14
Jun

By Robert Mason

Utilising the high oil price regime since 2003, as well as renewing century’s old trade links with China and India, Saudi Arabia is now in a position to manage a gradual transition towards a diversified economy that includes development across all sectors. The education and health sectors are both experiencing rapid expansion and reform, and privatisation is leading Saudi Arabia more rapidly into industries such as energy, petroleum, infrastructure, services and large scale projects such as its economic cities. However, there are challenges which could significantly alter the timescale and nature of a future diversified Saudi economy. These can be divided into the following issues:

  • The ‘Arab Spring’
  • A re-evaluation of the strategic plan for the economic cities
  • The dialogue between the government and private sector (including the priorities of business versus internal security concerns)
  • Youth unemployment and the Saudi work ethic
  • Domestic constraints and pressures to slow the pace of reform

Like an oasis in the Empty Quarter, Saudi Arabia is managing to flourish despite being surrounded by a harsh Arab Spring in the North (Egypt), South (Yemen), East (Bahrain) and West (Libya). Saudi Arabia is in good shape financially, having injected $36 billion in social and welfare programs and boosted public-sector pay by 15%1. Arab unrest, the resignation of President Mubarak, and attacks on Libyan oil fields, has contributed to a $100 per barrel oil price. Therefore, Saudi Arabia is in a prime position to benefit within the production constraints of OPEC. It is only the misconception of some businesses which may look at the region with one lens that requires Saudi Arabia to maintain vigilance in the way it continues to promote itself as an attractive investment opportunity.

However, the immediate concern of the Saudi Arabian General Investment Authority (SAGIA) must be its economic cities since they have only attracted high net worth Saudi businessmen and received very little foreign investment. There remain questions as to how they will connect with the industrial cities and how the state should finance them. SAGIA is therefore reappraising its strategic plan and looking at an increased role for the private sector in terms of financing and risk. This dialogue will inevitably slow down the timescales and lead them to take a different form from that originally envisaged. Read more…

Robert Mason is a PhD candidate in the Institute of Arab and Islamic Studies, University of Exeter, UK. His thesis is on the economic drivers of foreign policy of Middle East states with reference to oil and gas exporters.

Comments

[…] From Wellhead to Wire: Diversification and its Challenges in Saudi Arabia: INTERNATIONAL RELATIONS BLOG […]

Encuestas Remuneradas February 6, 2012 - 11:35 am

the immediate concern of the Saudi Arabian General Investment Authority (SAGIA) must be its economic cities since they have only attracted high net worth Saudi businessmen and received very little foreign investment.

June 23, 2011 | SUSTG May 3, 2012 - 11:20 pm

[…] From Wellhead to Wire: Diversification and its Challenges in Saudi Arabia: INTERNATIONAL RELATIONS BLOG […]

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