Introduction:
The Kingdom of Saudi Arabia (KSA) was established by
King Abd Al-Aziz Abdulrahman Al-Saud also known as Ibn-Saud in 1932 after a 30-year
campaign for the consolidation of the Arabian Peninsula into four traditional
regions- Hejaz, Asir, Najd & Al-Hasa, the empire has since been a monarchy;
located in the Middle East (West Asia), Saudi Arabia is surrounded by the Red
Sea on the western side & by the Persian Gulf on the eastern side; Jordan,
Iraq & Kuwait borders it to the north while Qatar & UAE borders it to
the eastern front and Oman & Yemen borders it to the south. It is the 5th
largest country in Asia & 12th largest in the world with an area
of about 21,49,690 sq. km. and an estimated population of 33.1 million. (1) The geographical terrain of Saudi Arabia is mostly comprised of deserts, highlands, and steppe landscapes with no perennial rivers. The
local communities (58.4% of the Saudi population) comprise mostly Sunni Muslims
(84%) and Shia Muslims (10%), while the rest 41.6% of the population comprise the
non-Saudi immigrant population of various ethnicities settled there as workers.
Islam is the official religion & Arabic is the official language of the
kingdom. (1)
Saudi Arabia’s economy has been mostly dependent on
oil exports since the discovery of petroleum in 1938, amounting to
approximately 92.5% of the government’s revenue in 2014. (Cordesman et al.,
2016). (2) Although there has been a rise in the service sector
in recent times, the agricultural sector has very little contribution to Saudi
Arabia’s GDP due to geographical constraints of limited cultivable land (.2% of
the total landmass) and sporadic rainfall.
But considering that petroleum is a non-renewable
resource, and Saudi Arabia needs alternate sources of revenue to sustain its
growing economy in the future, the Kingdom came up with the development plan of
“Vision 2030”, under which the government will focus on creating a vibrant
society, a thriving economy and an ambitious nation through investments in
renewable energy and ending dependence on oil revenues, promoting tourism and
investing more in the domestic production.
Development Trajectory: 1950s-1990s.
The period of the 1950s-80s was specifically chosen by me due to some of the major internal disturbances and external political tensions that shaped the trajectory of reforms in the Kingdom of Saudi Arabia.
During the initial period of the 1950s, Saudi Arabia’s
economy was completely dependent on oil revenues, and the society was divided
into two major classes, one comprising the wealthy elites of the royal family
& the merchant class while the other belonging to the lower class
comprising of unskilled & semi-skilled workers employed by the former.
(Michel, 1994)
However, the state revenue was mostly spent on the
expenditures of the royal families and not on improving the state
infrastructure, and this class divide added to making Saudi Arabia one of the
poorest parts of the world despite the availability of a considerable amount of
state revenues.
This period also saw the rise of Arab nationalism in
neighbouring countries like Jordan & Egypt. Saudi’s involvement in
international politics changed with the ascendence of Kind Saud to power in
1953, in opposition to his father’s (King Abd Al-Aziz) stance of
non-involvement; he signed a pack with Egypt & Syria to oppose Iraq’s
stance for western-sponsored defence systems in 1955, He also severed Saudi’s
diplomatic relations with Britain & France and signed the Eisenhower
Doctrine in 1957 endorsed by all Arab leaders to keep the Soviet Union out of
the Middle-East; On the other hand, Saud was provided with defence loans from
US of 250 million dollars which was opposed by Egypt & Syria who wanted to
hold their neutral stance. (Michel, 1994)
Such stances of King Saud caused more harm to his
empire as on one side his oil exports declined and on the other hand, he also
faced opposition from rising Arab nationalism.
The transition of Saudi Arabia from an agricultural
& herding economy to an oil-exporting economy also witnessed the emergence
of a growing middle class; who were comprised of foreign workers working in
these oil companies, but with the immigration of these foreign workers also
came new outlooks and values which influenced the urban Saudi citizens greatly;
The ARAMCO (Arabian American Oil Company) being the largest state-owned oil
company witnessed two major worker’s strikes in 1953 & 1956, the former
being staged over the demand for better working conditions and latter against
the renewed lease of US access to Dhahran Air Base by the Saudi government. At
the time ARAMCO was owned and administered by the United States due to which
the workers blamed the US for their exploitation. But these strikes were
eventually crushed by King Saud and he ended up issuing the Royal Decree of
1956 forbidding the strike of any kind. (Michel, 1994)
The economy of Saudi Arabia was also affected by the
financial crisis during the late 1950s due to the reduction in oil production
by ARAMCO and from falling global oil prices, The government had to manage
their budget deficits through internal borrowings from the Saudi Arabian
Monetary Agency (SAMA) which is the central bank of Saudi Arabia or through
external grants.
