Saudi Arabia is important for its region and for the world for many reasons. One of the most vital is its religious importance for 1.6 billion Muslims. The Hajj and Umra pilgrimages are very important for Muslims. The Hajj is a requirement, with some stipulations that may waive this requirement, for all Muslims. The Umra is not a requirement, but is often seen as one of the most important events in a Muslim’s life, if he or she can do it. The only place the Hajj and the Umra can happen is in Saudi Arabia, most particularly in Medina and Mecca. Muslims from all over the world come to Saudi Arabia for these pilgrimages. When millions come from Indonesia, India, Pakistan, Bangladesh, China, the EU, North America, Africa, the Middle East and North Africa and more then Saudi Arabia is in the spotlight. Tourism is about 2.7% of Saudi Arabia’s GDP, with a grand majority of the tourism receipts coming from religious tourists. The political, religious, diplomatic and even economic importance of Saudi Arabia as a focal point of Islam (along with the pilgrimages, for example, all Muslims face the Ka’ba in Mecca, Saudi Arabia in their prayers five times a day) is vital to understanding the importance of stability and prosperity of the country. Islam came out of Saudi Arabia. Saudi Arabia is its most important religious landmark.
An economy focused on oil
Saudi Arabia is a powerful player in OPEC and on the world oil markets. Saudi Arabia is the largest producer, and by far the largest net exporter, of oil. Most of its exports go to Asia, but the EU and the US also depend on Saudi oil. It is the most important source of imported oil for China, Japan, South Korea and India, four of the most important economies on the planet, and where much of the world’s population can be found. These are also drivers for the world economy. Saudi Arabia’s oil is one of the most important fuels for Asia’s and the west’s great economies and, hence, for the world economy. Saudi Arabia’s oil will likely become increasingly important for developing Southeast Asia, and especially Indonesia, which not only has a large population, but also has the largest Muslim population of any country. Saudi Arabia’s exports are dominated by oil sent to Asia, the EU and the US. Saudi Arabia imports from a wide variety of countries in the Middle East, Asia, Europe, Africa and South America. Saudi Arabia is often about the 3rd largest important of arms and military equipment. It is a huge part of that industry’s trade. Many jobs in the countries where it imports products and services from rely on that Saudi demand.
Trade on a global level
Saudi Arabia is the second largest remittance sending country. Only the US sends out more remittances. The largest recipients of remittances from Saudi Arabia are India, Egypt, Pakistan, Bangladesh, Indonesia, the Philippines and Sri Lanka. Many families and communities in these countries rely on such remittances. Saudi Arabia has foreign direct investment outflows to China, Turkey, the UAE, Jordan, South Korea, Egypt, Lebanon, South Africa, Pakistan and the US. The US, France, Japan, the UAE, China, the Netherlands, India, Malaysia, Singapore, Germany and many others invest in Saudi Arabia. The Saudi King’s recent visits to Asia will spur even greater Saudi FDI inflows and outflows to and from that part of the world. Saudi Arabia’s economic ties to its regional neighbors are the strongest with Bahrain, Egypt, and the UAE. These would include trade, remittances and tourism links. For example, many Saudis travel to Bahrain for holidays and Egyptians are often the largest numbers of Umra pilgrims in recent years. Saudi Arabia is an important economic, political, diplomatic and military partner with members of the GCC and many North African and Levant countries. It is one of the most important countries in the Arab world. Saudi Arabia is about the 20th largest economy, between Switzerland and Argentina on some lists. It has about the 21rst largest GDP per capita. It is the 46th largest country by population.
At the forefront in the fight against terrorism
Saudi Arabia is often seen as a blocker to Iran’s hegemonic advances and desires. It has been increasingly helpful in anti-terror actions, and in intelligence and other sharing in the battles against violent extremists. It is a part of many coalitions facing down these threats. Some see the complex relationship it had in the past with regard to certain extremists, but in recent years Saudi Arabia has seen the light and has been an increasingly good partner with many others in the world in countering violent extremism. It has been the victim of terrorism on many occasions. Saudi Arabia has lent a hand and financing to help protect sea lanes of communications in its region and even beyond. Saudi Arabia has for many years given aid to developing countries and significant amounts of charity to the poor throughout the world. It is involved in many international organizations, and is part of some of the most important economic, diplomatic and other dialogues, blocks and organizations. Saudi Arabia is a big player in the world on many levels.
