INTRODUCTION

1.1 Background

Famed as the birthplace of the Islamic faith, Saudi Arabia is a Middle Eastern Kingdom that has been under the rule of the Al Saud family since its formation in 1932. Because of the oil reserves found in the country, Saudi Arabia has a lot of influence in the global economic field, a fact that brings with it socio-political concerns. The Extremist Sunni Islamist group has been a significant challenge to the political stability enjoyed in the country, bringing the need for the state to find a solution to the problem that is insecurity and terrorism.

Official relations between Saudi Arabia and the US began in the 1940s, and the US administrations over the years have termed the Saudi Kingdom as an essential partner. Arms sales and other related security co-operations between the US and Saudi Arabia are conducted under the supervision of both the Congress and the Congressional opposition (Congressional Research Service, 2020). Consequently, the executive branch of the US government has made Congress aware of over $139 Billion worth of military sales proposals since 2009. There have been successfully concluded arms sales of $76 billion between the US and Saudi Arabia between 2009 and the 2017 financial years (Congressional Research Service, 2020). This being the case, it can be conclusively agreed that the US and Saudi Arabia have a successful business relationship as far as the export of arms is concerned.

Stockmaster (2020) defines Economic factors, otherwise known as factors of a business as the critical information provided about a specific market and which affect how a company performs. Additionally, economic factors affect the business environment, consequently affecting the investment value of any organization or economy. Therefore, economists are supposed to critically business environments so that they can make informed decisions on the performance of investments. That being so, analyzing business factors can help investors to project a business’ performance in the long run.

Business factors affect how international trade is carried out. Therefore, it is right to conclude that business factors have a role to play in the export of weaponry between the United States and the Kingdom of Saudi Arabia. Economic factors that play an active role in the export of arms between the countries include the advancement of technology in the countries involved.  Advancement in technology and innovation will primarily affect the export of weapons between the US and Saudi Arabia. Technological progress is key to the improvement of economies, and this is reflected in the income levels of a country. Since a country’s technological advancement is defined not only by the innovations achieved domestically but also by diffusion of technologies acquired from other countries, it would suffice to say that Saudi Arabia is technologically advanced in terms of weaponry due to their importation of weapons from the US. The United States is ranked secondly behind Japan in terms of innovation and patent applications for original ideas, and this shows how advanced the country is in terms of technology and development(WTO, 2013). Therefore, technology has actively influenced the export of weapons between the US and Saudi Arabia.

Secondly, ICT development of the two countries affects the growth of export trade in economies. The Information and Communications Technologies (ICT) of both the US and Saudi Arabia play an active role in the enhancement or failure of weaponry export and import, respectively. Through social media and technology, news and information on expected arms trades and deals spread faster, and more people in the affected countries get to have a say on the subject matter. Therefore, if either the US citizens or Saudi citizens are opposed to the arms exportation, the business will be affected. Also, through ICT, the two countries can communicate faster on the orders and the specification of weaponry to be exported without necessarily having to travel physically (Visnja, Jovicic, Arsovski, Zivkovic & Badjok, 2016). Also, through ICT the communication between governments and their citizens is enhanced, enabling the governments to clarify the arms deals they plan on engaging in and quelling propaganda and false information that may have been propagated to the masses.

Secondly, population changes affect the weapons export business between the two nations. Demographic changes affect how a country does business (WTO, 2013). If the US experiences growth in population, it would mean that there will be a higher workforce to work in manufacturing industries that produce arms. This being so, the people would also be able to provide more skilled laborers who can produce more sophisticated weapons. On the other hand, a more significant population would mean that the US government will be more reluctant to sell more weapons since their citizens will need more protection. If Saudi Arabia experiences population growth, it would mean that the country would be in more demand of weaponry to protect its citizens from internal and external threats, hence making more orders for the importation of more weapons from the US.

The availability and cost of energy and other natural resources also affect the export business between the two nations. Power is as equally important in the production of goods, both for local and export use as labor and capital is to the production process. While Saudi Arabia enjoys the availability of energy in the form of oil, the nation is not able to produce arms on their own. Since the United States does not produce oil and depends on oil from the Middle East, Saudi Arabia included, Saudi Arabia has at times used the oil it produces as leverage to get more weapons without being questioned on their use (BBC, 2014). This can also be viewed as the nation’s way of trying to twist the other nations’ arms to accept their policies, including their weapons importation policies unquestionably since they will respond by increasing oil prices if they are provoked (WTO, 2013). Additionally, the cost of oil, coal and electricity which are used in the production of arms will affect the value of the exported weapons since the producing entity will have to factor in these costs in the selling price of weapons to the end-user. An increase in energy prices results in an automatic increase in prices of the exported weapons.

Furthermore, exchange rates between the two nations will determine the number of weapons exported between them. Through the use of the J-curve model, it is possible to show how the appreciation or depreciation of the US dollar affects bilateral trade between the US and the Kingdom of Saudi Arabia in the long term (Cho, 2012). Through the J-curve, it is possible to deduce that consumers need time to adjust to changes in prices of goods due to increase or decrease in exchange rates of the currencies involved. When the exchange is lower, the consumers take longer to adjust to the changes. In contrast, if the exchange rates are favorable to the consumers, they react positively, increasing the demand for the goods to be supplied.

In addition to the above factors, the Gross Domestic Product of the nations involved plays a role in the export of weapons between the two economies. When the producing economy, i.e. the US has a sufficient GDP, then it means that the country can comfortably undertake extensive production of arms, both for their use and for export. Also, if Saudi Arabia’s GDP is favorable, they can import more weaponry into their country (Cho, 2012). Additionally, having a surplus GDP affects the economies of the countries involved, in that the consumer of the weaponry, i.e., Saudi Arabia will have all the social amenities and federal standards that will help the country have stability, hence reducing the need for the importation of more arms into the country to defend themselves.

Transportation is another factor that affects the export of weapons between the US and Saudi Arabia. Transportation costs are a significant factor in the export business, since if transportation expenses incurred by the producer are factored into the final price of the products being sold. Additionally, the availability of transportation networks determines the possibility of business happening or failing. Also to be included under transportation is the efficiency of transportation of the goods between the two economies, since if the goods are not delivered on time, they may not be effective in tackling the problems they were supposed to solve. Also, if the products being transported are not handled well during transportation, they will reach their destination while damaged, reducing their efficiency and durability (Khan, 2020). Hence, an efficient, reliable and flexible transportation system and the network is critical in ensuring business between two economies is running smoothly.

In the instance that the importing country is securing a loan to get the exported goods, interest rates will be a determinant to the export transaction taking place or not going through. Stockmaster (2020) states that an increase in interests influences an increase in the cost of credit, in turn making it expensive to borrow money. This scenario, therefore, means that countries will reconsider the importation of goods since the purchase will leave a heavy financial burden on them. Kayhan ET. Al (2013) also concluded that increased interest rates affected the exchange rates of the currencies between the two transacting countries, therefore influencing the volumes of goods being supplied.

The culture of the two transacting countries plays a vital role in the export transaction between the US and Saudi Arabia. For instance, if the American representatives of the companies selling the arms to Saudi Arabia do something that is deemed culturally unacceptable by the Saudis, then the transactions would not go through or would take longer since the matter would have to be settled first before commencing on business. Additionally, the market would experience a slow movement if the language barrier between the two dealers is not broken. The Saudi Arabians are Arabic-speaking people, while Americans speak English. Therefore, a translator would be needed to translate the communication between the two economies for business to take place smoothly (Khan, 2020). The translator would have to be proficient in both Arabic and English so that not even the smallest would be lost in translation, and bring up complications later in the transaction.

Individual Government policies on the exportation of arms play another role in the transaction between the USA and Saudi Arabia. There is a need for countries to put international arms transfer policies in place to guide them on methods of operation. The systems are meant to prevent illicit dealings and transfer of weapons between countries (SIPRI, ND). There is a range of national, bilateral, territorial and international policies that guide the nations of the world on how to interact on the export of weaponry. Therefore if the supply of weapons to Saudi Arabia by the US will start or continue conflicts in Saudi Arabia, then international export laws are against such exportation. Also, if the weapons imported are going to pose a threat to the civilians and their properties, then the export of firearms would have to be halted.

Finally, the relationship between countries determines the rates of success of the export of arms between the countries. Official relations between Saudi Arabia and the US began in the 1940s, and the US administrations over the years have termed the Saudi Kingdom as an essential partner. Arms sales and other related security co-operations between the US and Saudi Arabia are conducted under the supervision of both the Congress and the Congressional opposition (CRS, 2020). Consequently, the executive branch of the US government has made Congress aware of over $139 Billion worth of military sales proposals since 2009. There have been successfully concluded arms sales of $76 billion between the US and Saudi Arabia between 2009 and the 2017 financial years (CRS, 2020). This being the case, it can be conclusively agreed that the US and Saudi Arabia have a successful business relationship as far as the export of arms is concerned.

