Saudi Arabia - Future trends



Barring the discovery of a new energy supply that renders oil obsolete, Saudi Arabia will be able to maintain its economy through the production and distribution of oil for nearly another century. The discovery of new reserves, which appears likely, will extend the viability of the oil-based economy even further. However, as oil supplies rise and efficiency increases, prices will likely go down. To compensate for lower oil revenues, the Saudi government will continue to take steps toward economic diversification, expanding its agricultural, non-oil mining, and tourism sectors. The government will also continue to push for private sector growth as it loosens its grip on the economy.

In the meantime, Saudi Arabia will continue to implement oil policies that are favorable to the West for 2 main reasons. One, Saudi Arabia is dependent on the West, primarily the United States, for trade and military protection. And two, it is in Saudi Arabia's own interests to maintain stable oil prices to keep the commodity competitive with other forms of energy.

Saudi Arabia will also further its efforts to attract foreign investment, especially in heavy industrial sectors where the government is encouraging the creation of public-private partnerships. Although the government has expressed interest in decentralizing the economy, full privatization in most industries has yet to occur.

Cooperation between the United States and Saudi Arabia should continue, at least into the near future. However, relations could become strained if the situation in Israel continues to deteriorate. Historically, U.S. support for Israel has generated hostility in the Arab world. If the violence in Israel escalates and the Palestinians are perceived as being grossly victimized, the Saudi population, for reasons of Muslim solidarity, may begin pushing for intervention. Any move in that direction would complicate U.S.-Saudi relations.

Young Saudis will continue to enter the labor market in growing numbers. As such, the so-called Saudiization of the workforce will remain a government priority for the foreseeable future. Hiring fees will be raised for foreign workers, and those workers with expired visas may be forbidden to renew them. The Saudi infrastructure will also expand in the coming decades as new oil fields are discovered and the non-oil mining sector grows. Saudi Arabia's push to gain entry into the World Trade Organization will accelerate the pace of economic reforms currently underway.

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