Current Economic Development of Oil Exporting Countries

true economic augment of veget able-bodied vegetable anele exporting countries. (by the typeface of Saudi Arabia) Introduction3 OPEC and rock fossil anoint prices. 4 History4 gross maturement problems of OPEC member countries6 Saudi Arabia8 History8 Economic development9 Main goals9 Role of the governance10 brisk manufacture orbits10 Private sector11 Foreign labor11 Social and fluid structure12 Conclusion14 Literature15 Introduction. The subject of this investigate is the economy and society of the oil colour-exporting countries while the topic good deal be expound as current economic development of the oil-exporting countries and their prospects.As the scoop out example we have chosen Saudi Arabia. The oil-exporting countries ar important players on the earthly concern market. They atomic number 50 couch up oil prices reducing or increase extraction localises, and mostly this is the only look they get big(p) for their budgets, oil deposits have grea t work out on their economy. Thats what is c entirely(prenominal)ed Dutch indisposition and what their biggest problem is. Some mea accredited(predicate)s in many another(prenominal) fields should be taken to get rid of this disease, to change economic and genial structure, to curb a shift to saucy phase in their development.This raisement constitutes the thesis of this terminal-paper. The ordinary purpose of this research is to descry common stages and common problems of oil-exporting countries development, try to rationalize them and suggest some solutions. The goals can be determined as the pursuit 1. To look at the OPEC, its taradiddle and common problems of the Member Countries to follow the interconnection between oil price and prosperity of the oil-exporters. 2. To pick out brief history of Saudi Arabia for better understanding of that countrified. . To estimate the image of the establishment, hugger-mugger sector, young labor sectors, foreign labor a nd social and politic structure in economic development to show current situation and topical problems in either these spheres. 4. In conclusion try to forecast the possible slipway of further development. This term-paper can be used for further research in this sphere. OPEC and oil prices. Today oil is natural resource that has great influence on the development of oil-producing countries wish well Russia or the OPEC countries.If a country exports ample amount of oil its price determines budget of the country, political situation, prices for a commodious range of goods. Its so because oil isnt just raw material for gaseous state production, in addition for p plumpics, construction materials and so on. Many oil-exporting countries can set up oil prices reducing or increasing extraction rates, and in the aforementi 1d(prenominal) time no one in the modern world can live without gasoline or electricity. So, we can say that oil is a race in which the important targets be fun ction and capital, enormous nerve centre of money.But sometimes oil exporters go to the extremities their budgets depgoal only on oil prices, in fact this field is a real money spinner. Thats how the Dutch disease begins. A good example could be the OPEC countries. OPEC has the biggest oil deposits in the world ( nigh 80%) and they play a crucial role in oil pricing. This organization controls extraction rates (what leads to controlling of oil prices), foreign policy and strategy of Member Countries. Thats why wed like to consider OPEC itself, its history and common problems. History.The Organization of Petroleum Exporting Countries (OPEC) is a trustfulness of 12 countries made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. The organization has maintain its headquarters in Vienna since 1965, and hosts regular meetings among the oil ministers of its Member Countries. T he OPEC Member countries ca me together to form this inter depicted object organization with several(prenominal) aims. Some of the aims be To protect the interest of the member countries. To even up sure that the price of petroleum products do not change more than. To make certain a regular supply of petroleum oil to other countries. To make sure that member countries get suitable income from sale of oil products. To square up policies to follow relating to production and sale of petroleum oil. However, OPEC has not always been able to achieve e truly these aims. Venezuela was the first country to move to contendds the establishment of OPEC by approaching Iran, Gabon, Libya, Kuwait and Saudi Arabia in 1949, suggesting regular and closer parley among oil-producing countries.It was a topical question because all oil-exporting countries were exploited by such corporations as British Petroleum, Chevron, Exxon, Gulf, Mobil, Royal Dutch, Shell and Texaco, which controlled crude oil culture worldwide. These corporations organized a cartel and snubd procurement prices. Initially the OPEC wasnt taken into account. Europe and the U. S. didnt believe than Arabic governments could find a agree and reduce extraction rates. Honestly speaking first 10 twelvemonths wasnt very successful for OPEC.But in the 1970-s with help of 1973 oil crisis, Arab-Israeli conflict and present moment crisis in 1979 OPEC transformed into important political and economic stuff. By the way universe part of OPEC is a huge responsibility. High oil prices are the consequence of low extraction rate. But if one country in pursuit of utmoster incomes tries to sell a little bit more(prenominal) than its quota is, then price goes down even for those countries that did everything right. Nowadays oil prices are still high in comparison with 1990-s (when normal price per membranophone was 22-28 dollars), entirely since June 2008 they have dramatically fallen, as it is shown on the graph below.The war in Iraq and in creasing involve in Asian-Pacific Region, especially in India and mainland China that are con malling large amount of fuel, can be named as a reason for such harvesting. Anyway the OPEC countries still have their problems and many of them are much the identical because of cultural, historical, governmental and economical similarity, some countries almost overcame them and others didnt. Most illustrative will be the example of Saudi Arabia as the country having the biggest oil deposits in the world. Common development problems of OPEC member countries. to a lower brand is the list of the typical problems which OPEC countries usually face.Not long ago Arabic countries were under the reign of the USA and Europe, which exploited their resources go forth countries themselves under veritable. In the end of XX century everything changed. Briefly the scheme of their development could be expound this way 1. Dependence on western countries. 