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Saudi Arabia’s Role in Global Development: Progress, Policies, and Challenges
Saudi Arabia has emerged as an influential player in global development, wielding significant economic power while navigating complex geopolitical waters. This article examines Saudi Arabia’s international development efforts, policy controversies, and the fiscal structures that shape its approach to global engagement.
Saudi Arabia’s Development Contributions
Saudi Arabia has positioned itself as a major donor in international aid circles. The country provides approximately $5 billion annually in development assistance. This represents one of the highest aid-to-GNI ratios among G20 nations. Saudi assistance primarily targets fellow Arab and Muslim-majority countries across the Middle East, North Africa, and parts of Asia.
The Kingdom has established several specialized development institutions. The Saudi Fund for Development (SFD), founded in 1974, has financed over 700 projects in 87 countries. Additionally, the King Salman Humanitarian Aid and Relief Centre distributes emergency relief and development assistance worldwide.
Saudi Arabia’s development approach emphasizes large-scale infrastructure projects. This includes roads, power plants, hospitals, and educational facilities. Such projects create visible impact but often require substantial ongoing investment.
Furthermore, Saudi Arabia has expanded its development focus in recent years. The country now funds climate resilience initiatives, digital transformation efforts, and public health programs. This diversification reflects an evolving understanding of development needs.
Vision 2030 and Global Development
Vision 2030, Saudi Arabia’s ambitious reform agenda, significantly influences its approach to global development. The initiative aims to diversify the economy away from oil dependence. This transition affects both domestic and international investment decisions.
Under Vision 2030, Saudi Arabia has increased its focus on sustainable development. The country has pledged over $186 billion toward green energy projects. However, critics question whether these investments represent genuine environmental commitment or merely economic diversification.
The reform program also shapes Saudi Arabia’s international partnerships. The Kingdom increasingly pursues development projects that create mutual economic benefits. This approach blurs the line between development assistance and strategic investment.
Criticisms and Controversies
Despite its substantial contributions, Saudi Arabia faces significant criticism regarding its development practices. First, human rights organizations consistently highlight the disconnect between Saudi Arabia’s humanitarian rhetoric and its domestic human rights record. This contradiction undermines the country’s moral authority in development spaces.
Second, critics argue that Saudi aid often comes with political conditions. Recipients must typically align with Saudi regional policies. This approach transforms development assistance into a foreign policy tool rather than purely humanitarian support.
Third, Saudi development projects frequently lack transparency. Limited public reporting makes it difficult to evaluate project effectiveness or financial integrity. This opacity fuels concerns about potential corruption or mismanagement of funds.
Moreover, Saudi Arabia’s ongoing involvement in the Yemen conflict directly contradicts its development messaging. The war has created one of the world’s worst humanitarian crises. Critics argue that Saudi military activities undermine its claims of humanitarian leadership.
Additionally, Saudi development assistance often prioritizes Islamic institutions. While culturally significant, this emphasis sometimes occurs at the expense of broader development needs. Critics suggest more balanced investment would yield better socioeconomic outcomes.
Tax Policies and Development Funding
Saudi Arabia’s tax structure significantly impacts its development capabilities. Until recently, the Kingdom operated without personal income taxes. The government relied almost exclusively on oil revenues to fund both domestic and international commitments.
This tax-free environment created fiscal vulnerability. When oil prices declined, development budgets often suffered. The resulting funding inconsistency undermined long-term project success.
In 2018, Saudi Arabia introduced a 5% Value Added Tax (VAT). This was increased to 15% in 2020 amid pandemic-related economic pressures. These tax reforms represent important steps toward fiscal sustainability. However, they remain insufficient to fully fund Saudi Arabia’s ambitious development agenda.
Furthermore, the Kingdom has implemented selective corporate taxation. Foreign businesses face a 20% corporate income tax, while domestic companies remain largely exempt. This uneven approach limits tax revenue potential while creating market distortions.
Saudi Arabia also maintains a Zakat system, requiring Saudi and Gulf Cooperation Council nationals to contribute 2.5% of their wealth annually. These funds support various social welfare and development initiatives. However, critics argue that the Zakat system lacks the transparency and enforcement mechanisms of modern taxation.
The Paradox of Oil Wealth and Development
Saudi Arabia’s position as the world’s largest oil exporter creates a fundamental paradox in its development role. The Kingdom promotes global development while simultaneously exporting a product that contributes significantly to climate change.
This contradiction becomes increasingly problematic as climate impacts disproportionately affect developing nations. Saudi Arabia has historically resisted ambitious international climate agreements that might threaten oil revenues. This stance has drawn criticism from climate-vulnerable countries and environmental advocates.
Moreover, Saudi Arabia’s domestic resource consumption remains among the highest per capita globally. Critics argue that the Kingdom should address its own sustainability challenges before positioning itself as a development leader.
Regional Influence vs. Global Responsibility
Saudi Arabia wields substantial influence throughout the Middle East and Muslim world. This regional power carries both opportunities and responsibilities for development leadership.
The Kingdom has invested heavily in regional organizations like the Islamic Development Bank. These institutions extend Saudi Arabia’s development footprint while reinforcing its political influence. However, this approach sometimes prioritizes regional considerations over global development best practices.
