Economic Diversification In The Gcc

Abstract: The economies of the six Gulf Cooperation Council (GCC) countries are heavily reliant on oil. Greater economic diversification would reduce their exposure to volatility and uncertainty in the global oil market, help create jobs in the private sector, increase productivity and sustainable growth, and help create the non-oil economy that will be needed in the future when oil revenues start to dwindle. The GCC countries have followed many of the standard policies that are usually thought to promote more diversified economies, including reforms to improve the business climate, the development of domestic infrastructure, financial deepening, and improvements in education. Nevertheless, success to date has been limited. This paper argues that increased diversification will require realigning incentives for firms and workers in the economies—fixing these incentives is the “missing link” in the GCC countries’ diversification strategies. At present, producing non-tradables is less risky and more profitable for firms as they can benefit from the easy availability of low-wage foreign labor and the rapid growth in government spending, while the continued availability of high-paying and secure public sector jobs discourages nationals from pursuing entrepreneurship and private sector employment. Measures to begin to address these incentive issues could include limiting and reorienting government spending, strengthening private sector competition, providing guarantees and financial support for those firms engaged in export activity, and implementing labor market reforms to make nationals more competitive for private sector employment.

This book delves into the economic development of the six Gulf Cooperation Council (GCC) countries. Since the 1960s, the GCC states have harnessed their potential to exploit the wealth accrued from the oil boom to build their infrastructure and grow their economies. However, the high level of dependency on oil as the primary source feeding their output made their economies volatile and vulnerable to fluctuations in the global oil prices. Moreover, the plunge in oil prices and the threat of depletion of this natural resource pose serious challenges to the GCC countries. Consequently, the GCC governments have realized the importance of diversifying their economies following the need to move away from reliance on hydrocarbon. This book contributes to the theoretical literature by enriching the debate on the transition of the GCC countries from rentier states to diversified economies. It helps students and scholars understand this transformation with an expansive comprehension of the contemporary challenges facing the region, as well as outlining prospects for the future.

This volume explores the challenges to diversification in Gulf countries, which can no longer rely on profits from hydrocarbons to fund national expenditures. It elaborates on the problem of weak institutions, lack of coordination between policy makers and executors, limited investment in research and development, and a workforce that is too poorly skilled to compete in the private sector. In addition to analyzing issues in areas such as education, labor, business, and trade, the contributors underscore the importance of using global best practices to overcome fundamental weaknesses in the Gulf Cooperative Council's economic structure that limit opportunities for economic diversification. This is the second volume in Economic Diversification in the Gulf Region.

This volume focuses on the role of the private sector in diversifying the economics of Gulf countries in the post-petrodollar era, when fluctuating and declining oil prices are negatively impacting national expenditures. It explores current policies of countries in the Gulf Cooperation Council and their efforts to shift their economies away from heavy dependence on hydrocarbons. The structural changes will create favorable conditions for the private sector to flourish, shift production dependence from public to private sector, and allow for more efficient resource allocation. Such changes will also allow local banks to provide financial support to small and medium enterprises, boost entrepreneurship for job creation, and strengthen organizational structure and efficiency. This is the first volume in Economic Diversification in the Gulf Region.

The ‘Arab Spring’ of 2011 has affected the countries of the region to varying degrees, including the Gulf Cooperation Council (GCC) members, comprising Saudi Arabia, Kuwait, Qatar, the United Arab Emirates, Oman and Bahrain. The GCC has become a significant regional bloc playing a vital economic and political role far beyond its shores, given its geopolitical strategic location, a preponderance of global energy reserves and a major international player through the use of accumulated financial reserves. A new Gulf is rising, one that is more self assertive, looking to expand its membership to other Arab countries such as Jordan and Morocco, while at the same time strengthening the bloc’s relationship with current and emerging trading and strategic partners in Europe, USA and Asia. Regional and international realities, especially the uncertainties unleashed by the ‘Arab Spring’, are forcing Gulf leadership to initiate new policies involving closer cooperation amongst GCC countries to address emerging challenges. This volume brings together thirty renowned academics and specialists to examine a range of multifaceted social, political and economic issues facing the GCC in key areas such as: · Diversification from a high dependency on a narrow hydrocarbon base · Social transformation, youth employment and effective gender participation · Outward and inward foreign direct investment flows · Prospects for education reforms and e-learning. · Sustainable security in oil, renewable energy (including nuclear) and food · Corporate governance, transparency and enhancing the private sector's operating environment · The role and governance of Gulf Sovereign Wealth Funds in investing their surpluses. The volume also offers insights for challenges facing the GCC in monetary union, expanding the regional debt market and Sukuk issuance, GCC intellectual property rights application, detailed assessments of individual GCC country risk analysis, as well as the sustainability of long term government fiscal stimulus programs at the expense of private sector involvement.

This paper presents an overview of the unprecedented economic and social transformation witnessed by the member countries of the Cooperation Council of the Arab States of the Gulf (GCC)-Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates-over the last three decades.

A key priority for the Gulf Cooperation Council (GCC) countries is to create a dynamic non-oil tradable sector to support sustainable growth. Since export diversification takes a long time, it has to start now. We argue that the failure to diversify away from oil stems mainly from market failures rather than government failures. To tackle market failures, the government needs to change the incentive structure for workers and firms. Experiences of oil exporters that managed to diversify suggest that a focus on competing in international markets and an emphasis on technological upgrade and climbing the “quality ladder” are crucial.

This open access book questions the stereotype depicting all Gulf (GCC) economies as not sustainable, and starts a critical discussion of what these economies and polities should do to guarantee themselves a relatively stable future. Volatile international oil markets and the acceleration of the energy transition has challenged the notion that oil revenues are sufficient to sustain oil economies in the near to medium term. But what is the meaning of economic sustainability? The book discusses the multiple dimensions of the concept: economic diversification, continuing value of resources, taxation and fiscal development, labor market sustainability, sustainable income distribution, environmental sustainability, political order (democracy or authoritarianism) and sustainability, regional integration. The overarching message in this book is that we should move on from the simplistic branding of the Gulf economies as unsustainable and tackle the details of which adaptations they might need to undertake.