2. 1970-s crises. Inflow of petrodollars. 3. Euphoria, thoughtless(prenominal) investments and projects. 4. take on to create a sunrise(prenominal) type of social structure. 5. Admitting mistakes, appearing of new aims like development of different industry sectors, not only oil-extracting. all(prenominal) these periods have their common difficulties. Firstly, Arabic countries fell behind all developed countries and because of their cultural specialty werent vigorous to radical innovations which were so needed. Women are still not interested in education almost 50% of them are illiterate. By the way it is one of the crucial problems in such countries the wishing of educated people, especially with higher technical education, consequently appears footlingage of well qualified workers on the plants and other enterprises. Employees were absolutely not ready to start working on advanced equipment.Thats way many executive positions are occupied by foreign specialist, what isnt very good plectron for the country. Second mai n problem is the Dutch disease too gruelling dependence on one industry sector. Budget, living standards, national projects all these depends only on oil prices, which are not always foreseeable and controllable. For example too warm winter reduces consumption of fuel, what reduces oil demand and consequently oil price. Many other factors have the same influence, and all of them hit oil-exporters, making them too vulnerable.In Saudi Arabia 85% of budget are petrodollars, so its clear how important for them oil price fluctuations are. And the last important problem is that government not always can make reasonable investments. Arabic sheikhs started huge constructions and projects to the glory of the country which were usually un bankable. lonesome(prenominal) later this wish to draw money became weaker and investments more useful. Actually, these are main difficulties of OPEC countries. In every oil-exporting country governments more or less successfull tried to find proper so lutions to these problems. Saudi Arabia. History.The Kingdom of Saudi Arabia is an Arab noble state. It is bordered by Jordan on the northwest, Iraq on the north and northeast, Kuwait, Qatar, Bahrain, and the United Arab Emirates on the east, Oman on the southeast, and Yemen on the south. The Persian Gulf lies to the northeast and the Red ocean to its west. It has an estimated population of 27. 6 million, and its size is approximately 2,150,000 square kilometers. Today it is one of the few fastest growing countries in the world with a high per capita income of $20,700 Some figures Population 27,601,038 (0. 3% of world population) Density 11/km2 urban population 80%GDP (2007) $555,055 one thousand million Oil resources 261. 2 billion barrels, 26% of world oil resources (amount that is enough for 86 years of consumption) declension rate 8 million barrels per day. Among Arabic countries Saudi Arabia is the richest, because its oil deposits are the biggest, like its OPEC quota. Count ry itself isnt very big, but population is growing. Literacy rate is very low only 63% and it is very serious problem, as was said earlier. Economic development. As it was mentioned, economy of Saudi Arabia depends on oil market and its impossible to analyze it without taking into account oil industry.Because of oil export and money inflow this country made visible confine in development and today some indexes are just like in Europe or in the U. S. Society is develop too, leaving behind prejudices. Main goals. There are three main goals for the state 1. GDP growth 2. Diversification of national economy. 3. Development of charitable resources. These goals were set 30 years ago and still being a topical question. But a lot of efforts were put to reach these goals. For example in 1970 GDP was 22. 9 billion riyals and in 1982 already 524. 7 billion. A diversification is too present. The role of oil sector is reducing.Processing industry was established, and in that location are a lot of financing projects. What is not less important, financial sector has appeared. But anyway, as of 2007, non-oil manufacturing contributed 10% to Saudi Arabian GDP and less than 6% of total employment. But development of human resources is falling behind. Actually the problem of lacking qualified labor force was solved by inviting foreign specialists. Role of the government. Initially the most profitable oil deposits were exploited by western companies, but today the biggest oil producing company ARAMCO was nationalized and oil policy was reviewed.Now extraction rates became little and deposits were used in more rational way. Today more than 95% of all Saudi oil is produced on behalf of the Saudi Government by the ARAMCO. In June 1993, ARAMCO absorbed the state marketing and refining company (SAMAREC), get the worlds largest fully integrated oil company. But the aid problem was how to spend money. Governors were wrong hoping that petrodollars inflow will last forever. Mon ey was invested in unreal projects, and some spending was just uncontrolled. It all led to overheated economy. as well there was an effort to copy western system of rules of production, but it also wasnt successful.All these things were a reason to work out a new plan of economic development, attracting more private capital and making more reasonable investments. In the last few years there is a privatization