Saudi Arabia’s free market economy has undergone remarkable changes in a relatively short period of time. It has evolved from a basic agricultural society into a regional and global economic power with a modern infrastructure.
Petroleum is an integral part of the Saudi economy; Saudi Arabia is the world’s largest producer and exporter of oil. In recent decades the Kingdom has increasingly diversified its economy, and today produces and exports a variety of industrial goods all over the globe.
The government has an essential role in industrial and economic development. The Ministry of Economy and Planning formulates economic and social development plans that set long-term economic goals. Additional sectors of the economy are overseen by individual ministries, such as agriculture, energy, transportation, communications and finance.
The private sector is playing an increasingly larger role in the Saudi economy – it now accounts for 48 percent of the gross domestic product (GDP). The sector is expected to continue growing, especially as Saudi Arabia opens its doors further to foreign investment.
In December 2005, Saudi Arabia joined the World Trade Organization (WTO), a significant development that gives Saudi products greater access to global markets, creates jobs and encourages foreign investment.
Building a modern economy
When the modern Kingdom was established in 1932, the Arabian Peninsula was an agricultural society that depended on farming and commerce – especially date exports and trade generated by pilgrims coming to Makkah and Madinah. It lacked the infrastructure needed to support the kind of economic growth envisioned by its founder, King Abdulaziz bin Abdulrahman Al-Saud.
The discovery of oil in commercial quantities in 1938 changed that. Soon after World War II, steady oil exports provided the funds to build a basic infrastructure of roads, airports, seaports, schools and hospitals.
In 1970, Saudi Arabia introduced the first of a series of ongoing five-year development plans to build a modern economy capable of producing consumer and industrial goods that previously had been imported. The country’s infrastructure was expanded, allowing industry and commerce to flourish.
At the same time, the national oil company, Aramco, invested in new production facilities, pipelines, plants and shipping facilities and continued exploring for new deposits to maximize earnings from the oil sector, which were needed to fund further growth.
The result has been a steady economic transformation of the country. Today, Saudi Arabia is one of the fastest developing countries in the world.