1.2 Statement of the Problem

Business operations determine how poorly or successfully a country performs in the world economy. Without security, a business would not prosper around the globe. Therefore there is a need for nations to come up with tactics that will provide safety from both external and internal threats.

With this in mind, there arises the need for countries taking part in exportation and importation of weapons to research on the factors of business that play a role in the transfer of weapons between them.

Factors of a business are the critical information provided about a specific market and which affect how a company performs. Additionally, economic factors affect the business environment, consequently affecting the investment value of any organization or economy. Therefore, economists are supposed to critically business environments so that they can make informed decisions on the performance of investments. That being so, analyzing business factors can help investors to project a business’ performance in the long run. Business factors affect the running of international trade. Therefore, it is vital to study the business factors that affect the worldwide exportation of weaponry between the United States and Saudi Arabia so that current trends in international business can be explained. Also, by studying the effects of factors of the market on the export of weapons between the US and Saudi Arabia, future trends on the international business can be concluded on.

Factors such as the advancement of technology in the countries involved affecting the possibility and effectiveness of transactions between the US and Saudi Arabia. Improved technology in the US, which is the producer and supplier of weapons to Saudi Arabia means that the US will supply higher quality weaponry to Saudi Arabia. Secondly, the Information and Communications Technologies (ICT) of both the US and Saudi Arabia play an active role in the enhancement or failure of weaponry export and import, respectively. Through social media and technology, news and information on expected arms trades and deals spread faster, and more people in the affected countries get to have a say on the subject matter. Also, through ICT the communication between governments and their citizens is enhanced, enabling the governments to clarify the arms deals they plan on engaging in and quelling propaganda and false information that may have been propagated to the masses.

Additionally, factors such as demographic makeup of a country will dictate the rates and levels of export transactions between the US and Saudi Arabia. In contrast, the availability and cost of energy resources in the importing and exporting countries will affect the price, and consequently, the transaction’s success or failure. Furthermore, the exchange rates between the two countries’ currencies will determine the occurrence of the business transaction, and the volume of arms being procured. The Gross Domestic Product of the US and determines the supply of weapons to Saudi Arabia since more GDP means more production power by the US and a higher purchasing power by Saudi Arabia. Transportation plays a critical role in the production, supply and prices of arms since the expenses incurred in the production and supply process is included in the final product. This affects the volume of purchases by Saudi Arabia since if the prices are high, the units purchased are reduced.

The cultures of both the representatives of the US and Saudi governments need to respect each other’s culture while also ensuring that there is a competent translator to help them overcome the language barrier between them. Government policies play a vital role since the US Congress controls the weapons exported between the two countries. Recent changes made by the Trump administration to introduce a more improved The 2018 approval of the Conventional Arms Transfer (CAT) policy was especially crucial to the US due to the financial benefits it brought to the country. The president sought to improve the arms from the $55.6 billion it brought in for the US in 2018, to either match or go above the $69.1 billion profits experienced in 2012 (David, Turp, Wood & Azarova, 2019). The CAT policy makes the arms deals dependent on how well the US relates to the purchasing nation, the effects on the security of both the US and the purchasing country.

Finally, the relationship between the two countries, i.e. the US and Saudi Arabia determines the rate of success of the exportation of arms between the two countries. That being so, the excellent relationship between the US and Saudi Arabia has been vital in their arms dealings since the 1940s. Also, the Kingdom’s oil reserves come in handy in negotiating for better deals from the US.

1.3 Objectives of the Study

1.3.1 General Objectives

The general objective of this research proposal is to establish the effects of the factors of business in the United States and Saudi Arabia have on the exportation and importation of weapons between the two nations.

1.3.2 Specific Objectives

1. a) To find out the role of Technology and ICT on the export of weapons between the US and Saudi Arabia.
2. b) To establish the role of demography in the exportation of weapons between the US and Saudi Arabia.
3. c) To find the role of energy and other natural resources in the export of weapons between the US and Saudi Arabia.
4. d) To investigate the role of energy and natural resources in ensuring the success of trading of weapons between the US and Saudi Arabia.
5. e) To examine the role of GDP in the exportation of weapons between the US and Saudi Arabia
6. f) To research on the part of transportation in the arms dealing of the US and Saudi Arabia.
7. g) To find out the role of culture in the export of weapons between the US and Saudi Arabia.
8. h) To bring to light the role government policies play in the exportation of weaponry between the US and Saudi Arabia
9. i) To find out the role of relationships between the transacting countries in the success of weapons between the two

 

1.4 Hypothesis

1. a) The information provided is reliable and dependable.
2. b) The factors affecting business are the same in both countries
3. c) The states have an excellent trading relationship
4. d) The currency of exchange is dollars
5. e) The elements mentioned are the only ones involved in the export transaction between the two nations.

1.5 Scope of the Study

The study involved the data provided by the governments of the United States and Saudi Arabia. Additionally, independent sources of information like the media and the internet came in handy in providing information not made public by the two governments. Furthermore, information was gathered from previous studies and other materials from libraries, both physical and virtual. The survey covered and collected issues affecting the export and importation of weapons between the two countries and the effects of the business dealings between the two.

1.6 Limitations of the Study

1. a) The accuracy of the data provided by the two governments on figures is not fully verified, since some deals may have been done without public knowledge.
2. b) There were limited data sources from which to get information on this research
3. c) The information provided by independent sources like the internet and the media was not consistent, therefore making it difficult to verify their accuracy and reliability.
4. d) The sample sizes used in providing the factors of trade affecting the export of weapons between the two countries may have been smaller than the size of the two countries, making the study unreliable in the findings brought forward.
5. e) Limited time to collect the information and come up with this project may have made the author of this document to overlook some essential details in the study.
6. f) Financial limitations, since it would have been ideal if the researcher travelled to both the US and Saudi Arabia to find out the facts from real-time data sources.
7. g) The use of pure research method to collect data may have caused the findings of this document to be slightly inaccurate. This is because there are some key players in the economies of the two countries not interviewed, or whose input was not included in this paper, making the data insufficient to come to a complete conclusion.

 

 

 

CHAPTER 2: LITERATURE REVIEW

2.1 How Technology and ICT as a Business Factor Affects the Export of Weapons between the US and Saudi Arabia

Wahab and colleagues (2012) define technology in different terms according to the role technology plays at a particular time of definition. For instance, technology has been described from viewing it as having two primary parts, i.e., a physical element which has tangible products and equipment such as tools and a non-physical aspect that is strictly made up of information and skills in managing, producing, controlling, and providing reliability. On the other hand, technology can be defined as a configuration, whereby the transfer object, i.e., technology is subject to the pre-determined processes and products.

Technology can be directly linked to having and applying knowledge. Also, in addition to expertise, research, and development are vital in the definition and application of technology (Wahab et al., 2012). Therefore, technology is meant to obtain results, solve problems and overcome challenges, completing tasks, and exploiting the assets and resources available.

Through technological advancement in the US and Saudi Arabia, there has been a change in the way the two countries carry out arms exportation. There have been immense transformations experienced in how the countries organize their production process, conduct trade, and allocate the available capital. Additionally, there has been a change in the way the states carry out their operations and product creation (Muroyama & Stever, 1988). Through improved production techniques, the US has been able to improve on the previously practiced production techniques, hence producing more sophisticated ammunition and combat techniques that they export to Saudi Arabia. Also, improvement in air and water transportation through the use of technology has improved the speed of production and delivery of the weapons to the end-users.

Technology has also helped in the diversification of the products being delivered. Through innovation, there has been an improvement in how weapons are made in the US. Technology has enabled to use of old technology to create new weapons, make arms previously in the market using modern technology, and building entirely new products using the discovered technology (Ferragina & Pastor, 2007). Therefore, there is a broader range of weapons and combat techniques brought forward by the use of innovative technology and building on previous knowledge on weapon-production.

Furthermore, technology helps a country to remain competitive in their endeavors. As intimated by Marquez-Ramos and Martínez-Zarzoso (2010), a country’s economic development is directly linked to its advancement in technology. Through technological advancement, the US has been able to enjoy lower production costs since they save on human resources, transportation, and communication fees. Additionally, through ICT, there is a reduction of barriers to communication since information is swiftly shared between the two trade partners without physical interaction. Through the infusion of technology in their production of weapons, the US has been able to be the major exporter of arms globally from 2015-2019, exporting 35% of the world’s weapons (Varcellone, 2020). Therefore, through technology, the US has remained to be the go-to supplier for Saudi Arabia and the majority of the world’s nations.

Finally, through the use of ICT, the US has been able to be more effective in their exportation of weapons to the US. Through the use of e-commerce, the two partners have been able to keep their business relationships and interactions going without the need for physical meetings by using the available means of telecommunication means. Also, through the internet, the two trade partners can conduct transactions and even offer training and other after-sale services on the use of weapons. Xing (2018) states that the United States’ use of telecommunication in their trade between 1975 and 2000 resulted in a 10% increase in internet usage in the country they transacted with, resulting in a 1% increase in the exports and imports between the trading partners. Therefore, not only does ICT ease communication, but it also improves the rates of adoption of technology between the interacting partners.

