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Saudi Arabia's Development Strategy: Comparative Advantage vs. Sustainable Growth

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Journal article

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In almost every country, industry is the glamour sector of economic development. People look to industrial development to provide much needed employment, to generate higher individual and national income, to relieve balance of payments constraints through import substitution, to open up markets for primary products such as those from the mining and fishing sectors, to provide the country with greater economic independence, to generate new tax revenues, and to furnish an important source of national pride. I By and large, these hoped for benefits of industrialization are realistic--provided a country makes sensible choices. Until recently, investment in Saudi Arabia has concentrated on infrastructure, light manufacturing and construction materials. Most of the major products in transportation, communications, health, education, electricity, and water that were initiated in the 1970s are completed or nearing completion. Since the mid-1970s, attention has centered on heavy industries, primarily in the downstream activities of the petroleum sector and on import substitution. In fact, one of the more intriguing question marks concerning the kingdoms development strategy centers precisely around the governments selection of industries. A steel plant, fertilizer plants, domestic and export-oriented refineries, and a series of major petrochemical complexes form the basis of the governments attempt to diversify the economy. What is the rationalization for this strategy and is all this too ambitious for a country with virtually no previous industrial experience As Yannis Stournaras has recently noted, the whole rationality of this policy has been seriously questioned. The main purpose of this paper is to examine the viability of Saudi Arabias industrial development strategy.

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  • Economics and Cost Analysis
  • Government and Political Science

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