Saudi Arabia seeks economic diversification in five-year plan
Poised to register its highest current account surplus in 19 years, the oil-rich Kingdom of Saudi Arabia is embarking on a new five-year development plan, which sets ambitious goals for higher growth and more rapid job creation through 2005.
Experts contend that while the plan aims high, it’s goals are attainable. "The new plan is ambitious, but achievable," Saudi American Bank (SAMBA) Chief Economist Brad Bourland remarked. "Emphasis on increasing real GDP, job creation for Saudis, and non-oil, private sector growth, rather than an economy driven by oil revenues and government spending, is appropriate and consistent with the economic reforms currently underway."
Calling for a downsizing of government involvement in the economy, the plan sees a sharp boost in private sector investment, which is forecasted to hit SR 478,500 million ($127 billion) over the coming five years and constitute 71.2 percent of total investment during the period. The new Foreign Investment Regulation adopted in April, is intended to strengthen the private sector and alleviate state regulation, MEED reported.
Job creation is a main plank of the plan, and a number of initiatives are expected to create new places employment for 817,000 Saudis. According to SAMBA estimates, the unemployment rate among Saudi males currently stands at 14 percent, and 20 percent for those between 20 and 29 years old.
The goal for average growth in GDP is 3.16 percent, more than twice the average for real GDP growth in the 1990s. Under the plan, the private sector will expand by 5.04 percent per year.
On the main goals of the new plan is to reduce Saudi Arabia’s dependency on its oil industry. Indeed Non-oil GDP under the plan is expected to swell by 4.01 percent. Oil today accounts for 80-85 percent of Saudi Arabia's exports.
The non-oil sector contribution to GDP will jump to 71.6 percent in 2005 compared to 68.4 percent in 1999. That is not likely to be the case this year, though. Should oil production rise in September as part of an OPEC quota increase, and should recent price levels hold, the oil superpower could enjoy revenues of $80 billion, making 2000 the most profitable year since 1981.
Many experts feel that should efforts to diversify and grow the economy fail, future shocks—such as the discovery of alternative energy sources—could leave this desert nation destitute, with the growing population and few alternative sources of revenue. – (Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)