1. Saudi-Turkey Economic Relations Abdulkareem Abu al Nasr CEO 27April, 2011

2. 2 Saudi Arabia and Turkey, the two emerging giants 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 Saudi Arabia real GDP growthTurkey real GDP growth Source: IMF World Economic Outlook

3. Set to grow further in the coming years The Saudi economy with an estimated GDP of USD434 billion is the 23 rd largest economy in the world while the USD729 billion Turkish economy is the 17 th 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 Saudi Arabia & Turkey current standing (2010)Saudi Arabia & Turkey projected standing (2015) The Turkish economy is currently the 17 th largest in the world while the Saudi economy is 23 rd in world ranking By 2015, the Turkish economy would be over USD1trn and remain the 17 th largest while the Saudi economy at USD656bn would be the 19 th largest in the world Source: IMF World Economic Outlook

4. Favorable demographic profile Saudi Arabia demographic profile Turkey demographic profile 4 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 Turkeys 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% 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 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 Source: UN Population Division, World Bank

5. Strong government finances Saudi Arabia government debt & current account balance Turkey government debt & current account balance 5 One of the defining characteristics of both these economies is that they have strong government finances with public debt at significantly low levels 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 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 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 Turkeys 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 Source: IMF World Economic Outlook

6. Increasing foreign direct investments 6 Source: UNCTAD 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 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

7. Booming external sectors 7 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 Arabias exports peaked at over USD300 billion in 2008 on the back of significant increase in oil prices while Turkeys 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 Saudi Arabia exports and imports (USD billion)Turkey exports and imports (USD billion) Source: SAMA, Turkstat, IMF World Economic Outlook

8. 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

9. Joint effort from both countries 1974 Trade agreement Economic and technical cooperation agreement 2007 Agreement on Avoidance of Double Taxation 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 1986 Agreement on coordination of highway transport and regulation Agreement on regulated maritime transport management 2008 KEK IX. Term Protocol Major milestone changes in the Saudi Arabia-Turkey economic partnership

10. Increasing trade between the two 10 Bilateral commercial exchange reached a total of USD5.5 billion in 2008, up from around USD1.3 billion in 2002 Saudi Arabia is Turkeys 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

11. Oil dominates the trade equation Turkeys exports to Saudi Arabia (USD million) Turkeys imports from Saudi Arabia (USD million) The trade between Saudi Arabia and Turkey is dominated by oil with the commodity accounting for over half of Turkeys total imports from Saudi Arabia Turkey accounts for nearly 2.1% of Saudi Arabias total imports and 1.0% of total exports 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

12. 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 Turkeys 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 Turkeys 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 Arabias construction and infrastructure sector pipeline well over USD730 billion (MEED), Turkeys 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

13. Banking emerging as new area for closer ties

14. Thank you