The main objectives of the 2030 plan
According to recent IMF, Saudi and other reports: Saudi Arabia wants to cut it unemployment rate to about 7 percent from its present 11.6 percent. It wants to increase women’s participation in the work force to 30 percent from about 20 percent. It wants to reduce the people working in its government and see more of its people working in the private sector. It also wants to Saudiize its private sector workforce, and create new jobs and industries to accomplish that. It wants the share of oil in its exports to drop drastically. The Saudis want to reach a balanced budget, a reduction in salaries as part of the budget and to pare down some of its subsidy and other schemes. It wants non-oil revenues to increase five-fold. They want the private sector and smaller to medium sized companies to be a much bigger part of the economy. They want a lot more FDI, both inward and outward. They want to increase the size of tourism drastically, and to quintuple the number of Umra visitors. They want to privatize health care, and the oil and gas industry, to some extent. They want to create affordable housing, make a more professional military, and improve greatly the efficiency of the government and those attached to the government. The Saudis want to greatly improve their education system, and direct it more towards Saudis, both men and women, being more readily and effectively employed. They want to increase their competitiveness and productivity way up the global charts. They want to develop massive private investment funds and successfully and profitably create a massive investment program to help fulfill many of the above objectives through a massive IPO of Saudi Aramco. Yes, massive is a term that would fit well to this very ambitious program. These goals will entail epic changes to the economy and even society of Saudi Arabia within the next less than 13 years. Just think for starters how increased numbers of non-religious tourists and a much large number of women entering the work force might be considered by the more conservative elements in the country. This project is breathtaking in its depth, breadth and aggressiveness. It is also one that could fundamentally alter some aspects of Saudi society. This mostly conservative and traditional country cannot have such massive changes happen in such a short time without some social and cultural dislocation – unless a miracle happens. Iran learned that the hard way in the 1970s.
What if 2030 does not work?
Saudi Arabia has come from being a poor country of Bedouins, religious scholars and others in mostly traditional industries, to a modern, mostly-oil based and fairly rich country in a precious few decades since the first discoveries and developments of its oil economy and Aramco. The development of Aramco and a good part of Saudi Arabia’s economy was with the help of the US and Americans, other experts from the other countries in the west (yet recently more from Asia), and millions of expat workers from mostly the Middle East, North Africa and Asia in the past. However, the Saudis now have a lot greater control over their destiny than at any other time in the past. It is vital they do this right not just for their people, but for the people of the region and for the world. If expectations for the success of 2030 become too high, and they are not fulfilled to a large extent, there could be increasing tensions within the country not just by the regular every day Saudis, but also possibly from some in leadership positions, such as the thousands of princes who are now seeing their allotments from oil revenues cut and even the military, who have recently had drastic pay and other benefits cut – and these could be cut greater in the future. If the younger people, who are facing very high unemployment rates that for some groups reaches 50 percent and more, do not see their lives improving there could be trouble. Saudi Arabia will have to produce more and more jobs with its growing and youthful population or face some potentially serious consequences. The biggest sources of potential instability could possibly be the unemployed, the underemployed and members of the royal family and others in power who think they have been cut out of their expected returns to 2030.If expectations are diminished or shattered there could be an increase in recruitment into extremist groups that exist within the country – and even of Saudis to outside groups. And that will be no good for just about everyone else but the terror or anarchist groups. If the Shia areas of the country think that they are not getting their expected share of the 2030 pie there could be more troubles developing in those parts of the country. Many of the largest oil fields in the country are found near areas which have large pockets of Shia in the east.
If the worst case scenario happens, and there is significant instability in the country, then its region and the world will feel the effects. Oil markets could be seriously disrupted. Given how important Saudi oil is for many Asian, EU, and the US economies any oil infrastructure and industry disruptions in Saudi Arabia would be initially felt most in those areas. The economic and financial disruptions felt in those countries would spread to other areas fairly quickly given how important those economies are to the global economy. Financial markets could feel the shivers and potential earthquakes. Non-oil international trade could be disrupted to some degree. Remittances sent to many countries would decline, and possibly decline drastically. All of these potential results, and potentially connected and even unpredictable results, could affect the lives of many people in many more countries beyond the borders of Saudi Arabia. Hajj and Umar visitors could have greater difficulties in getting their religious duties and needs accomplished, and this could have significant political and economic feedbacks within and outside of Saudi Arabia.
The global consequences of the Saudi transition
Given the importance of Saudi Arabia in the global economic systems, population and income flows, and in the lives of Muslims and others globally the Saudis need to get this right. It would be to the benefit and stability of many others to help make sure this economic and social transformation program succeeds in a way that increases, rather than decreases, the stability and prosperity of Saudi Arabia. The Arab Spring shocked the world. If there is a Saudi Spring the reverberations could be felt possibly a lot stronger and wider than anything that has happened with the Arab Spring so far. And when one thinks of some of the effects of the Arab Spring that is a stunning possibility indeed. We could all be facing a far more complex and potentially dangerous and destabilized future. A collapse of the social contract and the stability of Saudi Arabia could pull in not only its neighbors in the region, but a good part of the global economic, energy and political systems. The Saudis are betting big on this project. There is a chance they may slow it down and rethink things if oil prices go way up again, but that would put them right back into the oil-economy roller coaster that they are trying to get off with the 2030 program. The more progress that happens on moving Saudi Arabia to a more stable economy, and one that is not whipsawed by oil prices and oil-dependency, then the better off we will all be. Saudi Arabia is a lot more important to the world than most people may think. It is time to think more about Saudi Arabia’s importance and how things may change both inside and outside of Saudi Arabia - or not - as we approach 2030, which is not that far away.
*(All opinions are Dr. Sullivan’s alone.)
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