Development in Saudi Arabia - Essay Example

? The Development in Saudi Arabia Saudi Arabia is the largest country in west Asia mainly comprising of Arabian Peninsula. It is thesecond largest in the Arab world from Algeria. The country’s Gross Domestic Product per capita stood at 9425 US dollars in December 2010 as per the World Bank. Previously in 2009, the Gross Domestic Product per capita stood at 9300 US dollars. This indicated an upward growth of 145 US dollars (Trading economics, 2012). In 2011, the country’s gross domestic product grew further by 6.7% in comparison to 2010. Saudi Arabia economy is largely dependent on oil. It also experience major government controls over various economical activities. The growth rate of the country since 2000 has been varying with the highest being in 2004. The country is ranked as the largest exporter of petroleum in the world and has a very important role to play in Organization of Petroleum Exporting Countries (OPEC). Currently, the country is focusing on encouraging the private sector to invest in the country in order to create more employment opportunities for the local citizens in order to reduce the unemployment rate in the country that currently stands at 10.9%. Some of the effort by the government to attract more investors in the country is through improving service provision in telecommunication sector, natural gas exploration and other power generation measures. These measures are aimed at provision of a serene enviroment for transacting busineses. One of the challenging issues that affects Saudi economy is a high population of people who are illeterate. This has given way for the foreignors who retrieve countrys wealth and send back to their country. The government is therefore, aiming at improving education levels in the country through setting up various education institutions in the country.(Trading economics 2012) Population The population in Saudi Arabia stands at 26.1 million people as per July 2011 statistics. 20.5% of this population is Saudis while 5.6million of the total population are composed of foreign nationals. Annual growth rate in the country stands at 1.536% as per 2011. Major ethnic groups in the country comprise of Arabs 90% (of native population), afro- Asian (10% of native population). The main official language is Arabic while the literacy levels stands at approximately 78.8% with male comprising of 84.7 and female 70.8%. The workforce in the country comprise of 7.3 million with 80% of this number being foreigners. Industries hold 21.4 % of the population with services which include government holding 71.9% and agriculture on the other hand supporting 6.7% of the population (US department of state, 2012). Wealth indicators in Saudi Arabia Middle East countries are one of the driest countries in the world. As a result the country spends much of its revenues in importing food from other agricultural viable countries. In measuring the level of wealth, the main wealth indicator is food security. Food security in Saudi Arabia is measured using three key indicators. They include food aid as a proportion of overall domestic consumption, imports as a proportion of total consumption and lastly the income levels of the population in the country (Wilson & Bruins 2008, p.52). On the household levels, the mostly used indicators include: land ownership, vehicle ownership, type of the house, ability of the citizens to save their money and average earning per household. This gives the government a data that is used to gauge the public wealth status an aspect that is used in resource distribution (Wilson & Bruins 2008). Most significant industries in Saudi Arabia Saudi Arabia is the world leading oil exporting countries. As a result the country’s main industries are oil related. These industries include crude oil production industries, petroleum refining industries and petrochemical industries. The three industries are the major contributors to Saudi Arabia economic growth. In addition, the country is one of the leading dates exporters making the sector play an important part in countries economy through job creation and foreign exchange earnings. In addition, some of the largest companies in the country include Saudi basic industries corp., Dallah Al-Baraka and Saudi airlines. These form one of the largest contributors of government’s revenue (Workman, 2010) Largest three Saudi Arabian exports One of the major exports is oil. This contributes 90% of the country’s revenue. It also plays an important role in employing thousands of workers who work in the industries. The largest oil trading partners is America which purchases 60% of Saudi Arabia’s total oil (Trading economics, 2012). Second largest export from Saudi Arabia is petroleum products. The major markets for these products are United States, china and Japan. The country has benefitted from these exports which has enabled it to invest heavily on infrastructure development and improvement programs (Workman, 2010). Third export products are fertilizer and pesticides. With the current changes in agriculture to use of inorganic fertilizer in order for the countries to sustain the increasing population level, the country’s exports