Saudization and Sound Economic Reforms: Are the Two Compatible?
Abstract
Saudi Arabia and the other Gulf Cooperation Council (GCC) countries face a challenging set of problems that must be addressed to maintain political and military stability in the region. The first problem involves attaining and maintaining economic growth rates that are at least sufficient to keep pace with the rise in population. For Saudi Arabia, low economic growth has become a chronic problem: gross domestic product (GDP) increased by only 1.6 percent between 1990 and 2000 while growth in the country's population grew at an annual rate of 2.7 percent during that period, thus producing a declining trend in per capita income. This low rate of growth cannot be attributed to a lack of capital formation. In fact, the rate of investment is relatively high in Saudi Arabia. The Sixth Development Plan (1995-2000) envisaged a total capital of around 472 billion riyals (US$125.8 billion), including nearly 212.7 billion riyals ($56.7 billion) from the private sector. It had also targeted an economic growth of 3.8 percent over the plan period. By the end of the plan, actual investment increased by around two percent to 481 billion riyals ($128.2 billion) but included nearly 292 billion riyals ($77.8 billion) from the private sector-an increase of around 37 percent over the projected level. Thus, even though the Plan overachieved in terms of investment, it underachieved in terms of what really counts-real economic growth. The ineffectiveness of investment to sustain growth stems appears to be structural, stemming in part from a weakening of the linkage between public and private expenditures together with a decline in the ability of public expenditures to stimulate real output. Given the inability of the public sector to directly stimulate real non-oil output, all of the pressure to provide expanded employment opportunities, jobs and output is now placed on the private sector.
Document Details
- Document Type
- Technical Report
- Publication Date
- Feb 01, 2004
- Accession Number
- ADA524846
Entities
People
- Robert E. Looney
Organizations
- Naval Postgraduate School