Research Paper: Kasp and Saudi Economy

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[. . .] This improvement in female participation in higher education should in theory be a boon to the Saudi economy.

The reality is that educational opportunities for Saudi women are good, but economic opportunities are poor. While unemployment among Saudi women with a secondary education is around 20%, unemployment among Saudi women with a tertiary education is closer to 80%. This contrasts with the experience of women in developed nations, and even in other Muslim nations such as Kazakhstan, Indonesia and Turkey, where education unlocks opportunity for women.

The issue of women's economic opportunity is important in the context of high unemployment in the nation. That so many women with good educations are excluded from the workplace means that the country has a wasted asset. While it is hard to dispute the value of educating women, there needs to be follow-through in the economic realm. The more educated, intelligent people are in the workforce, the higher the rates of innovation and productivity will be. The country is creating this economic potential and then letting it go to waste. Having more educated people in the workforce does not increase unemployment, it creates jobs, because greater innovation means more businesses are started and existing businesses perform better, enabling them to expand. Both of these things create jobs.

Overseas education is shifting the cultural norms with respect to women in the workplace as well. While significant impacts have yet to show in the official statistics, it is worth remembering that changes to education policy are relatively recent and it will take time for these impacts to appear. But anecdotal evidence suggests that attitudes towards women in the workplace are changing. Whereas lesser-educated Saudi women were able to find work in firms run by family members, many Saudis who study overseas are bringing back some cultural norms from their experience. Many Saudi women who study overseas prefer to seek employment when they return home. As the numbers of these women grow, it becomes more acceptable in Saudi society, among their families and friends, to work outside the home and without family supervision. One of the major drivers of success in regards to shifting cultural norms is that government scholarships under the new plan are being offered to all students based on ability. Thus, even students from middle class or poor families are being granted the opportunity to become exposed to the wider world. The results, if this evidence holds as a trend over time, will transform many of the key issues that have held back the value of these programs in the past. More Saudi women -- and more men as well, from less-privileged classes -- will not only have the education needed to drive economic growth in the future but will have the opportunities as society adapts to more global values with respect to bringing young, poor and female workers into the workforce in roles for which they are educated (McDowall, 2012). The government has assisted in this by encouraging and sometimes funding the development of pathways for women returning with foreign degrees to find work in the kingdom, such as glowork.net, a job-finding portal, and career fairs that take place in the country's major economic centres (Thomas, 2013).

Economic Growth Factors

Engaging as much of the workforce as possible is critical to sustained economic growth in the KSA. Having so many women and so many young people without meaningful employment harms the Saudi economy. The petroleum sector accounts for 45% of the country's GDP, 90% of export revenues and 80% of budget receipts (CIA World Factbook, 2014). The rate of growth in industrial production is slow, at 2.7%, and this is mostly tied to the petroleum industry. In general, Saudi Arabia lacks productive capacity outside of petroleum. The problem with this is that while petroleum has been good for the country, it is not sustainable. Eventually, petroleum supplies will run out. But long before that, the country continues to face high levels of unemployment and a complete lack of economic diversity.

Currently, non-oil economic growth in Saudi Arabia is correlated significantly with government expenditure. Given that government's budget is driven by oil revenues, there is a clear relationship that can be understood. Given the high level of involvement of government in the Saudi economy, the use of oil revenues should be directed as driving non-oil GDP growth, with an eye to encouraging economic diversification. In the long-run, government can stimulate growth by encouraging private domestic investment and total expenditures (Alshahrani & Alsadiq, 2014).

It is worth noting that evidence is not yet available for the role that foreign-educated students will play in spurring economic growth in the future. Education reforms took place in 2005, and the results of these reforms will be seen only when the foreign-educated students return home and become actively involved in the economy (Ibid). There are two caveats to this. The first is that these students are at this point unlikely to become actively involved in the economy if they are women. Female economic participation is so low much of the new education policy and many of the foreign students returning will not actually be able to contribute much to the economy. Pathways need to be available for educated Saudi women to contribute to the Saudi economy. It is not unreasonable to expect that many might remain overseas, where they can take full advantage of their education. Degrees from the four target countries are highly portable around the world, and given the choice between a fulfilling career overseas and a traditional Saudi life, many women with a degree are likely to choose the former. There may be some residual impacts from remittances in such cases, but this is nevertheless a drain on Saudi Arabia's productive capacity to have so much potential go unused.

The second caveat is that the youth unemployment rate remains stubbornly high. With adequate technical training, perhaps youth returning to Saudi Arabia will be able to find meaningful work sooner than their less-educated counterparts. However, the role of private direct investment has to be taken into consideration here. Returnees bring with them skills, but there are limited opportunities to pursue entrepreneurial activity. The Saudi economy remains tightly controlled. Recent policies to open the economy have included the creation of "economic cities" that will allow freer foreign direct investment (FDI), but even these often rely on government to provide "all technical, administrative and financial services" (Saudi Gazette, 2014). While incubation of entrepreneurs is usually welcomed, the high degree of government control even when encouraging entrepreneurial activity contrasts with the free economies of the four target overseas education destinations.

The reality, however, is that private direct investment is so critical to spurring economic growth in the kingdom because such enterprises are 92% of the businesses and represent 80% of total employment. In many instances, small enterprises can also leverage the capabilities of educated Saudi youth and women even given Saudi traditions, as entire families can become involved in the management of such businesses. More often, however, women are empowered by their foreign experiences, which allow them more responsibility than they would have at home, and they return home with desire to implement more of these freedoms into their daily life, including in the economic domain such as working in businesses with no family supervision (Hausheer, 2014).

Foreign education, too, plays a key role in driving private direct investment. Hamod (2010) notes that "talented men and women are pushing the envelope in their respective communities and challenging longstanding assumptions about value creation and risk aversion in the Arab world." It is reasonable to assume that foreign universities in countries with strong entrepreneurial cultures are going to teach those values to Saudi students to a much greater degree than those students would learn at a domestic university. The arrival of many foreign tertiary educational institutions to Saudi Arabia in recent years will also bring those same values of risk-taking and innovation to Saudi students who remain at home. Recall that the government is subsidizing the education of many Saudis at these private institutions, in addition to the students to study overseas.

Measuring Economic Impacts

Fleischaker et al. (2013) looked at a number of economic variables that can be used to measure the changes to the Saudi economy arising from KASP. One outcome of KASP is that now young Saudis are returning with higher educations that make them more qualified not only for technical work, but work in health care and for entrepreneurial work as well. This should result in improvements to a number of key metrics, including Saudi employment, youth employment, female employment, new Saudi jobs, and new business creation.

Saudi employment is a subset of employment for the total of Saudi Arabia. Overall unemployment in the kingdom is at moderate levels, but Saudi unemployment has been… [END OF PREVIEW]

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Kasp and Saudi Economy.  (2014, August 13).  Retrieved June 17, 2019, from https://www.essaytown.com/subjects/paper/kasp-saudi-economy/2341067

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"Kasp and Saudi Economy."  Essaytown.com.  August 13, 2014.  Accessed June 17, 2019.
https://www.essaytown.com/subjects/paper/kasp-saudi-economy/2341067.