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Economic diversification in Saudi Arabia: Myth or reality?


  • Albassam, Bassam A.


Economic diversification is important for building sustainable economic growth. Thus, an economy that is highly dependent on income from a natural resource is in danger of instability or even collapse if the price of such commodity decreases in the global market. Additionally, economic diversification contributes positively to creating jobs, fighting corruption, and improving the institutional quality of countries. The Saudi government has issued 10 development plans since 1970, each covering five years, and economic diversification is a main objective of all these plans. This paper examines the government׳s efforts to diversify the economy using four variables: oil share of gross domestic product (GDP), share of private sector in GDP, oil exports as a percentage of the country׳s exports, and oil revenues as a percentage of total revenues. The current analysis covers nine development plans from 1970 through 2013. The analysis concludes that, after more than 40 years of development plans aiming to diversify the Saudi economy, oil is still the main engine driving the economy. The Saudi government needs to fully consider economic diversification as a tool for better governance.

Suggested Citation

  • Albassam, Bassam A., 2015. "Economic diversification in Saudi Arabia: Myth or reality?," Resources Policy, Elsevier, vol. 44(C), pages 112-117.
  • Handle: RePEc:eee:jrpoli:v:44:y:2015:i:c:p:112-117
    DOI: 10.1016/j.resourpol.2015.02.005

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    Cited by:

    1. Ari, Ibrahim & Akkas, Erhan & Asutay, Mehmet & Koç, Muammer, 2019. "Public and private investment in the hydrocarbon-based rentier economies: A case study for the GCC countries," Resources Policy, Elsevier, vol. 62(C), pages 165-175.
    2. Faudot, Adrien, 2019. "Saudi Arabia and the rentier regime trap: A critical assessment of the plan Vision 2030," Resources Policy, Elsevier, vol. 62(C), pages 94-101.
    3. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Poverty Reduction in Recipient-Countries," EconStor Preprints 213807, ZBW - Leibniz Information Centre for Economics.
    4. CHARLES Ayobola & MESAGAN Ekundayo & SAIBU Muibi, 2018. "Resource Endowment And Export Diversification: Implications For Growth In Nigeria," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 13(1), pages 29-40, December.
    5. Soummane, Salaheddine & Ghersi, Frédéric & Lefèvre, Julien, 2019. "Macroeconomic pathways of the Saudi economy: The challenge of global mitigation action versus the opportunity of national energy reforms," Energy Policy, Elsevier, vol. 130(C), pages 263-282.
    6. Ansari, Dawud, 2017. "OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics," Energy Policy, Elsevier, vol. 111(C), pages 166-178.
    7. Dawud Ansari & Ambria Fareed, 2019. "Stranded Assets and Resource Rents: Between Flaws, Dependency, and Economic Diversification," DIW Roundup: Politik im Fokus 136, DIW Berlin, German Institute for Economic Research.
    8. Albassam, Bassam A., 2019. "Building an effective knowledge management system in Saudi Arabia using the principles of good governance," Resources Policy, Elsevier, vol. 64(C).

    More about this item


    H; O; Q; G3; Saudi Arabian economy; Economic diversification; Development plans; Oil sector;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance


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