Measure of the national economy in the Saudi Arabia with how to balance the rich and the poor and how it is done in Saudi Arabia
Saudi Arabia is an economic independent county in the Middle East region with a population of 28 million and an area of 2 million square kilometers. The country’s economy is driven by superb petroleum industry that contributes 75% of the country’s budget earning with a purchasing power parity of $622 billion in 2010 and official exchange rate of $443.7 billion (Mundi, 2011). The export earning of the country is about 90% petroleum-based (Library of Congress, 2006). The Middle East country is enjoying economic prosperity as a result of structured government measures intended to distribute national wealth to all the citizens. Privatization of the power industry and the telecommunication sector of the economy back in 1999 have accelerated expansion of the economy of the country in the Information Communication and Technology sectors creating employment for both the Saudis and foreign firms. Therefore, firms and business practitioners ought to study the Saudi Arabia favourable business environment and institute ICT investment in finding IT solutions that are urgently needed by the growing population.
Saudi Arabia is a stable political independent country with excellent mechanisms of controlling economic and political stability. The monarchy has started various forms of structural reforms in the process of creating democratic space and enhances economic stability. According to the statistics provided by CIA, 82% of Saudi Arabia is undergoing rapid urbanization that is expected to rise at a rate of 2.2% a year since 2010-2012 (Cordesman, 2011, p.3). Therefore business management practitioners have to come up with strategies to provide services and satisfy business needs of the growing population.
The population of Saudi Arabia is growing at a higher rate following government structured measures to distribute wealth to families and couples. However, dependence on foreign labor is major shift that is likely to affect the production capacity of Saudi Arabia. Currently, there are a total of 5.6 million foreign experts and workers in Saudi Arabia; the business and management practitioners within Saudi Arabia have to come in terms with the probability of cushioning the nation against a possible labor vacuum as a result of 80% of the labor consisting of foreign expatriates (Karl, 2007, p. 16).
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Saudi Arabia is among the few governments that have instituted a working government e-commerce and e-government portal to assist investors and business growth within the state. The future of Saudi Arabia is an informed nation is guaranteed by the government efforts to connect the whole country to national online services. For instance, the government launched the YESSER ICT plan that is already in phase two of implementation. YESSER has formulated and implemented government delivery of secure internet services that provide organizational framework in aiding business practitioners register business firms with relative ease. The Saudi Arabia e-government program is intended to create better business environment by training and producing better skilled Arabian workers. However, the development to better skilled and knowledgeable workforce is the counter is yet to be realized because of disparities that exist in the education system whereby colleges are discriminated according to gender. Business operations in the country and the future are expeced to change over time since the government is preparing to create a technology focused Saudi human capital in a bid to make the country ready for the expanding businesses. Online technology has bridged the gap between the poor and the rich citizens by making services more available through an online portal (Sala XV).
Human capital development in Saudi Arabia is a major shift in training the poor Arabians and the process of training is changing lives of many Arabians; the economic shift is likely to bridge the gap between the poor and the rich in the monarchy rules kingdom. Information Communication and Technology is the main economic pillar that the Saudi Arabia government is using to revolutionize economic emancipation. Currently, Saudi Arabia is ranked 12th in the world in ICT readiness (Sala, 2011, p. 28). Prioritizing ICT plans in has encouraged growth of ICT companies and firms that offer internet services to the government and the people. Business management practitioners and managers need to come up with better solutions. Stiff competition in the telecommunication sector is driving innovations and increasing employment for foreigners and local Saudis. For instance in 2009, mobile subscription in ICT sector increased from 2.5 million in 2001 to 45 million as result of government infrastructure devolution back in 2001 when the Saudi King created the Communication & Information Technology Commission (CITC). The move helped bridge the gap between the rich and poor in that previously only the wealth were able to subscribe for ICT services which were beyond the scope of many poor Saudis. The promulgation of the CITC increased mobile subscription by 175% when compared with 67% world average percentage (Sala, 2011, p. 128). Therefore, what that means for business practitioners is that business is likely to boom in the future because more particularly manufacturers of ICT equipment and gadgets are likely to see a heightened market development and sales electronics is likely to go up. Investors within the ICT sector have an opportunity to capitalize from the growing subscription rate whereby even young people need electronics gadgets for communication purposes (Faisal, 2005, p. 3). However, due to invariable competition, innovative firms that re likely to offer quality communication products will make more profit than companies that have expensive products.