2.2 How Demography Affects Exportation of Weapons between the US and Saudi Arabia

The demography of a country is defined as the population size and its composition. Additionally, critical attributes in demographic factors include the literacy levels of the people and the differences in the incomes of individuals in society. It can be theoretically stated that the larger the population of a country, the bigger the potential market for the goods produced. However, there are also other factors such as age and sex of the target market that play a role in the availability of a market for the finished products (ExportHelp, 2020). Additionally, Harding (2009) states that the population changes experienced in the 21^st Century do mean not only a difference in the distribution of people but also a difference in the flow of delivery of goods around the world. Factors such as having an aging population, migration, and immigration, and the inclusion of women in the labor force mean that countries’ competitive advantage and stand in the world export business is different depending on the demographic structure of the said nation. It is also expected that countries with a younger population are bound to have a competitive advantage in manufacturing industries. This reality is advantageous to the US, which has a population of 191,499,600 people in the workforce out of a total of 318,498,500 total population (KFF, 2018). Therefore, the availability of an active workforce in the US makes the supply of weapons for export to Saudi Arabia possible.

The population structure in a country plays a part in the scale and structural effect on the bilateral relationship between the US and Saudi Arabia. Tian, Yao, Yu & Zhou (2011) define scale effect as the existence of a population which has an existing workforce in the country undertaking production, meaning that they can export a large volume of goods, while also providing a market for the importation of more products. On the other hand, the structural effect is the changes that a nation would experience should the number of a nation’s workforce be affected positively or negatively. Therefore, changes in population size and structure in the US and Saudi Arabia will affect the amount of weapons exported and imported, respectively.

Having an export-oriented strategy is aided by certain factors in the make-up of the population. Having a large amount of labor force, urbanization, and low dependency ratio is vital in ensuring that a country meets its goals in exporting on a large scale. Seeing that the US fulfills all the requirements for export orientation in its production process, a self-selection behavior is achieved in the process (Yao & Yu, 2009). A large number of workforce provides an opportunity for the manufacturing industries to produce a surplus that caters to both the domestic needs and export needs, and the surplus offers for the supply of weapons to be exported to Saudi Arabia.

According to the ILO (2010), a skilled workforce in a country ensures the sustainability of the country and the global transactions it takes part in. Therefore, if the US has a skilled workforce, there will be more production of weapons ready for export to Saudi Arabia. Similarly, if Saudi Arabia trains its military personnel to handle the imported weapons, then there is a higher possibility of the nation importing more weapons from the US.

2.3 How Energy and Natural Resources Affect the Export of Weapons between the US and Saudi Arabia

Access and availability to energy are vital in ensuring the well-being of the society, nurture economic advancement, and fighting off poverty. However, there is a need for economies to ensure that a balance between the pursuit of industrial excellence and providing environmental protection is achieved. In the 1960s, the West (North America and Europe) was the primary consumer of energy sources, mostly oil. However, contemporary times have seen a change in this trend. Other parts of the world, especially the Pacific regions, have seen at least a 12-fold increase in the consumption of energy resources. By 2015, the Pacific region was consuming energy equaling the intake of the energy consumed in Europe and North America (Ritchie & Roser, 2014). Coal has been overtaken by oil in recent days in terms of usage due to the efficiency of oil to coal.

Energy plays a critical role in the economic growth of a country. Industrialization heavily relies on the use of power, and if a country masters the efficient use of energy, then the country’s success in manufacturing is assured. Population growth and the incessant search for economic prosperity by nations provide the continuous need for economies to seek efficient and reliable sources of energy (Erkan, Mucuk & Uysal, 2010). Energy consumption in the world grows parallel to economic and demographic advancement. Therefore, as the population increases and new technologies are discovered, then the need for more energy sources arises. Technology gives the US more innovations that need to be manufactured and brought to reality. Only a sustainable source of energy will ensure that the dreams are brought to life.

Saudi Arabia is the second-largest producer of oil globally (Investopedia, 2019). While this is so, the nation is unable to use the energy they produce to produce the weaponry they need. On the other hand, the United States, which is the biggest producer of oil on earth, has mastered both the management and use of the oil that is abundant in their country. Therefore, by learning the production and management of energy, the US has been able to continually export weapons to Saudi Arabia and the world at large.

While the US is the world’s largest producer of oil and natural gas, the country has been for the motion of using the energy domestically and store up the excess production. In recent years, there have been calls to relax the restrictions on the exportation of oil from the US because of the increased oil and gas deposits that have been found in the country (Arora, 2014). However, this approach by the US has been a secret for their success in mastering the international exportation business through intensifying production in their country. Additionally, the US’ attitude has helped local manufacturing and production by ensuring that the energy prices remain affordable to all local manufactures. Therefore they can undertake intensive output of arms and other industrial products.

The economic sustainability of a nation is tied to its commercial growth rates. This being so, economic growth is also directly linked to energy use in the country in terms of the intensity of the usage and the pricing of the energy source. Ergo, the more the energy consumption of a country is, the more the nation’s GDP (Korsakienė, Tvaronavičienė & Smaliukienė, 2014). However, despite suspected expectations that increased energy prices affect the economic growth of a country, studies show that even despite increased energy prices, a country can still prosper. This is because the states can reflect these extra charges in the final pricing to the end-user. Therefore, due to the intensive use of energy in the manufacturing industry in the US ensures that the increasing energy costs do not deter their manufacturing and export missions, and this is reflected in the rising economic prosperity enjoyed by the US.

Following the initial oil shock of 1973, researchers have been interested in the impact of oil prices on oil-exporting countries. Alekhina & Yoshino (2010) state that an increase in production costs causes fluctuations in oil prices. With an increase in oil prices, oil-exporting countries like Saudi Arabia experience increased capital in the form of foreign currencies, and this reflects on an increase in the nation’s GDP. With an increased GDP, the Kingdom of Saudi Arabia can import more weapons from the US, and this causes a ripple effect on the improvement in the US’ GDP and economy, respectively.

Finally, it should be noted that energy is critical in globalization and exportation in the world. Overland (2016) cites the Middle Eastern oil crisis of 1972, and the Russo-Ukrainian gas crisis of 2006, 2009, and 2014 to illustrate how dependent the world is on energy. Had countries that import energy been self-sufficient during these times, then these crises would not have happened, and the world’s economy would not have taken a blow in the process. Therefore, if the United States, which is an exporter of weapons to Saudi Arabia, would find a sustainable source of energy to help them in their production, there will be economic prosperity due to increased levels of production and exports. Additionally, sustainable energy sources mean that the energy is cheaper since it can be recycled and reused, compared to non-renewable energy use.

 

2.4 Exchange Rates and their Effect on Exportation of Weapons between the US and Saudi Arabia

There are direct and indirect links related to the effect of exchange rates on international trade. Direct links came to be a point of interest for scholars after the unexpected rise of exchange rates during the gold exchange standard (WTO, 2017). Exchange rates affect the economy directly since they affect the output of investment, change the allocation of external trading, influence the availability and cost of labor, and alter accounts held externally. Therefore, it can be concluded that exchange rates affect economies both directly and indirectly. However, the indirect links are hard to be substantiated, and this explains why exchange rates are treated independently as a shifting variable.

Exchange rates affect the economies directly and indirectly. Real exchange rates affect the allocation of resources and are used as a measure of competitiveness in an economy. Misalignment of exchange rates and inflation of prices leads to the setting of wrong prices for exported goods, in turn affecting international trade negatively. Also, it affects investment decision-making leading to a shift in the allocation of resources that may prove to be misinformed (WTO, 2017). Additionally, there are commercial risks associated with inflated exchange rates due to the uncertainty that arises during the period of inflation. The uncertainty on how long the inflation will be in place pushes prices further up, making the countries sourcing for goods through importation procure fewer products due to the devalued state of their currency. This being so, the amount of arms exported to Saudi Arabia from the US is directly intertwined with the exchange rate of the Saudi Riyal against the US dollar.

With globalization, the world’s economies are presented with business opportunities that they can exploit to achieve maximum profits. The opportunities presented include technological and innovative advancements, capital mobility, and investment opportunities. For this matter, economies need to develop a free-floating currency exchange system whereby the market value of the agreed-upon currency, i.e., the dollar, is determined by the forces of demand and supply in the international forex market (Ngondo & Khobai, 2018). Therefore, the United States and Saudi Arabia can decide to use the forces of demand and supply of weaponry in the international forex market to determine the price of the weaponry exported, hence ensuring that the demand of Saudi Arabia for weapons is not affected by the inflation rates.

However, the free-floating currency exchange system can be argued to be both positive and harmful to the economies that decide to implement it. While it allows for mobility of capital across the globe, the variability brought about by the exchange rates voids the positive effects brought by the approach (Ngondo & Khobai, 2018). Therefore, the two countries can also decide to use the free-floating approach of exchange partially or on a case to case basis.