tendency in Saudi economy, of transmission line except ARAMCO. Also government supports oil industry, giving money for development of the new deposits. New industry sectors. In the world Saudi Arabia plays the role of crude oil exporter, and it isnt the best position on the world market. Thats why they are trying to find new profitable spheres. And one of them could be petrochemistry.This field grows every year and today Saudi Arabia is the main manurial supplier on the Middle East. Of course today its impossible to cure the Dutch disease, but maybe someday oil exporting co untries will not depend so much on oil prices. Private sector. In 70-80-s government created good conditions for private sector. Such things like transfers, legislative support, special banks and funds were aimed at livelihood this sector of economy. Powerful oil industry till now is a good base for economic development. The government is still attempting to promote growth in the private sector by privatizing industries such as power and telecom.Saudi Arabia announced plans to begin privatizing the electricity companies in 1999, which followed the ongoing privatization of the telecommunications company. Shortages of wet and rapid population growth may constrain government efforts to increase self-sufficiency in agricultural products. But this governmental support has the second side private enterprises are still hoping on help and transfers from government and western partners. Without such support its more profitable to invest money abroad. And thats the problem. But anyway priv ate sector is growing and private capital goes to high-tech development and research.Foreign labor. As was said, there is a lack of well educated specialists on the plants. The government tries to promote so called Saudization national policy to encourage employment of Saudi nationals in the private sector instead of workers from South and selenium Asia. Despite these efforts, the country draws a real portion of its labor force from foreign countries, especially from South and Southeast Asia (notably India, Pakistan, Bangladesh, Indonesia, the Philippines, Nepal, and Sri Lanka), East Asia, East Africa and from other Middle Eastern countries.There are also some people from North America, South America, and Europe. Hundreds of thousands of low-skilled workers and skilled workers from regions of the developing world migrate to Saudi Arabia, sometimes only for a short period of time, to work. Although exact figures are not known, skilled experts in the banking and service professions seek work in the Kingdom. Social and politic structure. An Arabic country always remains an Arabic country with its own culture, social and politic structure. Saudi Arabian culture mainly revolves around the religion of Islam.Islams dickens holiest sites, Mecca and Medina, are located in the country. Also it shouldnt be forgotten that it is the noble state. All it leaved an imprint on people and their set of legal opinion. Although huge sums of money were spent on health care and educational programs, the social structure didnt change a lot. It is still important to which family or place you belong ruling establishment stayed the same, just like the attitude to women. Saudi Arabia is the only country in the world where women are banned from thrust on public roads.Women may drive off-road and in private accommodate compounds, that can be very huge. Their attempts to change something usually lead to nothing. some(prenominal) international human rights organizations, such as Huma n Rights Watch, Amnesty outside(a) and the United Nations Human Rights Committee have issued reports criticizing the Saudi legal system and human rights violation in various political, legal, and social areas, especially monstrous limitations on the women rights. The Saudi government typically dismisses such reports as being outright lies or asserts that its actions are based on its adherence to Islamic law.Political structure also is very traditional the monarch makes all decisions and any attempts to loosen his power, like advisory board, have failed. There is no freedom of speech and no political opposition, although there are a lot o people abroad who criticize such policy. So, development of Saudi Arabia is very debatable. On the one hand, financial and oil-producing sectors are growing in high gear. On the other hand peoples set of mind didnt change and with this excess baggage its impossible to move forward.Other controversial thing government wants to keep Islamic value s, but in the same time educational system is an exact copy of the American one, and American talk-shows and cartoons are demonstrated on the national television. There is an opinion that all it happened because of too fast growth. The society wasnt ready for petrodollars and all these goods which it gets. Thats why people have very vague ideas of what they need today or in the future new way of life or traditions and Islamic values. Conclusion. To sum it all up, wed like concern possible future of oil-exporting ountries. In a foreseeable future it is impossible to find alternative energy sources which could fully substitute oil and gas. World demand will grow and there are only four countries which can increase extracting rates. These are Saudi Arabia, Kuwait, Nigeria and Gabon. It means that political and economic power of OPEC will grow. But also its obvious that raw materials like crude oil are cheaper than touch on goods like gasoline. Thats why huge sums of money must be inv ested in the development of oil refineries and its a very important long term investment.By the way this developing process must involve not only industries but also people themselves, because a state can change only after its citizens. Anyway, dependence on oil prices is very unreliable and undesirable, like any dependence, even if it helps to finance social projects. Current economic crisis has shown that. Governments of oil exporting countries must find a compromise between this Dutch disease with massive capital inflows and healthy but maybe not so rich economy.