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Is Saudi Arabia’s Oil More of a Curse than a Blessing?

Is Saudi Arabia's Oil More Curse than Blessing Free Essay

Abstract

Resources in a country are supposed to be a blessing because they help in the progress of the state and, therefore, lead to high living standards of the citizens; however, but this has not been the case about most of them. Once mineral or oil producing countries begin to earn high revenues from the minerals, they tend to forget about the development of the other sectors. Furthermore, in some of them the political class embezzles the funds, and this creates divide in the state resulting in the rise of the insurgent groups. It is due to these reasons that countries with the natural resources have been termed as either blessed or cursed. Nevertheless, not all the nations with natural resources have been adversely affected by the great fortune. For instance, Saudi Arabia has been one of the few of them that has been able to attain peace and growth at the same time. The following paper aims to conduct a research to explain how oil has been a blessing in Saudi Arabia and will explore the political stability, economic prosperity as well as the social well-being as its indicators.

Keywords: oil, Saudi Arabia, development

Is Saudi Arabia’s Oil More Curse than Blessing?

Introduction

Discovery of natural resources can be viewed as a good thing since it helps in boosting the incomes of a country. However, this is not often the case since most states have run into severe economic crisis following the mentioned disclosure. The best example is the Netherlands that found natural gas in the 1960s in the North Sea (Rodrigues, 2006). The export revenue rose due to the high capital inflow, and this resulted in strong demand for Dutch florin that culminated in increased exchange rate thus creating problems for the country’s manufactured goods that could not compete in the global market (Rodrigues, 2006). Other states include Nigeria that neglected its agricultural sector upon discovery of oil while the diamond disclosure in Sierra Leone generated more blood that revenue (Rodrigues, 2006). Fortunately, it has no relevance to Saudi Arabia since the discovery of oil can be termed as a blessing there that will be discussed in the following essay.

Political Stability and Absence of Violence

Political influence in any government decisions is inevitable, and this means that the leadership has the power to determine the course of the country’s development. With chaotic leadership, the state will find itself in chaos, and the public will march on the streets vandalizing all the investments made in the past. Such incidences have been experienced in most countries, and it takes a moral leadership to steer the nation towards development and prosperity (Hamid, 2014).

Most of the states with abundance of natural resources such as oil have been at war for a long time making their discovery more of a curse than a benefit. It has been found that there is a correlation between the resource richness and civil war (Haglund, 2011). Such an interrelation can be explained by the big amount of wealth that helps rebels to accumulate money that enables them to have enough capabilities to organize armed groups which fuels civil conflicts. As an illustration, one can consider such countries as Nigeria and Sudan that have been experiencing civil wars since the discovery of oil, and instead of the resource promoting the sustainability of the states, it has made them chaotic and unstable (Ohmura, 2014).

On the contrary, the discovery of oil in Saudi Arabia has been a blessing in the sphere of political life guaranteeing stability and absence of conflicts. It has not experienced serious civil war and has been in a position to retain its position as the leading oil producing state. Even in the time of the Second World War, Saudi Arabia was not involved into the struggle and managed to remain stable, thus, becoming the cornerstone upon which Europe relied during its reconstruction following the aftermath of the conflict (Rodrigues, 2006). The state was crucial in the industrialized world as a constant supply of oil was required to maintain the steadiness of the global economy (Rodrigues, 2006). Following the Gulf War, the country had an increased oil capacity as it had been able to remain intact, and this lead to its role in the determination of the oil prices and supplies (Rodrigues, 2006).

Saudi Arabia’s stability is as a result of the strict religious adherence. It is the birthplace of the religion of Islam, and the place that is the homeland of the world’s most recognized sites of Medina and Mecca (Ezz, 2012). Because of the mentioned above facts the Kingdom has received a unique inherent role of leadership in the area, and therefore, it has sought to ensure its own stability before guiding the other states in the area. The country has also been able to enhance the rule of law, thus, the corruption related incidences are few. The youth have been given employment, and this has helped the country to attain relative peace. The political class has also encouraged unity as well as ensured a smooth transition of power over the last decades (Ohmura, 2014). Even though the state is mostly dependent on oil as the primary source of revenue, there have not been witnessed any cases of insurgent groups like in the other oil producing countries. It is due to all the stated aspects that the Kingdom has been able to manage its wealth accumulated from oil extraction without violence.

Economic Prosperity

Oil producing countries have experienced economic retrogression due to the overdependence on oil and the lack of diversification of the revenue like in the case of Nigeria where the discovery of the resource has led to the collapse of other major sectors such as the agriculture (Rodrigues, 2006). The country is also marred by rampant corruption and despite whopping 95% of the profits made from oil extraction, it remains one of the poorest and underdeveloped states (Rodrigues, 2006). Therefore, one can conclude that rather often, countries endowed with resources face developmental stagnation (Rodrigues, 2006).

However, this has not been the case with Saudi Arabia where oil has been the source of economic prosperity. It has continued to experience development over the years, and the GDP growth rate for the year 2013 was 3.8% (U.S Department of State, 2016). The state’s government has also made all efforts to improve the investment climate with the aim of providing more employment to the youth as well as diversify the revenue (Seznec, 2014). Consequently, in spite of the political upheaval among the Middle East nations, the country has been stable and has attracted huge numbers of foreign investors. The authorities have encouraged investment in various sectors including education, transport, life sciences, communication technology, health, and energy (Seznec, 2014).