Business is booming for the broadband penetration following government deregulation of stiff laws that have allowed foreign investors and local investors to merge and adopt set standards. ICT department introduced new tariff regulations that have encouraged acquisition of non-performing government protected industry players opening the avenue for all investors. That means that the Saudi Arabia ICT market is safer and more organized with the introduction of anti-spam laws, to protect financial transactions from hackers and cyber related crimes. Consequently, firms that can provide anti-spam services and other ICT related security services have a big market to invest in; moreover, since the country is economically stable as indicated by a sharp rise in broadband subscription from 32,000 in 2006 to 2.75 million in 2009 (QNB, 2011, p.21). Saudi Arabia is experiencing a 5% economic growth following the sharp rise in prices in the crude oil.
However, the country is facing a shortfall of essential social infrastructure; but not amenities like education, social health with more 100% of population connected to water. The Saudi Arabia kingdom is facing an annual shortfall of 230,000 house units (QNB, 2011, p. 23). Therefore business investoors need to develop a credible investment plan and strategy that can find the best niche to invest inside the country’s government investment cities. The construction sector of thee economy is promoting creation of employment in a bid to increase independence of the lower class Saudi workers; the construction sector grew by 6.1% in 2010 due to high profit returns from the oil sector that correlates with government expenditure in the construction industry (QNB, 2011, p. 22). Construction industry experts expect the Saudi Arabia investment portfolio to grow higher than 9.3% in 2011. At the same time, the government has asserted its intention to inject the crude oil capital into the building and construction of cities, infrastructure and energy plants. The government efforts to spread economic wealth into the construction of four economic cities: The monarch built the King Abdullah Economic City (KAEC) at the cost of US$27 that created 1 million job opportunities with Saudis being given an upper hand over foreigners (QNB, 2011, p. 22). KAEC gained status as an academic city as well when the King Abdullah University of Science and Technology was constructed in the city. The construction sector has drastically changed the face of Jeddah from a simple place into a sophisticated economic city housing energy-intensive industries. Jazan Economic City helped to diversify oil wealth into the mineral rich and agricultural region of Jazan to act as a logistic center at the cost of US$27 billion; the creation of the city provided 100,000 job opportunities. Prince Abdul Aziz bin Mousaed City was also built for logistics and industrial development purpose at an initial cost of US$U8 with a capacity of 55,000 initial jobs. Knowledge Economic City is a visionary model city expected to drive knowledge economy in Saudi Arabia; the city was constructed at initial investment of S$7 billion dollars similarly creating 20,000 jobs (QNB, 2011, p. 22). In total, the government of Saudi Arabia directly invested into diversified economic proposal in different regions with the mission to built landmark industrial projects that can increase job opportunities and helps both the rural and urban poor make economic ends meet. Furthermore, the building of the four cities has included construction of the Petro Rabigh that consists of a refinery and petrochemical industry (Howard & Savard, 2009). Creation of cities is one of the best world economies that are expected to attract tourists and other investors who will invest in the housing sector since the government is into national capital investment schemes without much interest in home investment. Therefore, business management practitioners should draft an entrance formula in the construction sector that is likely to grow by 11% in 2012 (QNB, 2011, p. 22).
In conclusion, the government of Saudi Arabia is using different structural measures to diversify oil wealth that accounts for over 75% of the country’s GDP expenditure with over 39% spent on construction and trade accounting for 25% of petrochemical exports (Howard & Savard, 2009, p. 5). Investors are yet to capitalize on the open and encouraging investment climate in Saudi Arabia due to fear of political security. Nevertheless, the country is quite stable economically and socially since the government is initiating reforms to counter a possible counter-reform from the general public. Security and health values of the country remain superb compared to most Asian countries attracting investors from across the world. In conclusion, the government of Saudi Arabia spends over 75% of the petroleum profits into creating social economic structures that support poor and wealth while diversifying wealth.