Reducing Public Sector Influence

As has been exemplified by the wheat farming experiment, governmental subsidies have not worked towards the diversification of the economy or the strengthening of the private sector. Industrial subsidies have not only failed to do these things as well, but have also had other negative effects including wasting resources and reducing incentive for innovation (Espinoza 72). In the justification for many of the established subsidies there is mention of a so called spillover effect, where money flowing from the state into an

industry, acts as a way to increase profits and therewith increasing welfare. However, as Espinoza argues, since many of the subsidies go directly into the hands of large

and seen as public sector employment has had many ill effects on economic growth, the final question would be how the role of the public sector can be reduced in the Saudi economy. Several options have been mentioned before. For one the educational sector is a powerful tool in the attempt to forge an independent and strong private sector. It is normal for students from higher education to have serious trouble finding jobs with the skill set they acquired during their studies. Many of the students that can be employed directly after graduation have taken extra courses. Private companies as well as higher education

institutions should therefore have the knowledge of what changes can be made in the curriculum for better job prospects, which can in turn decrease the unwillingness for working in the private sector (Yusuf 100). Additionally, ICT investments can increase productiveness of the labour force, also stimulating private activity.

Saudisation, although being rather disruptive for established companies can also help create opportunities towards lesser reliance on public spending, since the money that flows out of the Saudi economy in the form of remittances would instead flow into the local population, leading to increased spending and therewith opportunities for non-state led growth of the private sector (Espinoza 45). On the same note can economic

diversification increase the money supply in the hands of potential investors, possibly leading to a snowball effect. As for what the government can do in this area has Yusuf put forward the proposition that women should be less held down by legal or cultural

limitations in establishing companies of their own. She states a number of possible ways in which this cultural problem can be solved. Encouraging a first wave of female

entrepreneurs to open up businesses can help break the cultural problems surrounding female employment. This can be done for example by offering internships or educational courses (103). Through these measures can public sector importance be increased.

Conclusion

All in all, the Saudi economy is very strongly linked to the government. As has become clear through many of the examined aspects of the Saudi Economy explored in the Rentier State Theory, the need for some kind of reform program is high. As of late the government has no longer been able to support the same number of people through direct employment. At the same time there is a large number of Saudis unemployed are there many expatriate workers on the labour market. Several kinds of measures are taken to the end of diminishing the dependence on foreign workers, but the focus should lie on those measures that can bolster structural improvement in the compatibility between the Saudi workforce and private sector jobs. Saudisation is therefore a less desirable program than investments in human resources.

Linkages between government and many of the largest companies mean that much of the money spent in subsidies flows back into the state without benefit for the economy. Many of the reforms are in an effort towards creating an economic system that is less focussed on state intervention. It has become clear that there will have to be several societal changes as well. Labour in the Kingdom is, despite the extensive spending in education, still not compatible with the needs of the Saudi economy.

The government’s focus should for economic growth and employment lie more in private sector companies. Economic diversification and the development of the high tech sector are the most promising directions the Saudi economy can take. Foreign investors can help supply funds and knowledge to the Saudis.

To conclude, with regards to economic development there are several things that should and should not be done or attempted. At present, there is however only one major player in the process of reforming the economy, and that is the state. The question to what extent the Saudi government is influential in development can only be answered in one

way: it is crucial for any change in Saudi economic and societal structures. The state supplies the majority of its citizens with jobs and leads a great part of the economical activity. Therefore the initiative towards new and sustained economic development lies with the Kingdom’s leaders, but the only option lies in diminishing their share in it in the future.

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