The Kingdom of Saudi Arabia is one of the fastest growing economic countries in the Middle East and North Africa, where it has 25% of the aggregate territorial GDP (Gross Domestic Product), mostly, as a result of its topographical area that causes it effectively get to fare and import showcases in Europe, Asia, and Africa. .The Saudi Arabian economy is dominated by oil and has been for many decades. Oil without a doubt speaks to the foundation of the Saudi economy, as the Kingdom is a main maker and exporter of the rough, notwithstanding being the all-inclusive biggest country with demonstrated oil holds, which remain at around 25% of the aggregate gross global oil saves. Although Saudi Arabia’s economy is heavily dependent on oil revenue, it is trying to diversify so it can reduce its dependency.Moreover, the Kingdom has other regular assets, including an extensive variety of mechanical crude materials and minerals, for example, Bauxite, Limestone, Gypsum, Phosphate and Iron metal. The Kingdom, vigorously, puts resources into the national economy, with a specific end goal to accomplish the vital objective of monetary enhancement, i.e. to incorporate industry, exchange, administrations and different parts, to add to the riches age process. In April 2016, the kingdom unveiled the significant economic reform plan for the future, vision 2030.this vision is going to help in expanding the economy. It mirrors the nation’s quality and abilities to satisfy its objective of building a strong ground to enhance the economy.
In 1932, the largest Arabian monarchy was established, and it was named Saudi Arabia.Between the years 1920s and 1930s, the kingdom’s economy were dependent mainly on pilgrimage (Hajj and Umrah), taxation system, Zakat from Muslims and Jizyah from non-Muslims.
in 1933, an agreement was signed between King Abdulaziz; the founder of the Kingdom of Saudi Arabia and American Company of Standard Oil of California (SOCAL) which is what is known today as Saudi Aramco. this agreement was signed to start the process of exploring the country’s desserts looking for oil. The contract stated that the Saudi Government would acquire 25% of the company and will own it on a full scale by 1980 or max by 1985.
Saudi Aramco has become the world largest totally integrated company that has managed all the oil exports and promoting. When the crises in 1997 were faced by Saudi Arabia the result was that it becomes the key player because Saudi Arabia was the major country in producing and exporting the oil.
a huge quantity of oil started to be produced during 1938. by the year 1945, the oil production reached 21.3 million barrels. This amusement changes in the economy shifted the kingdom from being a Bedouin society into a developing country. unlike other developing countries, Saudi Arabia developed rapidly as a result of oil wealth.
between the year 1950s and 1960s, oil revenue was put in for developing existing ministries such as finance and foreign affairs and setting up new ministries for e.g health, education, agriculture, mineral resources etc.
Saudi Arabia relies heavily on its income from oil. It holds 18% of the world’s oil reserves and ranks as the largest oil exporter in the world. Saudi Arabia has become a main player in the world economy, Therefore, the Kingdom remains vulnerable to changes in the global oil market.
first Saudi Arabia crisis
Saudi Arabia has witnessed its first boom which happened during the 1970s and early 1980s, it was a period of growth and increase in oil prices. arise in the GDP appeared from 10.4 billion riyals to 164.53 billion (Al-Rasheed, 2002). This rise in revenue is a direct result of the rise in the oil prices.
In 1960, Saudi Arabia along with 4 other oil producing countries (Iran, Iraq, Kuwait, and Venezuela. ) established an intergovernmental organization “OPEC’s.OPEC objective is to coordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry” (OPEC, n.d.). Saudi Arabia’s price per barrel of oil began from US$0.22in 1948 to US$0.89 in 1970. By 1973, the price had reached to US$ 10. In 1982 the average export price per barrel of oil increased above US$30. Between 1973 and 1980, government oil revenues increased from US$4.3 billion to US$101.8 billion (Ramady, 2005).
due to the oil shock in the 1970s, the demand for oil has dropped and caused a huge surplus in crude oil. industrial nations’ consumption of oil has declined as a reaction to the price boom in 1973 . in addition, because of the decline in the demand of oil, Saudi Arabia has suffered heavily and its economic power was weakened. The general strike of Saudi economic policy underwent a major change after the oil price crash of 1986. The serious reduction of foreign assets, combined with the decline in oil revenues, needed an adjustment economic policy (Ramady, 20)
second Saudi Arabia boom
the second oil boom period was between the years of 2003 and 2013. Saudi Arabia has become the 19th-largest economy in the world. the GDP of the country has doubled, the household income has witnessed a rise by 75 percent, and 1.7 million jobs have been created for Saudis, including a huge percentage of Saudi women.
