Oil, the source of wealth
Most of Saudi Arabia's economy is based on oil production. The first oil field was discovered in March 1938 in the northeast of the country. In 1945, the United States secured privileged access to Saudi oil in exchange for military protection. Revenues from oil production enabled the young country to ensure its development. A railroad was built between the northeast and Mecca, and roads linked the various regions. In 1960, the oil-producing countries got together to raise the price of a barrel, which was then fixed at US$5. OPEC had 5 founding members, including Saudi Arabia. Between 1977 and 1981, Saudi Arabia raked in $300 million a day. This financial windfall was used to finance five-year development plans. The 1975-1980 plan, with a budget of $195 billion, saw the construction of 28 dams, 24,000 km of roads, 4 ports, 175,000 houses and Jeddah airport, then the largest in the world. From the 2000s onwards, the share of crude oil exports in GDP declined. It fell from 34% in 2000 to 21% in 2013, which still represented $312.7 billion. In 2015, the drop in oil prices is not without consequences for the country's economy. Saudi Arabia has been forced to issue debt, for the first time since 2007, and to revise its operating expenditure downwards. The country currently produces 10.4 million barrels of crude oil a day, with a maximum output of 12 million barrels. Just under 7 million barrels are destined for export, making the country the world's leading exporter. The kingdom plans to increase its production capacity to 13 million barrels by 2027. In 2019, British oil company BP estimated Saudi Arabia's oil reserves at 266 billion barrels, representing 15.8% of global reserves. The country also has significant natural gas reserves of 8,200 billionm3, or 4.4% of global reserves.
The manufacturing industry
From the 1950s onwards, Saudi Arabia began to diversify its production to meet growing domestic demand. The diversification of oil-derived products and the availability of capital led the country to set up and increase the number of production units in a variety of sectors: plastics, office furniture, industrial foodstuffs, paints, air-conditioning systems, fertilizers, prefabricated aluminum buildings... But lacking technical expertise and skilled manpower, the Saudis were forced to sign contracts with foreign manufacturers, which often included maintenance and operation, in addition to the delivery of a turnkey plant. In the 1970s, the government built two industrial cities: Jubayl on the Persian Gulf coast and Yanbu on the Red Sea. These oases focus primarily on energy-intensive activities and the production of hydrocarbon-derived products: refineries, heavy chemicals, fertilizers, plastics, steel and metal. Ultra-modern residential areas are built around these factories. In 1982, in order to limit the growing influence of foreign contractors and investors, the government introduced a "Saudiization" of companies designed to increase the proportion of local workers. By 2020, manufacturing accounted for 10% of Saudi GDP.
A country in search of foreign investment
In 2000, Saudi Arabia stepped up its efforts to attract foreign capital by creating the Saudi General Investment Authority (SGIA, later replaced by the Ministry of Investment). In particular, the institution is responsible for facilitating administrative procedures for investors, including foreign investors, and issues licenses authorizing foreign investors to take a stake in the capital of local companies. Minimum investment amounts are set by sector: US$6.7 million in the agricultural sector, US$1.3 million in industry and US$500,000 in other sectors. In addition, many sectors are closed to foreigners, such as the oil industry (exploration, drilling, production), health, transport, telecommunications (with the exception of mobile and fixed telecommunication services or electronic data interchange), fishing, distribution, services to the armed forces, printing and publishing, real estate investment and services to pilgrims in the holy cities of Mecca and Medina. According to the latest UNCTAD World Investment Report, foreign direct investment in 2022 will amount to 7.8 billion dollars.
Vision 2030
Brought to power in 2017 by his father King Salman, the young Crown Prince Mohammed Ben Salman is working to restore his country's image with the aim of attracting investment. Anticipating the end of the oil bonanza, he developed an ambitious economic diversification program. "Vision 2030" was presented on April 25, 2016, while MBS was Minister of Defense and Chairman of the Economic Affairs and Development Council. This socio-economic reform program is based on three pillars. The economic pillar calls for the diversification of activities and the empowerment of youth. It includes plans to open up the country to tourism and major sustainable development projects. The social plan aims to strengthen services to the population, particularly in the health, culture and leisure sectors. It aims to strengthen the Saudi national identity, by, among other things, enhancing the country's heritage. The political aspect has not been forgotten, with a project for institutional reforms to bring greater transparency and efficiency to the management of public affairs. The program is broken down into three five-year plans enabling the implementation of 543 concrete initiatives.
