By the 1960s, Saudi Arabia had made major advances in many areas. Roads were established, a modern educational system introduced, health care improved, agriculture expanded and factories built.
Although the economy largely depended on oil revenues, Saudi leaders resolved to bring about basic improvements in the country’s economic structure. The objective was to diversify the economy away from oil into other fields.
Achievement of such an economic transformation required deliberate planning and careful implementation of a development program with clearly defined objectives. The quest for economic development and growth began in earnest with the introduction of the First Development Plan in 1970. This began a series of five-year plans that continues today.
The first phase of this process was to establish an infrastructure that could support a modern economic base. The next was to develop the human resources necessary to help bring about the planned economic transformation. Finally, the focus could shift to economic diversification, including expansion of the industrial, agricultural and other sectors, an expansion that is now well advanced.
The establishment of the physical infrastructure was accomplished in stages during the first three development plans. As the infrastructure was taking shape, the government launched a major effort to expand the industrial base. This was done along two separate, but parallel, courses. One aimed at the expansion of the country’s oil industry and the other at establishing a modern non-oil industrial sector.
In addition to optimizing revenues from Saudi oil production, the modern oil industry plays an equally important role in the development of the non-oil industrial sector by providing the raw materials and feedstock that facilitates this growth.
By 1985, with most of the physical infrastructure in place, attention shifted to diversifying economic sources.
The Fourth (1985-89), Fifth (1990-94), Sixth (1995-99) and Seventh (2000-04) Plans all emphasized strengthening the growing private sector and increasing the efficiency of the industrial sector. The Eighth Five-Year Development Plan (2005-09) was devised with a focus on increasing foreign as well as national investment, and on developing human resources.
Throughout the course of the development plans, Saudi Arabia’s steady but dramatic industrial and economic transformation has been accomplished through the careful guidance and active support of the government. To judge the success of this effort one need only consider that in the 25 years from 1970 to 1995, the non-oil sector’s share of GDP increased from 46 percent to just over 70 percent, and that this GDP tripled, to 125.1 billion U.S. dollars, reflecting a growth rate of 8.6 percent in current prices. By 2002, the GDP had reached 186 billion dollars.