Economies have to devise ways in which to overcome the challenges posed by an unfavorable balance of payment, accumulated foreign debt, inflation levels, and slow growth rates. Some of the suggested tactics include the formulation of tactics that directly bring benefits and stabilization to the macroeconomic factors in the country. These factors include improving standards of living, liberalizing the economy, and championing economic freedom of the masses. More importantly, the adoption of a favorable exchange system regime should be considered to ensure that the nation undertaking the policies benefit from their selection. A country’s decision on an exchange system regime depends on the country’s size, past, sophistication, ease of doing business in the economy, and the major trade partners of the economy (Nyambariga, 2017). Therefore, the exchange rates and exchange rates regimes in place both in the US and Saudi Arabia determines the number of arms that will be exchanged between the two economies. If the regimes are favorable, then the amount of weapons exported between the two countries is increased, while an unfavorable exchange system will lead to lesser volumes of weapons exchanged.

Kass (2020) offers reasons for factors that affect the exchange rates between economies’ currencies. First, the inflation rates of a country will determine the exchange rates. Countries experiencing low inflation rates experience a rising value of their currency against those that are experiencing high inflation rates. High inflation means that the amount of purchases is reduced, and therefore less trade is happening between the countries. Therefore, if Saudi Arabia experiences high inflation rates, it means that the number of weapons they import from the US will be reduced.

On the other hand, if the US experiences a higher inflation rate than Saudi Arabia, then it means that Saudi Arabia will import higher volumes of weapons. Secondly, interest rates on borrowed funds determine the exchange rates. If a country borrows funds, the interest rates of the loan will determine the exchange rates. If it is found that a state pays more interest, there will be more lenders willing to give those loans and means that demand for the currency will rise, and this will increase the exchange rates. That being so if the prices are less, there will be little demand for the money, and therefore exchange rates will plummet.

Additionally, current accounts that a country maintains determine exchange rates. Current accounts include the balance of trade and returns from investments made abroad. A deficit in the current accounts is arrived at when the country imports more than it exports. This deficit brings about depreciation in the currency, causing the currency exchange rates to be high (Kass, 2017). Furthermore, government debts can be a cause of increased or reduced exchange rates. If investors fear that their government has taken too many loans, they sell their previously-purchased bonds and investments, thus reducing the supply for the currency leading to a declined foreign exchange rate. This situation leads to a spike in inflation. In a different case, the prices of inflation go down when investors are confident in the way the loans that the government has taken and their debt management. In this situation, the investors will buy more government bonds and increase their investments in the economy, increasing the demand for the currency and hence strengthening the exchange rates of the currency.

The political and economic stability of an economy plays a part in the exchange rates of economies. Kass (2020) explains this point by describing how investors are more likely to invest in countries where there is political stability since the conditions there are predictable. Therefore, countries with political stability experience a more substantial exchange rate and consequently reduced inflation levels. Finally, the speculation by investors leads to increased inflation and exchange rates. If a country is set to experience recession, then investors will sell their investments at a loss resulting in a decline in the value of the currency.

2.5 How GDP affects the Arms Export between the US and Saudi Arabia

Shihab and colleagues (2014) argue that Economic growth is determined by a country’s economic welfare. Exports are a country’s main source of foreign exchange, and they help create a balance of payment that is both favorable and has less pressure. Additionally, the exportation of goods and services by a country provide the nation’s workforce with employment opportunities. Therefore, it can be correctly concluded that if the US’ GDP is high, then they will be able to support their manufacturing industries, hence provide more weaponry to satisfy the demand by Saudi Arabia. Additionally, if Saudi Arabia’s GDP is high, it means that their purchasing power for weapons will be high, and therefore they will be able to buy more weapons from the US.

The US Bureau of Economic Analysis gives the US’ growth rates as -0.92% in 2008, 3.88% in 2014, and 2.93% in 2015 (AKALPLER & SHAMADEEN, 2017). These economic growths were attributed to residential fixed and non-fixed investments, personal expenditures, and government expenditure. Foreign Direct Investments (FDI) has a direct role in an increase in economic growth, albeit slightly insignificant. Conclusively, there is a direct co-relationship between exports, economic growth and an increase in a country’s GDP.

There has been a debate on how significant a role exports play in improving an economy’s GDP, with a consensus yet to be reached. Despite the arguments, it is agreed that economic growth is every country’s first priority. Also, it also agreed on that economic growth is important for economic development to be achieved. There have been studies to show a direct link between exports and economic growth. Hameed & Devi (2012) attribute positive external factors to ensure the economy’s success. Therefore, it can be concluded that if conditions in the Saudi market are positive, then the production of weapons in the US will be increased. This is because the positive reception of the weapons will provide a positive financial motivation for the US to keep on manufacturing. In relation to this, if the oil Saudi Arabia produces is well-received to the countries they export to, then they will have the financial muscle to import more weapons from the US.

GDP helps economies to improve living standards of their people. An increase in GDP means economic growth for the economies. Through the use of VAR analysis, Ronit & Divya (2014) a stable VAR chart means that there is a growth in exports, reflecting economic growth for the country under study. However, a large GDP does not necessarily mean that the economy will have more exports, since the domestic demand will increase and the products meant to be exported will be consumed locally.

Ogbokor & Meyer (2017) tie economic growth to exports. The growth is mainly due to globalization of trade, since technological advancement has made trading globally easier. Through use of time series procedures, it is possible to see how an increase in exports aids an economy’s GDP to grow.

2.6 The Role of Transportation in the Export of Weapons between the US and Saudi Arabia

When a nation invests in transportation, there is a reduced amount of money and time spent in the production and delivery period. Efficiency in transportation ensures that a country is both competitive in its participation in international trade. Albrarran ET. Al list transportation and transportation costs as an integral part of international business. Having efficient transport systems ensures that the cost of participating in international business is reduced, meaning more profits for the economy. The competitiveness is the ability of businesses and countries to deliver higher quality goods in shorter periods and at lower costs. Therefore, if the US is to maintain its competitiveness in exporting weapons globally, specifically to Saudi Arabia, then it means that they have to improve on their infrastructure. Also, if Saudi Arabia ensures that their transport network is well-established, then it means that the oil they export worldwide will be delivered in a timely manner. With this, there will be more profits and therefore more financial power to import more weapons from the US.

Behar and Bernabes (2010) discuss the effect of transportation costs on the export business. They argue that when transportation costs are low, then the cost of production will go down, providing room for the production of more goods for export. Therefore, if the US is able to streamline their transport system, it is possible for them to achieve maximum profits for the weapons they export to Saudi Arabia, and the case is the same for Saudi Arabia. If they have an efficient transport system, then their oil will be quickly transported to the countries it is to be exported and the increased incomes will provide them with a chance to import more weapons from the US.

The importance of a road system has been stressed by Blyde (2010). By establishing a reliable road network in the respective countries, the production process is quickened, meaning that the produce will be processed and transported to their destinations quickly. Therefore, if the US has a reliable road network, the production of weapons will be eased since the raw materials can be swiftly transported to the respective factories to ensure that the international demand for weapons is addressed fast. Also, if Saudi Arabia’s road network is good, it means that the imported weapons will be received and transported to the areas they are needed, in a timely and effective manner.

With globalization of trade defining this era, it is also important to explore the effects of having an efficient transport system to support the practice. It is impossible for globalization to be without transportation (Ślusarczyk, 2010). This is because transportation ensures the movement of goods and people, creating a worldwide market in the process. The arms dealings between the US and Saudi Arabia would be impossible to happen if there was unavailability of a transport network connecting the US and Saudi Arabia.

Finally, transportation helps in facilitating trade, both local and international. Through the TFA agreements arrived at in Bali, 2013, policymakers showed the critical role played by transportation in ensuring international trade took place. Therefore, it is necessary for countries to ensure that they have an effective transport system, and that their international trade partners do not struggle delivering goods to them or having the goods supplied to them take too long or experience unnecessary hardships in the process.

 

 

2.7 Culture and its Role in the US Export of Weapons to Saudi Arabia

Culture is the way of life and how a people carry out their day to day activities. Kalhor et al. define culture in different aspects. First, they define culture as concepts and beliefs that form a behavioral pattern of a society. Secondly, they defined culture as the values and measures of values in a society. Finally, a more suitable and applicable definition was given to culture as a mixture of knowledge, beliefs, laws, traditional practices and skills in the course of a society’s interaction in their day to day interactions within themselves and with others.

Culture grows and evolves with time, and the negative aspects of culture may deter the development and improvement of commerce and economic growth. Kalhor et al. (2014) mention Gandhi’s mention of the West’s impact on the world’s culture, with the western culture being responsible for eroding other cultures, human values, and converting human beings into machines only concerned with production and making money. Therefore, it can be concluded that cultures can be exchanged with continued trading interactions between economies.

