Public expenditures typically have acted as the vanguard for economic growth and development since the early 1970s. After completing the infrastructure in the 1970s and early 1980s, the emphasis of development expenditures moved to education and training to encourage private enterprise. Deficits have been common since 1983, as oil revenues have declined. Oil revenues typically account for nearly 75% of government revenues.
Deep budget cuts over the past years; higher charges on energy, electricity, water, telephone, worker and visa fees; and reduced subsidies on fuels, utilities, and airline fares have combined to reduce the deficit. To finance the deficit, the government borrows from domestic financial markets. The difference goes to Aramco's operating expenses and numerous off-budget expenditures. Observers believe that one major use of the off-budget money has been to pay down arrears on contracts, amounting to an estimated $30 billion in 1995. Estimates are that such arrears had been reduced to $3 billion by 2000. With the exception of the year 2000, the Saudi government has run a deficit every year since 1982.
What Country Does Saudi Arabia Belong To Rising oil prices in 2000, recovering from near-record lows in 1999, helped produce a $12 billion surplus as oil revenues came in 60% higher than expected. The accumulated domestic debt in 2000, however, was an estimated 105% of GDP, which has been financed by government pension funds and bonds held by banks and some companies. External debt from transactions in the privatized portions of the economy had reached nearly $40 billion in 2001, but this represents a still manageable 21% of the annual GDP.
As of October 2018, Saudi Arabia is the largest economy in the Middle East and the 18th largest in the world.Saudi Arabia has the world's second-largest proven petroleum reserves and the country is the largest exporter of petroleum. It has the second highest total estimated value of natural resources, valued at US$34.4 trillion in 2016.Saudi Arabia's command economy is petroleum-based; roughly 63% of budget revenues and 67% of export earnings come from the oil industry. High petroleum prices in the 1970s boosted Saudi revenues and allowed increased spending. A series of ambitious, high cost initiatives were launched to develop the nation's infrastructure, expand industry and agriculture, overhaul health and education, and modernize the military .
These efforts eventually put a strain on the government budget, as spending began to outpace the flow of revenues. In the 1970s, the problem was mitigated by the high price of oil, but in the 1980s, when oil prices declined, revenues fell and the government deficit grew, reaching 19.6 percent of GDP by 1986. Financial resources were further strained in 1990 when Iraq's invasion of Kuwait prompted the Saudis to appropriate US$30 billion in emergency defense spending. Though the value of Saudi exports exceeds that of its imports, the trade surplus has historically been unable to offset the deficit, which is generally financed through domestic borrowing.
Eighty percent of the debt is held by autonomous government institutions, such as pension funds and social security. And production, begun in earnest after World War II, has provided a huge income, much of it expended on infrastructure and social services. Saudi Arabia's petroleum derived wealth has considerably enhanced the country's influence in world economic and political forums. Following the 1967 Arab-Israeli War, the Saudi government undertook a vast aid program in support of Egypt, Syria, and Jordan.
Saudi Arabia joined the 1973 Arab boycott against the United States and the Netherlands and, as a key member of Organization of the Petroleum Exporting Countries , lent its support to the huge rise in oil prices during the 1970s. This move had stunning consequences for the world economy and also caused a dramatic upsurge in Saudi Arabia's wealth and power. Since the 1980s, the government has regulated its petroleum production to stabilize the international oil market and has used its influence as the most powerful moderate member of OPEC to restrain the more radical members.
The western coastal escarpment can be considered two mountain ranges separated by a gap in the vicinity of Mecca in Tihamah. The northern range in the Hejaz seldom exceeds 2,100 meters, and the elevation gradually decreases toward the south to about 600 meters. The rugged mountain wall drops abruptly to the sea with only a few intermittent coastal plains. The western slopes have been stripped of soil by the erosion of infrequent but turbulent rainfalls that have fertilized the plains to the west. The eastern slopes are less steep and are marked by dry river beds that trace the courses of ancient rivers and continue to lead the rare rainfalls down to the plains.
Scattered oases, drawing water from springs and wells in the vicinity of the wadis, permit some settled agriculture. South of Hejaz, the mountains exceed 2,400 meters in several places with some peaks nearing 3,000 meters. The eastern slope of the mountain range in Asir is gentle, melding into a plateau region that drops gradually into the Rub al Khali. Although rainfall is infrequent in this area, a number of fertile wadis, of which the most important are the Wadi Bishah and the Wadi Tathlith, make oasis agriculture possible on a relatively large scale. A number of extensive lava fields scar the surfaces of the plateaus east of the mountain ranges in the Hijaz and give evidence of fairly recent volcanic activity. The largest of these beds is Khaybar, north of Medina; another is Al Harrah, part of the large volcanic field Harrat Ash Shamah.