The government has invested heavily in education, health, and infrastructure and built up reserves (McKinsey & Company, 2015). during this period, Saudi women played an important role in the Saudi economy.
in 2007, the world economic growth rate indicated a decline from 5.2% down to 3.2% in 2008, this decline is a result of the global financial crisis. Demand for oil and its price has fallen. However, the impact on Saudi Arabia was minimum compared to other advanced economies.
To avoid this crisis , the following measures were appointed by the Saudi supreme economic council;
1-calling upon ministers of finance and governors of central banks in GCC countries to coordinate their stances (SAMA, 2009).
2-Reducing the reserve requirement for banks and the costs of financing if necessary.
3-Follow-up by the government to ensure the soundness of domestic banks and banking deposits.
4-Provision of liquidity to banks by SAMA whenever needed.
in 2015, Saudi Arabia has suffered from a budget deficit estimated at 13% of GDP, and a deficit of $87 billion in 2016, which is going to be financed by bond sales and drawing down reserves .the following are some of the plans to cut the capital deficit:
• introducing a value-added tax and reducing subsidies on electricity, water, and petroleum products.
• listing shares of ARAMCO
• privatization and diversification of the economy.
saudi Arabia previously was focusing on diversification through the following sectors: power generation, telecommunication, natural gas exploration, and petrochemical.but nowadays, the government is emphasizing to diversify the private sectors such as healthcare, education, and tourism.(Patchett-Joyce, 2016). For many years, the kingdom intended for diversification, but because of the decline in oil prices, the government made a fast movement to improve its economy.
5 Years Plan:
Saudi Arabia has developed some plans to ensure the country’s successfulness. As we all know that the economy of any country is the key to its strength, so much effort and time are needed to plan for an economy. These plans focused on setting goals, analyzing potential economic resources, creating new economic opportunities, and resolving obstacles.Saudi Arabia is among the few nations that still produce five-year plans. India and China do, as well. However, unlike China, Saudi Arabia has not consistently implemented what it states in its plan documents.
Saudi Arabia has set ten five-year plans that aimed at diversifying the economic resources. Instead of relying on the Oil sector, which is considered an unstable economical factor that is affected by the fluctuating oil prices, the government tended to focus on revenues from the private sector, and international investments. As a result, the government has allocated $9.2 billion (SR 34.5 billion) to cover economical projects in the five-year plan.
The Kingdom’s five years development plan:
• First Development Plan: 1390-1395 AH (1970 – 1975)
• Second Development Plan: 1395-1400 AH (1975 – 1980)
• Third Development Plan: 1400-1405 AH (1980 – 1985)
• Fourth Development Plan: 1405-1410 AH (1985 – 1990)
• Fifth Development Plan: 1410-1415 AH (1990 – 1995)
• Sixth Development Plan: 1415 to 1420 AH (1995 – 2000)
• Seventh Development Plan: 1420 to 1425 AH (2000 – 2005)
• Eight Development Plan: 1425 to 1430 AH (2005 – 2010).
Achievement of such an economic transformation required deliberate planning and careful implementation of a development program with clearly defined objectives. The quest for economic development and growth began in earnest with the introduction of the First Development Plan in 1970. This was the first of a series of five-year plans, each considered a step that has to be taken before the economy.
The first phase of this process was to establish an infrastructure that could support a modern economic base. The next was to develop the human resources necessary to help bring about the planned economic transformation. Finally, the focus could shift to economic diversification, including expansion of the industrial, agricultural and other sectors, which is now well-advanced.
The establishment of the physical infrastructure was accomplished in stages during the first three development plans. As the infrastructure was taking shape, the government launched a major effort to expand the industrial base. This was done along two separate, but parallel, courses. One aimed at the expansion of the country’s oil industry and the other at establishing a modern non-oil industrial sector.