Culture leads to economic development. Through inclusion of culture into public policy-making, and co-operation of international development projects, economies are able to experience great strides in achieving great economic milestones and smother the export business globally. There have been steps made towards achieving cultural right in international trade. Marana (2010) identifies the inherent need for incorporation of culture into development. Therefore, it is important for the US and Saudi Arabia to include their nations’ cultures into their development programs and more importantly, the export interactions between the two nations.

Culture and globalization go hand in hand. Globalization is the intensification of economic activities among different nations of the world (Globalization 101). There have been strong efforts by economies to protect themselves from the effects brought by globalization and the increased interaction between the world economies. Therefore, it is important for economies to find ways to protect themselves from the negative effects of cultures brought into their countries as they interact with each other in trade. For example, Saudi Arabia is mostly a Muslim country, guided by Muslim values and therefore they are conservative in their nature. On the other hand, the US is mostly made up of a liberal culture and therefore they are not conservative in their behavior. The interaction between the two nations has to be in such a way that the cultures of the two nations do not clash and that only the positive aspects of the two cultures are exchanged between them.

Finally, it is important for the economies of the world to develop an export-oriented approach and culture for their economic development. A corporate culture has to be developed in that the structure, strategic planning and the daily operations in the economy and also in their relationship with other countries. Having an export-oriented culture is important since it affects the decision-making of the economy, consequently affecting the performance of the economy (Navarro-Garcia ET. Al, 2013). The export-oriented culture of the US has enabled them to remain a world-renown exporter of weapons. On the other hand, Saudi Arabia has also developed an export-oriented approach in their oil production and this has also made them develop into the world’s largest supplier of oil. Therefore, the export-oriented culture of the two countries has helped the countries to provide for their needs, i.e., the US becoming the world’s biggest weapons exporter, and Saudi Arabia getting enough money to procure weapons from the US.

 

 

2.8 Government Policies and their Roles in the Role in the Exportation of Weapons between the US and Saudi Arabia

Government policies affect how the production and export of goods and services. Admittedly, if the government policies are favorable to the trade, then there will be positive results emanating from the experience, and negative trade terms will result in negative results.

According to NES, Jamaica (2020), government policies are formulated with the aim of bringing economic growth and ensuring sustainability of the methods of production. The policies are also mean to contribute to the economy’s GDP by increasing the exports from within, increase the role of exportation in providing employment for its population, and achieving more diversification of the economy. Diversification is achieved by setting up more policies that will enable the governments to attain high values for their export sectors, improve the values of currently exported goods, increasing the role of services as a contributor to the national economy. Additionally, the policies should help the economies to increase the penetration into bigger and more profitable markets, and help in maintaining their competitive nature and mindset.

Taxes placed on commodities, both for local and international use determine the profitability and success of the export endeavors of a country. Piermartini (2004) suggests the use of export taxes in improvement of the terms of trade. The improvement will help in smoothening the earnings from exports, improve diversification of production, and in setting up the manufacturing sector as a way of alleviating poverty and redistribution of wealth back to the society. Therefore, if the taxation system in the US is favorable to the exportation of weapons to the US, then the economy of the US will experience significant growth and the population will have more wealth as a result. Also, the reduced taxes will mean that Saudi Arabia will have more money to demand more weapons from the US.

Due to global competition, national policies have opted to become more perfectionist and detailed in nature. Also, unfair competition from competitors has made economies opt for imposition of taxes on international companies that have set up in their countries to ensure that the mother countries of the companies do not benefit unfairly from their trade. Leo and Deng (2019) also mention the imposition of stringent environmental laws that are meant to keep environmental damage on the minimum, while also keeping competition fair. Therefore, if Saudi Arabia sets up policies that would give rise to internal production of weapons instead of importing them from the US, it would mean that they save on the extra amounts that they would have spent in the course of the trade. Also, this would mean that the US would have less profits since their biggest partner will have pulled out of their long-standing deal.

2.9 How the Relationship between the US and Saudi Arabia Plays a Role in the Export of Weapons between the Two Countries

Official relations between Saudi Arabia and the US began in the 1940s, and the US administrations over the years have termed the Saudi Kingdom as an essential partner. Arms sales and other related security co-operations between the US and Saudi Arabia are conducted under the supervision of both the Congress and the Congressional opposition (Congressional Research Service, 2020). Consequently, the executive branch of the US government has made Congress aware of over $139 Billion worth of military sales proposals since 2009. There have been successfully concluded arms sales of $76 billion between the US and Saudi Arabia between 2009 and the 2017 financial years (Congressional Research Service, 2020). This being the case, it can be conclusively agreed that the US and Saudi Arabia have a successful business relationship as far as the export of arms is concerned.

Further, the ongoing business dealings between the US and Saudi Arabia on the export of oil to the US means that the relationship can only get stronger. This being so, the exportation of weapons between the two countries means that the two nations continually seek to provide positive working environments on which the dealings can prosper and increase the volumes of weapons exchanged between the two countries. Finally, it is correct to assume that when countries have a good relationship between themselves then the possibility of business dealings between the two nations will be assured. However, countries that have tension or bad relationships between them experience negative working conditions that mean they will not provide positive working environments for each other and this will finally result in little or no trade happening between the two.

 

 

 

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction

Igwenagu (2016) describes methodology as the systematic and theoretic analysis of the applied methods. Methodology involves theoretic study and analysis of the methods and principles used in finding information on a particular branch of knowledge. Therefore, factors such as paradigm, models of theory and the techniques involved, either qualitative or quantitative.

Research, on the other hand, is the process of tools of experience and reasoning to answer questions that they experience on a daily basis. Research is involved in hypothesizing of formulation of a conclusion by using experience and reasoning of the person undertaking the research. Therefore, research is a proven way of getting the truth, especially in the field of natural sciences.

This chapter presents a breakdown of the factors related to acquiring data and information on this research paper. Therefore, through this chapter, the process of acquiring data, verifying the sources and putting the data to use is addressed.

3.2 Research Design

To design is to draw out an outline of the planned outcome. It also involves planning details on the path to take in the process of research (Akhtar, 2016). It involves arriving at decisions and preparing strategies that will aid in conducting the research. Therefore, this research design will cover detailed information on the research topic, objectives to be achieved, concepts and definitions, variables to be included in the study, and the methods of data collection and data processing.

The design of this research paper covers the target population and sources of the information presented in the paper, the sample and sampling design, explaining the criteria used in deciding on the exact data source. Additionally, the procedure of collecting the data findings of the study will be explained. A pilot study on the findings of this research paper will be explained, and the findings validated by backing data. The data collected in the study will be analyzed to arrive at the precise findings and the variables used in the course of the study will be measured and operationalized. Finally, the ethical issues involved in the study will be mentioned and explained.

 

3.3 Target Population

A target population, also known as a population of interest has been defined by Majid (2018) as the targeted population that the study seeks to study and provide treatment to. A small sample of the total population is selected and the small sample is meant to represent the total population covered. Through the use of an eligibility criteria, the eligibility of an individual to participate in provision of information to a study is confirmed. Also, the eligibility criteria is used to ensure that the participants of the study do not hold any negative opinions on the subject matter, and that they will provide relevant information to the study.

This research study was conducted using the target population of stakeholders concerned with the export of weapons between the US and Saudi Arabia. Additionally, the target population included the stakeholders in the economics field who are important in providing insights on the factors of business involved in exportation and globalization business in the world. Therefore, the target population of this study included:

The Ministry of Defense of the United States to provide the data on the amounts of weaponry exported annually to Saudi Arabia.

The Ministry of Defense of the Kingdom of Saudi Arabia to provide data on the weapons imported annually from the United States.

The Ministry of Trade of the United States to provide information on the terms of trade and extent and amounts involved in the trade between the US and Saudi Arabia.

The Ministry of Trade of the Kingdom of Saudi Arabia to provide data on the confirmed arms deals between them and the US, and also the amounts involved.

Stakeholders on the field of economics in both the US and Saudi Arabia to provide the terms that determine the rate of success or failure of the arms exportation between the two economies.

Stakeholders in International trade and Globalization in both the US and Saudi Arabia to provide further insight on the terms that determine the success or failure of export dealings between countries in the world.

Stakeholders and Resource people in International Relations between the US and Saudi Arabia to help in providing information on the dealings between Saudi Arabia and the US and how it plays a role in the exportation of weapons between the US and Saudi Arabia.

Researchers and stakeholders on Arms deals and exportation, especially those with information on dealings between the US and Saudi Arabia to help provide the requirements for a successful arms deal and the requirements for the supplier and the recipient of the weapons.

Experts in research to provide insight on the best method of data collection and proving the data collected.

3.4 Sample and Sampling Design

Sampling is the process of choosing a sample from which the population’s characteristics can be gotten (Sajjad Kabir, 2016). Sampling is meant to help researchers in several ways, including: saving time and other resources, enabling the collection of data that is comprehensive, enabling more accurate measurement of data, and providing estimation of an error of margin. Also, sampling is more effective when the population contains more members than time and other resources would allow for the data to be collected.

