Saudi Arabia, also known as the Kingdom of Saudi Arabia, is located in the Arabian Peninsula comprising of 20% of the world’s oil reserve. Its GDP comprises of 45% from the oil industry and 40% of its private sector. It is an economy based on petroleum whose 90% of the export earnings come from oil. The Kingdom i.e. currently rapidly capitalizing was one of the least developed countries in the 1970s. The country is currently in transition with expanding labor market, increasing educational opportunities, declining per capita income with the reduction in oil prices, stimulating private sectors, reducing inequality or corruption issues and dealing with modern changes coming in the nation with respect to technology.
The demography of Saudi Arabia suggests that more than half of its population is under the age of 35. Given the changes in technology, the people of Saudi Arabia are witnessing changes in social interactions. It is one of the active markets for social media. It accounts for 40% of twitter users and more than 210 million tweets per month. The country had restrictions on expression in traditional media, but the enhancement of social media has encouraged the exchange of opinions which they might have feared before. The marketing fund on social media quoted by Bilal Hallab, founder of Social Clinic, was about $40,000 in 2011 while in 2015 increased by ten folds. This had an enhanced impact on the market demand.
Saudi Arabia has not been known for committing to environmental conservation. It usually faces severe environmental consequences issues such as oil spills, a decline of marine habitats, pollution, etc. But the country is seriously focusing on environmental protection. The Presidency of Meteorology and Environment has given an ultimatum to all companies to meet air, water and noise pollution standards. The consequences of ignoring the new policy will be shut down of the projects, etc. The new policies address the preservation of land, pollution from machinery, radioactive waste in coastal waters, etc. It has also brought companies focusing on green movements such as Presidency of Meteorology and Environment, Saudi Aramco, Saudi Gulf Environmental Protection Company, etc (Azhar, 2012).
In the economic level, Saudi Arabia is listed as one of the best performing G-20 countries over the years. The GDP of Saudi Arabia was around $745 billion (Alhamad, 2014). The country usually faces annual growth rate of around 7%, but the inflation has been increasing rapidly. The basic utilities such as housing, water, electricity, gas, etc. have an annual inflation of around 7.9%. The overall cost of living in the country is rising (Euromonitor PLC, 2014).
The country has been in transition which broke its traditional barriers in terms of lifestyles and earnings. The changes in lifestyles, increase in population, improvement in education, urbanization of rural areas, etc. have brought changes in its consumption patterns, leisure time, investment, transportation, traveling habits, etc. The consumers were less affected in Saudi Arabia even during economic downturn. With the development of modern retail, the shopping habits, especially food shopping habits, are changing to those of Western world. This is seen in increased demand for a range of products. The trend towards Smartphone among teenagers is seen highly common. They are also adapting to Western fashion in the face of conservatism. Among middle youth, the demand for Turkish product in relation to soap operas is also highly witnessed. The middle age people have evoked high interest towards Western medicine and cosmetic surgery. Additionally, Saudis are highly demanding energy efficient appliances in households. The foreign workforce base in the country demands more imported food along with high demand for fast food. The social changes among people are giving rise to the demand for consumer goods.
In terms of demand for oil, the country will face reduced or stagnant demand from USA, OECD Europe, etc. However, the forecast suggests growth in oil demand from countries such as China, other Asian countries, Africa, etc. during 2015 to 2020. Canada’s demand has doubled since 2009. China is a potential market with second largest import whose demand is believed to be increased by 1.5 million barrels per day. As Saudis are China’s crude oil suppliers, the demand for crude oil will enhance.
The continuous reduction in cost due to oil battle between USA and Saudi has been affecting the entire world. The price of oil during 2010 to mid-2014 was around $110 a barrel. The crude oil prices have fallen below $50 at present (Pulmer, 2016). The Saudi Arabia has about $900 billion in reserves. They can afford the reduction in price also due to their efficiency in new technologies leading to lower costs. Even though their revenues are reducing, the country can still reduce the price without a loss since the cost per barrel for Saudis is mere $5-$6 per barrel to obtain from their grounds.
The country has an escalated demand in steel industry after the state-backed investment and growing investment in the private sector. It is one of the biggest producers of steel rod, wire, bar, etc. in the Middle East and North Africa. The growth projections for coming year are double at 10% per year due to more and more projects in the region (Oxford Business Group, 2012). The country’s ambitious infrastructural demand will meet these demands and will further expand health and social service facility making its infrastructure even stronger.
Saudi Arabia has a large flow of foreign labor which evoked high concern for the Saudi government. This has been caused due to large young population base, and the mismatch between Saudi labor entrant and the need of the market. Saudization has been a common tool adopted by the government to provide higher incentive yet visa restrictions on foreign workers to provide higher involvement of Saudi Arabians in the workforce. The share in private sector job has increased from 7% to 16% from 2011. It is transforming attitude and society as a whole (Jeddah, 2014). The Saudi workers were found to check out early, 100% turnover rates, etc. during 2011. It can be due to their nature of being served but not serving. The youths declined to take orders from Pakistani or Indians. Such behaviors originated from the division in their society between tribal and non-tribal origins. They had great difficulty dealing with a merit-based relationship. There have been changes regarding work ethics for Saudis who are adapting to the market needs and job expectations. The social changes are bringing reduced work ethics violation such as absenteeism, turnover, declining duties, etc. Saudis are developing sector-specific employment goals to recruit workers in growing the private sector. Saudis are being more realistic in their nature to tackle the traditional nature of going to work which related to earning salary even when they are not efficient and effective in their work.
References
Alhamad, H. S. (2014). "The High Cost of Living in Saudi Arabia: Growth and Inflation in a Macroeconomic Perspective." Student Pulse, 6(09). Retrieved from http://www.studentpulse.com/a?id=918
Azhar, B. (2012, February 28). The Top 7 Environmental Movers and Shakers of Saudi Arabia | Green Prophet. Retrieved from http://www.greenprophet.com/2012/02/environmental-movers-shakers-saudi-arabia/
Euromonitor PLC. (2014). Consumer lifestyles in Saudi Arabia. London: Euromonitor.
Jeddah. (2014, July 14). Strong domestic demand spurs Saudi private sector | Arab News. Retrieved from http://www.arabnews.com/news/598996
Oxford Business Group. (2012, October 30). Saudi Arabia: Rising steel demand | Saudi Arabia | Oxford Business Group. Retrieved from http://www.oxfordbusinessgroup.com/news/saudi-arabia-rising-steel-demand
Pulmer, B. (2016, February 8). Why crude oil prices keep falling and falling, in one simple chart - Vox. Retrieved from http://www.vox.com/2016/1/12/10755754/crude-oil-prices-falling
