�A closer look at social expenditures finds that their budgetary share has grown largely at the expense of several economic sections of the budget, namely transport and communications and direct economic allocations (Looney).� The decline in funding for transportation, communications and infrastructure allows for little economic growth. Economic development expenditures have declined since 1980, making up as little as seven percent of total expenditures by 2003. (Looney)
The government has also dramatically decreased the budgetary funding of subsidies, possibly in order to further increase social expenditures. Investment remained consistently low at 22 percent throughout the 1990s. (Looney) �While investment is not the only important factor in determining future rates of growth in non-oil GDP, a country of Saudi Arabia's vast resources should be able to mobilize larger amounts of capital . . . Again the inability of the country to devote more funds to capital formation will limit the economy's ability to just keep up with the rapidly expanding population (Looney).�
If Saudi Arabia continues to treat public capital formation as a low priority and optional section of its budget, the country will only further stall economic growth. �The welfare state will have to be scaled back and economic allocations given a higher priority (Looney).�
Saudi Arabia has also had trouble integrating itself into the world economy. The trouble has come both from its own people and those that could do business in the country.
Traditional groups within Saudi Arabia are strict Muslims of the middle or lower class. To begin with, such traditional groups oppose foreign business practices that illustrate the materialistic and greedy West. They prefer to keep business a local enterprise, caring for each other within the community and following Islamic rules of business. Further, traditional groups have grown weary of their government. They view Saudi rulers as wealthy and wasteful. A move by the government to invite foreign businessmen to the region would further strain relations between traditional groups and the country�s rulers. �The increased presence of foreign businessmen will further strain relations between the government and the kingdom's more traditional groups (Looney).�
For ideological reasons, the country has also diminished economic relations with the U.S., focusing more on Syria, Iran, and China. (Seznec) �There has been a steady decline of U.S. sales to Saudi Arabia, with sales of US$10 billion in 1998 now ebbing to US$3 billion for 2004.� (Seznec) Saudi Arabia�s wariness of western investors had further slowed its progress in the world economy.
On the other hand, foreign investors are not chomping at the bit to enter Saudi Arabia. The kingdom�s tension between the royal government and international terrorists has repelled many foreign businessmen. The country would need to improve its reputation, promoting a safe and stable atmosphere for business, before investors would even consider branching out. �The Saudi government also has to convince the foreign investment community that the kingdom is a secure place to do business, and not a battleground between the royal family-dominated government and international terrorists (Looney).�
Further, the government has failed to consistently protect the rights of investors. �Until the civil service loosens its control of the economy and there are greater limitations on the ability of royals to seize investments, privatization and investment efforts will continue to falter (Seznec).�
In addition, Saudi Arabia has had difficulty maintaining foreign assets because of its continual national budget deficit. �Newspaper accounts placed foreign assets held by SAMA overseas at around US$100 billion during the early 1980s. These assets have been substantially depleted to finance current account deficits (Saudi 185).�
Saudi Arabia has not been able to create an environment of cooperation or stability in which either its own people or foreign businessmen can embrace the idea of welcoming foreign investment. Further it has depleted foreign assets in order to maintain a balanced budget.
Finally, Saudi Arabia is known for its deluxe palaces and dynamic oil booms. However, the government has failed to utilize the oil booms responsibly and continues to plunder the national wealth. In addition, the country�s civil servants do not always appear very responsible either. Waste has played a large role in the country�s inability to develop economically.
When Saudi Arabia had increased oil revenues, it failed to save a large portion for the future, expecting oil booms and increased revenue to continue. Since the �70s, however, no boom as large as that of �73 has come, and the country is now suffering. �It is surprising that Saudi Arabia has not taken steps to establish an oil stabilization fund, which would receive windfall revenues when oil prices are high and disperse funds for government operations when they are low (Davis).�
In addition, much of oil revenue is given to the already wealthy ruling family. �More and more Saudis complain that corrupt members of the royal family are plundering their national wealth (Looney).� While various sectors of society, including important economic sectors, suffer from decreased funding, government salaries remain consistently high. �More emphasis must be placed on efficiency and productivity in government activities. There is tremendous waste in government ministries that will have to be dealt with (Looney).�
However, although Saudis complain of the royal family�s fault, the country�s civil servants are also to blame. A recent study found that 69 percent of civil servants in the Kingdom stay away from work without a good reason while 54 percent come to work late. (Looney) �More emphasis must be placed on efficiency and productivity in government activities. There is tremendous waste in government ministries that will have to be dealt with (Looney).�
Much of the past revenue of Saudi Arabia could have been invested for the future, and much of its current budget could be handled more responsibly to foster economic development. However, instead, revenue is not saved, but dished out to the royal family and government activities that fail to be efficient and productive.
Historically, the United Arab Emirates began similarly to Saudi Arabia. The union of states, however, has pushed for reform since its start, wisely investing oil revenues. The UAE has emphasized a free market economy, capital funding, a strong presence in the world economy, and strategic allocation of government revenue.