INDUSTRIALIZATION IN SAUDI ARABIA
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The Saudi Arabian economy is dominated by oil, which accounts directly for nearly forty percent of gross domestic product (GDP).1 Indirectly, however, considering that petroleum production allows the government to subsidize manufacturing, agriculture, and services in much of the private sector, it is estimated that the oil sector controls eighty percent of the desert kingdom's economy. That said, official general policy since the oil boom two decades ago has been to diversify the economy. Agriculture, for example, is subsidized in order to decrease dependence on imports of foodstuffs in this arid, mostly non-arable land that requires vast amounts of irrigation. As a result of such subsidies, agricultural production has increased about 8 percent a year since the 1980's, but costs are far above international market levels. For instance, the country is now self-sufficient in wheat, but its cost is nearly five times the world price. And industry too has received similar subsidies in the national effort to diversify economically away from oil. Thus, the Saudi economy is dominated away from oil, but official policy is to lessen dependence on the "black gold" via subsidization to the agricultural and manufacturing (and increasingly service) sectors. Industrially, diversification efforts by the Saudi government, which owns or controls most of the economy, have been largely fields related to oil--petrochemicals, refinin
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o wean itself away from overdependence on crude oil production, the desert kingdom has focused on processing, distribution, and transporting the commodity in the initial phase of diversification, in effect capitalizing on the country's comparative advantage of having so much of the raw material on (under) her soil.
Oil's impact on the Saudi economy has been virtually immeasurable. It has transformed the country from a desert backwater fifty years ago to one of the wealthiest nations on earth.6 With a relatively small population, the kingdom's per capita income of more than $12,000 is one of the highest in the world. Formerly a nation of Bedouin nomads, now the land is dotted with modern cities and Western style amenities. Life expectancy is nearly at US and European levels, thanks to free medical care provided by the Saudi government. Cheap housing is subsidized and now affordable to the average citizen. Widespread education has been established in the kingdom, inexpensive, subsidized, and/or free to the Saudi people. And all this is due to the "black gold" discovered in the country in the 1930's and developed largely by American oil firms. Thus, oil has totally transformed Saudi Arabia into a modern, prosperous state.
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Approximate Word count = 1946
Approximate Pages = 8 (250 words per page)
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