Balancing change and identity
Richer than ever thanks to high oil prices, Saudi Arabia is developing an economy that will meet the needs of its rapidly expanding population. Its challenge is to engage increasingly with the modern world while retaining a national identity rooted in tradition and religious values

Saudi Arabia is a land of mosques and money, of vast empty desert and luxurious modern cities with sleek skyscrapers, a place where religion and consumerism coincide, where Mercedes cars are advertised as gift items but women are prohibited from driving.

It’s a very different country, of course, from when Abdul Aziz Al Saud united four-fifths of the Arabian peninsular into a single kingdom approximately the size of western Europe back in 1932. Saudi Arabia then was a poor desert state sparsely populated by nomad tribes. Within six years, however, American geologists had discovered oil beneath the sands, and with the start of commercial production during the Second World War the process of change that produced today’s kingdom began.

Seventy-five years on, Saudi Arabia is the world’s largest oil producer, its state coffers overflowing with petro-dollars thanks to high international prices, currently at around $65 (£32) per barrel. Oil accounts for more than 90 per cent of exports and almost 75 per cent of government revenues. Proven reserves are put at more than 260 billion barrels, which amounts to approximately 25 per cent of the world’s total.

Living standards have been rising and through the internet, satellite television and cell phones, the predominantly young and urbanised population, which has a median age of 21, have access to the world outside Saudi Arabia that their parents could not have dreamed of.

And yet, while much has changed, much remains the same. The birthplace of Islam, whose ruler is the Custodian of the Two Holy Mosques, Macca and Madina, is a deeply traditional, patriarchal society with a political system based firmly on Islamic Sharia law.
Saudi Arabia’s challenge in the 21st century is how to retain its national Islamic identity while endeavouring to meet the needs and satisfy the desires of its citizens – particularly the young. What gives urgency to the need for social and economic development is the ticking time bomb of population growth. Currently estimated at more than 27 million, Saudi Arabia’s population is expanding at a rate of 2.06 per cent annually, with huge implications for areas such as employment, education, housing and health.

That necessitates the development of a wider range of economic activity than the current dependence on the extraction of oil and gas, and it means increased engagement with a globalised world. With economic reform can be expected to come social and political change – indeed it is already starting to happen, particularly in areas such as education, employment and business opportunities for women.

It would be unrealistic to expect the pace of change to be anything other than gradual, and finding acceptable ways of operating in the secular world of modern commerce may require imagination and innovation – a prime example is the emergence in recent years of Sharia-compliant banking products and services, now in demand across the Islamic world and beyond.

Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz Al-Saud is a reformer with his eye on the long-term future, who fully understands the economic realities. Top of the list is employment. The kingdom is heavily reliant on foreign workers, with non-nationals making up a fifth of the population. The official unemployment rate is between 9-12 per cent – some observers put it higher – and is attributed largely to a skills shortage among Saudis.

Saudi Arabia’s 2007 budget – the largest in its history – puts the emphasis on spending to create job opportunities and boost economic growth. Thanks to a record budget surplus of SR265 billion (£35 billion), larger sums than ever before are being spent on education and manpower training, health, municipal services, water, agriculture and infrastructure. The huge oil revenues of recent years are being used to reorient the economy with the help of foreign investment.

At present, most of the population is concentrated in Jeddah and Macca in the west, the capital Riyadh in the centre and Dammam and Al Khobar in the east. But construction has already started on the first of six new mega-cities that will provide jobs and homes for millions of people.

Over the last 20 years, the pace of development has been extraordinary, and it could be even greater over the next 20. As the kingdom moves towards becoming one of the world’s most competitive economies and extends the benefits more widely to its citizens, it will need to continue to balance tradition and modernity.


Project Director: Bertrand Epaud
Project Coordinator: Aleksandra Pancevska