February 23, 2011 / 1:32 PM / 8 years ago

FACTBOX-Main economic challenges for Saudi Arabia

Feb 23 (Reuters) - Saudi Arabia, the world’s biggest oil exporter, is facing challenges as it tries to diversify its economy and integrate its fast-rising young population.

Saudi Arabia’s King Abdullah, the sixth king to rule one of the world’s most conservative nations, returned home on Wednesday after three months abroad for medical treatment. [ID:nLDE71M11C]

He is returning to a region that has undergone momentous change since he left, with the rulers of Egypt and Tunisia toppled, a revolt in Libya and stirring unrest in some of the other Arab countries.

Because it is an absolute monarchy, many of the economic and social policies will depend on who is leading the country.

Interior Minister Prince Nayef bin Abdul-Aziz, who is also second deputy prime minister, is considered to be in a strong position to assume leadership of the country in the event of serious health problems afflicting the king and crown prince.

Here is a list of the main challenges:

HOW DOES SAUDI ARABIA PLAN TO DIVERSIFY ITS ECONOMY AND CREATE NEW JOBS?

* Saudi Arabia has pledged to spend $400 billion until 2013 to upgrade its infrastructure and has launched a plan to build five economic and industrial cities to create new jobs. But delays are stalling many projects while analysts point to the competition from more established locations like Dubai.

Several international firms have pulled out of projects due to a credit squeeze after the global financial crisis. But given the huge reserves accumulated from years of high oil prices, the kingdom can keep funding the main industrial projects.

HOW RAPID IS POPULATION GROWTH?

The population is projected to rise by 15.4 percent to 29.3 million within five years, mainly due to imports of skilled labour for major projects meant to diversify the Gulf kingdom’s oil-based economy, according to a Reuters poll. [ID:nLDE6570V3]

Growth of expatriate ranks from around 6.2 million now is expected to outpace that of Saudi nationals, indicating that the kingdom will rely on foreigners to go ahead with its development plans.

With population officially at 25.4 million, Saudi Arabia offers its nationals social benefits but they are below those granted by other Gulf Arab oil producers such as Kuwait and Qatar, which have much smaller native populations.

The kingdom does not publish regular jobless data, a sensitive issue for authorities since it would highlight fissures in wealth distribution in one of the world’s wealthiest countries. Unemployment among Saudi women stands at 28.3 percent, the labour minister was quoted as saying in June.

HOW DOES SAUDI ARABIA PLAN TO SOLVE HOUSING PROBLEM?

* The kingdom has recognised the challenges of providing housing and land for the mushrooming population but a mortgage bill to help facilitate funding has not been approved yet despite years of preparations.

HOW SUCCESSFUL IS EDUCATION REFORM?

* Officials seem to understand the need for an overhaul of the education system to hone the skills of its graduates for the job market. But, wary of clerics’ opposition, the government has not yet undertaken a serious drive at reforming the curriculum.

Billions are spent on building new universities and schools and equipping old ones with computers. But diplomats say up to 60 percent of school curriculums deal with religion.

WHAT ABOUT THE JUDICIARY?

* King Abdullah removed in 2009 the head of the supreme court, a hardline cleric, as part of efforts to modernise the court system but diplomats say the pace of reforms is slow.

The only concrete step is the set-up of appeals and commercial courts. But there is still no consistent law application with courts in different provinces handing out different verdicts for the same crime — often to a point of embarrassment for the government.

The case of troubled family firms fighting out a lawsuit in New York shows that even locals do not trust the court system.

HOW SUCCESSFUL ARE PLANS TO ATTRACT MORE INVESTMENT?

* Efforts to attract more investment have been hampered by a debt crisis involving family firms unveiling debt restructurings but they have declined to detail the size.

Saudi Arabia’s bourse, the Arab world’s largest, has allowed limited ownership of shares but disclosure rules fall short of standards of more mature markets.

* WHAT ABOUT AL QAEDA THREAT FROM YEMEN?

Saudi Arabia is worried about infiltration by al Qaeda militants from Yemen via the 1,500 km (900 mile) border the two countries share, and which is known for smuggling.

The Yemen-based regional wing of al Qaeda (AQAP) has said it wants to topple the Saudi ruling family. In August 2009, an AQAP suicide bomber tried to kill Prince Mohammed bin Nayef, who heads Saudi Arabia’s anti-terrorism campaign. (Reporting by Ulf Laessing; editing by Elizabeth Fullerton)

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