In addition to optimizing revenues from Saudi oil production, the modern oil industry plays an equally important role in the development of the non-oil industrial sector by providing the raw materials and feedstock that would facilitate this growth.
By 1985, with most of the physical infrastructure in place, attention shifted to diversifying economic sources. “Our economic policy is based on lessening our dependence on the export of crude oil as the sole source of income to the state,” emphasized the Custodian of the Two Holy Mosques King Fahd Bin Abdul Aziz.
Both the Fourth Development Plan (1985-89) and the Fifth Development Plan (1990-94) emphasized strengthening the growing private sector and increasing the efficiency of the industrial sector.
Throughout the course of the development plans, Saudi Arabia’s steady but dramatic industrial and economic transformation has been accomplished through the careful guidance and active support of the government. To judge the success of this effort one need only consider that between 1970 and 1992, Saudi Arabia’s gross domestic product (GDP) increased three-fold to 112.98 billion dollars and that the non-oil sector’s share of GDP increased from 46 percent to 67 percent.
All success stories and dreams began with a vision. According to Prince Mohammad Bin Salman, Saudi Arabia’s vision is based on strong pillars and it’s not random.The first pillar is the kingdom’s status; being the heart of the Islamic and Arab world. The second pillar is the country’s tendency to become a global economic power by diversifying the economy and the revenues. The third pillar is Saudi Arabia unique location, as it is considered a gateway that connects the three continents (Asia,, and Europe).
Vision 2030 was published in April 2016. According to Prince Mohammad Bin Salman, the main goal is to diversify the economy through a set of economic and social policies instead of relying totally on oil exports. Moreover, It has other objectives: health, education, infrastructure constructive, and tourism. this vision is composed of three main themes; each of which has a number of goals to be achieved (Al-Saud, 2016). The themes are:
• A Vibrant Society.
• A Thriving Economy.
• An Ambition Nation.
HOW will Saudi Arabia ACHIEVE the vision
the kingdom has an ASPIRATIONS AND HOPES to be achieved, it has ALREADY LAUNCHED Many TRANSFORMATIVE PROGRAMS THAT has PAVED THE WAY FOR THE VISION AND WILL HELP ACHIEVE the gOALS.
THESE INCLUDE, BUT ARE NOT LIMITED TO THE FOLLOWING:
1-THE GOVERNMENT RESTRUCTURING PROGRAM
2-THE STRATEGIC DIRECTIONS PROGRAM
3-THE FISCAL BALANCE PROGRAM
4-THE PROJECT MANAGEMENT PROGRAM
5-THE REGULATIONS REVIEW PROGRAM
6-THE PERFORMANCE MEASUREMENT PROGRAM
In order to diversify the Saudi economy, the kingdom has established a certain global economic trend that would evolve its economy and ease its dependence on oil. The trends include knowledge-based economy, green economy, and privatization.
the first economic trend is a knowledge-based economy.A knowledge economy is an economy in which the production of goods and services is based primarily upon knowledge-intensive activities. In a knowledge economy, a large portion of economic growth and employment is a result of knowledge-intensive activities. A knowledge-intensive activity involves the collection, analysis, and synthesis of information.
According to Prof. Edward Steinmueller, every society is knowledge-based, however, every knowledge is different. This knowledge is dependent on the economic interest of each country, for example, a country that is petroleum reliant has to acquire elevated knowledge in that area in relation to other knowledge (Steinmueller, 2013)
Saudi Arabia is slowly trying o transfer its economy from an oil-based economy into a knowledge-based economy. This transformation process is going to slow compared to other countries that adopted this model for the following reasons:
1. The Saudi human resources constraints.
2. The brain drain (immigration).
4. The low investment in research and development.
5. The unstable political situations in the Arab region.
6. The current ineffecient educational standards.
7. The dependence of the private sectors on the international institutions instead of the locally existed universities in research and development.
8. The drop of the oil prices (Khorsheed, 2015).
the second economic trend is green economy .green economy is an economy that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. It can be seen as a means to achieve a resilient economy that provides a better quality of life for all within the ecological limits of the planet. It can be also seen as a means to link the economic, environmental and social considerations of sustainable development in such a manner that long-term economic development is achieved by investing in environmentally friendly and socially equitable solutions.
