27April, 2011
Saudi-Turkey
Economic Relations
Abdulkareem Abu al Nasr
CEO
Saudi Arabia and Turkey, the two
emerging giants
Saudi Arabia real GDP growth
Turkey real GDP growth
600
9.0%
800
12.0%
8.0%
700
10.0%
7.0%
600
8.0%
500
400
6.0%
5.0%
300
6.0%
500
4.0%
400
2.0%
4.0%
200
3.0%
-2.0%
1.0%
100
-4.0%
0.0%
0
2.0%
2003
2004
2005
2006
Saudi Arabia GDP (USD bn)
2007
2008
2009
Real GDP grow th (%)
2010
0.0%
200
100
0
300
-6.0%
2003
2004
2005
2006
Turkey GDP (USD bn)
2007
2008
2009
2010
Real GDP grow th (%)
Source: IMF World Economic Outlook

The Saudi and the Turkish economies, both members of the all important G20, have grown rapidly in recent years
emerging as two of the largest economies in the Middle East and West Asia region
 These two economies were resilient during the global financial turmoil and bounced back to the pre-crisis level growth
rates, thanks largely due to prudent fiscal and monetary policy measures

Apart from their cultural, historic and religious ties, Saudi Arabia and Turkey have many other similarities as two of
the most important and dynamic emerging economies in the world
 Both Saudi Arabia and Turkey have a large population base and one of the highest growth rates in their population in
recent years
2
Set to grow further in the coming
years
Saudi Arabia & Turkey current standing (2010)
Saudi Arabia & Turkey projected standing (2015)
16,000
20,000
14,000
18,000
16,000
The Turkish economy is currently the
17th largest in the world while the Saudi
economy is 23rd in world ranking
12,000
10,000
8,000
By 2015, the Turkish economy would be
over USD1trn and remain the 17th
largest while the Saudi economy at
USD656bn would be the 19th largest in
the world
14,000
12,000
10,000
6,000
8,000
4,000
6,000
4,000
2,000
2,000
Source: IMF World Economic Outlook

The Saudi economy with an estimated GDP of USD434 billion is the 23rd largest economy in the world while the
USD729 billion Turkish economy is the 17th largest, as of 2010
 These two economies are set for higher growth in the coming years with Saudi Arabia emerging as the 19 th largest
economy in the world by 2015

Given their increasing economic might and geo-political standing, both Saudi Arabia and Turkey are likely to
emerge amongst the most important players in the global landscape in the next decade
Taiwan
Saudi Arabia
Turkey
Netherlands
Indonesia
Mexico
Korea
Australia
Spain
Canada
Italy
India
Russia
Brazil
UK
France
Germany
China
Japan
0
US
Poland
Saudi Arabia
Sweden
Belgium
Switzerland
Turkey
Indonesia
Netherlands
Korea
Mexico
Spain
Australia
India
Russia
Brazil
Canada
UK
Italy
France
Japan
Germany
US
China
0
Favorable demographic profile
Saudi Arabia demographic profile

The attractive future prospects of both economies are
underpinned by their favorable demographics, with
nearly two-thirds of population below 30 years of age

While nearly 64% of the total population falls in the
working age group of 15-64 years in Saudi Arabia,
nearly 67% of Turkey’s total population falls in the
same age group

33% of population is below 14 years of age in Saudi
Arabia while the number for Turkey is 27%
>65 years
3%
0-14 years
33%
15-64 years
64%
 This indicates that these two countries would be in an
enviable to sustain the demographic profile with more
people coming into the working age population in the
coming years
Turkey demographic profile
>65 years
6%
0-14 years
27%

Unlike the West, the low dependency ratio (population
above 65 years) will also ensure that government
finances are not burdened with pension costs and
other social sector entitlements
15-64 years
67%
Source: UN Population Division, World Bank
4
Strong government finances
Saudi Arabia government debt & current account balance
90%

