The oil-rich Kingdom of Saudi Arabia is the largest and wealthiest country in the Arabian Peninsula, but MENA’s regional powerhouse is something of an enigma to private equity investors. With a gross domestic product (GDP) of US$468bn in 2008, the Saudi economy has grown dramatically since the latest oil price boom started in 2003. GDP grew at an average of 5.0% between 2003 and 2007 according to the Economist Intelligence Unit (EIU).

By the end of 2007 rising oil exports, which account for some 90% of Saudi export revenue, had swelled government’s coffers, taking the trade balance from deficit to a healthy surplus of US$151bn, according to the EIU. To put the real wealth of Saudi Arabia in perspective, its state-owned oil business Saudi Aramco has 300bn barrels of proven oil reserves. Exxon Mobil, with 20bn of proven reserves, is the most valuable public company in the world, worth US$406bn at the end of 2008. But with the world economy slowing and the oil price well below recent highs, what are the prospects for Saudi Arabia?

“People think because the oil price has dropped to 40 bucks a barrel we are in bad shape, but definitely not,” says Fadi Arbid, executive vice president and country head for Saudi Arabia of private equity firm Amwal AlKhaleej, which is headquartered in the capital Riyadh (see profile, page 34). “The government budget is...

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