Furthermore, unlike the Netherlands, where the manufacturing industry has faded away due to the discovery of the natural gas, Saudi Arabia has been doing well in the manufacturing sector (Rodrigues, 2006). It has a target of becoming the leader in the field. Before the discovery and boom of the oil extraction in the state the manufacturing sector was small; however, in contrast to other nations where the relation between the two spheres has been inversely proportional to each other, in Saudi Arabia, both of them have grown together with time. The government has helped in the building of manufacturing plants as well as the offered subsidies to the sector so as to help in the expansion of the domestic industries (Rodrigues, 2006). The improvement in the field has been a result of the five-year plan set out by the Saudi Arabia’s authorities to use the oil revenues to help in the development of other sectors of the economy (Rodrigues, 2006).

Another sector that is often neglected when countries gain high income from oil is the agricultural one, but in the case of Saudi Arabia, the profits gained from the oil extraction have been used to fund the given branch of industry. As a consequence, despite the decrease in the employment to the sector, the agricultural production increased, and this enabled the country to have sufficient amount of food particularly in the period between 1981 and 1994 (Rodrigues, 2006).

Infrastructure is also dilapidated in most oil producing countries such as Sudan but in Saudi Arabia the government has sought to improve it through financing the construction of the ultra-modern one using the revenues generated from oil extraction. The new objects include the schools, hospitals, roads, airports, ports as well as telecommunication networks.

Lastly, the state has been able to curb inflation despite the massive capital inflow leading to the increased supply of money in the economy. It has been the characteristic of the mineral-rich countries to fail in the control of the huge influx of money that flood the economy leading to the high prices. In Saudi Arabia, this has not happened, and the country has maintained a stable economy (Isaac, 2013). In the time of high liquidity, the government has always redirected the revenues towards the development projects avoiding the risk of inflation.

Social Well-Being

The wealth of the country must lead to the social fulfillment of its citizens, and therefore, the income of the state cannot be considered sufficient if it does not work towards the promotion of good living conditions of the citizens (Alsweilem, 2015). Saudi Arabia has been one of the few oil producing countries that have been able to improve the social life of the inhabitants. The development has been witnessed in all facets and has catered for all the members of the society (Al-Kibsi et al., 2015). Children have access to the best education, and the youth are guaranteed well-paid jobs while the women are no longer burdened with the house chores as the government has rolled out a program of the mass employment of the immigrants from the low-income countries especially those in South Asia.

According to the statistics, the revenue for the households in Saudi Arabia has grown by approximately 75% in the recent years, and the figure is predicted to increase with time due to the rise in the oil prices as well as the political stability in the country (Al-Kibsi et al., 2015). The country has been able to create over 1.7 million workplaces, and over $450 billion have been invested in various areas such as health and education with the aim of promoting high standards of living (Al-Kibsi et al., 2015).

The rising household prosperity in the last decade has been attributed to the improvement of the public sector which has offered employment to more than 2/3 of the entire Saudi Arabia population (Al-Kibsi et al., 2015). About 4.4 million jobs have been created in the economy, and only 1.7 million of them have been occupied by the locals (Al-Kibsi et al., 2015). There was also a rise in the social transfers for the unemployed with the aim of sharing the government income across the public sector (Al-Kibsi et al., 2015).

The government has also used a large amount of profit from the oil extraction with the aim of improving the living conditions of the citizens. The capital worth $450 billion has been invested in areas such as education, social welfare, health, transport, and infrastructure that has enhanced the living standards of the locals most of whom live in quality homes and with access to lavish lifestyles (Al-Kibsi et al., 2015). For instance, King Abdullah Economic City is one of the prestigious towns built on the Red Sea and having a lot of amenities that have boosted the social life of the masses (Al-Kibsi et al., 2015). Furthermore, lots of universities and about 81 new hospitals have been built (Al-Kibsi et al., 2015). What is more, the country has experienced low infant mortality rate that has dropped by 2/3 while the life expectancy has improved and is now70-76 years (Al-Kibsi et al., 2015). These figures depict a country where the citizens have availability of the resources provided by the government, and this has to do with the sound policies that have enabled the effectiveness of the trickle-down effect of the revenues obtained from oil.

Conclusion

In summary, it is evident that minerals such as oil can be a curse or a blessing to a country. Most of the oil-producing states such as Nigeria and Sudan have experienced prolonged violence periods that has led to political instability and discouraged investors. Saudi Arabia, however, has been different since it has managed to enhance development and maintain its reputation as the world leading producer of oil. The political stability has been reached, and this has resulted in the attraction of investors in the country. The economic markers have also been positive since the state has been able to diversify its income investing into agriculture and manufacturing sectors. The social life of the locals has been enhanced with the substantial investments of the government into the projects that aim to improve education, health, and other social amenities. All these aspects have enabled Saudi Arabia to stand out as one of the few oil producing countries that have managed to attain both peace and growth.


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