The political economy of Saudi Arabia

273 Pages·2007·1.2 MB·English

by  Tim Niblock

The Political Economy of Saudi Arabia
This book is a broad-ranging survey of the development of the political
economyofSaudiArabiafromthe1960srightuptothepresentday.The
firstofitskind,thebookanalysesthesocialandpoliticaldynamicswhich
have shaped economic development, the outcomes which have ensued,
andthechallengeswhichcurrentlyfacethecountry’sfurtherdevelopment.
Thefocusthroughoutisonthewayinwhichsocial,politicalandeconomic
factorsinteractandsetthelimitsandcharacterofdevelopment.
The context is set by the massive increase in revenues accruing to the
Saudi state following the sharp rise in oil prices since 2004. The Saudi
government’scurrenteconomicstrategyenvisagesSaudiArabiaemerging
as a major industrial power, with a substantial stake in the global petro-
chemicalsmarket. DothedynamicsofSaudiArabia’spoliticaleconomy,
asithasdevelopedsincethediscoveryofoil,suggestthatsuchastrategy
could succeed? Is the social basis of the Saudi state, especially the state–
private sector relationship, geared to that kind of outcome? Does Saudi
ArabiasharethecharacteristicswhichhaveenabledsomeFarEasternand
South-EastAsiancountriestoundergorapidindustrialisation?Ifthestrat-
egyissuccessful,whatwillitmeanfortheSaudipopulation,andwillthe
social impact be positive or negative? These are the issues and concerns
addressedinthebook.
Writtenbyahighlyrespectedscholar,withinputfromahands-oneco-
nomicanalyst,ThePoliticalEconomyofSaudiArabiaisidealreadingfor
those with practical involvement in Saudi Arabia and both students and
academicsintheareaofMiddleEasternstudies.
Tim Niblock is Professor in the Institute of Arab and Islamic Studies at
theUniversityofExeter,UK.
Monica Malik has worked for a number of international financial insti-
tutions as senior economist for the Middle East, and is currently based in
Dubai.

The Political Economy of
Saudi Arabia
Tim Niblock
WithMonicaMalik
Firstpublished2007byRoutledge
2ParkSquare,MiltonPark,Abingdon,OxonOX144RN
SimultaneouslypublishedintheUSAandCanada
byRoutledge
270MadisonAvenue,NewYork,NY10016
This edition published in the Taylor & Francis e-Library, 2007.
“To purchase your own copy of this or any of Taylor & Francis or Routledge’s
collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.”
RoutledgeisanimprintoftheTaylor&FrancisGroup,
aninformabusiness
©2007TimNiblockwithMonicaMalik
Allrightsreserved.Nopartofthisbookmaybereprinted
orreproducedorutilisedinanyformorbyanyelectronic,
mechanical,orothermeans,nowknownorhereafterinvented,
includingphotocopyingandrecording,orinanyinformation
storageorretrievalsystem,withoutpermissioninwritingfrom
thepublishers.
BritishLibraryCataloguinginPublicationData
AcataloguerecordforthisbookisavailablefromtheBritish
Library
LibraryofCongressCataloginginPublicationData
Niblock,Tim.
ThepoliticaleconomyofSaudiArabia/TimNiblockwith
MonicaMalik.
p. cm.
Includesbibliographicalreferencesandindex.
1.SaudiArabia–Economicconditions. 2.SaudiArabia–
Socialconditions. I.Malik,Monica. II.Title.
