Saudi Arabia; From nomadic tribes to world influence: the rise of Saudi Arabia

Saudi Arabia is absolutely unique. Within the span of one generation it has been transformed from an impoverished semi-nomadic society into a physically modern nation, replete with computers, Boeing 747s, and cordless telephones.

The desert kingdom, a political backwater at the end of World War II, is now treated with respect by the industrial nations - despite the sharp falloff in its oil revenues in the last half year. Saudi Arabia still sits astride a quarter of the world's oil reserves, oil that within a few years could again be much in demand.

When this reporter last visited the kingdom in 1968, slavery had only shortly been abolished. A few camels still roamed the streets of Jiddah, a steamy, sleepy trading town on the coast of the Red Sea. Dharhan, on the opposite coast, had the air of a transplanted California suburb, put there for its expatriate employees by the Arabian American Oil Company, which was owned by four United States oil giants.

Oil money was already having its development impact then. Yet to come, though , was the quadrupling of petroleum prices in 1973-74, the even larger hikes in dollar terms of 1979-80, and the switch to sudden wealth and pell-mell development. The government budget for 1968-69 was $1.2 billion, compared with spending running around $80 billion today.

It was only in 1953 that the nation got its first currency, the Pilgrims Receipts. Before then silver coins worth their silver content were the means of exchange. The Saudi Arabian Monetary Agency, the central bank, was still hand posting its ledgers in 1968. Civil servants were only learning their profession.

In its own leisurely way, Saudia Arabia took complete ownership of Aramco in 1980. The government was boss well before then, a position firmly established with the oil embargo of 1973-74. Today, Aramco, which produces some 97 percent of the nation's oil, employs more than 60,000, of whom 34,000 are Saudis and 5, 500 American. The chairman and president are American; but two senior vice-presidents and an executive vice-president are Saudis. It will probably not be long before the quiet Saudi takeover extends to the top executive slots. In the Aramco housing compound, where in 1968 lawns mostly stretched from yard to yard, some low walls now separate certain homes, reflecting the Arab preference for privacy.

In Jiddah, as in other Saudi cities, the automobile dominates. Little or no provision has been made for the pedestrian who must cross highways without the aid of stoplights. Skyscrapers are multiplying. But Saudi executives prefer to locate on the second floor rather than the top floor. They have fewer steps to climb in the event of power outages, though these are becoming less frequent.

Development here is different from that in most developing nations in it is taking place in the context of an enormous annual income on a per capita basis - say $10,000. It is also occurring in a society determined to retain its essential values and identity. Saudi Arabia is the only major nation whose constitution is the Koran and whose political system does not include such institutions as political parties or legislatures.

Society is, of course, changing. But for many of the 2 million or so expatriates here, it remains a frustratingly restricted society, particularly for women. Few women are to be seen on the streets of conservative Riyadh in the day, and these are mostly veiled. They climb through a separate entrance into a separate compartment at the back of public transit buses. They are not seated next to strange men in airplanes. They cannot drive cars. More women are visible in commercial Jiddah.

Yet women are being educated in large numbers, going to work as teachers and nurses. When those slots are filled in a few years, there may develop pressure for new acceptable jobs for women. But there is little social mixing of the sexes at present. Even foreign-managed companies must be extremely careful not to allow Saudi women to work together with men, though it is easier for them to use non-Saudi women in secretarial or other functions.

Saudi Arabia's major challenge at the moment is dealing with a sharp reduction in oil revenues. Most Saudi officials and executives maintain the adjustment can be made by using the nation's enormous financial reserves and cutting back on less essential government spending. One former government insider held that massive defense spending - some $2,000 per capita compared with $520 in the United States and $20 in Egypt - could stand sizable cutbacks. But, he said, this might be resisted by some Saudi princes making up to 5 percent on defense contracts by acting as middlemen for foreign suppliers.

With oil revenues cut in half, development will be hit, admitted one minister. ''But we are in a much better situation than other OPEC countries. We can cut down on waste. We can trim public subisidies. I think what is happening to us is good.''

Like others, he noted that much of the nation's infrastructure - it ports, airports, roads, telecommunications, and housing facilities - has already been built. The new cities of Yanbu and Al Jubayl and their petrochemical facilities - probably the biggest industrial projects in history - are on schedule and adequately funded.

Further, he added, ''the private sector is generating its own activiies. It is becoming more capable of handling big projects by itself, without the government. Our encouragement of private enterprise is paying off.

''I am optimistic. And we have a tradition of being able to look after ourselves.''

Saudi Arabia was not colonized by Western powers.

Western businessmen here are less confident of Saudi Arabia being able to adjust easily to a lower spending pattern. ''Whenever there is a change of that magnitude in revenues, it is going to be felt,'' noted one foreign banker.

Yet no expatriate or Saudi this reporter spoke to doubted the ability of the royal family to remain in power. They maintain it is widely different from Iran.

One reason, explained Dr. Ali D. Johany, dean of the College of Industrial Management, University of Petroleum and Minerals, is the success of the regime in spreading around the nation's new wealth. The 2,000 or so members of the royal family may have done especially well in accumulating fortunes. But there has been more than sufficient money to provide education, housing, electricity, water, and health benefits for practically everyone. Nor is there any class rigidity in society.

''Very wealthy people come from every sector of society,'' noted Dr. Johany. ''Some were immigrants, tribal people, illiterates. Generally, everyone has shared in the pie.''

Interest-free housing loans, subsidies to agriculture, cheap business loans, subsidized electricity, water, and food - all have helped push the oil money to the bulk of the people.

