The bold new development of infrastructure, new industrial cities, ports and railroads which is turning significant parts of the Kingdom into a complex construction site is a dazzling exercise in which every Saudi can take great pride. But it is important to remember that there is a development every bit as important that has to be addressed — and that is the growth in the intellectual and technical skills of Saudis, young and old. Indeed, unless the Kingdom produces a well-educated and highly-motivated new generation of citizens, all the physical changes currently taking place, will count for little. As he signed the largest-ever Saudi budget into law, Custodian of the Two Holy Mosques King Abdullah, laid considerable stress on the fact that the immense investments within it must be used to create “sustainable” developments.
That is why it is right that the 2008 budget focuses so strongly once again on education and training with, among other projects, seven new training institutes for girls and 16 new vocational training centers. The expansion of the facilities and the number of places for young people of course underpin the drive for Saudization. However, facilities in and of themselves achieve nothing. Increased attention must be given to the quality of both the education and training that is given to students. The other important human element in the budget is the continued expansion of health care with eight new hospitals to be built in addition to the 79 presently under construction.
Just as the next generation of Saudis needs to be equipped for a high-technology world in which the challenges will only become more complex and commercial competition more challenging, so the Kingdom needs to continue to diversify away from its reliance on hydrocarbon income. Last year nonoil sales rose from ten to 12.4 percent of total exports. Many would argue that the proportion is still far too small but nevertheless, the figure is growing.
The Kingdom is seeking to make itself a center of excellence in high-tech research and development with the establishment of King Abdullah University of Science and Technology (KAUST). There will thus in time be many opportunities to build on R&D and bring new products and inventions onto the market. It will be up to Saudi entrepreneurs and investors to produce these ideas here in the Kingdom and so further boost nonoil exports.
Alongside the budget’s developmental vision is also a hard-headed assessment of the more immediate economic dangers that could challenge the Kingdom. Despite the market price of a barrel of oil coming within cents of $100 before falling back, the authorities continue to make their calculations on the basis of $45. This is wise, given market volatility and the now widespread intervention of speculative investors. The second danger remains one of inflation. Monetizing the Kingdom’s oil revenues has to be carried out with considerable caution. High demand in construction is boosting price inflation. The cautious approach to paying off public debt this year (only half the planned repayments was made) and next demonstrates Saudi Arabian Monetary Agency’s (SAMA) determination to control liquidity.
