Agreement and the GCC
Patent Law.29 This membership helped Saudi Arabia to establish its rights in other countries. Now
Saudi Arabia can protect its intellectual property rights in many countries and get benefit from many
international standard, protection system and dispute resolution system. All these happened
because Saudi Arabia took all these initiative to become a member of GATT/WTO.
Better Protection for Copyrights, Patents and Trademarks
In 2003 Saudi Arabia introduced amended policies to protect the copyrights of some intellectual
properties. These new policies are in full inconformity with international standard (TRIPS). For
example, now computer software, database, audio-visual works and sound recordings have better
protection in Saudi Arabia. Now copyrighted items are protected up to 50 years after their first
publications. New provisions also ensure legal use of foreign copyrighted items. Similar provisions
27
Report Of The Working Party, 35.
Report Of The Working Party, 63–7.
29
Report Of The Working Party, 79–80.
28
Proceedings of 23rd International Business Research Conference
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are now also available for patentable subject matters. Now Saudi Arabia has legal provisions
regarding patents. These provisions are comparable with Section 5 of the TRIPS agreement. Now
Saudi patent holders have rights provided in Article 28 of TRIPS agreement. Another important
issue is that, now the administrative procedures regarding patent has also improved. The process of
accession also improved the trademark regime in Saudi Arabia. The new trademark regime (Royal
Decree M/21 of 29.5.1423H of 7 August 2002 is in accordance with TRIPS. Now trademark
infringement may result in harsher punishment. The injured party is allowed to get appropriate
compensation equal to the damage caused to them due to trademark infringements. Most
importantly, well-known trademarks are now protected even if they are not registered. 30 These new
policy changes are beneficial for trade and investment in Saudi Arabia. This will help local business
to run their business and grow in a healthy environment. This also helps to maintain a good
competition in trade in Saudi.31
Policies Affecting Trade in Services
During the GATT/WTO application process, another important achievement for Saudi Arabia was to
implement a very liberal service regime. Many foreign workers and service providers are now
already providing services in Saudi Arabia. Saudi Arabian General Investment Authority (SAGIA)
has been created to act as a one-stop shop for all foreign investors, except those listed in negative
list. Saudi Arabia has made new provisions to provide a wide range of judicial, arbitral and
administrative procedures with respect to trade in services. A Board of Grievance has been
established. Now trade related disputes are resolved by this board very efficiently. 32
Transparency
An important requirement of GATT/GATS (General Agreement on Trade in Services)/WTO was that
its member countries will have transparent system so that all interested parties have access to
relevant all laws, regulations, judicial decisions and administrative orders or rulings relating trade
policies. During the application for membership to WTO, Saudi authority said that they have
established, the Ministry of Commerce and Industry, a single operational enquiry point in conformity
with the requirements of Article III of the General Agreement on Trade in Services and the WTO
Agreements. At the same time Saudi Arabia made higher level commitment that they will take
necessary step to make more rules and policies so that full transparency is ensured. 33
1.1.2 Legislative Benefits
Accession in the WTO benefitted Saudi Arabia in many ways and one of this is the legislative
benefit. In order to prepare for the WTO, Saudi Arabia introduced a number of important legislations
in this country. This initiative strengthened Saudi Arabia’s legal regime and modernised its trade
related laws. This opportunity helped Saudi Arabia to bring such changes that is necessary in order
to become a part of active partner of an important trade related organisation like WTO. New
30
ibid.
Report Of The Working Party, 81–3.
32
Report Of The Working Party, 87–8.
33
Report Of The Working Party, 96.
31
Proceedings of 23rd International Business Research Conference
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legislations made it easier for domestic and foreign investors to invest in Saudi Arabia more easily.
It gave them a favourable legal framework to establish and run business, maintain certain standard,
protect their business interest and protect the interest of the customers/consumers. Now Saudi laws
are of international standard because WTO means trade in international standard. Therefore,
accession to WTO gave a strong and useful legal ground for local and foreign business to operate
in Saudi Arabia. This laws protect the interests of all parties and makes it easier to resolve business
related dispute, locally and also internationally. Below is the description of some important
legislation relating accession to the WTO.
