Why the Saudi Government has implemented banning exports of cement and Article

Why the Saudi Government has implemented banning exports of cement and explain the answer in terms of monopoly strategy - Article Example This ban in led to a 58 percent slump in the cement index and reduced profits for most cement producing companies. The decision by the Saudi government to stop and ban the exportation of cement was prompted by the soaring domestic prices of building and construction materials. In the subsequent discussion, we will attempt to identify and explain the cause(s) of such a shortage, and factor(s) leading to the imposition of the ban. In addition, we will assess the reasons for its partial uplift and subsequent reinstatement, how the government’s actions translate to monopolistic behavior. Finally, we will analyze the impact, and effectiveness of the monopolistic strategy on the economy and in particular in relation to the country’s projected economic growth. Despite being the highest producer of cement among GCC countries, Saudi Arabia has recently been experiencing cement shortages. This is because the manufacturing companies export most of their products to international market to fetch higher prices. The exportation of cements has grown steadily between 2004 and 2007. In 2006, the cement export volume was quoted as 2.26 million tones. Total production over the same period was estimated at 33.1 million tones against a local consumption level of 31.2 million tones. This translates to a shortage of approximately 0.36 million tones locally. These statistics show the total production of cement in Saudi Arabia was 33.1 million tons in 2006. However, the total consumption of cement in the same year was about 31.2 million tones (El-Quqa, Hasa, Desai, Rout & Gupta 2007, p. 9). Comparing the above statistics, it is evident that there has been a shortage of cement in the local market. Since this trend has continued, the government responded by banning exports of cement to alleviate the shortage in the local market. In 2009, the ban was partially lifted following an upsurge in demand in the Middle Eastern countries.