Table Of ContentECONOMIC DIVERSIFICATION IN RESOURCE ABUNDANT
ECONOMIES: THE CASE OF THE MINERALS INDUSTRY IN
SAUDI ARABIA
Thesis submitted for the degree of
Doctor of Philosophy
at the University of Leicester
by
Mohammed Ibrahim Aldagheiri
Department of Geography
University of Leicester
April 2008
UMI Number: U495953
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ECONOMIC DIVERSIFICATION IN RESOURCE ABUNDANT ECONOMIES;
THE CASE OF THE MINERALS INDUSTRY IN SAUDI ARABIA
Mohammed Ibrahim Aldagheiri
Abstract
The macro-economy of Saudi Arabia has been dominated by oil exports which between
1970 and 1995 accounted for more than 85 per cent of total export earnings. Due to the
fact that oil is an exhaustible resource, the price of which fluctuates considerably, and is
produced in an enclave economy, the Saudi Arabian government had recognized the
needs to diversify their economy away from oil as the main source of income to avoid the
economic problems that are usually, associated with the resource curse. Therefore, since
the oil price crashed in 1986, the Saudi Arabian government has adopted a new policy to
develop non-oil sectors, such as manufacturing, agriculture and more recently, non-oil
minerals. This study focuses on the minerals sector in Saudi Arabia which is considered
one of the economic activities which has already started to achieve the strategic goal of
economic diversification away from oil activities as the main source of national income.
The considerable attention has been paid to the large reserves of strategic minerals that
have been found such as, phosphate and bauxite. The mining has been embraced by the
Saudi government not only to diversify the national economy, but also to stimulate the
economy, generate employment opportunities, attract foreign capital, and encourage
citizens to invest their money. Therefore, an exploitation of these minerals requires a high
demand for transportation infrastructure, the provision of which has become a necessity.
The development of transportation infrastructure plays an important role in the economic
development of a country, and therefore the railways is considered an economic lifeline
for minerals development in the Kingdom, as it will facilitate the transport of raw
materials and provide mobility for workers to reach the work place and products to the
market place. Moreover, it should facilitate the diversification of the national economy
and has the potential to be a powerful instrument in promoting long-term growth and
employment.
I
List of Publications
Aldagheiri M. and Bradshaw M., (2007) The impact of transportation infrastructure on
the minerals exploitation in Saudi Arabia, CTRF 42nd Annual Conference, Winnipeg,
Manitoba, 162-174.
Aldagheiri M. and Bradshaw M., (2007) The economic future of industrial minerals in
Saudi Arabia, GRMENA II: Geo-Resources in The Middle East and North Africa, Qairo
University Press, Vol 2, 89-106.
Aldagheiri, M. and Bradshaw, M., (2006) Promoting economic diversification by the
relationship between the minerals sector and transport infrastructure in Saudi Arabia,
Urban Transport XII: Urban Transport and the Environment in the 21st Century, WIT
Press, Vol 89, 579-592.
II
Acknowledgements
First of all, this stage in my educational career would not have been reached without the
blessing and mercy of Allah. There are a number of individuals and organisations who
have contributed significantly to this thesis. Without their cooperation, understanding and
encouragement, this research would never have been completed. I would like to thank all
the people who agreed to participate in this research, including senior officials,
department managers and respondents from numerous organisations and authorities from
government and the private sector. I would like to express my deep and sincere
appreciation to the many individuals and institutions who have given information and
assistance in order to make this thesis a reality.
In particular, I am deeply indebted to my supervisor Professor Michael Bradshaw for his
tremendous support, guidance and encouragement. His sincerity and strong commitment
are surely reflected throughout the study. His intensive and creative comments have
helped me step by step through the many complexities of the researcher process.
Professor Bradshaw has had a profound effect on my approach to this research and I will
never forget his supervision and support. Of course, my thanks and appreciation are
extended to all members of the staff and post graduate colleagues in the Department of
Geography and some other Departments in University of Leicester.
I express my huge thanks to the Saudi government, represented by Al-Qassim University,
for offering me scholarships to do the Ph. Degrees and for giving me the chance to get the
III
highest degree in economic geography. May Allah help me to repay and serve my
country Saudi Arabia and assist in its development.