HC415.33N53 2007
330.9538–dc22
2007018410
ISBN 0-203-94619-7 Master e-book ISBN
ISBN10:0-415-42842-4(hbk)
ISBN10:0-415-42843-2(pbk)
ISBN10:0-203-94619-7(ebk)
ISBN13:978-0-415-42842-2(hbk)
ISBN13:978-0-415-42843-9(pbk)
ISBN13:978-0-203-94619-0(ebk)
Contents
Listoftablesandcharts viii
Preface xi
Listofabbreviations xiii
Maps xvii
1 Introduction 1
1.1 Perspective 1
1.2 TheoryandSaudipoliticaleconomy:usefulapproaches 4
1.3 TheSaudiprivatesector:dependentorindependent? 21
1.4 DefiningtheSaudiprivatesector:acomplication 25
1.5 Thestructureofthebook 27
2 Layingthebasisfordevelopment,1962–70 32
2.1 Introduction 32
2.2 Theeconomybefore1962 35
2.3 Governmentalrevenueandforeignassets,1962–70 37
2.4 Planningwithoutadevelopmentplan:theTen-Point
Programmeanddevelopmentstrategies,1962–70 39
2.5 Therecordofachievementineconomicandsocial
development 44
2.6 Growthandstructureoftheprivatesector 48
2.7 Thechangingpatternofemployment 51
2.8 Conclusion 51
3 Planningfortransformation,1970–85 52
3.1 Introduction 52
3.2 Governmentalrevenuesandforeignassets,1970–85 54
3.3 Developmentstrategy:overalltargetsandobjectives 57
vi Contents
3.4 Thearticulationofdevelopmentstrategyand
economicpolicy 65
3.5 Therecordofachievementineconomicandsocial
development 72
3.6 Thecontributionandcompositionoftheprivate-sector
economy 83
3.7 Thesocialdynamicsoftheprivatesector 88
3.8 Thechangingpatternofemployment 90
3.9 Conclusion 92
4 Constraineddevelopment,1985–2000 94
4.1 Introduction 94
4.2 Governmentalrevenuesandforeignassets,1985–2000 99
4.3 Developmentstrategy:overalltargetsandobjectives 104
4.4 Thearticulationofdevelopmentstrategyandeconomic
policy 108
4.5 Therecordofachievementineconomicandsocial
development 116
4.6 Thecontributionandcompositionoftheprivatesector 127
4.7 Thesocialdynamicsoftheprivatesector 131
4.8 Thechangingpatternofemployment 139
4.9 Conclusion 141
5 Attitudesofthebusinesselite,1970–2000 143
5.1 Introduction:theroleoftheprivatesectorasseenbythe
businesselite 143
5.2 Perceptionsofthebusinesselite:therelationshipwith
government 144
5.3 Perceptionsofthebusinesselite:thestrengthoftheprivate
sectoranditsabilitytomeetinternationalcompetition 153
5.4 Perceptionsofthebusinesselite:thebusiness
environment 163
5.5 Conclusion 171
6 Planningforreform,2000–6 173
6.1 Introduction 173
6.2 Governmentalrevenuesandforeignassets,2000–6 178
6.3 Developmentstrategy:overalltargetsandobjectives 180
6.4 Thearticulationofdevelopmentstrategyandeconomic
policy 185
6.5 Therecordofachievementineconomicand
socialdevelopment 192
Contents vii
6.6 Thecontributionandcompositionoftheprivatesector 195
6.7 Thechangingpatternofemployment 198
7 Therecordofreform:progress,constraintsand
requirements 200
7.1 Introduction 200
7.2 Willthelegal,financialandinstitutionalstructureswhich
arenowinplaceenabletheprivatesectortoactasacritical
motorofSaudiArabia’seconomicgrowth? 202
7.3 Doesthesocialandphysicalinfrastructureconstitute
asoundbasisforpromotingeconomicexpansion? 207
7.4 Istheeconomylinkedintothewiderglobalsettingin
amannerwhichwillenableittodevelopeffectively? 210
7.5 Hasthegovernment’spolicyonprivatisationprovedcapable
ofcreatingamorecompetitiveandeffectiveeconomic
order? 214
7.6 Doesthestockmarketoperateasaneffectiveinstrumentfor
raisingcapitalandchannellinginvestmentstoproductive
