By Shriya Chitale
Saudi Arabia is one of the world’s wealthiest countries – with a plethora of natural resources and a newly burgeoning tourist industry, the country’s economy only continues to grow. Despite this growth in wealth, , economic inequality persists, a stain on the country’s reputation. This prompts an important question: how does the House of Saude continue to grow wealthier as the rest of the country continues to struggle?
The riches of the House of Saude primarily stem from the country’s oil reserves, which were discovered approximately 75 years ago. With the advent of this, the country started Saudi Aramco, a state-owned oil company. According to the royal family members, who founded the company, the vision for Saudi Aramco was to shape Saudi society and business for years to come. In the 2000s, the company began to truly grow as the government started tapping into foreign markets.
In 2018, the company decided to go public for the first time. They put approximately 5% of the company up for sale. This, nevertheless, was not aimed at providing Saudis an entry to the business, rather, it was to reduce costs associated with the government operating the company. Soon after going public, instead of locals investing in the company, a plethora of foreign individuals decided to invest in the stock. The first international bond was worth 100 million, the largest in recorded history. The results of this IPO would place the company’s value at $1.88 trillion dollars.
Saudi Aramco expanded their foreign reach by including Asia, Europe, and North America as their primary consumers, as well as signing a major deal with Poland. Later, alongside their decision to go public, the company also signed a deal to acquire a 13% stake in a South Korean Oil Refiner for 1.24 billion USD.
While some of this earned revenue is fed into business operations, a majority of it goes towards the government. Yet, most of the money is not used for government programs such as healthcare, housing, education, unemployment programs, etc. Rather, much of the wealth accrued through the company is used by the House of Saude to indulge; his is well documented — the princes of the House of Saude are seen to be purchasing lavish goods, such as yachts and beachfront property as much of the country struggles to keep up. The lack of a comprehensive social network is worrying, considering the fact that unemployment is a problem in Saudi Arabia. For Saudis born since 1990, there aren’t any jobs. Thus, the vast majority of the population are unemployed university graduates or unemployed without an education. In fact, 60% of the employees in Saudi Arabia are foreigners working for Saudi Aramco. Millennial Saudis, even in the country’s more prosperous cities, are struggling to meet basic necessities. In order to combat this problem, Saudi Arabia would have to create over 350,000 jobs every year and businesses would have to pay higher wages to employees.
This reveals an important truth: Saudi Aramco, while incredibly profitable for those that directly profit from the country, is not helpful for the people of Saudi Arabia. In order to ensure that the unemployment rate does not continue to decrease, or that the country’s healthcare infrastructure does not crumble, it is necessary to evaluate the tradeoff between equality and efficiency. Primarily, the reason that Saudi is considered a wealthy country is because of the profits of Saudi Aramco. But, if individuals continue to struggle under the House of Saude, less will be inclined to support the government and Saudi Aramco. Political and economic stability could cause other aspects of the economy to collapse. □
- Image source
- Kelly, Kate, and Stanley Reed. “Saudi Aramco to Raise $25.6 Billion in Biggest I.P.O. Ever.” The New York Times, The New York Times, 5 Dec. 2019, http://www.nytimes.com/2019/12/05/business/energy-environment/saudi-aramco-ipo.html.
- Delventhal, Shoshanna. “What Is Saudi Aramco?” Investopedia, Investopedia, 28 Aug. 2020, http://www.investopedia.com/what-is-saudi-aramco-4682590.
- Uddin, Rayhan. “Saudi Youth Take to Social Media to Complain about Unemployment.” Middle East Eye, 14 Mar. 2021, http://www.middleeasteye.net/news/saudi-arabia-unemployment-youth-graduates-complain.