The fear of oil revenues dropping
A difficult financial phase is looming. Oil prices have fallen by more than half, and may continue to fall in the future
A difficult financial phase is looming. Oil prices have fallen by more than half, and may continue to fall in the future. This is not the first time - Saudi Arabia witnessed the $12-barrel crisis in 1986 and endured the following unfruitful years.
Although we have known for decades that oil revenue will one day come to an end, we are still hoping to develop alternative revenue sources, but that looks inconceivable in the near future. Dependence on oil revenue kept rising with each new budget, until we got tired and stopped thinking about addressing our petroleum addiction.
With low oil prices, the country will not be able to afford foreign workers and drivers. This is a positive result because most of the richest and most-advanced countries do not have our slothful habitsAbdulrahman al-Rashed
With high oil prices, resources management was easy for bureaucrats. The government’s task was to distribute the expected proceeds from oil and its derivatives to hospitals, education, commerce, imported livestock and wheat. It paid subsidies for cement, iron, gasoline, soft drinks, textbooks and sports clubs. It also gave rewards for students at university.
As long as there are oil buyers, bureaucrats do not need to overwork themselves; it is just an accounting issue. However, similarly to addicts, these doses will not be enough for them one day.
Spending on good education will engender productive men and women, and contribute to national resources. Unproductive graduates drain the country’s resources. Money is supposed to be invested in building viable industries after the fall of oil resources. However, the majority of industries get subsidized electricity, water and fuel. They are all managed by cheap imported workforces, and the owners will close shop after government aid stops.
With low oil prices, the country will not be able to afford foreign workers and drivers. This is a positive result because most of the richest and most-advanced countries do not have our slothful habits.
The real challenge facing the government is bigger than that; it must find additional financial resources. It will require the government to appoint creative minds. It will also need good management that is able to create miracles, reduce costs and explore additional resources. The country has a promising future as the banks are full of people and companies’ funds. However, they do not know how to invest their money.
Regardless of the oil-revenue decrease, we are optimistic about the government’s reserves and private financial resources. Nevertheless, it is a tough mission. Without education reform and orientation toward productive activities, 5 million students will become a burden on their families.
If we do not prompt changes in state institutions, optimize their services and manage their growth, this big elephant - bureaucratic government - will remain tired and drained for a long time.
The drop in oil revenues is not so bad because we need a shock to wake up and see the world around us. We should anticipate the biggest shock and correct our track. This is the right time to do so.
This article was first published in Asharq al-Awsat on August 21, 2015.
Abdulrahman al-Rashed is the former General Manager of Al Arabiya News Channel. A veteran and internationally acclaimed journalist, he is a former editor-in-chief of the London-based leading Arab daily Asharq al-Awsat, where he still regularly writes a political column. He has also served as the editor of Asharq al-Awsat’s sister publication, al-Majalla. Throughout his career, Rashed has interviewed several world leaders, with his articles garnering worldwide recognition, and he has successfully led Al Arabiya to the highly regarded, thriving and influential position it is in today.
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