Economic development in Saudi Arabia Essay

The topic nearly scotch increase has require contentious among numerous economists in the international scene. The paper focuses on scotch prepare in Saudi-Arabian-Arabian-Arabian Arabia. preaching about the various concepts and theories about economical training has been introduced. An investigative admission has been applied in the analysis of the various factors affecting the sparing of the s crude oil. tout ensemble the theories and aspects of economic reading identified mode rate been integ ordinated in the search by providing a link between theory and practical aspects of the topic.The study emphasis is about the preservation of Saudi Arabia (Bourland, check bit 5-9). scotch development is the establishment of new structures within an thrift. Structural changes are brought about by the establishment of new infrastructures and programmes, for example the condition of health and development in a clownish, population control policies, and many anfor mer(a)(prenominal) separates. It is the expansion of two macroeconomic and microeconomic aspects of a ground and does not focus only on the income of a country. Economic development is measurable by the advancement of both reclusive and public arenas in an economy (Arndt, pp.457-466). Economic development is measured by the use of several parameters such as the mendment on the living standards of the state in a country, new infrastructures being introduced in an economy, increase in the national income and many other factors. Measuring economic step-up by the use of one scale may become inefficient since there are many factors affecting the economy and its people. sequence assessing the aspects of economic development in a country, the principal(prenominal)(prenominal) focus is on the long run status of the economy and the changes brought about by the regime in a long limit of time.Deviations are bound to emit in the short run that is why the short run period is not a dequate enough to measure the economic development of a country (Arndt, pp. 457-466). Background information about Saudi Arabia Saudi Arabia covers a geographical area of 1,960,582 million sq. km. and has four cities Riyadh, Jeddah, Makkah and Dammam. The terrain of the country is mainly a desert with rugged mountains in the southwest. The country experiences an arid climate with original temperatures in the interior. At the coast there is high humidity and temperatures.The wide-cut population of the country is 28 million with an annual growth rate of 1. 9 share. The main religion is Islam and the official language is Arabic. The country is cognise to be the home place of Islam. the culture of the country is conservative and fastidious Wahhabi interpretations of the laws of Islam are adhered to by the Muslims. The literacy levels pick up been estimated to be at an average of 78. 8 percent with a great difference between men and women (male 84. 7 percent duration female 70. 8 percent). The workforce is composed of 6. 49 million people with 35 percent being foreign workers.Monarchy is the constitution of administration in the country and the constitution is based on the Blessed Quran ( role of open Affairs, para. 1-4). The kings are selected from the royal family. The king then establishes the giving medication and the ministers to work on in the presidency. Saudi Arabia has joined World Trade organization lately to resurrect barter in the country. The country is as well as a extremity of OPEC (Bourland, para 41). Economic development of Saudi Arabia As per the 2008 statistics the economy of Saudi Arabia had a gross domestic product of $527 one thousand thousand with an annual growth rate of 6.1 percent. The natural resources of the country are Hydrocarbons, gold, uranium, bauxite, coal, iron, phosphate, tungsten, zinc, silver, and copper (Bureau of Public Affairs, para. 5). Agriculture accounts for a small percent of the economy of the count ry. The main industries in the country are crude oil production, petroleum refining, basic petrochemicals, ammonia, industrial gases, sodium hydroxide (caustic soda), cement, fertilizer, plastics, metals, commercial ship repair, commercial aircraft repair, and construction. According to Bureau of Public Affairs (para.5) the exports of the country in 2008 were valued at $364 zillion while the imports where valued at $103 billion. In 2009 the exports were worth $180. 5 billion petroleum and petroleum products accounted for 90 percent of the total exports. The organisation has constituted international relations with many countries in the homo (Bourland, para 17). U. S. is the leading(p) importer of oil products from Saudi Arabia. In 2008 oil exports were sold as follows US 17. 2%, Japan 15. 3%, southeasterly Korea 10. 2%, China 9. 4%, India 5. 9%, Taiwan 4. 6%, Singapore 4.4%. the country do imports worth $86. 61 billion in 2009. The main imports are machines, equipment, foo dstuffs, chemicals, automobiles, and stuff products. As per the data collected in 2008 the import partners are US 12%, China 10. 4%, Japan 7. 6%, Germany 7. 3%, South Korea 5. 1%, Italy 4. 7%, India 4. 