. In the past, while much of the rest of the world spent its time pondering issues such as global warming, water, air, and soil pollution, over-exploitation of resources, and a myriad of other environmental concerns, the Saudi people and government seemed to be primarily focused on expanding their capital in a globalized economy. However, in 2015, for the first time, this trend began to show legitimate change. This new emphasis on environmental concerns has caused some interest and uproar, specifically in the economic sector. Therefore, we will be discussing the barriers, strategies, and opportunities that might impede or encourage Saudi Arabia in its quest to develop a greener and more sustainable economic infrastructure. Some data ,reliable statistics ,etc concluded that, while change will be difficult and, possibly slow, Saudi Arabia should expect to see greener projects and initiatives transpiring in their homeland over the course of resource
Saudi Arabia’s Major Environmental Concerns
—Water and Sewage Issues
It is a well-known fact that the Arabian Gulf’s hyper-arid climate creates major problems for potable water which, in turn, results in many, related problems such as the disposal of waste via a sewage system (Kajenthira, Siddiqi, & Anadon, 2012). Most Gulf and Middle Eastern nations, to include Saudi Arabia, lack sufficient water sources for its people and agricultural needs (Barau & Al Hosani, 2015).
– -Clean Energy
Ironically, despite the fact that Saudi Arabia is amongst the leading petroleum producing nations in the world, it still has plans to transition its own energy supply to sustainable and renewable resources. Currently, its use of petroleum-based energy products has caused major problems. Not only do these energy sources pollute the air, they also wreak havoc on the limited water supply and degrade the quality of the soil (Rahman, Rehman & Abdul-Majeed, 2012). Moreover, initial studies have indicated that the process of extracting the oil is just as damaging, if not more so, to the Saudi and global environment than the burning of fossil fuels. This has caused great concerns, to include an increase in health-related issues (Wise, 2015).
little to no attention was given to sustainable building practices. Rather, buildings, roadways, and other development was simply done as quickly and cost-effectively as possible
In sum, Saudi Arabia has many environmental issues that need to be addressed. These include, but are not limited to, water shortages that lead to sewage issues, a strong reliance on non-renewable, petroleum-based dirty energy, and unsustainable construction. The next section will carefully explore some of the major obstacles that stand in the way of creating greener infrastructure in Saudi Arabia.
Green economy is based on six main sectors :
4- water management
5- waste management
6 -land management
Finally, the third economic trend is privatization. it is the process of transformation of national services and assets from the public sector to the private sector in small, large or full scale.
The concept of privatization is to limit the government role and gives the functions of justice, security, basic services and set the state’s regulation, laws and policies in one hand, and empower the private sector to provide other services. It is used as a technique to correct the economic situation and reinforce labor performance to increase the rates for sustainable growth. The rationale behind privatization is that private enterprises are more motivated to gain profit, therefore, they perform in a more efficient and effective way (Loveman, 1991). statistics reveals that privatization increase operational efficiency by 26%.
Privatization has gained special attention in vision 2030. This proves that privatization is an important aspect of any economic growth (Al-Saud, 2016)
Women Empowerment refers to increasing and improving the social, economic, political and legal strength of the women, to ensure equal-right to women, and to make them confident enough to claim their rights, such as:
• freely live their life with a sense of self-worth, respect, and dignity,
• have complete control of their life, both within and outside of their home and workplace.
• to make their own choices and decisions,
• have equal rights to participate in social, religious and public activities,
• have equal social status in the society,
• have equal rights for social and economic justice,
• determine financial and economic choices,
• get equal opportunity for education,
• get equal employment opportunity without any gender bias,
• get safe and comfortable working environment.
remarkable progress has been achieved in the Kingdom in the status of women in education, employment, and health.
Vision 2030 aims to increase the percentage of women in the workforce from 22% to 30
in conclusion, saudi arabia has accomplished the greater part of the 17 objectives of complete reasonable improvement of the UN ,along these lines outperforming the accomplishments of the UN motivation 2030 (arab news,2017)
the success in achieving those objectives are an aftereffect of the auxiliary change received by the administration of king Salman on numerous advancement levels including social, financial, administration and productive.
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