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In 2014 Saudi Arabia spent 35% of its budget on defence, equivalent to roughly $80.7bn. The coming years are likely to see increased emphasis on homeland security in three areas: securing the Kingdom’s northern and southern borders, cybersecurity and counter-terrorism. The Kingdom remains focused on developing a sophisticated domestic defence industry, investing heavily to this end in research and development, with various agreements in place between defence companies and Saudi research institutions. These are complemented by a number of collaborative projects in defence-related disciplines that are being forged by leading US universities and their Saudi counterparts. Meanwhile, the offset rules in place ensure that Saudi companies and workers can benefit from the expertise offered by foreign firms that win tenders in Saudi Arabia’s defence sector. This chapter contains interviews with Prince Turki AlFaisal bin Abdulaziz Al Saud, Chairman, King Faisal Centre for Research and Islamic Studies; and Prince Mutaib bin Abdullah bin Abdulaziz Al Saud, Minister, Saudi Arabian National Guard.

The abundance of hydrocarbons in the Kingdom has led to a proliferation of downstream petrochemicals businesses. The natural gas that is allocated to producers at a subsidised price forms a significant part of Saudi Arabia’s value proposition to foreign investors. Demand from rapidly expanding markets in Asia, as well as steady sales to established Asian centres, should ensure that the Kingdom’s petrochemicals industry strengthens its position in the medium term. Meanwhile, the country continues to focus efforts on diversifying non-oil growth, with the combined contribution of mining and non-oil manufacturing rising from 7.6% of GDP in 2012 to 8.2% in 2013 and 8.7% in 2014, while the Kingdom’s steel production increased by 15% from 2013 to 2014, the second-highest rise anywhere in the world. Four new economic cities are due for completion by 2020 in line with the country’s 10th Development Plan, which aims to deliver more even distribution of industrial development across the country. This chapter contains interviews with Mohammed Al Kathiri, Secretary-General, Riyadh Chamber of Commerce and Industry; and Mohanud Helal, Secretary-General, Economic Cities Authority (ECA).

In 2015 Saudi Arabia will have generated twice as much electricity as it did in 2000 as demand in the Kingdom continues to expand. Energy-intensive industries, as well as highly subsidised utilities prices for customers, look set to push demand even higher in the coming years, and the government is increasingly looking to boost private sector participation in the sector. Numerous initiatives are under way that aim to manage demand and promote energy-efficient practices, particularly in construction, where there has been a focus on implementing cleaner and more efficient technologies. Meanwhile, advances in cogeneration technologies have boosted production at the country’s two largest cogeneration facilities, at Jubail and Shuaibah – advances which have saved power while boosting the Kingdom’s overall desalination capacities. This chapter contains an interview with Jean-Pascal Tricoire, CEO, Schneider Electric.

The Kingdom’s second-largest city and its most significant seaport, Jeddah is one of Saudi Arabia’s key economic engines. While rapid population growth has placed a strain on both housing and public infrastructure, economic growth remains strong, with GDP per capita increasing by 2.4% in 2014 while employment rose by 3.4%. Expansion plans for Jeddah Islamic Port, which is key to the region’s growth and already handles 55m-60m tonnes of shipped goods per year, are expected to increase its capacity by 45%. Among the numerous other development projects are under way, most notable is Kingdom City in Obhor to the north of Jeddah, whose centrepiece will be the world’s first building to be over 1 km tall: Kingdom Tower. This chapter contains an interview with Mazzen Batterjee, Vice-Chairman, Jeddah Chamber of Commerce and Industry.

The regulatory intervention that followed intense price competition in 2013 has enabled Saudi Arabia’s insurance market to return to a trajectory of sustainable growth over the course of 2014. Competition in the sector is still stiff, however, with 35 insurance and re-insurance companies in operation as of December 2014. In 2006 the authorities enacted the Health Insurance Law, which initially required all expatriates working in the Kingdom to have private insurance and in early 2011 was extended to cover all private employees. Meanwhile, the cooperative insurance model, a variation on sharia-compliant takaful insurance, continues to grow in the Kingdom, and in 2014 Saudi Arabia accounted for an estimated 48% of global takaful contributions. Elsewhere, local players can expect to benefit from new protocols and regulations that will enable domestic insurers to compete for upcoming mega-projects in the future. This chapter contains an interview with Ali Al Ayed, General Director, Insurance Control Department, Saudi Arabian Monetary Agency (SAMA).

A growing role for the private sector has brought greater investment opportunities in Saudi Arabia, with both domestic and international players taking a greater interest in the local market. With the stock exchange opening its doors to foreign investors and a recovery in the number of IPOs, significant capital inflows are expected in the short to medium term. A number of corporate and private investors have increasingly started to deploy their assets in venture capital, and several angel investor networks have been established. Foreign interest is also on the rise with international private equity players paying closer attention to the Saudi market, attracted by its size, growth rates and large domestic consumer market. Elsewhere, the government has stepped up its efforts to enhance the level of corporate governance in family-owned businesses, in a bid to further streamline private sector involvement.