In the course of this research project, the data was collected through random sampling of the data collected and verifying it against several sources. Data provided by the relevant authorities was sought for by the research team, and the available data was used in preparing this research paper. Data from libraries, both physical and virtual ones provided the information required from the ministries of defense of Saudi Arabia and the US, Ministries of Trade of the US and Saudi Arabia, researchers in the international relations between the US and Saudi Arabia, researchers in international arms deals and stakeholders in research procedures provided the sample from which we compiled this proposal.

Random is the random selection of a sample to be used in a research process. The use of random generation processes provides every subject in the total population an equal chance of being selected for sampling (Frerichs, 2008). Therefore, simple random sampling, whereby the sources of data were selected based on the availability of data was used to provide data for this research document.

3.5 Data Collection Procedure

Data collection procedures are the methods employed with the aim of gathering information on a particular subject matter (Dlib, 2020). There are two methods of data collection: quantitative and qualitative data collection methods. Quantitative methods of data collection rely on random data sampling and methods of data collection that fit into different experiences. Also, the qualitative method provides results that are simple in summarization, comparison and generalization.

Qualitative data on the other hand emphasize on the use of measurements, mathematics and analysis of collected data, by asking the target population for their opinion and inputs on the subject matter. Since the research proposal did not provide for the orthodox methods of data collection, then the researchers opted for purely theoretical methods of data collection, with online and physical library sources used to provide the required data on the matter under investigation, i.e. the exportation of weapons between the US and Saudi Arabia.

As mentioned in the shortcomings of the study, it was impossible for the researchers to get to the Kingdom of Saudi Arabia and the relevant offices in the US due to financial and time constraints on the researchers’ side. Therefore already processed data was put into use in coming up with the findings of the study, due to the negative factors involved in finding fresh, independent data for this study.

There was unavailability of raw data due to the lack of enough time to come up with independent sources and information on the export of weapons between the US and Saudi Arabia. Also, the lack of resources to aid the researchers in getting raw data required for the study made the researchers opt for acquiring already processed data which was cheaper to acquire and process, and also faster in retrieving.

3.6 Pilot Study

A pilot study is an essential part of a research proposal. A pilot study is achieved through conducting tests on the protocols of research, the instruments of data collection, strategies of collecting data, in conjunction with other techniques of research (Hassan & Mazza, 2016). Pilot studies are undertaken in preparation for larger studies in the course of preparing research findings.

There are three steps involved in conducting a pilot study. First, the definition of the feasibility of a research protocol is conducted. Secondly, subjects are recruited. Subjects are selected to represent the whole population and in the process, assumptions on the whole population can be made. Finally, the measurement instruments are selected, with the responses gotten from the subjects analyzed and put to the test (Hassan & Mazza, 2016). After these three steps, data will be entered into the relevant and required places to conclude the matter.

For this research proposal, the already conducted researches were used as the pilot studies. This is because in the assumptions made in the introductory part of this research, it was assumed that the findings of the researches conducted in the past were true and the findings reliable in nature. Therefore, since there was no need to conduct further pilot studies on the subject matter. Additionally, the decision not to conduct the pilot studies on this research were also informed by the goal of saving time and resources that would have been spent in search of the data that was already available. Finally, the research team also saw that the library sources available on the subject matter provided more reliable and verified data that covered all the angles and aspects of the subject matter compared to if the researchers of this study set out to find out the facts on their own.

3.7 Validity of the Collected Data

Measurement of reliability and validity of data is important in evaluating the measurement tools and instruments used in conducting a research. Mohajan (2017) stresses the importance of validating and testing the reliability of data collected by mentioning the importance of having this stage in a research proposal. First, transparency is achieved through validity and reliability testing. Through verification of the validity and reliability, the bias and negative attitudes held by the researcher are scrapped off. Also, through validation of data, the researcher is able to interpret the findings of their research.

There are however, threats to validating the research findings. First, carelessness is the most common threat to verification. Carelessness from the researcher, the resource people and the methods of data collection applied. Secondly, errors in measurement affect the validity of a research finding, in that the data might be inaccurate due to false data being handed to the final user of the data. Finally the lack of clear instructions on the data being collected may remove credibility from the subject matter.

During the search for data sources on this research paper, library sources found were heavily relied on and therefore there was need to verify the correctness of the information provided in each source. The data provided was verified by comparing it to other data sources on the same subject matter to ensure that the sources settled on were correct, and reliable. Also, only academic and official documents were used in the course of this research to ensure that only real information was used, not ones from online sources that are made to alarm the public or gain popularity, views or subscription by posting fake news to the public.

3.8 Data Analysis 

Dspace (2020) describes data analysis as a process of adding order, more meaning and making the data collected have more mass. Although it is usually found to be a messy, equivocal and prolonged procedure, data analysis is a creative process that brings excitement and contentment to the person undertaking the procedure. Data analysis also involves application of logic, whether deductive or inductive, into the research process.

Through data analysis, the basis for interpretation and analysis of data is achieved. This is because, as Dspace (2020) puts it, the process offers room for analysis, processing and interpretation of the data collected into the specific area of study that the researcher is seeking information on.

The data on the exportation of weapons between the US and Saudi Arabia was processed data since it was found in verified and valid academic and research documents. Therefore, the process of data analysis was made easier, faster, cheaper and less time-consuming. Since the data was found to be reliable, all it required was the researchers to find all the data they required from all the available sources and interpret it. Through the interpretation of the available data sources, the researchers of this paper were able to find the relevant information that has been presented in this paper, and consequently convert the data that was not specific to this study into relevant information by interpreting, referencing and referring it against the subject matter, i.e. the exportation of weapons between the US and Saudi Arabia. Therefore, the data presented in this paper has been verified, interpreted and made subject-specific to the discussion topic.

3.9 Operationalization/Measurement of Variables

A variable is a measurement that takes on two or more values. Variables are of different kinds. First, there are qualitative and quantitative variables. While qualitative data comes in different types, quantitative data comes in different amounts of measurement. In simpler terms, qualitative terms answer the `what kind’ questions, while quantitative variables answer the `what amount’ questions (Bcs, 2020). Secondly, there are discrete and continuous variables. Discrete variables offer definite numbers on the subject matter, while continuous variables offer infinite numbers, i.e. it offers a continuing number that cannot be tracked down in one research proposal. Furthermore there are dependent and independent variables. Independent variables are ones that are considered casual in their use in an experiment, while dependent ones are the ones that have presumed effects on the subject matter.

Additionally, there are variables that are considered to be constructs. These type of variables are the underlying characteristics not directly inferred or mentioned in the course of the study but are assumed to be available in the course of the study. Finally, mediator variables are the ones that provide a causal link between the quantitative and qualitative variables. They explain the reason why a variable behaves the way it does.

This study encountered the above variables, as they have been broken down below: Qualitative variables include the type of business carried out between the US and Saudi Arabia, the factors that determine the rate of success or failure of the exportation of weapons between the two nations. Also, included in this list are the type of weapons and trainings exported from the US to Saudi Arabia.

Quantitative variables covered the amount of money exchanged between the two countries in individual financial years as they engage in exportation of weapons from the US. Secondly, the number of years that the exportation of business has been taking place. Also, the number of weapons sent to Saudi Arabia from the US is provided.

Discrete variables include the amount of money exchanged between the two countries in individual financial years as they engage in exportation of weapons from the US. Secondly, the number of years that the exportation of business has been taking place. Also, the number of weapons sent to Saudi Arabia from the US is provided.

Continuous variables include the amount of money that has not been documented for the case of the export business between the two countries. Secondly, the number of people affected by the weapons exchange between the US and Saudi Arabia is an important aspect of the continuous variables. Finally, the number of employment opportunities provided by the exportation of weapons between the two countries cannot be fully quantified.

Dependent variables in this case include the amounts spent per year in the exportation of weapons and the amount of weapons transferred from the US to Saudi Arabia. Independent variables used in this research proposal were the need for weapons by Saudi Arabia, and the factors of business affecting the trade, since they remain relevant whether or not the countries adjust the amounts transferred or not.

The construct variable used on this paper was the public opinion on the exportation business between the two countries. The public opinion of the two countries has not been covered, but they are assumed to be supportive, since the trade is ongoing. Mediator variables are the business factors that affect the trade between the two nations. By explaining the effects of the factors on the amounts and reasons for the business, the mediator variables are achieved.

3.10 Ethical Issues

Akaranga & Makau (2016) describe research ethics as an important aspect of the carrying out of research activities since it requires that researchers protect and uphold the dignity of the subjects involved in the study, and ensure that they publish well-researched information to ensure that they do not provide misleading information. Through research ethics, the ends arrived at by the researchers are justified by the means of acquiring data employed by the researchers. While deontological researchers argue this fact, they provide room for considerations of the case at hand and whether or not the means are justified by the end.  It is however agreed upon that the researchers should not use deception and false methods of data acquisition in pursuit of their findings.