5%, UK 4% (Bourland, para 29). Oil is the prevalent economic product produced by the country for local use and export. It accounts for to a greater extent than 90 percent of the exports of the country and 75 percent of the revenues collected by the government.Oil was discovered in the 1930s and large scale victimisation of the resource was done after World War II. The economic development of the country has been reachd through the sale of oil products to many countries in the world. Saudi Arabia has the largest oil reserves in the world and is the leading producer and exporter in the world. The government has control over all the oil produced in the country (Bureau of Public Affairs, para. 14). The increase oil prices bemuse made Saudi Arabia achieve fast economic growth and deve lopment.The country has enjoyed surplus balance of dearth in trade with other countries. The revenues collected from trade in oil are utilize to strengthen the defense of the country, carry out development programmes and to assist other Arab and Islamic countries. Saudi Arabia has influenced OPEC to raise the oil prices. This increasing demand for petroleum products is creating a lot of revenues to the country and there have been many expansions in the industries in the country (Bureau of Public Affairs, para. 16). To increase doorway to many foreign markets the country joined World Trade Organization in 2005.The government has encouraged foreign direct investment in the country to expand most of its industries. The living standards of many people in the country have been uplifted by the income from the sale of oil and its products. The government plans to expand the economy while go oning its traditional Islamic values and custom (Bureau of Public Affairs, para. 31). The surplu s budget of the country has enab take the government improve the education system and job training to its citizens. The infrastructure of the country has been developed to improve the economic activities.The government provides expert wages and salaries to its employees to promote the living standards of the people (Bourland, para 13). Saudi Arabia has successfully entered the business world. According to World chamfer Group (para, 1-6) the Kingdom of Saudi Arabia has been rated as the 13th most economically competitive country in the world, according to the International Finance potful (IFC)-World pious platitude annual Doing Business report issued for 2010. The government has enacted several reforms in many sectors of the economy to open up the market of the country to international investors.This has attracted many investors and the country is experiencing rapid growth in the business sector. The country has been ranked as the best in terms of business activities in the ent ire Middle East as well as in the Arab World (Bureau of Public Affairs, para. 51). International kind with other countries has been improved to maintain peace in the region and to avoid conflicts which may affect the economy of the country. The government has established several embassies with foreign countries. Saudi Arabia has maintained good relationship with US for a long period of time.The two countries have been trade partners and they exchange products as well as other resources. U. S. has been the major importer of oil products from the country. Europe and Japan have also been good trade partners with Saudi Arabia and trade has been facilitated through establishment of agreements and negotiations. To maintain peace in the region, the Saudia government funds security agents to keep peace in the populate countries as well as other Arab countries (Bureau of Public Affairs, para. 19-25). The good relationship between U. S.and Saudia government has promoted security in the cou ntry. For example, the United States has sold Saudi Arabia military machine aircraft (F-15s, AWACS, and UH-60 Blackhawks), air defense weaponry (Patriot and Hawk missiles), armored vehicles (M1A2 Abrams tanks and M-2 Bradley animal foot fighting vehicles), and other equipment (Bureau of Public Affairs, para 33-41). The Saudia armed forces is supported with weapons and training facilities by the U. S. government. The U. S. Army Corps of Engineers were used in the construction of military and civilian structures in the country. U. S.has promised to sell advanced defense military equipment to members of disconnect Cooperation Council (GCC). This is a strategy to improve self-defense of the members of GCC (Bureau of Public Affairs, para. 26-31). The economic development of Saudia continues to be touched by poor policies about human rights practices. secretion against women has remained a great challenge to the government. Ethnic and religious minorities are also not favored by the po licies of the country. There are re rigidions on immunity of speech and this has caused a orbicular concern over the rights of the people to exhibit themselves freely in the country.The press has been closely monitored by the government and strict rules have been placed to hinder spread of some information about the government. Several cases of abuse of prisoners have been reported as well as detention to citizens who are not guilty. Other human rights issues affecting the country are suppression of the rights of the workers, and the denial to change the government by the citizens. Since economic development is not only measured in terms of the gross domestic product the country is still lagging behind towards achieving success in the furtherance of the economy (Bureau of Public Affairs, para.32-40). The increasing population in the country is creating a great threat to the economy of the country. As the population increases more ancestry is placed upon the resources of the cou ntry. If the trend is not reversed the country will have inadequate resources to cater for the needs of its people. The excess control of the government to the private sector is creating threat to expansion of the private investments in the country. Foreign investors veneration the strict policies established by the government upon the private investment.The system of the government also restricts growth and development of the economy since the kings come from the royal family. A democratic system of government is better since it encourages competition and good performance. such(prenominal) a system increases the freedom of the people to express themselves and also provides rights to the citizens (Bourland, para 34). The orbicular economic recession of 2007-2009 and its impacts on Saudi Arabia The economy of Saudi Arabia was bear upon by the global recession experienced by the world economies in 2007-2009. An estimated growth rate of -0.6 percent in 2009 was achieved collectible to the poor performance of the global economies. 