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They've been talking about the House of Saud falling for decades now and it hasn't happened yet. Although I thought A few years ago the young prince was going t

They've been talking about the House of Saud falling for decades now and it hasn't happened yet. Although I thought A few years ago the young prince was going to make a bunch of drastic moves away from oil in order to secure the economic future of the country? Beyond a few articles in 2017, I haven't seen much of an update on that, anybody know if it was all just bluster, or are real things happening that would soften this blow coming?

unexpected 7y ago
Every Arab ruler has tried to do this for decades, but this is a HARD problem: 1) Their climate sucks 2) They have very little arable land and lack water 3) Production of electricity is expensive 4) A lot of interior cities - not a lot of port access So, from a geographical perspective, what is SA supposed to produce that gives them a comparative advantage against the rest of the world? Then you move into the political/religious aspects: 1) Uneducated workforce, despite offering scholarships to study abroad for every one of their citizens 2) They import most of their labor from other countries, ergo, their labor costs are higher with respect to the rest of the world. A factory in India will be cheaper than a factory in SA, all else being equal. These disadvantages make the only real route to a viable economy a service-based one. This is what Dubai has done - Dubai has done their damndest to establish free trade zones, a legal framework, and a tax regime to get companies to establish their MENA HQ's there (and they've done so accordingly). SA is WAY behind on this (I would argue irrecoverably behind).
- jcranmer 7y ago
  Saudi Arabia is in a good location for logistics and transshipment hubs (although this is something else they've probably lost to Dubai). There's also obvious tourism appeal, due to the historic sites in the Hejaz (probably already maxed out though, unless they want to open it up to non-Muslims). The other obvious choice for a commodities producer is to move up the value chain: go from selling crude oil to selling petroleum-based products instead. The biggest issue is the effect that the resource curse on the workforce, as you note. There is a small contingent of well-educated Saudis (largely found in Saudi Aramco), and the country has instead relied largely on giving their population sinecures in the government, which hasn't exactly done wonders for productivity.
puranjay 7y ago
To be fair, 2020 is proving to be the year all those long heard warnings are coming true

unexpected 7y ago

Every Arab ruler has tried to do this for decades, but this is a HARD problem: 1) Their climate sucks 2) They have very little arable land and lack water 3) Production of electricity is expensive 4) A lot of interior cities - not a lot of port access So, from a geographical perspective, what is SA supposed to produce that gives them a comparative advantage against the rest of the world? Then you move into the political/religious aspects: 1) Uneducated workforce, despite offering scholarships to study abroad for every one of their citizens 2) They import most of their labor from other countries, ergo, their labor costs are higher with respect to the rest of the world. A factory in India will be cheaper than a factory in SA, all else being equal. These disadvantages make the only real route to a viable economy a service-based one. This is what Dubai has done - Dubai has done their damndest to establish free trade zones, a legal framework, and a tax regime to get companies to establish their MENA HQ's there (and they've done so accordingly). SA is WAY behind on this (I would argue irrecoverably behind).

jcranmer 7y ago
Saudi Arabia is in a good location for logistics and transshipment hubs (although this is something else they've probably lost to Dubai). There's also obvious tourism appeal, due to the historic sites in the Hejaz (probably already maxed out though, unless they want to open it up to non-Muslims). The other obvious choice for a commodities producer is to move up the value chain: go from selling crude oil to selling petroleum-based products instead. The biggest issue is the effect that the resource curse on the workforce, as you note. There is a small contingent of well-educated Saudis (largely found in Saudi Aramco), and the country has instead relied largely on giving their population sinecures in the government, which hasn't exactly done wonders for productivity.

puranjay 7y ago

To be fair, 2020 is proving to be the year all those long heard warnings are coming true