The Economic Growth of Saudi Arabia Essay:
Saudi Arabia is known as the main oil producer and exporter in the world. Due to large reserves of oil, Saudi Arabia made a great progress and increased its economic strength.
To understand better the importance of oil for this country it is enough to look at the list of its export commodities. It includes only petroleum and petroleum products, which bring more than one hundred billion of dollars to the state treasury every year and make up about 75 % of the country revenues.
Oil industry arose in Saudi Arabia before World War I when petroleum deposits were discovered. The discovery of oil was a great event in the history of Saudi Arabia that changed radically its economy. Saudi Arabia turned from a poor area with desert princedoms into a developed state with high economic indicators. However, oil industry began to develop intensively only after World War II, especially in 1970s. It was Arab-Israeli war of 1973 that expedited the development of oil industry and increased Saudi Arabia revenues.
Since that time Saudi Arabia began to progress at a rapid pace and became one of the countries with the fastest growing economy in the whole world. Though this country experienced the slump in oil demand in 1980s as a result of high petroleum prices, today the economy of Saudi Arabia is still growing and this country occupies a leading position in Organization of Petroleum Exporting Countries (OPEC). Possessing one quarter of all oil reserves in the world, Saudi Arab became the country with one of the highest per capita income, which is $15,500.
It is necessary to mention that the country has rather small territory and population. The resources of oil had not been so important without the influence of globalization that touched all corners of the world and developed due to different factors.
At first sight, the Middle East may not seem an attractive region for investment if to consider its territory and population. However, regarding its resources of oil and gas that are 62 % and 40 % of the world’s reserve respectively, it becomes clear why these countries take an active part in globalization.
Today according to its nominal gross domestic product per capita Saudi Arabia occupies the forty-first place in the world and according to its Human Development Index it is on the sixty-first place in the world.
The government of Saudi Arabia understands the importance and necessity of the development of infrastructure and of the country in the whole and tends to make investments into the development of cities in Saudi Arabia. The project of launching six Economic cities is going to be finished by the year 2020. This event will contribute much to the development of the economy of Saudi Arabia as it will diversify it and will help to increase the standard of living in the kingdom. Besides these cities are expected to add $ 150 billion to GDP. This project will also help to strengthen the private sector. “Skeptics doubt that the Kingdom is writing a new chapter in its economic history, but many analysts contend that the situation today is different from the oil boom a generation ago. They argue the pieces are in place to create sustainable private sector growth” (Ramady 156).
Undoubtedly this project can be already named very successful as nowadays due to it Saudi Arabia enters the list of ten the most attractive places for foreign investment.
Saudi Arabia is the country that is considered to be the best place in the Arab world to do business. Therefore, no wonder that this country is attractive for foreign investors.
However, to increase investors’ interest the country has much to do. The first thing is to pay much attention to the educational system in the country in order to have well-qualified people, in other words to have good human capital. Today Saudi Arabia risks to have the unemployment increased in the context of rapid developing of the economy. Being not quite prepared, young population rapidly enters the labor market. It may entail low labor productivity.
Economy of Saudi Arabia is based not only on the foreign direct investment but also on the export and import markets. If to examine its export market, one can see that among its export partners the first place is occupied by the USA where 19.3% of all Saudi Arabia’s export goes, Japan is at the second place (16.4%), South Korea is the third – 8.7%, the People’s Republic of China is the forth – 5.8%, and on the fifth place is Singapore (4.5%).
“Saudi Arabia’s economy is the proverbial “sleeping giant”. Expanding rapidly Saudi Arabia’s oil dominated economy is the largest in the Arab world. Utilizing oil revenues to finance infrastructure development and modernization programs, Saudi Arabia aims to diversify its economic base and bring an increase number of nationals into the work force” (Abbondante 25).
In the context of such rapid development Saudi Arabia can be considered as a rapidly developing country with a rather stable political situation.
To make a conclusion we can say that Saudi Arabia is a country that can has a bright example of a fast-growing economy. Today the growth continues and helps the country to enter different world organizations and play an active role in the world economy. It exports oil to the largest and the most developed countries of the world, which helps it to thrive. Undoubtedly these are oil reserves that made Saudi Arabia prosperous. However, the process of globalization, which is in full swing and has involved all the countries contributed much to the development of Saudi Arabia exports and permitted this country to provide oil for the whole world.
Analyzing its economic indexes we see that the development of the country continues and governmental projects contribute much both to the development of the country itself and to the increase of foreign investment.
Actually being based only on the oil reserves and petroleum products this country managed to achieve great results. However, it still has many challenges. The necessity to have better-qualified people, to develop technologies and to increase labor productivity is obvious. Fortunately, the government realizes all these problems and tries to find ways out.
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