I would like to extend my heartfelt gratitude to all my friends in Saudi Arabia and UK for
their assistance and encouragement during my study in University of Leicester, especially
Dr. Hassan Al-Marzouki, Dr. Mohammed Al-Dakhil and Dr. Ahmed Al-Dughairi, for
their invaluable help and support. My great thanks to the Saudi Society in Leicester, and
all my friends, for their sincere friendship. Many thanks go also to all my colleagues at
the Department of Geography in Al-Qassim University for their support and
encouragement during field work.
Finally, my sincere appreciation and gratitude goes to my father and mother for their
prayer for me, and my brothers for their personal support and encouragement. Lastly, I
owe a great debt to my beloved wife, Wafa Al-Sleem for her support, encouragement and
patience. She has worked hard to make the years we have spent in Leicester as enjoyable
as possible. My love is expanding to my lovely son Adel and my lovely daughter Norah.
IV
List of Abbreviations
Ma’aden: Saudi Arabian Mining Company.
UNDP: United Nations Development Programme.
EITI: Extractive Industries Transparency Initiative.
AGT: Australian Government Treasury.
SGS: Saudi Geological Survey.
LDCs: less developed countries.
TRIP: The Road Information Program.
MEED: Middle East Economic Digest.
SACTRA: Standing Advisory Committee on Trunk Road Assessment.
EDRG: Economic Development Research Group.
MPMR: Ministry of Petroleum and Minerals Resources.
MOT: Ministry of Transportation.
MOC: Ministry of Communication.
MOP: Ministry of Planning.
MOI: Ministry of Information.
KACST: King Abdulaziz City for Science and Technology.
SRO: Saudi Railways Organization.
SPA: Saudi Ports Authority.
PIF: Public Investment Fund.
SOCAL: Standard Oil of California.
CASOC: California Arabian Standard Oil Company.
ARAMCO: Arabian America Oil Company.
V
AOC: Arabian Oil Company.
LPG: liquefied petroleum products.
SAFCO: Saudi Arabian Fertilization Company.
EDC: Economic Development Committee.
IBRD: International Bank for Reconstruction and Development.
UN: United Nations.
CPO: Central Planning Organization.
GDP: gross domestic product.
SAMA: Saudi Arabian Monetary Agency.
SABIC: Saudi Basic Industries Corporation.
SIDF: Saudi Industrial Development Fund.
SR: Saudi Riyal.
GCC: Gulf Cooperation Council.
ECC: European Economic Community.
DMMR: Deputy Ministry For Mineral Resources.
USABC: U.S.-Saudi Arabian Business Council.
SCPM: Saudi Company for Precious Metals.
ASMIC: Arabian Shield for Mining Industries Company.
FSU: Former Soviet Union.
USGS: US Geological Survey.
DAP: Dominium Phosphate.
DGMR: Directorate General of Mineral Resources.
SAMS: Saudi Arabian Mining Syndicate.
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BRGM: Bureau de Recherches Geologiques et Minieres of France.
IRF: International Road Federation.
BOT: Build Operate Transfer.
DBOT: Design, Build, Operate and Transfer.
HADEED: Saudi Iron and Steel Company.
NSR: North-South Railway.
SAR: Saudi Arabian Railways.
SAGIA: Saudi Arabian General Investment Authority.
VII
Table of Contents
Abstract............................................................................................................................... I
List of Publications............................................................................................................ II
Acknowledgements............................................................................................................ Ill
List of Abbreviations......................................................................................................... V
Table of Contents........................................................................................................... VIII
List of Figures................................................................................................................... XII
List of Tables.................................................................................................................... XIII
List of Maps................................................................................................................... XIV
CHAPTER ONE
INTRODUCTION............................................................................................................ 1
1.1 The study background........................................................................................ 1
1.2 The importance of the study.............................................................................. 3
1.3 Aims and objectives of the study...................................................................... 5
1.4 The structure of thesis........................................................................................ 6
CHAPTER TWO
LITERATURE REVIEW............................................................................................... 10
2.1 Introduction........................................................................................................ 10
2.2 The economic importance of minerals............................................................ 10
2.3 The relationship between natural resources and economic development 17
2.3.1 The'Resource curse'........................................................................................ 19
2.3.2 How to avoid the resource curse.................................................................... 26
2.4 Transport and development: historical background......................................... 33
2.5 The economic importance of transportation infrastructure............................. 41
VIII
Description:economic problems that are usually, associated with the resource curse. economic and political consequences of natural resource wealth In 1938, the valves were turned on to pump oil in commercial quantities and on 1 New Jersey (later renamed Exxon) 30 per cent and Socony-Vacuum (later
