Economic diversification in resource abundant economies : the case of the minerals industry in Saudi Arabia

The macro-economy of Saudi Arabia has been dominated by oil exports which between 1970 and 1995 accounted for more than 85 percent 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 need to diversity their economy away from oil as the main source of income. 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. Considerable attention has been paid to the large reserves of strategic minerals that have been found such as, phosphate and bauxite. 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 railway 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.