Such events caused a loss of confidence in King Saud’s
government among other princes and eventually under political pressure, he had
to surrender his executive powers to Crown Prince Faisal, who sought the help of
the International Monetary Fund (IMF) to develop a stabilization program and also
took effective measures to reduce the budget deficits. This paved the way for a
formal planning attempt in the future and a deliberate use of fiscal policy in
Saudi Arabia for the first time. It included establishing an Economic
Development Committee to evaluate the productive potential of the undergoing
ministerial proposals and projects and submit a report based on which a
five-year plan could be developed for the implementation of such projects
within the limits of the budget.
Later, the Economic Development Committee was
succeeded by the Supreme Planning Board established in 1961 with the help of
the World Bank, then known as the International Bank for Reconstruction and
Development, was charged with the responsibilities of planning and coordinating
strategies for economic development and monitoring the execution of the plans.
But due to a lack of reliable statistical data, it was quite difficult at the
time for the SPB to function properly and it more or less acted as the subcommittee
for the Council of Ministers. (Edens & Snavely, 1970).
Then in 1965, the Central
Planning Organization (CPO) superseded the Supreme Planning Board and consisted
of a president and twelve economic advisors, the report was directly sent to
the King, and it provided the base for formulating the five-year plans.
The economy of Saudi Arabia has grown rapidly since
1961. There was a continued rise in the standard of living & per capita
income every year from 1962/63 to 1971/72, from 1,853 Saudi Riyals (S.R.) in
the former year to 5,189 (S.R.) in the latter. But this increase has also
remained unevenly distributed being limited only to the Kingdom’s 8-9 major
cities. (Knauerhase, 1974)
The era of the 1960s was also covered with major
unrest among the lower classes due to the denial of rights to form unions and
the right to protest and in retaliation, they started joining underground
political organizations like the Sons of Arabian Peninsula, Saudi Communist
Party etc., which were also joined by students, teachers & urban
middle-class. There was intense political unrest during the time and it
witnessed massive arrests, executions and deportation of foreign workers
involved in these protests. The administrative deficiencies in meeting the rising
demands of workers, the problem of Arab nationalism & the Palestinian
problem are the major contributors to the unrest. (Michel, 1994)
Also, from 1950 to 1972 there were many important
revisions in the oil contracts between the Saudi government and the oil
companies, earlier the share of revenue was done with the 50-50 formula sharing
on all profits which was later revised to a precise calculation of the
company’s net taxable income.
The Organization of Petroleum Exporting Countries
(OPEC) (founded in 1960) also demanded additional benefits for the host country
due to the global inflation and Arab-Israel dispute during the period, which
resulted in an increase of concessions followed by a 2.5% annual increase in
oil prices. (Knauerhase, 1974)
The era of the 1970s came with another set of
challenges to the Saudi economy, the global fall in oil prices being one of
them sharply hurt the economic health of the Kingdom in the later years, the
per capita income shrunk from $28,600 in 1981 to $7,000 in the year 2000. And
the economy of Saudi Arabia slipped from being a high-income state to a
mid-to-low-income state. This period also saw massive unemployment due to
exponential population growth (3.5% a year) and slow economic growth (0.8% a
year). (Axelgard, 2001)
The political tensions with Iran continued throughout the
1980s on one hand and Iraq’s invasion of Kuwait in 1990 followed by attacks
against Saudi Arabia on the other triggered a major political crisis, during
the war Saudi Arabia accepted the royal family of Kuwait and around 4,00,000
refugees into the Kingdom. Also, the U.S. military forces played a major role in
launching counterattacks against Iraq but were followed by internal resistance
by the conservatives against admitting foreign non-Muslim troops in Islam’s
holiest cities, US troops later left the country in 2003. (Cordesman et
al., 2016)
Since 2005, the Kingdom has seen rapid modernization
followed by a series of economic & social reforms including expanding
employment opportunities for women, greater call for foreign investments, and
increased role of the private sector. The government also held its first-ever
election in the year 2005 for electing the municipal councillors. In December
2015, women were also given the right to vote and were allowed to contest elections
for the first time.
Conclusion:
The development trajectory of Saudi Arabia shows the
transition of the kingdom’s economy from being a nomadic agricultural economy
in the 19th and early 20th century to becoming an oil
exporter nation in the mid-20th century onwards, it came with
enormous changes in the societal structure itself that we saw above; and it
aligns with the psycho-cultural theories of modernization as mentioned in the
text by Richard Peet and Elaine Hartwick, as Saudi Arabia is still a
monarchy but there have been continued changes in the political structure of
the government, from being a traditional society where the king was the
unquestionable authority, the Saudi Arabia has gradually transitioned into a
modern society where the king gives regard to the advice of Council of
Ministers, the economy has also became more planned after establishments of
bodies like the Central Planning Organization. Also, in recent times there has
been a greater tilt towards Westernization by allowing the private sector to
grow in the economy, adoption of modern technologies and huge investments in
the education sector to create a skilled workforce.
Author: Reshu Kumar
Turnitin Paper ID: 2348892630
References:
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http://www.jstor.org/stable/43044287
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