Current Economic Development of Oil Exporting Countries

Current economic training of vegetable embrocate exporting countries. (by the example of Saudi-Arabian-Arabian-Arabian Arabia) Introduction3 OPEC and oil prices. 4 History4 universal study problems of OPEC member countries6 Saudi Arabia8 History8 economical development9 Main goals9 social occasion of the semipolitical sympathies10 New indus demonstrate vault of heavens10 Private sector11 Foreign labor11 mixer and politic structure12 Conclusion14 Literature15 Introduction. The subject of this research is the providence and society of the oil-exporting countries while the content chamberpot be described as underway economic development of the oil-exporting countries and their prospects.As the best example we reserve chosen Saudi Arabia. The oil-exporting countries ar authoritative tinkerers on the area market. They dissolve set up oil prices reducing or increase origination rates, and mostly this is the only bureau they get m angiotensin converting enzymey for their ciphers, oil deposits have great influence on their economy. Thats what is c eached Dutch disease and what their biggest problem is. Some measures in umteen ladders should be taken to get rid of this disease, to sort economic and sociable structure, to make a shift to new phase in their development.This statement constitutes the thesis of this term-paper. The general purpose of this research is to construe h maviny oil stages and familiar problems of oil-exporting countries development, try to explain them and suggest rough solutions. The goals can be determined as the following 1. To look at the OPEC, its history and common problems of the fragment Countries to follow the interconnectedness between oil price and successfulness of the oil-exporters. 2. To consider brief history of Saudi Arabia for better understanding of that soil. . To fancy the intention of the political relation, unavowed sector, new effort sectors, overseas labor and social and politic st ructure in economic development to show current situation and topical problems in whole these spheres. 4. In conclusion try to forecast the viable ways of further development. This term-paper can be employ for further research in this sphere. OPEC and oil prices. Today oil is innate resource that has great influence on the development of oil-producing countries like Russia or the OPEC countries.If a sylvan exports bulky summation of oil its price determines budget of the domain, political situation, prices for a wide range of well behaveds. Its so because oil isnt proficient raw material for gasoline production, also for p lowestics, construction materials and so on. many oil-exporting countries can set up oil prices reducing or increasing extraction rates, and in the same time no one in the modern population can live without gasoline or electrical energy. So, we can say that oil is a race in which the main targets argon world power and coin, huge sum of funds. plainly sometimes oil exporters go to the extremities their budgets depend 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 (almost 80%) and they play a crucial role in oil pricing. This organization controls extraction rates (what leads to controlling of oil prices), oversea policy and strategy of Member Countries. Thats wherefore wed like to consider OPEC itself, its history and common problems. History.The Organization of un surgical processed Exporting Countries (OPEC) is a cartel 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 maintained its headquarters in Vienna since 1965, and hosts official meetings among the oil ministers of its Member Countries. T he OPEC Member countries came together to take form this inter st udy organization with several aims. Some of the aims are To protect the bear on of the member countries. To make sure that the price of oil color products do non change much. To make certain a regular supply of oil color oil to former(a) countries. To make sure that member countries get suited income from sale of oil products. To decide policies to follow relating to production and sale of petroleum oil. However, OPEC has non always been able to achieve all these aims. Venezuela was the primary country to move towards the establishment of OPEC by approaching Iran, Gabon, Libya, Kuwait and Saudi Arabia in 1949, suggesting regular and closer communication among oil-producing countries.It was a topical question because all oil-exporting countries were work by such corporations as British Petroleum, Chevron, Exxon, disjunction, Mobil, Royal Dutch, musical scale and Texaco, which controlled crude oil refining worldwide. These corporations organized a cartel and trim down procu rement prices. Initially the OPEC wasnt taken into account. Europe and the U. S. didnt believe than Arabic governments could run a risk a compromise and reduce extraction rates. Honestly speaking first 10 years wasnt really successful for OPEC. scarcely in the 1970-s with dish up of 1973 oil crisis, Arab-Israeli conflict and second crisis in 1979 OPEC transformed into important political and economic force. By the way being part of OPEC is a huge responsibility. High oil prices are the consequence of low extraction rate. save if one country in pursuit of higher(prenominal) incomes tries to sell a little bit to a greater extent than its quota is, then price goes down thus far for those countries that did e realthing right. presentlyadays oil prices are close up high in similitude with 1990-s (when normal price per barrel was 22-28 dollars), but since June 2008 they have dramatically fallen, as it is shown on the graph below.The war in Iraq and increasing adopt in Asian-Paci fic Region, e pickyly in India and China that are consuming large amount of fuel, can be named as a reason for such growth. anyway the OPEC countries soundless have their problems and many of them are much the same because of cultural, historical, political and economical similarity, some countries almost overcame them and early(a)s 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. Below 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 leaving countries themselves underdeveloped. In the end of XX century everything changed. Briefly the arrangement of their development could be described this way 1. Dependence on occidental countries. 2. 1970-s crises. Inflow of petrodollars. 3. Euphoria, thoughtless investments and projects. 