medicine and health care, the service sector, and government contributing the most to the city's gross domestic product, estimated to be more than US$16 billion (60 billion Saudi riyals). Massive infrastructure projects are poised to transform the already cosmopolitan Arabian Gulf city into the most powerful business center in the Middle East. And the region is taking notice. Perhaps best captured in the regional business publication The Gulf, the magnitude of commercial activity, which included almost 3,000 projects valued at US$18.7 billion (70.3 Saudi riyals [SR]) scheduled for implementation in the Riyadh region throughout 2014, was stated as follows:
Infrastructure projects dominate spending. Some Saudi riyals (SR) 57 billion worth of power projects comprising 10 power generation facilities, 62 power transmission projects, and 19 power distribution projects. Meanwhile, SR 823 million worth of water network schemes are being implemented. Transport networks are also being overhauled to relieve pressure on the city's choked arteries and efficiently connect the various economic clusters currently being built or in the pipeline across the city. The most eye-catching transport scheme is the $16 billion underground metro system, construction work on which is due to start later this year. The huge project will be complemented by new roads, railways, and airport projects, the value of which will be SR24 billion in 2013/14 alone. The ADA (ArRiyadh Development Authority) notes that some SR 43 billion is being spent on financial and technological cities, hotels, offices, and industrial cities during this period. Arguably the most high profile of these projects is the hugely ambitious King Abdullah Financial District (KAFD), a massive real estate project whose glass tower blocks now dominate the skyline of North West Riyadh.
We will revisit Sheikh Abdulrahman Al-Jeraisy and the Jeraisy Group in Chapter 3. For now, however, let us acknowledge that the rapid rise of the Saudi capital has been at pace with the rise and modernization of the Kingdom itself. We will view more evidence of this in our first chapter.
Chapter 1
The Kingdom's Modern Economy and Economic Might
From the moment Standard Oil of California (SoCal), through its subsidiary California-Arabian Standard Oil Company (CASCO), struck oil from famous well Dammam No. 7 in Dhahran in 1938, the trajectory of the Kingdom's development and fortunes has never strayed far from the flow of the black liquid gold. Throughout its modern history, oil revenues have allowed Saudi Arabia to achieve an unimaginable level of economic development within a seemingly fleeting period of time.
In 1945, before mass-generated and distributed electricity came to the Kingdom, before Saudi Arabia had a national monetary regulator and the country's official currency had been minted (just 10 years before), and before the nation's road systems were built, its finances were in disarray and the world's powers expected it to slide into bankruptcy. Through direct subsidies and revenues from oil production, the United States and the United Kingdom kept the Saudi Kingdom from economic ruin. It was the exceptional leadership of His Majesty, Ibn Saud, and that of his sons and a cadre of able advisors that formed the masonry substructure upon which all future national gains would be built. The careful, methodical, and prescient approach to managing the Kingdom's state and economic affairs is what helped transform the nation from a primarily agrarian and trading nation into the nineteenth-largest economy in the world that it is today. Before the discovery of oil, 90 percent of Saudi Arabia's population subsisted as nomads and peasant farmers.
To understand how the Kingdom's economic and financial affairs are managed today, one must grasp and appreciate the fiscally conservative approach its chief financial stewards have always taken. Insight in this regard comes from Dr. Mohammed Al-Jasser, the former minister of economy and planning (MoEP) and former governor of the Saudi Arabian Monetary Agency. Dr. Al-Jasser is now the secretary general of the Strategic Partnership Office of the Council of Economic and Development Affairs (CEDA). In a speech he gave at the Saudi Arabian General Investment Authority's (SAGIA) Seventh Annual Global Competitiveness Forum (GCF) on January 19, 2014, then economy and planning minister Al-Jasser stated:
I would not be divulging a secret when I tell you that Saudi policy making is a very patient process that takes a long-term view. Policy makers in this country first determine where the long-term interest of the country lies. Then they work diligently and patiently toward that goal. Short-term conditions may change from time to time and may put tremendous pressure on us to change course, but we generally try to keep our eye on the ball and resist short-term temptations. 5
Since the 1930s, the production of oil and its revenues to the Kingdom heavily influenced economic planning. In large measure, because of the underdevelopment of its infrastructure and regional political issues, the period between 1930 and 1970 saw inconsistent growth in the Kingdom's oil production and export capacity. World War II disrupted the development of the oil industry in Saudi Arabia. Until 1945, Saudi Arabia recorded total revenues of less than US$4 million per year. However, by 1949, revenues climbed to US$85 million, approximately 60 percent coming from the production and export of oil.6
In 1970, however, Aramco was still a foreign controlled company. It began to expand the production of oil several times greater than pre-1970s levels. As the industry's production and infrastructure began to take off and oil revenues grew at faster rates, the Saudi government moved to establish a formal strategic planning process to ensure the integration of all aspects of the Kingdom's human, natural, and fiscal resources, institutions, and its economic and social interests into the deliberative process in shaping the nation's medium and long-term development goals.
The first Five-Year Development Plan was approved in 1970. Since then, there have been a total of nine such plans adopted and implemented. See Table 1.1.
Table 1.1 Chronology: Kingdom of Saudi Arabia Five-Year Development Plans
*Tenth Development Plan is currently being considered by the Saudi government and is expected to be a new part of a 15-year transformational period for the Saudi economy.
G = Gregorian Calendar; AH = Islamic Calendar, also referred to as the Hijri Calendar.
Although economic planning in Saudi Arabia was given thoughtful attention by King Abdulaziz Al-Saud, it was his son, King Faisal Bin Abdulaziz Al-Saud, who brought a new level of depth, range, and analysis to bear on planning the growth of the nation. Having taken over complete management of a badly mishandled economy and virtually all aspects of governance from his half-brother Saud Bin Abdulaziz in 1964, King Faisal began an unprecedented period of carefully planned economic expansion and government growth. King Faisal acquired the expertise of imported Western technocrats and experts who assumed positions alongside Saudis in government entities around the Kingdom. The beginning of this period witnessed a dramatic increase in the number of expatriate workers in Saudi Arabia, a phenomenon that the Kingdom is still grappling with today. Correcting the imbalance of an over reliance on foreign labor in the place of a higher number of employed Saudis is one of the greatest economic and social challenges facing the country, in this century or the last.
The president of the Kingdom's central planning organization, Hisham Mohiddin Nazer, submitted the first Five-Year Plan to King Faisal on August 16, 1970 (13/6/1390 AH). The rationale, objectives, and goals of the current, Ninth Year Development Plan (2010–2015) are reminiscent and elementally similar to those articulated in President Nazer's submission to King Faisal in 1970. He stated the plan objectives as:
The general objectives of economic and social development policy for Saudi Arabia are to maintain its religious and moral values, and to raise the living standards and welfare of its people, while providing for national security and maintaining economic and social stability. The objectives will be achieved by:
1.
Kingdom of Saudi Arabia, Ministry of Planning, Riyadh, Third Development Plan for the Kingdom of Saudi Arabia, 1980–1985 (1400–1405 AH), 8.