This research paper has passed the test for the requirements of an ethical paper. First, there is academic freedom in the paper, in that the researchers did not let their personal beliefs and stands to get in the way of writing up a bias-free paper. Additionally, the paper is open-minded and is respectful to all the intellectual properties used in this paper. Secondly, this paper is free from falsified and fabricated facts. This has been arrived at by ensuring that the data presented is verified and valid to the subject matter to the best of the researchers’ knowledge. Therefore, the data and sources used in this paper are valid and verified, while the research used to build up this paper has been peer-reviewed to ensure that the data provided is true and meets academic standards.

There were no sponsorships applied for or used in researching for this paper. The researchers used their own finances in the course of research, and therefore there are no financial matters or sponsorships that need to be declared to the public. Finally, this paper is plagiarism-free, and therefore original. The research team sought to provide original information on the export of weapons between the US and the Kingdom of Saudi Arabia, as much as they used previous research to build on it. Therefore, there are citations to provide the original sources of the information provided, so that the paper can be proven to be well-researched, valid, verified and original.

 

 

CHAPTER FOUR: DATA ANALYSIS AND FINDINGS

4.1 Introduction

After the collection of accurate and reliable data, the next step is to extract useful and relevant data to the research. There is usually valuable data buried under a massive amount of irrelevant data. Therefore the researcher is tasked with the duty to manipulate the data and interpret it according to the research’s requirement. Data analysis is the process of calculating and evaluating retrieved data to get relevant information (Ibrahim, 2015). While simple data requires simple calculations and organization, complex data requires proper and more extended processing.

Ibrahim (2015) describes analysis as operations performed to summarize the data collected and present it in a way that answers the questions that the research proposal seeks to answer. Therefore, analysis deals with making data relevant to the topic in question, by extracting and presenting the information in a manner that makes it possible.

Data can be categorized into two categories, according to (Labani, Wadhwa, & Asthana, 2017). First, data can be categorized into numerical or quantitative form. This category is classified further into discrete and continuous types. Categorical data is one that can be presented into groups in which all the factors have been put in place. When data has been analyzed, it is then shown in different forms, for example, tabulation, graphing or merely presenting the data in numerical ways.

The facts above being so, the need for analyzing the data collected in terms of the factors affecting the exportation of weapons between the US and Saudi Arabia is essential so that the information can be relevant and easy to interpret for people seeking information on the same.

4.2 Comparison of the Economies of the US and Saudi Arabia between 1995 and 2015

Getting a look of the economic growth between the two nations is essential since the researcher can present facts on how the economic growth played a role on the ease of conducting exportation of weapons from the US and Saudi Arabia. This is possible since previous research has proven that as an economy grows, so does the ability of the economy to take part in international trade (Gurgul & Lach, 2014). Therefore, it is essential to compare the individual economies, chart the growth or fall. Through them, a conclusion on the role the economy in the exportation can be arrived at.

4.2.1 The Economy of Saudi Arabia between 1995 and 2015

The economy of Saudi Arabia has not been predictable, mostly because its economy is provided for by the exportation of oil. Therefore, the rise and fall of oil prices determine the success or failure of the economy of the country, as shown below:

4.2.3 The Economy of the US between 1995 and 2015

The economy of the US is driven by different factors, such as manufacturing, mining and exportation of finished products in various industries globally. The economy had fallen between 2001 and 2009, but the rapid rise between 2009 and 2015 can be attributed to an improvement of the factors of business in that period. Below is the illustration of the economy of the US between those years

 

 

4.2.4 Comparison of Economic Performance of the US and Saudi Arabia

A comparison of the two countries’ economic performance is ironic. One would expect Saudi Arabia to be inferior to the US in terms of economic growth, but this is not the case. Saudi Arabia has performed better compared to the US between 1995 and 2015. Several factors can be attributed to this, although the most straightforward and most obvious explanation is that the Kingdom of Saudi Arabia provided more opportunities for the elements of business to thrive than the US, hence the better performance. Also, the better performance presents an insight on why Saudi Arabia has been able to import more weapons from the US as the years progress.

4.3 Analysis of the GDP and the Purchasing Power of the US and Saudi Arabia

Shihab and colleagues (2014) argue that a country’s economic welfare determines economic growth. Exports are a country’s leading source of foreign exchange, and they help create a balance of payment that is both favorable and has less pressure. Additionally, the exportation of goods and services by a country provide the nation’s workforce with employment opportunities. Therefore, it can be correctly concluded that if the US’ GDP is high, then they will be able to support their manufacturing industries, hence provide more weaponry to satisfy the demand by Saudi Arabia. Additionally, if Saudi Arabia’s GDP is high, it means that their purchasing power for weapons will be high, and therefore they will be able to buy more weapons from the US.

4.3.1 The GDP and the Purchasing Power of the US

The US has experienced continuous growth of their purchasing power due to its positive GDP. Other factors, such as positive environments from which the purchasing power of an economy can gain growth like government policies can be attributed to this increasing trend. Finally, due to the US’ tendency of importing more than producing locally, especially foodstuff may be the contributing factor to this trend. A graphical representation is shown below

4.3.2 The GDP and the Purchasing Power of Saudi Arabia

The trend in the GDP and purchasing power of Saudi Arabia is inconsistent, although it has been increasing between 2009 and 2015. This increase can be attributed to the rise in oil prices between those years, increasing the purchasing power of the countries.

4.3.3 A comparison of the Purchasing Power of Saudi Arabia and the US

The US has a superior purchasing power to Saudi Arabia, mostly because of the bigger population size of the US. Therefore, this superiority is expected by researchers, since the US had a population of 320 million people in 2015 compared to Saudi Arabia, which had 31.7 million people (Google Public Data, 2020).

4.4 Comparison of Inflation Rates between Saudi Arabia and the US

Economies have to devise ways in which to overcome the challenges posed by an unfavorable balance of payment, accumulated foreign debt, inflation levels, and slow growth rates. Some of the suggested tactics include the formulation of tactics that directly bring benefits and stabilization to the macroeconomic factors in the country. These factors include improving standards of living, liberalizing the economy, and championing economic freedom of the masses. More importantly, the adoption of a favorable exchange system regime should be considered to ensure that the nation undertaking the policies benefit from their selection. A country’s decision on an exchange system regime depends on the country’s size, past, sophistication, ease of doing business in the economy, and the major trade partners of the economy (Nyambariga, 2017). Therefore, the exchange rates and exchange rates regimes in place both in the US and Saudi Arabia determines the number of arms that will be exchanged between the two economies. If the governments are favorable, then the amount of weapons exported between the two countries is increased, while an unfavorable exchange system will lead to lesser volumes of weapons exchanged.

4.4.1 The Inflation Rates in Saudi Arabia between 1995 and 2015

Between 2005 and 2009, Saudi Arabia had a growth of inflation. The inflation growth was from 0.5 in 2005 to 9.9 in 2009 (GlobalEconomy, 2020). However, the inflation rates dropped from 9.9 in 2009 to 1.2 in 2015, meaning that Saudi Arabia had successfully handled the situation, through improving the factors that affect inflation rates.

 

4.4.2 Inflation Rates in the US between 1995 and 2015

The US has enjoyed relatively low inflation rates during this period, with the highest rates not going past 3.8 in 2008. Also, the US has enjoyed the lowest inflation rates in the world, with an inflation rate of -0.4 being experienced in 2009. By 2015, the US was at an inflation rate of 0.1, meaning that the country was in full control of the factors affecting inflation (GlobalEconomy, 2020).

4.5 Comparison of Workforces in Saudi Arabia and the US

Having an export-oriented strategy is aided by certain factors in the make-up of the population. Having a large amount of labor force, urbanization, and low dependency ratio is vital in ensuring that a country meets its goals in exporting on a large scale. Seeing that the US fulfils all the requirements for export orientation in its production process, a self-selection behavior is achieved in the process (Yao & Yu, 2009). A large number of workforce provides an opportunity for the manufacturing industries to produce a surplus that caters to both the domestic needs and export needs, and the surplus offers for the supply of weapons to be exported to Saudi Arabia.

According to the ILO (2010), a skilled workforce in a country ensures the sustainability of the country and the global transactions it takes part in. Therefore, if the US has a skilled workforce, there will be more production of weapons ready for export to Saudi Arabia. Similarly, if Saudi Arabia trains its military personnel to handle the imported weapons, then there is a higher possibility of the nation importing more weapons from the US.

4.5.1 The Labor Force in Saudi Arabia

As of 2015, Saudi Arabia had a population of 31.7 million people (Google Public Data, 2020). Out of the same, 13.09 million people were in the active labor force. Given that Saudi Arabia does not experience unemployment, it means that the country’s economy is made up of dependents and mostly young people who are either learning or older adults who are not working. However, the increasing curve of workers in Saudi Arabia means that the country has been experiencing both growths in population and in a culture of working. Finally, the small amount of workforce explains Saudi Arabia’s importation of weapons from the US

4.5.2 The Labor Force in the US

The US has a significant population, and as of 2015, they had a population of 320 million people (Google Public Data, 2020). Out of the population, 160.68 million people were working as of 2015 (Google Public Data, 2020). This means that more than half of the population is contributing to economic growth and development by working. Also, the US’ ability to manufacture weapons can be explained by the availability of a large workforce. Therefore, the US can export arms to Saudi Arabia through the existence of a workforce that can undertake in the production of weapons.