5 percent inflation rate was registered in the year 2009. Unemployment in the FY 2009 was estimated to be 11. 6 percent among Saudi males. The public debt of the country increased to 20. 3 percent in 2009 while the revenues declined to $167. 7 billion the same year. The public expenditure increased to $164. 3 billion in 2009. The economic recession can be traced from the subprime mortgages of the US. The banking sector in US issued many loans to subprime mortgage intermediaries.Due to the expanding market in the sub prime mortgage markets, many banks issued unsecured loans to the intermediaries. The climax of the amplify was reached in 2007 when the prices of products started to increase and many subprime mortgage lenders were unable to repay their loans. This led to massive default of debts and banks registered huge losses. This reduced the lending capacity of many banks. The resulting effect was lack of opinion in the economy and the collapse of many companies (Stapledon, pp. 29). Sub prime mortgages are policies which have a high pretend of default.Subprime borrowers are the people with low incomes and have a poor credit history. They have higher risk of default compared to the prime borrowers. The US government had deregulated the real estate mortgages leading to massive investment in subprime mortgages. This caused the defective lending of subprime mortgages. The subprime mortgages were not popular initially but they became widely used in the 1990s. The climax of the sub prime mortgages was in 2006 when they accounted for more than 21 percent of all mortgages traded in the US market. The value of subprime mortgages in 2006 was valued at $600 billion.Many subprime mortgage intermediaries were established to reap the benefits of the expanding industry (Helleiner, pp. 44). Since the US is a major export partner to Saudi Arabia, a eruct effect of the economic crisis was felt in the country. Other economie s were also affected and Saudi Arabia experienced declining exports for oil products. The imports purchased by the country were affected by global inflation and the countrys budget increased. Other economies declined since they had no market for their goods and Saudi Arabia reduced the oil exports.The entire world encountered economic crisis which resulted into failure by all sectors of the economy in the world (Stapledon, pp. 63). tall levels of unemployment were experienced as industries closed down. International trade was affected by the economic crisis and this affected all sources of employment leading to high levels of unemployment. meagreness increased and the living standards of many people declined. Family incomes were low and the people precisely survived through the hard economic period. The low incomes that people had could not demoralize the products in the market collectible to high rates of inflation.In the global economies, the crisis was at the peak in July 20 08 but afterwards, it started to decline. The decline of the crisis started towards the beginning of 2009. The economy of Saudi Arabia has started to regain from the crisis. The economy has not yet recovered and a lot of investment is required to regain the normal economic stake as before. It will take a lot of time for the economy of the country to recover completely from the impacts of the crisis (Helleiner, pp. 35). Current strategies The government has introduced new strategies to promote economic recovery from the economic recession experienced in the new-made past.The government of Saudi Arabia is encouraging private investors to extend investment in other sectors of the economy to avoid overdependence on oil. Only ten percent of the industries are non-oil manufacturing in Saudi Arabia. This sector provides employment to about sise percent of the working population. This condition has been identified as risky and imperative measures have been adopted to reverse the trend e specially after the global recession experienced in the country last year. The economic crisis affected the country due to over-dependence on oil as the main economic product.Other sectors have been neglected and this has created a major risk to the economy of the country. The government has permitted private and foreign investors to participate in telecom and federal agency generation industries. Foreign direct investment has been encouraged by the government to increase the economic activities in the country as well as provide employment to more people (Bourland, para 38). Conclusion Economic development measures to changes in the structures, population, and the welfare of the people living in a country.The economy of Saudi Arabia has developed tremendously over the years due to the wealth of natural resources bestowed upon the country. Oil and other petroleum products are the main economic products produced and exported by the country. The country has established good relationsh ip with other countries. It participates in trade with several countries. The government has offered assistance to neighboring countries and other Arab countries in terms of finances, peacekeeping and other aspects. The over-dependence on oil and petroleum products has placed the economy of the country at a great risk.variegation in the economic activities has been encouraged to provide a better military position in the turbulent global markets. Saudi Arabia has been adversely affected by the global economic crisis due to over-reliance on oil as the main economic product. The progress towards achieving success in economic development in the country has been hindered by the poor human rights practices experienced in the country. land cited Arndt, H. W. Economic Development A Semantic History. Economic Development and pagan Change. Vol. 29, No. 3. (Apr. , 1981), pp. 457-466.Chicago The Chicago University Press. Bourland, Brad. The Saudi Economys specious Era Phase Two. Saudi-US R elations Information Service. August 24, 2007. Brummer, A. 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