Moreover, with an economic system based on free enterprise and such rapid expansion, there have been plenty of business opportunities for the ambitious. Though able members of the Royal family are often assigned important administrative tasks, many commoners have also moved to the top in government on the basis of their talents - such as Oil Minister Ahmad Zaki Yamani and Industry and Electricity Minister Ghazi al-Qusaybi.

An incredible improvement in living standards is fresh in the memory of any middle-aged Saudi. Those slightly older may recall the unification of the kingdom by King Abd-al Aziz, or Ibn Saud, in 1932. Dr. Johany recalls how his father would threaten ''to cut your tongue in pieces'' if he heard any of his sons speak badly of the King. This was the time of Egyptian President Nasser and of much talk about Arab nationalism. The royal family is identified with the heroic struggle to unite most of the Arabian peninsula politically.

Another unifying factor, according to Dr. Johany, is the commitment of the royal family to the preservation of Islamic values. The House of Saud came to power in the 18th century as the political leaders of the reformist Unitarian Movement of Sheikh Muhammad Ibn Abd-al Wahab, who called for a return to the basic principles of Islam. The Saudi government continues to adhere staunchly to Islamic teachings, as interpreted here. Of course, in such a large royal family, some members do not abide by the strictures of their religion. Any reporting of such conduct would cost a foreign journalist the visa that allows him to stay here. Other family members are devoted and consistent Muslims. Nevertheless, religion is basically a cohesive force for the regime here, and will remain so unless the royal family misbehaves badly.

''There is no substitute for the royal family,'' said Dr. Johany. ''Without it, the kingdom would disintegrate completely.''

The long-term economic aim of the Saudi government has been to reduce its dependence on oil, preparing for the eventual drying up of its oil and gas fields.

Dr. Johany maintains that the nation remains ''totally dependent on oil.'' Some 60 percent of gross domestic product is derived directly from oil revenues; almost all the other 40 percent indirectly, he says. The government spends its oil revenues; that spending supports other business activities. Other exports than oil are nominal.

The government's economic strategy has been to build up a massive petrochemical industry to get greater value-added prices from its depleting oil and gas reserves. In addition, the government figures, smaller industry will spring up around the periphery.

Dr. Fouad al-Farsy, undersecretary for industrial affairs in the Ministry of Industry, says that some 15.5 percent of the nation's industrial capacity is now non-oil, compared with perhaps 5 percent 10 years ago. ''We are still dependent on oil,'' he admits.

The government has established five industrial parks in major cities where land and services are provided cheaply to new plants. Also, inexpensive loans are available.

Dr. al-Farsy said 1,384 plants are in production in these parks as of this winter. That compares with only 635 in 1976. These plants make air conditioners, washing machines, clothes, building materials, furniture, plastic goods, paints, food and beverage products, and so on.

The amount invested in these plants totals 23 billion Saudi riyals ($7.2 billion). It was somewhat less than half of that in 1976.

The industry ministry has been granting eight to ten licenses for new plants each week. Some are joint ventures. In February, for instance, 77 licenses were granted, with 22.2 percent of the 1.2 billion riyals coming from abroad and the remainder in Saudi money.

These figures do not include the massive investment in basic industries such as petrochemicals, fertilizer plant, and a steel mill by Saudi Basic Industries Corporation and its foreign partners. One difficulty for all these enterprises is finding trained Saudis. ''This problem cannot be solved overnight,'' admitted Dr. al-Farsy, a graduate of Oregon State and Duke Universities. He maintained that government education must direct more Saudis into vocational training vs. a university education.

The government hopes to attract capital-intensive rather than labor-intensive industry. In effect, Saudi Arabia aims to jump from a feudal society to a high-technology society, enjoying some of the best public facilities in the world, without going through the difficulties of the industrial revolution.

Another manpower problem is the dislike of Saudis (and this is not especially unique) for menial or laboring jobs. ''It is a bad tradition,'' said the ministry official.

Dr. al-Farsy does not envisage Saudi women replacing men in factories or on other laboring jobs. But similar attitudes would have prevailed among American men in the 1920s or '30s.

As for the overall approach to and execution of development, most observers here give the Saudis good grades. ''Given the time frame, they have done a marvelous job,'' said William P. Sutton, director of the Saudi American Bank.

Saudi statistics: A tale of progress Construction 1975 $5.62 billion industry 1981 $45.93 billlion Construction government 76% clients, 1981 private 18% ARAMCO 6% Deepwater 1975 25 berths 1981 123 Airports 3 international 6 regional 15 local Telephones 1974/75 100,000 1980/81 800,000 Electricity 1974/75 1.6 MW 1980/81 7.4MW Water 1975 very little desalination 1983 450 million gallons per day Hotels 1974/75 60 to 80 with 5-6 rooms 1980/81 over 225 with 18,000 rooms Education 1975/76 1980/81 (students) (students) Universities 8 (23,300) 12 (50,900) Women's colleges 4 (1,100) 7 (5,800) Technological & teacher training7 (800) 22 (5,800) Lower schools 4,695 (933,500) 11,322 (1,488,000) to high school 4,695 (933,500) 11,322 (1,488,000) Motor 1977 1.1 million vehicles 1981 2.4 million Gross domestic 1974/75 $43.7 billion product 1981/82 $165 billion Real growth rate 1981-82: 1.5% Oil sector minus 9.4% Non-oil sector 11.1% Private sector 12.6% Government 8.1% Inflation 1982 0% Population 7 to 9 million (estimate) including about 2 million foreign

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