Legislations Related to Economic Policies
Saudi Arabia enacted new legislation in order to establish a healthy competition regime so that they
are better prepared to extend cooperation with other WTO member countries. On 22 June 2004,
Saudi authority introduced Law on Competition Policies. A number of legislations relating ‘pricing’
were also made to regulate pricing policy in Saudi Arabia. For example, the Council of Ministers
Resolution No. 68 of 29.5.1412H, the Council of Ministers Resolution No. 260 of 23.10.1422H, the
Supreme Council for the Petroleum and Mineral Affairs Resolution No. 15 of 11.3.1422H and the
Pharmacy Law 1978. These legislations are important. They are the base of pricing of products and
services in Saudi Arabia.34 These legislations brought important changes in pricing of natural gas
liquids (NGL) among other things. These laws required that natural gas supplied for domestic use
shall be commercially based. New laws also ensured that pricing structure is fixed in a way so that
NGL’s production cost and reasonable profit is recovered. Earlier NGL was not exported because of
its high price. Saudi authority used to burn this natural product. But new legislations made it
possible to use these valuable natural resources according to WTO regulations.35
Legislation Regarding Privatisation
Saudi Arabian authority has made number of laws to facilitate privatisation in Saudi Arabia so that
private sector can play important role in economic activities. Some of the important legislations are
Economic Reform Program of the Kingdom of Saudi Arabia, WT/ACC/SAU/54 (4 April 2003), the
Council of Ministers Decision No. 219 of 6.9.1423H (Privatization Strategy), the Supreme Economic
Council Decision No. 1/23 of 23.3.1423H and the Council of Ministers Resolution 169 of 11.8.1419H
(restructuring electricity sector).36 These subordinate legislations helped to develop the private
sector in Saudi Arabia. This way Saudi government put more emphasis on the development of the
industry and agriculture sector and the development of mineral resources. This encouraged the
private sector to participate in many socio-economic development projects.37
Legal Framework for Making and Enforcing Policies
Saudi Arabian government has enacted a number of legislation in order to establish a legal
framework for making and enforcing trade related policies. Many of these laws were enacted at the
34
Report Of The Working Party, 1.
Report Of The Working Party, 11–12.
36
Report Of The Working Party, 2.
37
Report Of The Working Party, 6–7.
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Proceedings of 23rd International Business Research Conference
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stage when Saudi Arabia was preparing for applying for the GATT/WTO membership. For example,
the Commercial Agencies Law, the Combat of Commercial Fraud Law and the Negotiable
Instruments Law were enacted in 1962, 1984 and in 1964 respectively. However, the Council of
Ministers Resolution No. 165 of 24.6.1423H was enacted in order to implement the Vienna
Convention on the Law of Treaties.38 Also the Basic Law of Governance and the Law of the Shoura
Council were enacted in 1992. All these legislations helped to establish a strong legal framework to
assist policy making and their enforcement. Specially, the Capital Market Law, promulgated by
Royal Decree No. M/30 of 2.6.1424H established the Capital Market Authority (CMA), a strong
government regulatory body with rule-making and enforcement powers necessary to ensure that the
Saudi Arabia's security market is fair, efficient and vibrant.39
Legislations Affecting Trade in Goods
There are important legislations that legally establish the right to trade in Saudi Arabia. These
legislations provides necessary guideline and make sure that the right to trade in goods and all
necessary fees, charges or taxes levied on such rights are in full consistency with its WTO
obligations.40 Some of these laws (and directives with similar enforceability/power) are Saudi
Industrial Development Fund Law 1974 and the Saudi Arabian Standards Organization (SASO)
Technical Directive, issued 18 July 2000, as amended on 24 May 2004, and as further amended on
18 June and 19 July 2005.41
Legislation Strengthening Trade Related Intellectual Property Regime
During initial stage of the negotiation process of WTO membership, TRIPs was one of the issues on
which WTO Working Party and Saudi negotiator struggled to reach any agreement quickly. This
was a reason why negotiation took longer period.42 However, subsequently, legislations that were
enacted to strengthened trade related intellectual property regime in Saudi Arabia, as part of
preparing the Kingdom for WTO membership, played important role. The Copyrights Law 2003, Law
of Trademarks 2002, Regulations for the Protection of Confidential Commercial Information 2005,
Law on Patents, Layout Designs of Integrated Circuits, Plant Varieties and Industrial Designs 2004
are some of the notable legislations.43 The WTO Working Party on Saudi Arabia expressed their
satisfaction regarding the level of protection Kingdom’s legal regime provided to trade related
intellectual property rights. However, they also said that Saudi Arabia need to take necessary
initiative to ensure full compliance with TRIPS agreement.44
1.1.3 Economic Benefits
Saudi Arabia’s accession to WTO also brought significant positive changes in its economy. ‘Saudi
Arabia's development strategy has resulted in a positive economic performance in the past few
38
Report Of The Working Party, 2.
Report Of The Working Party, 30.
40
Report Of The Working Party, 41.
41
Report Of The Working Party, 4.
42
Above n 1, 172.
43
Report Of The Working Party, 5.
44
Report Of The Working Party, 79.
