Saudi Arabia’s most prominent industry is the oil and gas industry. The oil and gas industry has made Saudi Arabia extremely wealthy. However, in recent years, the government has decided to diversify the economy. The involvement of more industries in the job market could create more jobs for Saudis. Here is some information about economic diversification in Saudi Arabia.
Oil and Gas in Saudi Arabia
Saudi Arabia provides about 11% of the world’s oil. It is the second-largest oil provider after the U.S. Since 1938 when Saudi Arabia first struck oil, the gross domestic product (GDP) regarding oil and gas has seen mostly positive growth. Conversely, the oil and gas sector makes up 50% of Saudi Arabia’s GDP. The oil and gas sector also makes up 70% of all export earnings. However, some estimates go as high as 90%.
Saudi Aramco is the official oil company in Saudi Arabia. In 2020, Aramco made $229.9 billion USD in revenue and employed 66,800 people. The average salary people receive at Saudi Aramco is $129,083. Even on the lower spectrum, the salary is around $60,000. Good pay creates high competition for any other job market that tries to take off. In addition, creating more jobs that are not in the oil industry is beneficial because people of all skills and education levels can seek employment.
Saudi Arabia’s Dependence on Oil and Gas
In 2016, Saudi Arabia announced a new program called Vision 2030. One of the focuses of this program is economic diversification in Saudi Arabia. Specifically, the goal is to broaden Saudi Arabia’s exports and income possibilities from oil and gas to other necessary avenues like transportation and entertainment.
Economic diversification in Saudi Arabia has already proven to be beneficial because oil prices took a massive hit during the ongoing pandemic. China is one of Saudi Arabia’s largest oil importers. Because of the pandemic decreasing travel, Saudi Arabia’s oil exports to China have drastically decreased as well. In addition, Saudi Arabia’s oil exports to the rest of the world have declined because of the pandemic. The severe decrease in oil exports has contributed to the lowering of its GDP from 0.3% in 2019 to -6.8% in 2020. These numbers show how the reliance on gas and oil is detrimental to Saudi Arabia’s economy.
Diversifying Saudi Arabia’s Economy
The goal for the revamp of Saudi Arabia’s economy is not just about diversity but also about making knowledgeable job growth decisions that make sense for Saudis. The goal is to have an economy that relies more heavily on the private sector than the government. Getting Saudis working in the private sector and creating jobs that match people’s skills will be crucial to the success of this plan.
The government’s plans on achieving economic diversification are to increase foreign investment, increase the amount of small and medium businesses and create jobs by developing what the government is calling mega-projects. Mega-projects and the new jobs could be part of several sectors looking to expand including tourism, transportation, entertainment and others.
While the drop in oil sales has created setbacks in the economic diversification of Saudi Arabia, that has not discouraged the country. Despite COVID-19, Saudi Arabia is determined to continue the diversification process by continuing with already planned projects.
– Shelby Tomassini