Last week, I received with pleasure the invitation to give a lecture at the King Abdullah Petroleum Studies and Research Center. This is my second visit to this center, which is the first and largest independent research center set up in the kingdom. The center does not conduct researches in the field of energy at the level of the Kingdom of Saudi Arabia only, but at the level of the entire world. As the kingdom is an active member in the international community, it is vital to have a global vision on many economic and geo-strategy issues.
In King Abdullah Center for Petroleum Studies and Research, about 40 researchers from almost
every continent are conducting important researches on a variety of topics related to energy. The researches of this center are characterized by transparency and many of the Saudi universities have to follow the example of this center in the area of transparency. The Kingdom needs high level intellectual research and studies centers and this is what we will talk about next week, “Grace of God”. My lecture was about the future of the kingdom, which requires addressing the challenge of increasing domestic energy consumption, in addition to addressing the employment and economic diversification issues. I see the challenge of increasing domestic energy consumption should be part of a comprehensive plan of the future of the country after twenty years. As usual, work and economic planning, which relies heavily on energy does not create sufficient job vacancies for citizens. Unless restructuring the pricing techniques and energy consumption has been done in the kingdom. The final result will be disastrous when just little energy to export remains. And do not forget that in spite of all the talk about diversifying the economy for more than four decades, the oil still represents 90% of total state revenues. But the decrease of the oil exports due to rising domestic energy consumption will, in the end (God forbid), reduce the available revenues required to manage the country!!
There is another point related to the point above, which is hidden behind the high oil prices and the high economic growth over the past decade. This point is represented by the absence of large increases in the real income per capita and no big changes in productivity. Real GDP of the Kingdom has increased by about 31% between 2001 and 2009, mainly driven by the high global oil prices since the beginning of 2000. However, per capita income increased by less than 1% during the period mentioned above, due to the nature of the overall economic and development policies. Also the productivity remained low, as between 1990 and 2012, the real growth of the non-oil sector averaged 5.1%, but the employment (especially expatriate) and capital were the largest contributors to this growth, while it had the minimum contribution on productivity at the level of these three elements. In order to achieve a balanced economy, productivity must be one of the largest contributors in the growth. In order to increase productivity, it is necessary to increase investment in innovation, skills and improve techniques, and promote entrepreneurship and enhance competitiveness.
And the organizers of the Saudi Economic Planning need to think in ways that enable them to diversify the economy by creating more jobs for Saudis, with a commitment to reduce the energy consumption, since it is not quite worthwhile to create new jobs while retaining the growing in energy consumption and a decline in economic diversification. So, this challenge is not easy and requires a lot of patience, as well as a decisive political will.
Any future plan should include a transition to renewable energy resources; solar and wind power essentially. And in the absence of any real decision on the renewable solar and wind power across the country as a whole, the challenge will remain in place with the continuation of growing of the domestic energy consumption at an alarming rate. The kingdom today is in front of a narrow and dangerous turn and must make tough decisions. Also the time is a very decisive factor and won’t always be in the favor of the Kingdom.