39
Proceedings of 23rd International Business Research Conference
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years, in terms of GDP growth, moderate inflation, and surpluses in both its overall fiscal position
(except for 2009) and external current account’.45 After the accession to WTO in 2005, ‘Saudi
Arabia has become the eighth biggest recipient of foreign direct investment (FDI) in the world. Its
annual inflow of FDI jumped from an annual average of US$1,534 million during 1995-2005 to
about US$25,000 million over 2005-09’, as indicated in the WTO trade policy review of Saudi Arabia
in 2012.46
It is often said that Saudi Arabia’s free market economy has undergone significant changes. Within
a relatively short period of time Saudi society has evolved from an agriculture based society to a
regional and global economic power with modern infrastructure. The accession to WTO has
ensured greater access to global market for Saudi products; it created new jobs and encouraged
foreign investment.47 In order to strengthen country’s economy, the Kingdom has implemented
various economic development plans, including the Sixth Development Plan, Decree No. 142 of
19.11.1413H (10 May 1993) and the Seventh Development Plan, Decree No. 126 of 28.5.1421H
(29 August 2000).48
The Sixth Development plan was particularly aimed at maximising the private sector’s contribution
in providing new jobs, reducing dependency on oil by diversifying economic activities, establishment
of new physical infrastructures, offering new jobs to Saudi workers and improving social services.
This also aimed to raise the per capita income of Saudi nationals. As a result of these initiatives,
over the previous 3 decades (before 2005) non-oil GDP increased more than five-fold and private
investment increased seven-fold. The Seventh Development Plan was aimed at development of
private sector and for the development of Saudi human resources. At the same time the plan
focused on the development of Saudi industries.49
1.2 Discussion
As mentioned earlier, Saudi Arabia has mixed experience about WTO membership and there are
some failures along with many successes. Some of the important national problems are not
resolved yet. However, in this paper we focused our discussion only on positive achievements. It
does not really mean that WTO became as blessing for Saudi Arabia. It also brought some
challenges. Most importantly, some of the serious social and economic problems like higher
dependency on expatriate workers, who are over 4 million in number and who send out over 20
billion dollars remittance out of Saudi Arabia each year (when a number of Saudi national is
unemployed) is a big problem. This is a great imbalance. Often this is seen as a serious
management problem and a potential threat to social stability. Although the private sector grew as
anticipated but at the same time number of new jobseekers also grew. There is no guarantee that
adequate job will be created and Saudi’s will be employed in those jobs. Although 673 601 new jobs
were created in 2009 but only 9.9 percent Saudi national were employed in those jobs. This labor
imbalance indicates, among other things, to lack of solid economic plan in some sectors.50
45
Trade Policy Review, Para (4).
Trade Policy Review, Para (14).
47
Above n 19.
48
Report Of The Working Party, 1.
49
Report Of The Working Party, 7.
50
Above n 23,104–6.
46
Proceedings of 23rd International Business Research Conference
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Thomas W. Lippman mentioned that some of the jobs, like hotel room services, cleaning, working in
mines, taxi driving, hospital work and restaurant service are all taken by foreigners. Saudi nationals
do not do these jobs because they do not want to. Outside the oil patch, people hardly value the
hard labor which could be used in areas like farming.51
These indicate to a cultural barrier in Saudi society. This also mean that accession to WTO and
changes in some laws, policies and infrastructure alone cannot guarantee that long term economic
plan will be successful. In order to obtain and enjoy maximum benefit from WTO membership, some
cultural change is also necessary. Saudi national can start learning new skills and language and
then retake jobs that are now being done by foreign workers. This will not only help solve Saudi
Arabia’s unemployment problem; this will also save a lot of money.
However, now the above mentioned problems are already identified by Saudi Arabian government.
They understand that in order to gain maximum benefit from free market and international trade,
along with many graduate in mass communication and religious studies, they also need graduates
who can manufacture things, transport them to places, market them, sell them to interested
business or customers and provide maintenance services.52
1.3 Conclusion
Prior to GATT/WTO membership although Saudi Arabia was an open economy, but rate of
unemployment was much higher and there was a lack of fiscal discipline in the economy. Specially,
there was a restriction on foreign ownership of assets in Saudi Arabia. Nevertheless, there was a
huge pressure of liberalization.53 When Saudi Arabia decided to apply for WTO membership and
integrate Saudi economy and market with their other global partners, there was a number of positive
changes in Saudi Arabia, along with some new challenges.
A number of institutional, policy and legislative changes were introduced. Aim of these changes was
to prepare Saudi Arabia to enter into global market and open its market for foreign investors. In
order to do so Saudi Arabia had to make a lot of liberal changes in its economic policies and make it
easier for investors to invest. Adequate legal protection was also provided. Although there are many
social and economic challenges still existing, these changes relating WTO membership benefitted
Saudi Arabia in many ways. It helped economic growth, created new job and improved quality of life
of the people by giving them better quality goods and services in a competitive market. However,
there are some cultural issues as it was observed. Saudi nationals are habituated to accept certain
services from expatriate foreigners. This cost a lot of money and keeps Saudi nationals out of job.
This means membership to prestigious international organization cannot guarantee economic
development if such step is not supported by general people in every aspect of life.
51
Above n 23,106.
Above n 23,107.
53
Above n 1, 165–66.
52
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
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Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Saudi Arabia:
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