One year after the Sept. 11 attacks on the United States, in which a number of Saudi nationals took part, the Kingdom now finds itself at the center of world attention while trying to grapple with domestic, regional and international challenges. The effects of what has come to be known as the war against terrorism continues to generate endless debate among Saudis on how to respond to anti-campaigns.
At home the economy needs a lot of restructuring amid a pressing need for expanding and modernizing existing infrastructure projects and building new ones.
The Americans want to go to war with neighboring Iraq. It would be the second time in a decade if Washington presses with its demand for the removal from power of the Iraqi regime. The mere idea of the region plunging into another armed conflict triggers memories of the first Gulf War in 1991, when a US-led international coalition was assembled to drive the Iraqis out of Kuwait which they occupied the previous year.
For Saudi Arabia, the biggest problem remains the economy, where there is not enough jobs to go around. The privatization of government services that started a few years ago has yet to assume the momentum sought by economists. The slowness has its justification; the government is keen on balancing economic decisions that may have a direct effect on the welfare of its citizens.
With oil revenues shrinking in real terms and the population growing at nearly four percent a year, diversification of the economy has become a pressing need. At present, the government depends on oil for more than three quarters of its income, while oil makes up more than one-third of gross domestic product.
But despite attempts to diversify, oil remains the mainstay of the economy in a country where around 60 percent of the population is below 18 years of age (and more than half of them females). This makes securing jobs for the present and future generations a daunting task for planners.
The state remains the largest employer of the local population and a substantial portion of the national budget is swallowed up by civil service salaries, often for people who put in too little work in jobs that contribute little to the economy. Under the current development plan, ending in the year 2005, the government seeks to create more than 800,000 new jobs for Saudis. The new entrants to the job market would replace over 488,000 foreign workers.
To woo more investors, the government rewrote its foreign investment law to encourage more interest in the non-oil sector. Foreign-owned companies can now do business without a local partner.
Economists say what the country needs to diversify its economy is small and medium investments that take advantage of the infrastructure many other countries lack.
In recent years, attempts to encourage foreign investment have focused more on major global corporations and plans for flagship projects.
The Kingdom has recently agreed to open up the huge energy sector to foreign investments by signing deals with eight giant oil firms to tap its huge gas reserves.
While gas exploration and production have been opened selectively to foreign investors, progress outside the oil, gas and petrochemicals industries has been modest. Economists attribute this partly to the fact that the market size of the Kingdom and the surrounding region does not merit the scale of manufacturing investment the government wants.
Potential foreign investors have also expressed concern about the security of the legal environment in the country. This has hindered development of key infrastructure schemes such as private water and power projects. The government has recently passed bills governing the legal practice and regulating the rights of defendants and suspects before courts. Under these laws two or more persons can now form professional firms for the legal practice.