Famous cities of Hejaz include the holy city of Medina and the city of Taif. From 2003 to 2013, "several key services" were privatized—municipal water supply, electricity, telecommunications—and parts of education and health care, traffic control and car accident reporting were also privatized. In November 2005, Saudi Arabia was approved as a member of the World Trade Organization.
Saudi Arabia maintains a list of sectors in which foreign investment is prohibited, but the government plans to open some closed sectors such as telecommunications, insurance, and power transmission/distribution over time. The government has also made an attempt at "Saudizing" the economy, replacing foreign workers with Saudi nationals with limited success. The vast wealth generated by oil revenues was beginning to have an even greater impact on Saudi society. It led to rapid technological modernization, urbanization, mass public education, and the creation of new media. This and the presence of increasingly large numbers of foreign workers greatly affected traditional Saudi norms and values. Coffee, tea, sugar, cardamom, rice, cloth, and some manufactured items were the main imports.
Exports consisted of dates, camels, horses, and sheep, with western India, Iraq, greater Syria, and Egypt being the main centers of long-distance trade. Saudi Arabia also received a modest income related to the holy pilgrimage and other travel to shrines. Generally, the country was self-reliant, but for a smaller population and at a lower consumption level.
The majority of the population worked in food production; however, most people depended on local exchange for food and other items. Today, a vastly richer country is dependent on international trade for much of its food and almost everything else. American citizens who travel to Saudi Arabia are subject to the jurisdiction of Saudi courts, as well as to the country's laws and regulations. Parents planning to travel with their children to Saudi Arabia should bear this in mind. Saudi Arabia's first two development plans, covering the 1970s, emphasized infrastructure.
The results were impressive—the total length of paved highways tripled, power generation increased by a multiple of 28, and the capacity of the seaports grew tenfold. Spending on infrastructure declined, but it rose markedly on education, health, and social services. A local ruler, Muhammad bin Saud, joined forces with an Islamic reformer, Muhammad Abd Al-Wahhab, to create a new political entity. Over the next 150 years, the fortunes of the Saud family rose and fell several times as Saudi rulers contended with Egypt, the Ottoman Empire, and other Arabian families for control on the peninsula. The modern Saudi state was founded by the late King Abdul Aziz Al Saud .
In 1902, Abdul Aziz recaptured Riyadh, the Al Saud dynasty's ancestral capital, from the rival Al-Rashid family. Continuing his conquests, Abdul Aziz subdued Al-Hasa, the rest of Nejd, and the Hijaz between 1913 and 1926. In 1932, these regions were unified as the Kingdom of Saudi Arabia. Boundaries with Jordan, Iraq, and Kuwait were established by a series of treaties negotiated in the 1920s, with two "neutral zones"—one with Iraq and the other with Kuwait—created. The Saudi-Kuwaiti neutral zone was administratively partitioned in 1971, with each state continuing to share the petroleum resources of the former zone equally.
Tentative agreement on the partition of the Saudi-Iraqi neutral zone was reached in 1981, and partition was finalized by 1983. The country's southern boundary with Yemen was partially defined by the 1934 Treaty of Taif, which ended a brief border war between the two states. A June 2000 treaty further delineated portions of the boundary with Yemen. The location and status of Saudi Arabia's boundary with the United Arab Emirates is not final; a de facto boundary reflects a 1974 agreement.
The border between Saudi Arabia and Qatar was resolved in March 2001. Saudi Arabia's first two development plans, covering the 1970s, emphasized infrastructure. In 1902, Abdul Aziz recaptured Riyadh, the Al Saud dynasty's ancestral capital, from the rival Al-Rashid family. A majority of the kingdom's tourism currently comes from Muslims performing the "haj," the pilgrimage to the country's holy sites.
All Muslims are instructed to make the pilgrimage at least once in their lives. In 1999, the government moved to expand the travel rights of foreign Muslims, allowing them to venture beyond Mecca and Medina. In March 2000, it is estimated that over 1 million foreigners and 700,000 Saudis made their way to the western region of Hejaz to visit the holy cities.
Two events in the 1970s were crucial to Saudi Arabia's economic development. One was the Arab oil embargo of 1973, during which time Arab countries withheld oil from the world market, raising world oil prices dramatically. The other was the 1979 Iranian Revolution, when Shiites overthrew the western-backed monarchy in Iran and assumed control of the country. Both events disrupted oil supplies, causing the commodity's cost to rise.
