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Dr. Nahed Taher

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Title: Dr. Nahed Taher


1
Gulf SOL 10-12th May, Jeddah
Managing Tensions of Wealth Creation In the
Kingdom
  • Dr. Nahed Taher
  • Senior Economist
  • n.taher_at_alahli.com

2
Three Themes
  • Better Economic Strategies
  • More Skilled Labor
  • A Knowledge-Based Economy

3
Diversifying Economic Base
  • From Debt-Led to Export-Led Growth

4
Saudi Economic Diversification Strategy lies in
tatters..
The Productive Sectors Need to Grow by at Least
15 in the Next 2 Decades
Annual average real GDP (1995- 2002)
Based on the listed companies profits of the
underlying sector in the Saudi stock market
Electricity companys profits are only in
2002-2003, as it was a loosing sector before.
5
High Correlation Between Manufacturing Real
Estate Growth..
6
The Current Oil Boom is Different!!
Consumer Claims
Government Claims
'OIL-Boom
7
The Purchasing Power of Income declined
Significantly in the Last 2 Decades.
1975100
Source SAMA Reports
8
We Did Not Create Our Own Strategy
9
Our Man-made Brainpower Exports Are Very
Limited.
Exports/ pop Growth (1990-2004)
Source IFS
10
Despite The Oil Boom, Capacity Absorption Sagged
in the Saudi Economy.
Source SAMA reports, NCB Estimation
11
Saudis Have Very High Consumption Patterns
Source SAMA, NCB Economic Department
12
Recent Rise in Savings Ratio Was Mainly Driven
by High oil Prices
Brent crude

13
Labor Market Imbalances
  • How much Intellectual Capital Do We Have?

14
Kingdom University Graduates Are Mainly in
Non-Scientific Majors
Source Ministry of Higher Education
15
Job Creation NOT Substitution is the Solution
Demand-Supply Gaps by Occupation avg 2001- 2003
Source SAMA, Ministry of Higher Education reports
16
University Graduates Are Continuing to Grow in
the Unneeded Professions.
1999-2003 Growth
17
Science Engineering Graduates Are Way Low
Per 1000 Population Aged 20-34
Source European Commission Science and
Technology Report 2003, authors estimates
18
The Labor Force is Poorly skilled.
  • The majority of the labor force in Saudi Arabia
    is unskilled due to lower level of education
  • The economic structure between oil (capital
    intensive) trade (labor intensive /low skill)
    needs to be modernized diversified
  • Its essential to Restructure education towards
    producing high standards labor force in technical
    scientific fields.

19
Productivity Levels Are Relatively Low.
Indexed to U.S. 100 (2002)
  • Labor productivity
  • TFP
  • U.S.
  • France
  • KSA - total
  • Turkey
  • Korea
  • KSA non-oil
  • US
  • Brazil
  • Capital productivity
  • KSA non-oil
  • U.S.
  • France
  • KSA - total
  • Turkey
  • Korea
  • Brazil
  • U.S.
  • France
  • KSA - total
  • Turkey
  • Korea
  • Brazil
  • KSA non-oil

Source World Development Indicators Central
Department of Statistics McKinsey
20
But, Productivity Has Been Rising in Productive
Sectors.
Average Labor Productivity Growth 11.5 Annually
21
Productivity NOT Population Growth is the
Challenge for Job Creation
  • More than 2.6 million jobs need to be created for
    Saudis
  • Saudi employment, 2004
  • Increase due to population growth
  • Increase due to higher productivity
  • To decrease unemployment to 5
  • Saudi work force, 2014

Assuming Saudi male workforce participation
goes from 65 to 80, female participation goes
from 11 to 25 Source MOP Author estimates
22
No Room For Entrepreneurs in Our Current
Situation.. We Need Educated Brains!!!
- No of insured companies in GOSI (2002)
23
From Competition To Collaboration
Building Knowledge-Based Economy
24
Quality of life Index Reflects Under-utilization
of Our Capital
Source EIU
25
Doing Business Environment is not friendly For
Entrepreneurs or SMEs.
Source World Bank
26
Collaboration Is Essential To Have A Suitable
Ranking For The Kingdom.
Growth Competitiveness Index
Source IMD
27
The Saudi Economy is Not in the 21st century
Structure of Managing Knowledge
60s-70s
21st Century
80s-90s
Information
Innovation
Data
Agriculture
Manufacturing
Technology
Competition
Cooperation
Collaboration
Dictators
Managers
Leaders
28
AS LEADERS, WOMEN RULE New Studies find that
female managers outshine their male counterparts
in almost every measure, specially in
Transformational Leadership
Womens Leaders Are Crucial to Economic
Development and Job Creation
Title, Special Report, BusinessWeek, 11.20.00
29
Further Key Points To Build Wealth
  • Creating Wealth requires balancing between
  • Chaos vs. Order (entrepreneurs vs. leaders)
  • Individual vs. Community
  • Present vs. Future
  • Old Knowledge Experience have much less value
    in the rapidly changing business environment.
  • Manage Measure Intellectual capital (Managing
    Change or Changing Management)
  • The New Career concept Protean and Boundary-less
    (Not moving up the ladder)
  • Reward by merit.. Not by relationships
  • Never hire AMBITIOUS people with LOW MORALS
  • Enhance Ethical Corporate Culture to Enable
    Executing Change.
  • Think Globally.. Act Locally (FIND A SAUDI
    SOLUTION)

30
The Issue There is Significant Hidden Value in
our Beloved Kingdom Institutions...
31
Change and survival of the fittest
It is not the strongest of the species that
survives, nor the most intelligent, but the one
most responsive to change.
Charles Darwin
32
WE MUST CHANGE!!
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