SINCE 1938, the year oil was discovered in the Kingdom, the country has always been stable, secure and prosperous. At the time of oil discovery, military might was the name of the game in world dominance and influence. But many things have changed since then. Now we see countries, much smaller in size and population, with virtually no military power have emerged as strong economies and are standing neck and neck with the superpowers. In other words, it is the economy. An example of that is when Iraq invaded Kuwait on Aug. 2, 1990, the whole world got united to liberate Kuwait, which is a tiny country but has a lot of oil reserves. We all know the rest of the story.
Today, in the Saudi capital, Riyadh, the Euromoney Saudi Arabia Conference will be held in the Al-Faisaliah Hotel for two days (May 6-7). Many economists, political figures, bankers, investors and decision makers will attend the conference and exchange ideas to keep the wheel of the economy rolling. The biggest question for many economic decision makers is: Where does Saudi Arabia stand in the global economy and is Saudi Arabia achieving its goals, both internally and externally? Let us talk about the Saudi economy.
Economy is the hardest thing to predict. There are many factors that influence any country’s economy but Saudi Arabia has one of the most unique economies in the world. We are mainly a one-commodity economy. Oil sector is the backbone of our economy. Oil contributes more than 90 percent to our national budget. And after 75 years of oil production, we Saudis have not been able to use the resources more effectively. It is true that we have built and are still building the most advanced infrastructure but we have to go ahead with many changes to our economic and education systems. Most important is how we spend our money, which comes from depletable resources, which are oil and gas.
To do that, we must change not only our economic way of doing things but we also have to change or adapt to changes in the culture. The government can’t continue to be the main provider. And this is true in any other country. We were and still are a welfare state. The government is providing everything. But at this stage the government must lead the way to improve other sources of income and to utilize many of the opportunities, which are available for the people in Saudi Arabia. Ironically, Saudi Arabia has a high unemployment rate at a time when we have 9 million expatriates working in the Kingdom. In Saudi Arabia we are not utilizing many of the resources, which can eliminate unemployment and will help decrease the amount of hard currency being transferred outside. We need public transportation system to help ease traffic congestion and reduce energy consumption. Tourism is one area, which can be used to generate money and jobs.
The Gulf region, nowadays, is the meeting point of travelers between the East and the West. This is clearly seen in the massive expansions of airports in the Gulf countries. Saudi Arabia can have a more flexible visa procedure to lure visitors who are interested in seeing ancient archaeological sites and for those interested in seeing the massive state-of-the-art petrochemical plants in Jubail and Yanbu or how about the religious visitors who arrive in the millions each year and want to see other parts of the Kingdom?
Saudi Arabia has one of the largest retail economies and has the highest consumption rate of many products but Saudis are not utilizing this for their youth. Hotel services, restaurant services, trucking industry, small businesses, shops and transportation services are all job-generating industries but we did not give our youth proper training or the right indoctrination. Many economic reforms are needed in the Kingdom including taking care of the environment. In the past, Saudi deserts and coastlines were known to be the cleanest in the world but nowadays these places are full of industrial waste and tons of plastic waste. Whenever you drive on any major highway you will be able to see the sunray’s reflections on the waste. In later years we might waste billions of dollars for the cleanup. We don’t need to waste this money to clean up after ourselves. In other words, we have to spend the money wisely.
These days, Saudi Arabia is launching huge infrastructure projects and there must be a supervisory body to watch over the time and money being spent on any project. Their supervision and findings has to be transparent. Good money management is important. It is the first step to stop corruption before its starts. In other words, public funds must have strict rules and accountabilities. People don’t want to see late projects with overinflated budgets.
The Euromoney Conference will be attended by many Saudi and foreign decision makers including the Saudi ministers of finance, housing and economy and planning. And it will be a good opportunity to talk about investments, banking and economic research. Saudis must learn from others about the best ways to run the economy and how to adapt to one single source. Norway is an example. It is a major oil producer that we can copy from in regard to their unique use of their oil wealth. But most important is that we must teach our youth to utilize their energy. And finally, we have to eradicate any form of corruption because it is the biggest obstacle to real economic reforms and growth.