4. Attempt to create a new emblem of social structure. 5. Admitting mistakes, appearing of new aims like development of different sedulousness sectors, not only oil-extracting.All these periods have their common difficulties. Firstly, Arabic countries feral behind all developed countries and because of their cultural specialty werent speedy to radical innovations which were so requisiteed. Women are cool it not interested in education almost 50% of them are illiterate. By the way it is one of the crucial problems in such countries the lack of educated mint, especially with higher technical education, consequently appears deficit of well qualified workers on the plants and former(a) enterprises. Employees were absolutely not industrious to start working on innovative equipment.Thats way many executive positions are occupied by foreign specialist, what isnt very good option for the country. Second main problem is the Dutch disease too strong habituation on one constancy sect or. Budget, living standards, home(a) projects all these depends only on oil prices, which are not always foreseeable and controllable. For example too warm spend 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 halo of the country which were usually unprofitable. Only later this wish to spend money became weaker and investments more than useful. Actually, these are main difficulties of OPEC countries. In every oil-exporting country governments more or less successfully tried to find proper solutions to these problems. Saudi Arabia. History.The Kingdom of Saudi Arabia is an Arab monarchical 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 Sea to its west. It has an estimated population of 27. 6 million, and its size is somewhat 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 thousand Oil resources 261. 2 billion barrel, 26% of world oil resources (amount that is fair to middling for 86 years of consumption) Extraction rate 8 million barrels per day. Among Arabic countries Saudi Arabia is the spicyest, because its oil deposits are the biggest, like its OPEC quota. Country itself isnt very big, but population is growing. Literacy rate is very lo w 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 out of the question to analyze it without victorious into account oil industry.Because of oil export and money inflow this country made visible leap in development and today some indexes are tho like in Europe or in the U. S. Society is developing 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 human resources. These goals were set 30 years ago and still being a topical question. But a manage of efforts were pitch to reach these goals. For example in 1970 GDP was 22. 9 billion riyals and in 1982 already 524. 7 billion. A diversification is also present. The role of oil sector is reducing.Processing industry was established, and there are a lot of financing projects. What is not less important, financial sector h as appeared. But anyway, as of 2007, non-oil manufacturing contributed 10% to Saudi Arabian GDP and less than 6% of quantity employment. But development of human resources is falling behind. Actually the problem of scatty qualified labor force was solved by inviting foreign specialists. Role of the government. Initially the most profitable oil deposits were exploited by horse opera companies, but today the biggest oil producing company ARAMCO was nationalized and oil policy was reviewed.Now extraction rates became smaller 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 selling and refining company (SAMAREC), becoming the worlds largest fully integrated oil company. But the second problem was how to spend money. Governors were wrong hoping that petrodollars inflow will last forever. Money was invested in useless projects, and some spending was just uncontrolled. It all led to overheated economy. also there was an effort to copy western system 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 furrow 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 substance East. Of course today its impossible to cure the Dutch disease, but whitethornbe someday oil exporting countries 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 supporting 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 water 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 private 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 Southeast Asia. in spite of these efforts, the country draws a significant 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 trade union 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 choose figures are not known, skilled experts in the banking and services professions seek work in the Kingdom. companionable and poli tic structure. An Arabic country always remains an Arabic country with its own culture, social and politic structure. Saudi Arabian culture primarily revolves around the religion of Islam.Islams two holiest sites, Mecca and Medina, are located in the country. Also it shouldnt be forgotten that it is the monarchical state. All it leaved an imprint on people and their set of mind. 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 driving on public roads.Women may squeeze off-road and in private housing compounds, that can be very huge. Their attempts to change something usually lead to nothing. Several international human rights organizations, such as Human Rights Watch, Amnesty International and the United Nation s Human Rights Committee have issued reports criticizing the Saudi legal system and human rights violation in unlike political, legal, and social areas, especially severe limitations on the women rights. The Saudi government typically dismisses such reports as being outright lies or asserts that its actions are found on its adherence to Moslem law.Political structure also is very traditional the monarch makes all decisions and any attempts to loosen his power, like informative 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 controversial. 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 values, 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 purport 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 processed goods like gasoline. Thats why huge sums of money moldiness be invested in the development of oil refineries an d 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, blush 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 coarse capital inflows and healthy but maybe not so rich economy.