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Saudi Arabia & Bahrain Economy

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Presently, the economic freedom score for Saudi Arabia is 66.1, making the country emerge as the 77th freest economy according to the 2015 index. This score has not changed since 2014. The high score for the country dwells on trade freedom and eradication of corruption because of declines in business freedom, labor freedom, as well as efficient management of public expenditure. Saudi Arabia ranks eighth out of fifteen countries in the Middle East while its overall score is beyond global average (Crosston, 2015). Over a period of five years, only one of the economic freedom scores of Saudi Arabia has increased.

From 2011, 5 economic freedoms led to a drop by 4.1 points, whereas government spending dropped by 12 points and business freedom by 20 points. This has set the economy of Saudi Arabia aside from its Persian Gulf neighbors who are more freedom minded (Crosston, 2015). These trends have played a major role with regard to undermining the already uneven structural and institutional framework. Taxation and government spending are still well maintained, while profits generated from oil contribute to more than two-thirds of the government’s revenue.

Nonetheless, the rule of law is enforced in a weak manner, while the royal family influences the decisions of the judiciary. Since Saudi Arabia is a closed economy, it limits investment and technology transfers that are essential with regard to diversifying the economy (Heritage, 2015). In the world today, countries are becoming highly competitive by investing in a broad range of sectors to boost the growth of their economies. In this case, it is appropriate for Saudi Arabia to introduce both short-term and long-term strategies for it to compete effectively in the global business environment.

In terms of short-term strategies, the country should aim at stabilizing its micro economy and improve the production sector conditions (Crosston, 2015). With regard to macroeconomic stabilization, the country needs to enhance its monetary and fiscal stability in order to ensure low and stable inflation, regardless of the unpredictable oil prices, which governs most of the country’s operations. It should also enhance its absorptive capacity by attracting foreign talent and investment to boost its competitiveness, growth, and stability. Furthermore, the country should aim at developing the SME sector to increase its share of the GDP and enhance employment conditions of the nationals.

In terms of improving production sector conditions, Saudi Arabia should implement strategies of enhancing capital and labor productivity in both private and public sectors by investing considerable in education and technology.

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