The Case of the Minerals Industry in Saudi Arabia
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ECONOMIC 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 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U495953 Published by ProQuest LLC 2013. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 ECONOMIC DIVERSIFICATION IN RESOURCE ABUNDANT ECONOMIES; THE CASE OF THE MINERALS INDUSTRY IN SAUDI ARABIA Mohammed Ibrahim Aldagheiri A bstract 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. VI 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..................................................................................................................