The Kingdom must build a diversified economy if it is to solve the unemployment problem currently plaguing the Saudi population, said economic expert Salah Kashoggi. Even though Saudi Arabia leads the world in the production of petrochemicals, more is needed as that sector does not come close to rivaling oil’s contribution to the GNP nor does it generate significant employment opportunities.
Kashoggi stressed the importance of strengthening efforts to increase industrial activities, especially manufacturing and cognitive so that labor market satisfies the needs of society.
“The whole process will result in the narrowing of the gap between real incomes and salaries of Saudi families”, he said.
He noted that the Ministry of Economy and Planning’s five-year plan focuses on the importance of diversifying economic resources by expanding the industrial base of the Kingdom. “To achieve this, the Kingdom needs to diversify its raw materials”, he said, adding that oil created a base for the establishment of leading petrochemical industries, but that diversification was still needed.
“At the same time, local industries should be supported. Importers should be transformed into manufacturers, starting with consumer products for the daily needs of citizens,”, he added, demanding that a quota should be imposed for some imports that can be manufactured domestically. Kashoggi also said that he believed that the Kingdom should take advantage of its geographical location to set up free zones that can benefit neighboring countries, as well. This would increase the availability of raw materials which in turn would generate more industrial opportunities for the Kingdom in the fields of cognitive activities, re-exportation, marketing and logistical services. He pointed out that an industrial base is the economic foundation in hard times, a fact that can be seen in China’s weathering the global economic downturn better than the US has. “The banking industry created the crisis we are experiencing now. Its profitability is high, but it doesn’t create jobs”, he said.
There is an urgent need to enact laws that support the establishment of venture funds so as to enable the private sector to fund manufacturing with government support. Building such an industrial base should not be an overly difficult task, he said, as the Kingdom already has all elements necessary to build an industrial base, such as cheap labor, capital, land and cheap energy.
“Manufacturing plants will create a higher level of jobs for Saudis”, he said, pointing out the absolute necessity of investing in research and development in order to boost efficiency, and provide quality free-zone products, which will help to reduce non-oil imports.
Kashoggi also suggested that Saudis must be little quicker on the draw and seize opportunities that present themselves even in the midst of crisis.
He said that it should not be out of question to purchase troubled industrial companies in order to transfer technology. He gave as an example the opportunity to buy a share of GM when it was asking for protection from bankruptcy in 2008. “We had at that time the chance to buy a share in the group.
“Such moves would add a great deal to the Saudi economy. This would surely diversify our income sources, create more jobs and activate our industrial cities,” he concluded.