DTIC ADA529118: The Viability of Saudi Arabian Industrial Diversification Efforts: The Consequences of Declining Government Expenditures

29 Pages·1.7 MB·English

by  Defense Technical Information Center

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1991 2. REPORT TYPE 00-00-1991 to 00-00-1991
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The Viability of Saudi Arabian Industrial Diversification Efforts: The
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Consequences of Declining Government Expenditures
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Naval Postgraduate School, , ,Monterey,CA REPORT NUMBER
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Rivista Internazionale di Scienze Economiche e ComlI\erciali
Volume 38 (1991), N. 1,'17-43
TIlE VIABILITY OF SAUDI ARABIAN INDUSTRIAL
DIVERSIFICATION EFFORTS: THE CONSEQUENCES OF
DECLINING GOVERNMENT EXPENDITURES
by
ROBERT E. LOONEY *
Introduction
Given the probability that Saudi Arabia will not be able to significantly
increase its oil revenues in the near future, the major problem facing the
government will be how best to utilize its dwindling oil revenues to gener
ate positive overall rates of economic growth, while at the same time
meeting to the fullest extent possible the basic needs of the majority of the
population. Clearly any future growth strategy must involve devising means
whereby the private sector will assume a more important role in expanding
not only output, but perhaps more importantly in sustaining a level of
effective domestic demand to stave off any further recessionary tendencies
stemming from reduced government expenditures. This is especially critical
in the non-hydrocarbon manufacturing sector, which is almost totally depend
ent on the local market for sales.
In this context, the main purpose of the analysis below is to examine
the consequences of declining oil revenues for the Saudi Arabian economy.
In particular, the paper is interested in examining several alternative auster
ity strategies open to the government. In which general areas,ofgovernment
expenditure - consumption (current), investment (infrastructure) ot defense
(military) - would budgetary cuts be the least disruptive on the non-oil
manufacturing sector and in what sense?
* Naval Postgraduate School, Monterey, CA (U.S.A.).
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