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Economy Report: Saudi Arabia Adam Barnett
Saudi Arabia. To many, this country is a holy land, housing the Mecca city, the holiest
city for Muslims. To about just as many people, though, this country is known for its
increasingly large amount of oil it produces more and more of every year. Because of its
production numbers, and the international outcry for more oil, Saudi Arabia has become one of
the richest economies in the world.
Saudi Arabia became Saudi Arabia in 1932, winning its independence from Britain and
France. Not long after, oil was discovered in the country by U.S. geologists. Large-scale oil
production began sometime after World War 2, setting the stage for rapid economic
development. After the results of the oil boom started slowly growing Saudi Arabia’s economy
in the 1960s, by the 1970s it vastly boosted and transformed the country, with an incredible
1,858% increase in the nation’s GDP per capita.
Nowadays, Saudi Arabia is the world’s largest exporter of petroleum, second in
production only to Russia (a very close second, too). It is home to about 20 percent of all the
world’s oil reserves, and plays a leading role in OPEC, the Organization of Petroleum Exporting
Companies. Oil makes up around 90% of Saudi Arabia’s exports and 75% of government
revenues. Most of this oil is produced by the company Saudi Aramco. As for all Saudi Arabian
products not dealing with oil, they only make up around 10% of the GDP and around 6% of the
country’s employment. These include fertilizer, commercial ship & aircraft repair, plastics, and
metals, and the computer industry, among others. Many foreign workers make up the country’s
work force, around 5.5 million (actually, almost 1/3 of the country’s entire population is non-
national). In 2005, Saudi Arabia joined the World Trade Organization (WTO), though there
maintains certain areas where foreign investment is prohibited.
At its heart, Saudi Arabia is a centrally planned economy, in which the state manages the
economy. It is an oil-based economy, making it a modern industrialist state while still
idealistically sticking to traditional Islamic values and customs. Thanks to petroleum, today
their GDP lies somewhere around 600 billion dollars. The United States is both Saudi Arabia’s
biggest import and export partners, with 17% of all exports and around 12% of imports. China
and Japan are also big traders with the Saudis. Spec-wise, Saudi Arabia has seen a GDP growth
of 6% percent in recent years, its GDP per capita lies at about $21,000; inflation is at 10.3%, the
unemployment rate is about 11.8%, and the gross external debt is at $71.5 billion.
Though oil revenue is the main focus of Saudi Arabia’s economy, in recent times there
has been more emphasis on industry and agriculture than before. Probably the largest obstacle to
further economic growth for Saudi Arabia would be the uneven match-up between the needs of
the private job market and the needs of Saudi graduates. Since the 1970s, there has been many
development plans to do just this. The first two plans were focused on infrastructure, achieving
much progress in that area. The development plans that would come after would focus on things
such as education, health, defenses, social services, government costs, and economic
diversification. For the most recent plan that took effect around 2000, the Saudi government has
attempted to quell the aforementioned obstacle to economic growth by setting a target of
creating over 800,000 new jobs for Saudi nationals. Time will tell if this if this plan will set out
to do just that.
Looking toward the future, I believe it’s fair to say that as long as there is a high demand
for petroleum around the globe, Saudi Arabia will continue to be doing just fine, at least for the
government’s sake. As long as the rest of the world will still be hopeless fools for a slowly
depleting fossil fuel, the Saudi’s will continue to enjoy their multi-billion dollar economy. Saudi
Arabia has certainly found a way to appeal to the rest of the world; it is now up to the Saudi
government to appeal to its own people just as much.
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