/ world today news/ The basis of development is the oil industry
The leader among large countries in terms of economic growth rates has been the People’s Republic of China (PRC) for many years. For 40 years of development, with an annual increase of the country’s GDP by an average of 9.5%, the per capita income has increased by 22.8 times. China’s share of world GDP rose from 1.8% to 15.2%.
In Davos, however, IMF chief Kristalina Georgieva said that in 2022 global GDP growth was only 3.2%, while China’s GDP growth was 3.0%. China has lost its title as the leader in economic growth, for the first time in 40 years China’s GDP growth is below the world average.
And who is the new leader? According to preliminary estimates by the IMF, the World Bank and the OECD, Saudi Arabia demonstrated the highest growth rate – 8.9%. In second place is India (6.3%).
A large share of the GDP generated by the Saudi economy comes from the oil industry. And last year there was an unprecedented rise in the price of black gold, from which the Kingdom of Saudi Arabia (KСA) benefited. Joe Biden tried but failed to convince the Saudi king to lower prices by increasing oil exports. Usually loyal to Washington, Riyadh made no concessions to Washington.
Of course, those pundits who say Saudi Arabia won’t be a leader in economic growth for long may be right, it just got lucky last year with market conditions. Riyadh understands this and wants to reduce the country’s dependence on oil.
Attempts are being made to overcome the monoculture of the economy, to diversify it. Thus, in twenty years (2001-2021), the share of manufacturing industries (excluding oil refining) in GDP increased from 4.6% to 8.1%; the share of trade and the restaurant and hotel sector – from 4.4% to 9.2%; the share of the financial services and real estate services sector – from 7.1% to 10.7%. And the share of the extractive industry (oil and natural gas) decreased from 53.8% to 35.3%.
An important milestone in KSA’s economic development was the “Vision: 2030” modernization program. The initiator and main developer of the program is said to be Crown Prince Mohammed bin Salman bin Abdul-Aziz Al Saud. From September 27, 2022, he is the Prime Minister of the KSA (previously he was the Minister of Defense). The impetus for the development of the program was the sharp drop in oil prices in 2014-15, which threatened the formation of a balanced budget and the implementation of many government programs.
The task was to develop new sectors of the economy (petrochemistry, automotive, other branches of machine-building, electronics) and to reduce KSA’s dependence on foreign markets.
The correctness of this course was confirmed by the events of 2020-2021, when the so-called pandemic began with its blockades, which reduced the consumption of hydrocarbon fuel and had a downward effect on oil prices.
An additional impetus for the modernization of the Saudi economy was the decision of the Paris Climate Conference in December 2015 to reduce the dependence of the world economy on hydrocarbons. In countries where Saudi Arabia has traditionally supplied oil, ESG standards have begun to be implemented, designed to reduce the consumption of black gold and encourage the transition to green energy sources.
Saudi Arabia after 2015 had to demonstrate in every way its concern for environmental and climate problems. To the outside world, Riyadh presents the Vision 2030 strategy as a program to decarbonize its economy, as “contribution to the common cause of humanity’. In November, at the UN climate summit, Mohammed bin Salman announced that Saudi Arabia had sent $2.5 billion to the Green East Initiative.
However, Vision 2030 is not an external program. This is a strategy of clear national interest, a program to increase the sustainability of the Saudi economy and reduce its dependence on external factors. In Riyadh itself, the green agenda is met with skepticism. The share of renewable energy sources (solar, wind, etc.) in the KSA energy balance is measured in hundredths of a percent. If Riyadh is going to reduce the share of oil and gas in the energy balance, it will certainly not be at the expense of solar panels and wind turbines.
It turns out that there are large reserves of uranium on the territory of the kingdom, and Riyadh plans to create nuclear power. The construction of a nuclear power plant is planned, an international tender for the award of construction is being prepared. Rosatom announced its participation in the competition.
The Vision 2030 program includes breathtaking projects, some of which rival Elon Musk’s space fantasy. One of the projects is the mega-resort “Red Sea Project”. It is a 200 km area on the coast of the Red Sea together with an archipelago of 90 islands. KSA clearly wants to take away Turkey’s palm in attracting foreign tourists for seaside holidays.
Another megaproject is the giant entertainment center Qiddiya (The Qiddiya Entertainment Project). It includes the establishment of more than 300 entertainment and educational institutions within 40 kilometers of Riyadh.
And perhaps the most fantastic megaproject is NEOM, a “smart” city in the Tabuk administrative region in northwestern Saudi Arabia. The life of the inhabitants of this “city of the sun”, as promised by the Saudi authorities, will be completely automated.
The megaproject consists of several gigantic projects. The main one is “The Line”. This building will be 500 meters high, 200 meters wide and 170 kilometers long. The building is designed for nine million people. The movement of people from one part of the building to another must be done with the help of a high-speed train that will run along the side of the building.
According to experts, construction will take half a century. And the estimates for the necessary investments for the realization of the project are constantly revised upward. It used to be $500 billion, now the figure is $1 trillion.
However, all this is exoticism, the fruits of which can only be seen by representatives of the next generation. The authorities of KСА are doing a lot for today. In 2016, the number of industrial enterprises in the country was 7.2 thousand, and by the middle of 2022 it had grown to 10.7 thousand. In six years, 3.5 thousand new plants and factories were commissioned.
The kingdom has ample opportunities for industrialization: most of the economy is in the public sector (including entirely oil and gas). Unlike Russia, revenues from the export of hydrocarbons do not flow abroad, but accumulate in the state budget and the sovereign fund.
Clearly, Riyadh does not want to give up its leadership in terms of economic growth. KSA Foreign Minister Faisal bin Farhan Al Saud said in Davos that his country plans to surpass everyone in the world in terms of economic growth in 2023.
Translation: ES
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