KINGDOM OF SAUDI ARABIA

Kingdom of Saudi Arabia

Kingdom of Saudi Arabia

A flood of petrodollars enabled some oil-producing states to maintain authoritarian forms of government. State officials lost control of society and an Islamic elite led the Iranian revolution of 1978 to 1979. In view of the key role played by the private sector in the ascent of the West, scholars began to examine whether the private sector in the Gulf could perform in a similar manner. When the inefficiencies of the state-directed economy became apparent, the government needed the private sector's economic agency, and thus encouraged the limited expansion of its business activities, its access to decision makers in government and its independence of central-government regulation. (Raymond A. Hinnebusch, 1993)It is this trend in the Middle East, spurred on by the Gulf States' fiscal constraints that will force the state to increase the political space available to the private sector, through which this group can establish a market economy, foster pluralistic politics and, in time, form a true civil society. In view of the important role that the private sector is expected to play, it is essential to define what the term "private sector" means in the context of the Gulf. The private sector, like the rest of Gulf society, is based on kinship relations. The state's commitment to rapid modernization also explains its generous financial assistance to the private sector. (Third Development Plan, 1980)However encouraging these trends may be, the Gulf has a well-established tradition of authoritarian politics and weak institutional linkages between state and society. This article will argue that the private sector in the Gulf has neither the power nor the inclination to force major changes in the non-democratic political regimes and state-dominated economic systems. There are three basic reasons for this: Political instability in the region discourages long-term investment, turning private-sector attention abroad; the persistence of an authoritarian political tradition prevents the institutionalization of democratic practices; and the state control of economic power in oil-producing states impedes the establishment of pluralistic politics and market economies. Therefore, it is not the private sector that will determine whether democratic institutions will be created and nurtured; rather, the state itself will be forced to reform political institutions in order to respond to the political and economic challenges of modernization. To understand how the forces outlined above define the role of the private sector in the Gulf, this article will examine the continuing effects of regional violence, domestic politics and oil-related development. Regional Security Security issues loom large in the minds of regional investors, because the geopolitical importance of the Gulf intensifies regional struggles for power. Oil and the Struggle for Power Although the exact amount of oil and gas available for exploitation in Gulf countries is a matter of debate, there is general agreement that the region's crude-oil deposits make up approximately 65 percent of the world's proven oil reserves, and its gas formations contain some 25 percent of the world's proven reserves. When the 1973 Middle Eastern war broke out ...