30.0%
80%
25.0%
One of the defining characteristics of both these
economies is that they have strong government
finances with public debt at significantly low levels
70%
60%
 Robust economic growth on the back of higher oil
prices and petrodollar inflow allowed Saudi Arabia to
reduce government debt from over 80% of GDP in
2003 to around 15% in 2010
20.0%
50%
15.0%
40%
30%
10.0%
20%
5.0%
 At the same time, the country enjoyed high surpluses
on its current account with the balance reaching as
high as 30% of GDP in 2008
10%
0%
0.0%
2003
2004
2005
2006
Government debt (% of GDP)
2007
2008
2009
2010
Current account balance (% of GDP)
Turkey government debt & current account balance
80%
0.0%
70%
-1.0%
60%
-2.0%
50%
-3.0%
40%
-4.0%
30%
-5.0%
20%

The Turkish government has reduced its debt burden
from around 68% of GDP in 2003 to nearly 45% of
GDP in 2010

External deficits remain a weakness for Turkey
 Turkey’s current account deficit deteriorated to nearly
6.6% of GDP in 2010 from around 2.0% in 2009; the
negative trend is set to continue
-6.0%
10%
0%
-7.0%
2003
2004
2005
2006
Government debt (% of GDP)
Source: IMF World Economic Outlook
2007
2008
2009
2010
Current account balance (% of GDP)
5
Increasing foreign direct investments

Both Saudi Arabia and Turkey with their favorable macro fundamentals have become a hotspot for foreign
investors in recent years
 The foreign direct investments in both these countries has increased significantly with total investments reaching
USD129.4 billion in Saudi Arabia and USD86.9 billion in Turkey, in the 2000-09 period
Foreign direct investments (USD billion)

Increasing privatization following
greater liberalization initiatives and
economic reforms has led to an
increase in the FDI inflows in both
Saudi Arabia and Turkey

Saudi Arabia was the largest recipient
of FDI in the entire Middle East region
in 2009 with inflows topping USD35
billion

Turkey too has seen an increase in
foreign direct investments in recent
years with inflows peaking at over
USD22 billion in 2007
45
40
35
30
25
20
15
10
5
0
2003
2004
2005
2006
Saudi Arabia
2007
Turkey
2008
2009
Source: UNCTAD
6
Booming external sectors
Saudi Arabia exports and imports (USD billion)
Turkey exports and imports (USD billion)
350
250
300
200
250
150
200
150
100
100
50
50
0
0
2003
2004
2005
2006
Exports (USD bn)
2007
Imports (USD bn)
2008
2009
2003
2004
2005
2006
Exports (USD bn)
2007
2008
2009
2010
Imports (USD bn)
Source: SAMA, Turkstat, IMF World Economic Outlook

Saudi Arabia as well as Turkey have seen robust jump in their external sector activity in recent years, with both
exports and imports growing at double-digit pace
 Saudi Arabia’s exports peaked at over USD300 billion in 2008 on the back of significant increase in oil prices while
Turkey’s exports peaked at over USD132 billion in the same year, driven by higher agriculture, consumer electronics
and textiles exports

However, Turkey being a net importer of energy has seen its external account deteriorating significantly with the
trade deficit increasing to USD71.5 billion in 2010 from around USD22.1 billion in 2003
7
Saudi-Turkey partnership entering a
new level

Indicating growing political rapprochement, King Abdullah became the first Saudi King to visit Turkey in over
four decades in August 2006, to forge stronger socio economic ties between the two nations