Throughout the 1970s, Saudi Arabia was able to export oil at substantially elevated prices, leading it to become one of the fastest growing economies in the world. The massive inflow of revenue allowed the kingdom to increase import levels and still maintain a favorable balance of trade . Spending on defense and infrastructure rose, and Saudi Arabia became a benefactor nation to the rest of the Arab world, supplying large amounts of financial aid. As of 1 January 2005, Saudi Arabia had proven oil reserves estimated at 261.9 billion barrels, which includes 2.5 billion barrels, or half of the oil reserves in the Saudi-Kuwaiti divided, or neutral, zone.
About two-thirds of the country's reserves are graded as "light" or "extra light," with the remainder in the "medium" or "heavy" grades. Saudi Arabia has around 80 oil and gas fields and more than 1,000 wells. However, more than 50% of the country's oil reserves are in only eight fields. The former has estimated reserves of 70 billion barrels and is the world's largest oil field, while the latter is the world's largest offshore oil field, with reserves estimated at 35 billion barrels. Oil production in was estimated at 10.4 million barrels per day, of which 9.6 million barrels per day consisted of crude oil, and 1.2 million barrels per day were natural gas liquids. As a member of OPEC, Saudi Arabia is subject to OPEC's production quotas.
As of July 1, 2005, the quota was set at 9.099 million barrels per day. As of July 2005, Saudi Arabia's crude oil production capacity stood at 10.5 to 11 million barrels per day. Domestic oil consumption in 2005 was estimated at 1.9 million barrels per day. The government has always made economic diversification a top priority, seeking to develop industries using petroleum, such as petrochemicals, as well as to finance industrialization. By 1989, the massive Jubail and Yanbu'al-Bahr industrial complexes, combining petrochemicals and steel production, had been largely completed.
In the capital-intensive oil industry, the Saudis have relied heavily on foreign workers, who make up about 20% of the population. The kingdom's intolerance of democratic processes, labor unions, women's participation in the workplace, and foreign influences are impediments to development. The government launched an extensive program to promote modern farming technology; to establish rural roads, irrigation networks and storage and export facilities; and to encourage agricultural research and training institutions. As a result, there has been a phenomenal growth in the production of all basic foods.
Saudi Arabia is now completely self-sufficient in a number of foodstuffs, including meat, milk, and eggs. The country exports wheat, dates, dairy products, eggs, fish, poultry, fruits, vegetables, and flowers to markets around the world. Dates, once a staple of the Saudi diet, are now mainly grown for global humanitarian aid.
In addition, Saudi farmers grow substantial amounts of other grains such as barley, sorghum, and millet. As of 2016, in the interest of preserving precious water resources, domestic production of wheat has ended. This is a prominent example of one of the many non-democratic countries that lack basic human rights.
There is an absolute monarch in Saudi Arabia where the king, currently Salman of Saudi Arabia, serves as the country's head of state, leader of the national government and commander-in-chief of the nation's military. The people of Saudi Arabia are denied any substantial voice as authorities systematically discriminate against women and religious minorities, and judicial punishments are unbelievably inhumane. In 2015 alone, Saudi Arabia carried out 158 executions, 63 for non-violent drug crimes, according to the Human Rights Watch. The physical and social sciences are all taught in Saudi Arabian universities, which exist in all the main cities.
Medical sciences are especially popular among both women and men students. One university is specifically devoted to study and research relevant to petroleum. Agriculture and agricultural engineering is a specialty at several other universities, while courses and programs in social studies bring anthropology, sociology, and social work to a wide spectrum of students. Research centers tied to universities, government entities, and to Islamic entities have a significant presence.
Meanwhile, Saudi Arabia has a long history of state sponsorship of large numbers of university students and scholars abroad, especially in the United States. There are no political parties, but the royal family is a large grouping with significant political influence. It consists of about twenty thousand people and has several main branches and clans. Some princes are especially influential in politics, while others are active in business.
The ulama also play important leadership roles and consist of members of the Al Sheikh family and several thousand religious scholars, qadis , lawyers, seminary teachers, and imams of mosques. Business and merchant families often exert political influence, but there are no labor unions or syndicates for professional groups. Political upheavals, some of them violent, have taken place, yet the political system has remained relatively stable over decades of rapid economic, social, and demographic change. Unskilled manual work and that of servants and nannies is performed almost exclusively by immigrants. Medium- to high-skilled private sector salaried employment has also been dominated by guest workers.
Saudi Arabian citizens prevail in government employment and ownership and management positions in business enterprises. A process of "Saudization" of the modern workforce has been a national goal since the 1980s. With rapidly rising levels of higher education and the local development of specialized expertise, young Saudi Arabians increasingly have taken on positions requiring advanced professional knowledge. Economic and demographic forces have contributed to the replacement of immigrants by local citizens in middle-level private sector jobs. Higher education for men is government administered by the Ministry of Higher Education founded in 1975. The Ministry of Higher Education authorizes both the creation of a university and the programs offered.