sectors? 217
7.7 Doesthelabourmarketprovidethecalibreandskillsneeded
forsuccessfuleconomicdevelopment,atratesofpaywhich
arecompetitiveinternationally? 220
7.8 Arethestateinstitutions,andthemannerinwhichtheyare
linkedtotheprivatesector,gearedtoframingcoherent
developmentplansandimplementingthem? 224
7.9 ThesocialdimensionandtheSaudidevelopmentalstate:
conclusion 228
Glossary 231
Notes 232
Bibliography 233
Index 248
Tables and charts
Tables
2.1 Saudicrudeoilprices,productionandexports,1962–70 39
2.2 Governmentalrevenues,1961/2to1970/1 40
2.3 Distribution of financial allocations in budgets, 1959 and
1961/2to1969/70 42
2.4 Composition of the Gross Domestic Product by type of
economicactivity,1962/3to1970/1 45
3.1 Saudicrudeoilprices,productionandexports,1970–85 55
3.2 Governmentalrevenues,1969–85 56
3.3 Foreignassets,1970–85 57
3.4 FirstDevelopmentPlan,1970–5:projectedfinancial
allocations 61
3.5 SecondDevelopmentPlan,1975–80:projectedfinancial
allocations 62
3.6 Third Development Plan, 1980–5: projected financial
allocations 63
3.7 Budgetedandactualrevenuesandexpenditures,1969–85 70
3.8 BreakdownofgovernmentalexpendituresintheFirst,
SecondandThirdPlanperiods 70
3.9 GrowthinGrossDomesticProduct,1970–85 73
3.10 GDPbykindofeconomicactivity,1970–85 75
3.11 PercentagegrowthinsectorsoftheGrossDomestic
Product,1969–85 76
3.12 Balanceofpayments,1970–85 80
3.13 Private-sectorshareinGrossDomesticProduct,1969–85 83
3.14 Percentagegrowthinprivate-sectorfieldsofactivity,
1970–85,byplan-period 84
3.15 Grossfixedcapitalformationbysectors,1969/70to
1985/6 86
Tablesandcharts ix
3.16 Numberofestablishmentsbysector,1973–85 87
3.17 Civilian employment by economic activities, 1970, 1975,
1980and1984/5 91
3.18 Civilianemploymentbynationality,Saudi/non-Saudi,
1975,1980and1984/5 91
4.1 Saudicrudeoilprices,productionandexports,1985–2000 100
4.2 Governmentalrevenues,1985–2000 101
4.3 Foreignassets,1985–2000 103
4.4 FourthDevelopmentPlan,1985–90:projectedfinancial
allocations 107
4.5 FifthDevelopmentPlan,1990–5:projectedfinancial
allocations 107
4.6 SixthDevelopmentPlan,1995–2000:projectedfinancial
allocations 107
4.7 Budgetedandactualrevenuesandexpenditures,
1985–2000 114
4.8 Breakdown of governmental expenditures in the Fourth,
FifthandSixthPlanperiods 114
4.9 GrowthinGrossDomesticProduct,1985–2000 117
4.10 GDPbykindofeconomicactivity,1985–99 118
4.11 PercentagegrowthinsectorsoftheGrossDomestic
Product,1986–2000 121
4.12 Balanceofpayments,1985–2000 126
4.13 Private-sectorshareintheGrossDomesticProduct,
1985–99 129
4.14 Percentagegrowthinprivate-sectorfieldsofactivity,
1985–2000,byplan-period 129
4.15 Grossfixedcapitalformationbysectors,1985–2000 130
4.16 Numberofestablishmentsbysector,1985–2000 131
4.17 Civilianemploymentbyeconomicactivities,1984/5,1989,
1994and1999 140
4.18 Civilianemploymentbynationality,Saudi/non-Saudi,
1984/5,1989,1994and1999 140
6.1 Saudicrudeoilprices,productionandexports,2000–5 178
6.2 Governmentalrevenues,2000–5 179
6.3 Foreignassets,2000–5 180
6.4 SeventhDevelopmentPlan,2000–4:projectedfinancial
allocations 183
6.5 EighthDevelopmentPlan,2005–9:projectedfinancial
allocations 185
6.6 Budgetedandactualrevenuesandexpenditures,2000–6 192
6.7 BreakdownofgovernmentalexpenditureintheSeventh
Planperiod 192
6.8 GrowthinGrossDomesticProduct,2000–5 193