in these agricultural inputs have increased tremendously. In addition, the products have also led to increased domestic production of agricultural goods in the country in order to increase the domestic population. The major hindrance to agricultural production in the country is not inadequate inputs but it is the adverse environmental conditions that are experienced in the country (Workman, 2010). Value of oil in the export market Saudi Arabia exports 1.6 million barrels of oil daily to United States thereby making America one of the largest suppliers of oil to United States from Canada. Currently the country seeks to get $100 a barrel. The main reason behind this is to be able to sustain increased public spending. Currently country depends on oil to sustain the country economy. The country economy is 90% dependent on oil (Trading economics, 2012). Current trends of oil markets in the world Currently the prices of oil in the global market have increased. The trend has been fluctuating leaving the economies that largely depends on the product at a risk of collapsing. One of the major cause of increasing prices of oil in the market is increased uprising in the Arabs world such as Egypt, Tunisia Algeria, Syria etc which are one of the oil producing countries. Poor management of the commodity by the major governing bodies has also led to a sharp increase in the prices of the commodity. The market is controlled by cartels that control the prices of the commodity. These cartels increase the prices of the commodity as they wish leading to unpredictable oil prices. This trend has hit Saudi Arabian economy as some of the projects such as provision of education and infrastructure development have been put at a halt (Ramady, 2010). The high demand of the commodity has made it so precious making the supply of the commodity to be low. The world has in the recent days experienced high technological advancement. Majority of these machineries mainly depends on oil and its products for efficient running. As a result the demand for the commodity has increased. The largest beneficiaries of this increased demand are the intermediaries who regulate the prices of oil to fit their interests. Companies and specifications appropriate in oil sector The company listing depends on the reserves and company’s capacity to hold oil and gas. The largest company in oil sector is Saudi Arabian company which has a capability of holding 303,285 million barrels. The distribution points are spread in different parts of the world. Second largest company in oil handling is the national Iranian oil company which has a capacity to hold 300485 million barrels of oil. Third company is Qatar general petroleum corporation which has the capacity to handle 169,959 million barrels of oils. These major companies in the sector play a very crucial role in distributing oil and oil products in different parts of the world. They also have a part that they play in determining oil prices in the world because if they hold the commodity, the demand might increase leading to an increase in the world prices (Ramady, 2010). International Organization, membership and market implications One of the largest international oil organizations is Organization of Petroleum Exporting Countries (OPEC). It is made up of oil producing countries such as Saudi Arabia, Iraq, and Kuwait with majority of members being countries from Middle East. The organization major objective is to safeguard the members’ interests. It is also aimed at stabilizing the international oil prices through elimination all uncertainties that might cause fluctuations of oil prices in the market. It accomplishes its mission through ensuring that oil producing nations gets adequate returns from the product while the consumer countries get a stable oil supply to run their economy (Ramady 2010, p. 76) Future prospects of oil industry With the increasing technological advancement, the demand of oil is expected to increase in a decreasing rate. This will be as a result of other forms of energy that are becoming popular due to oils association with global warming. The supply of the commodity is expected to be swift as more distribution companies are expected to venture in this lucrative business. The level of competition in the sector is expected to increase tremendously. Different countries are discovering oil eg Sudan, Nigeria etc. this will ease global demand an aspect that might have an adverse effect on economies that largely depends on the product only. References Ramady, M. 2010. The Saudi Arabian Economy: Policies, Achievements, and Challenges. Springer. Trading economics. 2012. Saudi Arabia GDP growth rate. Retrieved from http://www.tradingeconomics.com/saudi-arabia/gdp-growth US department of state. 2012. Saudi Arabia. Retrieved from http://www.state.gov/r/pa/ei/bgn/3584.htm Wilson R. 2010. Economic Development in Saudi Arabia. Routledge. Wilson J.P. & Bruins, H.J. 2011. Food security in the Middle East since 1961. Retrieved from essources.ciheam.org/om/pdf/a65/05002195.pdf Workman, D. 2010. Saudi Arabia's Top Imports & Exports 2008. Retrieved from http://daniel-workman.suite101.com/saudi-arabias-top-imports-exports-2008-a155210 Read More