Furthermore, Saudi Arabia often frames development assistance through religious philanthropy. While culturally resonant, this approach can create exclusionary patterns in aid distribution. Critics argue for more inclusive development strategies that transcend religious identity.
Moving Forward
To strengthen its development impact, Saudi Arabia must address several key areas. First, increasing transparency across all development activities would build trust with the international community. Second, decoupling development assistance from explicit political requirements would improve aid effectiveness.
Additionally, aligning domestic and international policies would create more coherent approaches. This includes reconciling fossil fuel production with climate commitments. Finally, broadening development priorities beyond infrastructure to include governance, civil society, and human rights would create more balanced outcomes.
Saudi Arabia stands at a critical crossroads in its development journey. With Vision 2030 transforming the domestic landscape, the opportunity exists to similarly reinvent its international development approach. Success will require embracing more transparent, consistent, and comprehensive development practices.
The Kingdom possesses immense resources and regional influence. By addressing current criticisms and evolving its approach, Saudi Arabia could significantly enhance its contribution to global development challenges in the decades ahead.
Saudi Arabia
Kingdom of Saudi Arabia
المملكة العربية السعودية (Arabic)
Al-Mamlakah al-ʿArabīyah as-Saʿūdīyah
Population
35,939,806 (2023 est.)
Capital: Riyadh
Internet country code: .sa
Government
Saudi Arabia’s National Unified Portal for Government Services: my.gov.sa
Saudi Tourism Authority: sta.gov.sa
Background
Saudi Arabia is the birthplace of Islam and home to Islam’s two holiest shrines in Mecca and Medina. The king’s official title is the Custodian of the Two Holy Mosques. ABD AL-AZIZ bin Abd al-Rahman AL SAUD (Ibn Saud) founded the modern Saudi state in 1932 after a 30-year campaign to unify most of the Arabian Peninsula. One of his male descendants rules the country today, as required by the country’s 1992 Basic Law. After Iraq invaded Kuwait in 1990, Saudi Arabia took in the Kuwaiti royal family and 400,000 refugees, while allowing Western and Arab troops to deploy on its soil and liberate Kuwait the following year. Major terrorist attacks in 2003 spurred a strong ongoing campaign against domestic terrorism and extremism. US troops returned to the Kingdom in 2019 after attacks on Saudi oil infrastructure.
From 2005 to 2015, King ABDALLAH bin Abd al-Aziz Al Saud incrementally modernized the Kingdom through a series of social and economic initiatives that included expanding employment and social opportunities for women, attracting foreign investment, increasing the private sector’s role in the economy, and discouraging the hiring of foreign workers. Saudi Arabia saw some protests during the 2011 Arab Spring but not the level of bloodshed seen in protests elsewhere in the region; Riyadh took a cautious but firm approach, arresting and quickly releasing some protesters and using its state-sponsored clerics to counter political and Islamist activism. The government held its first-ever elections in 2005 and 2011, when Saudis voted for municipal councilors. King ABDALLAH’s reforms accelerated under King SALMAN bin Abd al-Aziz, who ascended to the throne in 2015 and lifted the Kingdom’s ban on women driving, implemented education reforms, funded green initiatives, and allowed cinemas to operate for the first time in decades. In 2015, women were allowed to vote and stand as candidates for the first time in municipal elections, with 19 women winning seats. King SALMAN initially named his nephew, MUHAMMAD BIN NAYIF bin Abd al-Aziz Al Saud, as the Crown Prince, but a palace coup in 2017 resulted in King SALMAN’s son, Deputy Crown Prince MUHAMMAD BIN SALMAN bin Abd al-Aziz Al Saud, taking over as Crown Prince. King SALMAN appointed MUHAMMAD BIN SALMAN as prime minister in 2022.
In 2015, Saudi Arabia led a coalition of 10 countries in a military campaign to restore Yemen’s legitimate government, which had been ousted by Houthi forces. The war in Yemen has drawn international criticism for civilian casualties and its effect on the country’s dire humanitarian situation. The same year, MUHAMMAD BIN SALMAN announced that Saudi Arabia would lead a multi-nation Islamic Coalition to fight terrorism, and in 2017, Saudi Arabia inaugurated the Global Center for Combatting Extremist Ideology (also known as “Etidal”).
The country remains a leading producer of oil and natural gas and holds about 17% of the world’s proven oil reserves as of 2020. The government continues to pursue economic reform and diversification — particularly since Saudi Arabia’s accession to the WTO in 2005 — and promotes foreign investment in the Kingdom. In 2016, the Saudi Government announced broad socio-economic reforms known as Vision 2030. Low global oil prices in 2015 and 2016 significantly lowered Saudi Arabia’s governmental revenue, prompting cuts to subsidies on water, electricity, and gasoline; reduced government-employee compensation; and new land taxes. In coordination with OPEC and some key non-OPEC countries, Saudi Arabia agreed to cut oil output in 2017 to regulate supply and help boost global prices. In 2020, this agreement collapsed, and Saudi Arabia launched a price war by flooding the market with low-priced oil before returning to the negotiating table to agree to a major output cut that helped buoy prices.