In January 2010, the Turkish Prime Minster Recep Tayyip Erdoğan reciprocated with a similar visit to Saudi
Arabia
Joint effort from both countries
Major ‘milestone’ changes in the Saudi Arabia-Turkey economic partnership
1974
 Trade agreement
 Economic and
technical
cooperation
agreement
1986
 Agreement on
coordination of
highway transport
and regulation
 Agreement on
regulated
maritime transport
management
2006
 International
highway transport
agreement
 Agreement on
Reciprocal
Promotion and
Protection of
Investments
 Agreement on
Cooperation in the
Field of Health
 Agreement on
Cooperation in the
Field of Tourism
2007
 Agreement on
Avoidance of
Double Taxation
2008
 KEK IX. Term
Protocol
Increasing trade between the two
Saudi Arabia Trade balance w ith Turkey
Saudi Im ports from
Year
Saudi Exports to
Trade Balance (USD Million)
Value (USD Million) Change (%) Value (USD Million) Change (%)
2000
386.55
-35.27%
961.68
161.91%
575.13
2001
500.64
29.51%
729.64
-24.13%
229.00
2002
547.32
9.32%
788.00
8.00%
240.68
2003
741.47
35.47%
969.13
22.99%
227.65
2004
768.52
3.65%
1231.51
27.07%
462.99
2005
962.16
25.20%
1888.78
53.37%
926.63
2006
983.23
2.19%
2252.14
19.24%
1268.91
2007
1486.92
51.23%
2439.99
8.34%
953.07
2008
2201.88
48.08%
3322.39
36.16%
1120.51
2009
1771.18
-19.56%
1691.95
-49.07%
-79.23
Cumulative
Yealy Average
10349.87
16275.22
5925.35
1034.99
1627.52
592.53

Bilateral commercial exchange reached a total of USD5.5 billion in 2008, up from around USD1.3 billion in 2002

Saudi Arabia is Turkey’s most important trade partner in the GCC. Saudi Arabia accounted for some 76% of the
total GCC exports to Turkey during the five years up to 2009

In the course of 2000-2009, Saudi imports from Turkey grew at a CAGR of 16% to USD1.8 billion, while the exports
grew at a CAGR of 6% to USD1.7 billion
Source: Turkstat, IMF, NCB estimates
10
Oil dominates the trade equation
Turkey’s exports to Saudi Arabia (USD million)

2,500
2,000
The trade between Saudi Arabia and Turkey is
dominated by oil with the commodity accounting for
over half of Turkey’s total imports from Saudi Arabia
 Turkey accounts for nearly 2.1% of Saudi Arabia’s
1,500
total imports and 1.0% of total exports
1,000
500
2003
2004
2005
Agriculture, Forestry and Fishing
2006
2007
Mining and Quarrying
2008
2009
Manufacturing

Turkey’s imports from Saudi Arabia (USD million)
3,500
3,000
2,500
2,000
1,500
1,000
500
2003
2004
2005
Agriculture, Forestry and Fishing
2006
2007
Mining and Quarrying
2008
2009
Manufacturing
On the other hand, being a dominant player in the
agricultural space, Turkey exports many foodstuff
and agricultural commodities to Saudi Arabia apart
from industrial and manufactured goods
Agriculture and manufacturing offers
greater scope for partnership

In the agriculture space, Turkey has emerged as one of the top recipients of Saudi investment as the Kingdom
seeks to boost its food security

Turkey’s status as an agricultural powerhouse – an economy where agriculture still accounts for nearly 10% of
GDP and almost a third of employment – allowed the country to increase its agricultural exports to Saudi Arabia
from USD90mn in 2008 to USD144mn in 2009

Private Saudi firm Planet Food World Company (PFWC) will invest around USD3 billion in Turkey’s agriculture
sector over the next five years to export food products to the Gulf region
 Manufacturing constitutes the core of Saudi-Turkish bilateral commerce. 88% of Turkish exports to Saudi Arabia
consist of manufacturing goods, while Turkey largely depends on Saudi Arabia for its crude needs

The opportunity for Turkish automotive firms to invest in the Saudi bus and truck manufacturing industry has
been widely recognized. The machine manufacturing industry and the mining sector are other areas with high
potential for growth

With Saudi Arabia’s construction and infrastructure sector pipeline well over USD730 billion (MEED), Turkey’s
construction and engineering firms have a large potential market to target

Going forward, Saudi Arabia has outlined its plans of taking up investment projects worth USD600 billion in the
next 20 years in Turkey
Banking emerging as new area for closer ties
Thank you