Smart Development

Published date01 January 2012
Date01 January 2012
Subject MatterArticles
Smart Development:
Saudi Arabia’s Quest for
a Knowledge Economy
Isam Yahia Al-Filali
Giulio M. Gallarotti
Nations that have sought to overcome the resource curse and other barriers to eco-
nomic growth have pursued, for some time, greater development through a number
of strategies: from import substitution in the 1950s to current strategies based on
micro-finance and human-capabilities approaches. Needless to say, the international
community is still searching for the elusive Holy Grail of an optimal development
strategy. One strategy that has attracted greater attention and a growing number of
adherents is that of promoting the transition to a knowledge economy. This paper
is about one such nation, Saudi Arabia. In analyzing the Kingdom’s quest for a knowl-
edge economy, this article hopes to shed light on the anatomy of the strategy itself
and identify important preconditions for and barriers to the strategy’s success. The
case study of Saudi Arabia’s quest for a knowledge economy carries important impli-
cations and lessons for other nations, especially those with resource economies that
are seeking effective plans of economic development and transition.
Knowledge economy, information economy, information technology, development,
Saudi Arabia
International Studies
49(1&2) 47–76
© 2012 JNU
SAGE Publications
Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/0020881713504673
Isam Yahia Al-Filali holds a PhD in Geology from the University of Manchester, UK. During
his tenure with King Abdulaziz University, Jeddah, Saudi Arabia, he worked as Professor of
Earth Science, and Director of the Center of Strategic Studies. He was also the General
Director of Scientic Research and Dean of the Institute of the Research and Consultation.
Currently, he is the General Director of Alryadah, a Jeddah-based consultation rm specializing
in strategic planning and knowledge economics. E-mail: eal
Giulio M. Gallarotti is Professor of Government and Tutor in the College of Social
Studies at Wesleyan University, USA. He has also been a Visiting Professor in the
Department of Economic Theory at the University of Rome. He is the author of The
Anatomy of an International Monetary Regime: The Classical Gold Standard 1880–1914 (New
York: Oxford University Press, 1995), The Power Curse: Inuence and Illusion in World Politics
(Boulder, CO: Lynne Rienner Publishers, 2010), and Cosmopolitan Power in International
Relations: A Synthesis of Realism, Neoliberalism, and Constructivism (New York: Cambridge
University Press, 2010). E-mail:
The authors wish to thank the anonymous referees for their useful comments on previous
drafts of the article.
International Studies, 49, 1&2 (2012): 47–76
48 Isam Yahia Al-Filali and Giulio M. Gallarotti
As one of the richest countries in the world and G20 economies, the Kingdom of
Saudi Arabia has been taking aggressive steps to break the long-established link
between the fate of the Saudi economy and conditions in the global market for oil
for more than a decade. But, even within the few highpoints of the oil age, and
with revenues abundant, the Kingdom has found life in the oil age anything but
trouble-free. Accordingly, the Kingdom has taken several strides towards eco-
nomic diversification. In fact, abundant revenues often found a way to cause
political and economic problems. Many economies dependent on natural resources
have also found oil to be a ‘curse’ rather than a source of wealth that propels the
country’s economy forward. The Kingdom has come to look beyond oil to ensure
a stable and vibrant economy, notwithstanding forecasts about the longevity of the
oil age. The nation has firmly set its sights on transitioning to a knowledge econ-
omy, as reflected in the spending pattern of the Ninth Five-Year Development
Plan that concludes by the end of 2014. The foundations of such a technological
society are the benchmarks of the leading economies of the modern age. Saudi
Arabia sees its economic future as unfolding squarely within such a development
plan. It is this new age that the Saudis embrace as a means of escaping the insta-
bilities of oil dependence, and arriving at a more prosperous and sustainable eco-
nomic future. This article analyzes the prospects for success in Saudi Arabia’s
quest for this objective. It describes the nature of a knowledge economy, identifies
the conditions within Saudi Arabia that favour the development of a knowledge
economy, and identifies existing obstacles to such a development while proposing
suggestions to overcome these obstacles. In marshalling these analyses, the article
hopes to highlight important implications and lessons on the greater issue of eco-
nomic development and transition.
The End of the Oil Age?
Daniel Yergin (2009 and 2011) has issued the most celebrated retort to the neo-
Malthusian chorus of naysayers who have been proclaiming the end of the oil age.
With the price of a barrel of oil reaching $147.00 in June 2008, the chorus gained
greater volume with a cacophony of warnings about trends in supply, demand, and
investment in the oil market. Yergin underscores the idea of an oil shortage as
misguided, given that the Earth is sitting on 1.5 trillion barrels of reserves in 2009.
Even more misguided, for Yergin, is the idea of ‘peak oil’ (that is, that the Earth
has now arrived at its maximum potential in oil production). He avers that innova-
tive technologies are not only finding substitutes for oil, but also creating the
potential for greater discoveries; hence, we should see increasing production of
oil well into the future. While he acknowledges that ‘innovation’ is leading the
world towards a path of alternative energies, he does insist that we are not yet at a
point where such sources are widely available, and hence ‘oil is still the one’.

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