SAUDI ARABIA ECONOMY

The Development of Saudi Arabia Economy

The Development of Saudi Arabia Economy

Introduction

The arguments underpinning the significance of each of these features are still as valid today as they were to Al-Farsy 25 years ago. The 1973-1974 oil crises and the 1991 Gulf War have demonstrated the unwavering economic, as well as the strategic global significance of Saudi Arabia, home to 26 per cent of the world's total oil reserves. Likewise, one could argue that the unquestionable importance of the Kingdom and the region, at times, might have played against regional stability and development, evidenced by the many wars and conflicts that the region has witnessed. Saudi politicians, economists, development practitioners and business agents alike, on the one hand, appreciate the good things that oil wealth has brought.

Oil Economy in Saudi Arabia

Saudi Arabia is best identified by its religious status as the spiritual destination for Muslims all over the world and second by having more than one-quarter of the global oil reserves. Thus, any developmental strategy for Saudi Arabia that does not adequately account for these two basic characteristics would be unrealistic and incomplete.

The creation of an indigenous productive entrepreneurship sector is most likely to make positive contribution towards each of the debated challenges facing the economic development of the Kingdom. Entrepreneurship has been globally promoted as an effective cure for the new/old unemployment challenge, through the creation of new business entities. Small businesses can be found in every sector of the economy and in every region of the country, thus they have the potential to limit the negative implications of the imbalanced development caused by huge oil revenues. The wealth created through local entrepreneurship is likely to stay in the country and change hands among its people in a more equitable manner. Consequently, it renders a vital contribution to the economic development of the country.

Even the economic benefits of the oil rents were played down by Sullivan (2004) who pointed out that the “oil consuming” rather than the “oil-producing” countries have achieved higher growth rates and produced more jobs for their citizens. He further explained that Arab oil countries have failed to achieve and sustain growth. Instead, their productivity growth rates during the past 20 years, on the average, were negative.

What differentiates the course of development in Saudi Arabia from that of the majority of other developing countries is that Saudi Arabia was able to instigate its developmental process relying on its own immense wealth, rather than depending on crippling loans and demeaning handouts (Al-Farsy, 1980; Yorke, 1980). Development assistance is usually a highly political issue because aid rarely comes unconditional and without hidden agendas that undermine the quality of its outcome. Furthermore, Saudi Arabia did not have to accommodate the World Bank's demands nor did it have to report to the International Monetary Fund (IMF). Massive oil revenues also enabled the Kingdom to have “reasonable” control over its development plans and to abridge the lingering process of saving and capital buildup necessary for economic development (Shihab, ...