4.5.2 Comparison of the Labor Force in Saudi Arabia and the US

Due to differences in the populations of the two nations, Saudi Arabia’s workforce does not compare in any way to the US’. The labor force in the US as of 2015, which was at 160 million people was by itself five times the total population of Saudi Arabia. Therefore, seeing that the workforce of the US is higher than that of the US, it is understood how the US can export weapons to Saudi Arabia.

4.6 Risk Indicators as a Factor of Business

Saudi Arabia has political risks, mostly from Sunni Muslim terrorists who are a threat to the political stability of the country. On the other hand, political instability means reduced economic growth and therefore reduced national prosperity. They score at 2 in terms of medium and long term political risks that may affect business both internally and externally.

On the other hand, the US scores a one on medium and long term political risks that can affect business within and without the country. Therefore, the reduced risk of political instability provides the country with an opportunity to increase their effectiveness in business and hence their ability to be the world’s biggest exporter of weapons.

 

 

Comparing the two economies, it is possible to explain why the US is doing better economically since they experience more political stability than their counterparts in Saudi Arabia. Political stability means that the US can experience more times of peace and can work on its export-oriented approach to production.

4.7 Energy and Natural Resources Generation between Saudi Arabia and the US

Access and availability to energy are vital in ensuring the well-being of the society, nurture economic advancement, and fighting off poverty. However, there is a need for economies to ensure that a balance between the pursuit of industrial excellence and providing environmental protection is achieved. In the 1960s, the West (North America and Europe) was the primary consumer of energy sources, mostly oil. However, contemporary times have seen a change in this trend. Other parts of the world, especially the Pacific regions, have seen at least a 12-fold increase in the consumption of energy resources. By 2015, the Pacific region was consuming energy equaling the intake of the energy consumed in Europe and North America (Ritchie & Roser, 2014). Coal has been overtaken by oil in recent days in terms of usage due to the efficiency of oil to coal.

Energy plays a critical role in the economic growth of a country. Industrialization heavily relies on the use of power, and if a country masters the efficient use of energy, then the country’s success in manufacturing is assured. Population growth and the incessant search for economic prosperity by nations provide the continuous need for economies to seek efficient and reliable sources of energy (Erkan, Mucuk & Uysal, 2010). Energy consumption in the world grows parallel to economic and demographic advancement. Therefore, as the population increases and new technologies are discovered, then the need for more energy sources arises. Technology gives the US more innovations that need to be manufactured and brought to reality. Only a sustainable source of energy will ensure that the dreams are brought to life

4.7.1 Comparison of Energy Generation between Saudi Arabia and the US

Due to the availability of oil reserves in the country, Saudi Arabia has an ever-increasing generation of oil. Also, the continued production of oil explains the country’s continued economic growth and buying power that enables them to import weapons from the US.

 

Furthermore, the US also has oil deposits that are estimated to be bigger than the US, and therefore their projections have been going upwards between 1995 and 2015. This trend has seen the country manage to provide energy for the running of their domestic industries enabling the country to satisfy their demand for weapons and also the global market of the same.

Comparatively, the US generates relatively more energy than Saudi Arabia. Therefore, the United States’ ability to sustain industrialization processes that have supported the production and exportation of weapons worldwide.

4.8 Government Effectiveness and the Success of Business in Saudi Arabia and the US

Government policies affect how the production and export of goods and services. Admittedly, if the government policies are favorable to the trade, then there will be positive results emanating from the experience, and negative trade terms will result in negative consequences.

According to NES, Jamaica (2020), government policies are formulated to bring economic growth and ensure the sustainability of the methods of production. The policies are also mean to contribute to the economy’s GDP by increasing the exports from within, increase the role of exportation in employing its population, and achieving more diversification of the economy. Diversification is achieved by setting up more policies that will enable the governments to attain high values for their export sectors, improve the usefulness of currently exported goods, increasing the role of services as a contributor to the national economy. Additionally, the policies should help the economies to increase the penetration into more significant and more profitable markets, and assist in maintaining their competitive nature and mindset.

 

4.8.1 Comparison of Effectiveness of Governments in Saudi Arabia and the US

The government of Saudi Arabia performs relatively well in terms of effectiveness. Therefore, their growth in the economy can be attributed to the government policies that support business activities in the country.

Comparatively, the US has performed well in the effectiveness of business between 1995 and 2015. This effectiveness can be attributed to the growth of the economy and the domestic industries that have aided the country to produce weapons that serve the demand of the local and international market. Additionally, sound government policies can be attributed to the continued export dealings between the US and Saudi Arabia.

Comparing the two economies, it is possible to see why the US has a better-performing economy than Saudi Arabia. The policies that support setting up and growth of a business, and the export-oriented approach to production that has been sanctioned by the government have enabled the government to comfortably export weapons to Saudi Arabia and other nations of the world.

4.9 Comparison of Innovation between the US and Saudi Arabia

Through technological advancement in the US and Saudi Arabia, there has been a change in the way the two countries carry out arms exportation. There have been immense transformations experienced in how the countries organize their production process, conduct trade, and allocate the available capital. Additionally, there has been a change in the way the states carry out their operations and product creation (Muroyama & Stever, 1988). Through improved production techniques, the US has been able to improve on the previously practiced production techniques, hence producing more sophisticated ammunition and combat techniques that they export to Saudi Arabia. Also, improvement in air and water transportation by use of technology improves the speed of production and delivery of the weapons to the end-users.

Technology has also helped in the diversification of the products being delivered. Through innovation, there has been an improvement in how weapons are made in the US. Technology has enabled to use of old technology to create new weapons, make arms previously in the market using modern technology, and building entirely new products using the discovered technology (Ferragina & Pastor, 2007). Therefore, there is a broader range of weapons and combat techniques brought forward by the use of innovative technology and building on previous knowledge on weapon-production.

Furthermore, technology helps a country to remain competitive in their endeavors. As intimated by Marquez-Ramos and Martínez-Zarzoso (2010), a country’s economic development is directly linked to its advancement in technology. Through technological advancement, the US has been able to enjoy lower production costs since they save on human resources, transportation, and communication fees. Additionally, through ICT, there is a reduction of barriers to communication since information is swiftly shared between the two trade partners without physical interaction. Through the infusion of technology in their production of weapons, the US has been able to be the major exporter of arms globally from 2015-2019, exporting 35% of the world’s weapons (Varcellone, 2020). Therefore, through technology, the US has remained to be the go-to supplier for Saudi Arabia and the majority of the world’s nations.

 

The difference in innovation indexes between the US and Saudi Arabia explains the US’ ability to remain relevant in their manufacturing and exportation of weapons not only to Saudi Arabia but the rest of the world.

4.10 Taxation on International Trade between the US and Saudi Arabia and How they Affect the Exportation of Weapons to Saudi Arabia

Taxes placed on commodities, both for local and international use determine the profitability and success of the export endeavors of a country. Piermartini (2004) suggests the use of export taxes in the improvement of the terms of trade. The increase will help in smoothening the earnings from exports, improve diversification of production, and in setting up the manufacturing sector as a way of alleviating poverty and redistribution of wealth back to society. Therefore, if the taxation system in the US is favorable to the exportation of weapons to the US, then the economy of the US will experience significant growth and the population will have more wealth as a result. Also, reduced taxes will mean that Saudi Arabia will have more money to demand more weapons from the US.

Due to global competition, national policies have opted to become more perfectionist and detailed in nature. Also, unfair competition from competitors has made economies opt for the imposition of taxes on international companies that have set up in their countries to ensure that the mother countries of the companies do not benefit unfairly from their trade. Leo and Deng (2019) also mention the imposition of stringent environmental laws that are meant to keep ecological damage on the minimum, while also maintaining competition fair. Therefore, if Saudi Arabia sets up policies that would give rise to internal production of weapons instead of importing them from the US, it would mean that they save on the extra amounts that they would have spent in the course of the trade. Also, this would mean that the US would have fewer profits since their biggest partner will have pulled out of their long-standing deal.

The US enjoys a favorable taxation system that has helped sustain the local production of weapons for export to Saudi Arabia and the rest of the world. Favorable taxation means that the government can export more weapons and get more profits from the same since they are not taxed too heavily.

On the other hand, Saudi Arabia taxes international business heavily, and therefore the country does not import as many weapons as they would wish. If the taxes went down, then the government would be able to import more weapons from the US.

Comparing the two economies’ approach to international trade, the US performs better. If the taxation were reduced in Saudi Arabia, then there would be an increase in the number of weapons exchanged between the two countries. Increased number of firearms would increase security for Saudi Arabia and more income for the US