Saudi Arabia’s Economic Growth & Industrial Expansion

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Table of Contents

Economy Overview
Saudi Arabia Resources Reserves
Manufacturing Sector (Textile and Motor Vehicle)
Supply and Demand Curve – Motor Vehicle
Economy Structure: Monopoly and Perfect Competition Market
Conclusion
References

Economy Overview

Economic development in Abdullah’s Kingdom, Saudi Arabia, is considered to experience the epoch of industrial modernization; oil wealth and industrial achievements make the kingdom be the place of migrant workers. Nevertheless, Saudi Arabia faces the problems connected with the world economic crisis; according to the speech of Abdullah Zainal Alireza, who is considered to be the minister of state, the most important aspects faced in economic development are connected with the following:

Private sector advent;
The productive base creation;

The rapid development of above-mentioned sectors made the kingdom be one of the 25 top countries in the world according to the economic situation.

Saudi Arabia Resources Reserves

It is important to stress that the state is rich in natural resources; major reserves of natural gas and petroleum influenced the position of Saudi Arabia on the world economical and petrochemical markets. The kingdom is rich in underdeveloped metals to be tapped for industrial opportunities enlargement; besides, it should be noted that Abdullah’sAbdullah’s kingdom covers a highly developed mining sector reproduced through one of the largest company Saudi Aramco.

Economical situation in the kingdom attracts a great number of foreign investors relying on its competitiveness and high resources reserves; it should be stressed that financial and banking systems in Saudi Arabia are of great importance for state economy stabilization; the kingdom cooperates with the world banks and financial institutions on the beneficial terms of investment. The experienced transition of Saudi Arabia from public sector to private one is based on the creation of new public-private partnership leading to the effectiveness of privatization development. Economical system of the state will be closely connected with created knowledge-based society in order to influence the improvement of human remorse sector and bureaucratic capabilities. (Wilson, & Rajhi, 2004)

Manufacturing Sector (Textile and Motor Vehicle)

The analysis of state manufacturing sector showed the this aspect in economic development is considered to be the fastest in growing and one of the most beneficial in financial system. It is important to stress that there are a lot of industrial and manufacturing enterprises bringing about $21 billion annually.

Two basic products to be manufactured in Saudi Arabia kingdom are considered to be textiles and motor vehicles. This choice can be explained by the level of import of these products, which can be reduced through the enlargement of the manufacturing sector in the sphere of machinery and fashion design in the kingdom. The analysis of financial side of these two products has shown that cooperation with Germany, Japan and USA brings about 30% of total annual income covering the promotion of the products mentioned. High development of manufacturing sector in the state gives an opportunity to enlarge Saudi Arabia economical chances being ahead not only in natural resources.

PPF Curve – Textile and Motor Vehicles Production

The balance between supply and demand is considerably weak; the fact is that import does not satisfy the demand of the kingdom population even through wide international cooperation of Saudi Arabia with many European countries.

Supply and Demand Curve – Motor Vehicle

Advantages and Disadvantages

Textile and Motor vehicle production on the territory of Saudi Arabia can be considered a beneficial and effective start of the kingdom in the development of new economical cooperation based on machinery and fashion business. It should be noted that the introduction and building of specialized factories for textile and machinery production will cover the necessity to widen the kingdom partnership with other international leaders of this sphere.

It is important to evaluate all advantages and disadvantages connected with the enlargement of the manufacturing sector of the kingdom and the introduction of new industrial directions. Weak positions and difficulties which can be caused by new products manufacturing will be influenced by the following factors:

Building of new factories will reduce cooperation with European countries based only on import partnership;
Manufacture will need major investments to promote this industry on a high level.

Advantages of the textile and motor vehicle production are the following:

Economical and industrial broadening;
The introduction of new directions such as fashion and automaking industry;
Low competitive in the products manufacturing inside the kingdom will allow to develop particular beneficial price system;
It will influence the establishment of new contacts and partnership on the international level;
Manufacture of innovative products will improve the status of Saudi Arabia on the world market.

So, the analysis of advantages and disadvantages has proved that strong points far outweigh minuses; besides, it can be an important step of the kingdom in its way to economic stabilization despite world financial crisis and instability. (Manufacturing Booms in Saudi Arabia, 2009)

Economy Structure: Monopoly and Perfect Competition Market

Monopoly is focused on the market structure with one manufacturer for a definite product; the industry is considered to be a single business. The disadvantages of such structure are connected with high costs caused by so social, political or economic factors. Principle restriction is this structure is connected with the exclusive right to the usage of natural recourses. It should be noted that this market form is spread in Saudi Arabia where the government keeps under control the kingdom’skingdom’s oil industry.

Competition in the market structure is focused on the number of sellers and buyers representatives balancing the fluctuations of supply and demand. This form has a number of advantages which are connected with price policy and the variety of goods offered to the clients. It is necessary to underline the fact that this market structure positively influences the quality of offered goods and wide choice of the clients.

Conclusion

The analysis of Saudi Arabia economical system has shown its high level and position on the international market. It was found out that the kingdom is rich in natural resources and has a highly developed manufacturing sector. Monopoly type of market structure influences the promotion and usage of natural recourses in the state affecting its price and availability.

References

Wilson, R. & Rajhi, A. Economic Development in Saudi Arabia. Routledge, 2004.

Manufacturing Booms in Saudi Arabia. Saudi Arabia News. 2009. Web.

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