Saudi Arabia Looks to Diversify Economy After Oil Prices Fall
Saudi Arabia is looking to reform its economy as part of an ambitious new plan entitled Vision 2030. The country’s economic growth is at its slowest in three years, and could even approach by zero by the end of the year. At the moment, oil makes us 87% of Saudi Arabia’s earnings, but due to falling oil prices the government is looking to diversify revenue streams. In an attempt to balance the books, we have already seen country cut top officials’ salaries and introduce new subsidies on energy and water.
History of Oil in the Region
Despite the discovery of oil in north-western Persia in 1908, the consensus at the time was that there was no oil to be found in the Arabian Peninsula. The period that followed was filled with war and instability in the region, and it was not until Abdulaziz Ibn Saud formally announced the Kingdom of Saudi Arabia in 1932 that further oil exploration took place. Six years later on 3 March 1938, in collaboration with American companies Standard Oil of California (SOCAL) and the Texas Oil Company, the very first example of crude oil in the region was finally found.
This resulted in the discovery of the Ghawar Oil Field in 1948 which, to this day, remains the largest oil field in the world. It has produced more than 65 billion barrels of oil over the last sixty years and is now estimated to produce over 5 million barrels of oil per day. In 1988, ARAMCO (the name of the subsidiary between SOCAL and the Saudi Arabian government) was officially bought out by Saudi Arabia and became known as Saudi Aramco.
Saudi Arabia in the Modern Age
As part of the country’s vision for 2030, Saudi Arabia is looking to boost non-oil revenues sixfold to $266 billion by 2030 as well as create a $1.9 trillion public fund to invest at home and abroad. Much of this growth is expected to come from the private sector. At the moment, around 70% of Saudi Arabian nationals work for the government, but the country is hoping to encourage more people to work for private companies in a bid to boost the manufacturing, mining, and tourism sectors instead.
According to the official government website, the country, home to a number of sacred sites, wants better utilise “its gift that is more precious than oil” by increasing the number of pilgrims from 8 million a year to 30 million a year in 2030. Finally, the country’s national oil company, Saudi Aramco, is set to make its debut on the London Stock Exchange in what will be the largest share listing in history. Scheduled for 2018, around 5% equity will be available for the company that is worth an estimated $2.5 trillion.
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