History of Saudi Arabia Economy
Saudi Arabia is a country whose economy is founded on oil production, with little diversification achieved in the past. The past rulers of the kingdom have exchanged cash for loyalty. This cash is mostly derived from oil business that they conduct in the international markets. However, increased calls for a transition from non-renewable sources of energy towards green ones have shaken the nation’s prosperity in the future. One of the biggest problems is the fluctuating oil prices in the international markets, which means that the Saudi government cannot plan adequately for the future of its citizens. In the past, the nation used to gain much revenue from the exportation of crude oil, making it one of the most affluent countries in the Middle East. The position has not changed but has become more threatened by increased global concerns about the high emissions from oil and petroleum products.
Another historically important factor is the fact that the Saudi government did little to invest in the people of the nation. As mentioned above, it shared oil revenues with citizens with minimum emphasis on the growth of critical sectors of the economy, such as the service industry. The untapped potential of the people of the country is a considerable wasted human capital. For example, the nation had to import labor, let alone other products that it could easily manufacture locally. Many of the citizens in the country might be affluent from the share of oil revenues offered by the government. Still, it is crucial to driving their personal and societal development. Additionally, the overdependence on oil and oil prices in the international market did not make economic sense as a result of the opportunity costs of forfeiting other economic development areas (Carey & Dana El Baltaji, 2018). It is the recognition that commenced with the late King Abdulaziz Al-Saud and advanced by the current Crown Prince Mohammed bin Salman bin Abdulaziz.
Plans for the New Generations in the Vision 2030
It was the Crown Prince who conceived the Vision 2030 with the sole aim of developing the potential of the people of Saudi Arabia and diversifying the economy of the country. In his speech, when inaugurating the vision, the Crown prince recognized that Saudi Arabia is a nation that has overly depended on oil exports in the past (Vision 2030 Kingdom of Saudi Arabia, n.d.). As such, the country has been at the mercy of international players in the oil and gas global industry. It was the fact despite the nation being endowed with many resources including other minerals, strategic geographical location for trade with Asia, Europe, and Africa, its position relative to holy sites of Kaaba and its people. The current ruler of the kingdom was keen to mention that the people of the nation are the most significant asset it owns. Tapping into the development capability of the citizens of the country has always been a significant drawback that the new leader aims at eliminating. He promised to start an array of programs that would ensure the realization of such an ambition, including training the young for job-related skills, supporting foreigners who would partner with the kingdom, and promoting diversification of the economy in general.
A major pillar of the Vision 2030 is the globalization of the nation through some innovative but decisive ways. The Crown Prince promised that he would open up the country to the world and the rest of the Muslim societies in the world. He recognized that though Islam controls the nation as its constitution, he was going to use moderation as the method for economic growth (Vision 2030 Kingdom of Saudi Arabia, n.d.). Particularly, the nation would become more tolerant of people of different religions and cultures from all over the world. The increase in diversity in the population profile of the country would enhance economic bolstering. More significantly, the Crown Prince said he would expand the nation’s largest oil-producing and refining company Aramco to become a conglomerate of globalization. He would do the same to other large companies in the country with the capacity to go and compete globally. The expansion towards full globalization promises a lot of changes in the Kingdom of Saudi Arabia (KSA). It would become the genesis of social, economic, and political changes that are critical for prosperity.
As an economy, KSA can be examined closely in terms of market factors to understand its position to suggest possible impacts of the Vision 2030. Trading Economics (2019) shows that the nation has depended on six major areas for its GDP that are mining, manufacturing, transport, construction, agriculture, and utilities, in the respective order of their salience. GDP from mining last stood at 256,721 million SAR in the fiscal year 2019. A large portion of the mining GDP directly came from the mining of oil and gas. From the list of areas that contributed to the nation’s total GDP of 785 billion USD, it is clear that the service industry in the nation is underdeveloped as well as other key sectors that would add to the wealth of the nation. Importantly, KSA has experienced a rather stagnated GDP growth rate oscillating between positive and negative growth records depending on the oil prices in the international market for the period between the year 2010 and the last fiscal year of 2019. The observation is critical in explaining why the Crown Prince expressed concerns about the growing problems with overdependence on oil for the economic growth of the nation.
From the simple history of the KSA, its outlined Vision 2030, and the market analysis, I can forecast positive returns on investment if the vision of the Crown Prince is properly implemented. Many nations in the world depend on the service industry, which focuses on people’s skills as well as small and middle enterprises (SMEs) with great GDP values. A good example is Australia. The right thing is investing in people, and the proposed programs of supporting the education of the young towards the attainment of job-related skills are a major step towards the direction (Amirat & Zaidi, 2019). Additionally, proper management of human capital through diversity and inclusion of populations is paramount towards the achievement of diversification of the nation’s GDP. Significantly, embracing globalization and its opportunities is the right roadmap towards prosperity. For instance, a small change towards the recognition of English as a language to unite people has major benefits (Alzahrani, 2017). It is a question of being open to new ideas, ideologies, and ways of doing things.
The vision outlined by the Crown Prince on major economic reforms to ensure the sustainability and prosperity of the nation of Saudi Arabia is feasible. The shift from oil dependence to a more diversified economy exploiting its fullest potential will surely succeed. However, as the Crown Prince mentioned, all people of the nation need to participate in making the transition a success. The best ways to achieve the goal are supporting and benefiting from the government initiatives and programs started by the new ruler. Finally, it is time for all citizens of the kingdom to embrace globalization and the diversity it introduces in the nation. They should welcome foreigners who seek to work with them, embrace free trade policies, partner with key international players, and open up the nation socially, economically, and culturally.
Alzahrani, A. (2017). Markets and language policy in Saudi Arabia: How the English language can contribute to the success of the Saudi vision 2030. International Journal of English Language and Linguistics Research, 5(6), 1-12.
Amirat, A., & Zaidi, M. (2019). Estimating GDP Growth in Saudi Arabia Under the Government’s Vision 2030: a Knowledge-based Economy Approach. Journal of the Knowledge Economy, 1-26.
Carey, G., & Dana El Baltaji, D. (2018). QuickTake: Saudi Arabia’s Shift. Retrieved 17 April 2020, from https://www.bloomberg.com/quicktake/saudi-arabia-economy
Trading Economics. (2019). Saudi Arabia GDP Growth Rate | 2010-2019 Data | 2020-2022 Forecast | Historical. Retrieved 17 April 2020, from https://tradingeconomics.com/saudi-arabia/gdp-growth
Vision 2030 Kingdom of Saudi Arabia. (n.d.).MESSAGE FROM HRH PRINCE MOHAMMED BIN SALMAN BIN ABDULAZIZ AL-SAUD | Saudi Vision 2030. Retrievedfrom https://vision2030.gov.sa/en/vision/crown-message