Saudi Arabia is about to enter a critical period. In question is whether the modernizers will be able to sustain the drive towards a market-oriented, private-sector-driven economy favourable to foreign investment or whether the kingdom will remain inward-looking and government-dominated.
The evidence at present is finely balanced but the consensus among western and Saudi bankers is that ultimately the government has little choice. It needs foreign investment to provide a significant proportion of the $175 billion required in the next 20 years to meet the country's power and water needs and it needs the private sector to provide jobs for young Saudis. With 73% of the population aged under 29, including 38% born since the Gulf War, that requirement will become even greater in the next decade.
However, many initiatives, which bankers had expected to be well advanced by now, remain either blocked by social conservatives, mired in the Saudi bureaucracy or delayed by complex negotiations as the government's focus remains on the political fallout from the terrorist attacks on New York in September 2001.
Gas project runs out of steam
In particular, the gas initiative, under which western oil companies were set to invest $20 billion to $25 billion to explore and gain access to natural gas to be used in downstream petrochemicals projects, appears to have stalled.