Economic Diversification in the Arab Gulf States

11 July, 2019

The Arab Center for Research and Policy Studies has published Economic Diversification in the Arab Gulf Countries, an anthology of studies that includes research presented at the 2016 Gulf Studies Forum. The research deals with a number of issues related to economic diversification in the GCC, starting with plans and strategies, and moving on to look at the role of employment and the workforce, and eventually, the future of economic diversification in the GCC based on the challenges it faces and the need to adopt a new development model, in contrast to the traditional economic rentier systems.

The book (335 pp.) consists of three sections, featuring a total of nine studies. The first section, “Economic Diversification Plans and Strategies,” is a collection of four chapters. In the first chapter, “Challenges Posed by the Collapse of Oil Prices and Strategies for Economic Diversification in the GCC”, Khalid Rashid Al-Khater argues that the decline in international oil prices is primarily due to the increase in supply in the global market in exchange for the decrease in demand, and that the Gulf countries were negatively affected by the decrease caused by the high deficit in their budgets, and the prolongation of the economic downturn. The Gulf did not benefit from previous declines to reduce exposure to oil shocks by proposing economic policy reforms, building human capital, reforming the public and private sectors, and building an industrial base non-reliant on oil.

In the second chapter, “Oman 2020: Prospects and Challenges,” Yousuf Hamad Al Balushi deals with the growing scope of the government’s role in the field of commodity and service production, the imbalances in the labour market due to the weak contribution of national labour, the low level of production efficiency and its inability to keep pace with the rapid developments in technology, and the continued expansion of reliance on expatriates. He also argues that the Omani economy succeeded in increasing the targeted growth rates between 1996 and 2015, and notes that the Oman 2020 vision aims to raise the relative contribution of the non-oil sectors from 65 percent to the GDP in 1995 to 81 percent by 2020.

In the third chapter, “Economic Diversification Policies in Saudi Arabia: Choice or Necessity?” Naser Al-Tamimi monitors economic reform policies and challenges in Saudi Arabia and follows their impact in terms of achieving economic diversification and advancing Saudi development outside of the oil sector, specifically political and economic obstacles. It also discusses the main drivers of economic diversification in the Saudi 2030 plan, in light of the uncertainty regarding the size and level of future oil revenues. In the fourth chapter, “Evaluating the Economic Diversification Strategies of the Gulf States: Opportunities and Challenges” Habibullah Turkistani examines the GCC strategies for diversification, focusing on the participation of the private sector and the availability of partnership with government institutions. He argues that there is a real discrepancy in the proportion of private sector participation in GCC economic development due to the type of central administration followed in some of them, which in turn has affected the private sector's entry into a real partnership with the government sector.

The second section, “Employment, the Workforce and Economic Diversification,” consists of three chapters. In Chapter Five, “Qatari Women Entrepreneurs: their Contribution to Economic Diversification?” Hend Al-Muftah examines the impact of Qatari women’s participation in managing small and medium enterprises, and identifies the most important challenges impeding their practice, continuity and development, arguing that because Qatari women have been empowered because of support in education and training, the government will enable them to enter the labour market and increase their contribution to the Qatari economy.

In the sixth chapter, “How has Expatriate Labour Affected the Saudi and Arab Gulf Economies?” Essam Al Zamel says that the dependence of Saudi Arabia and the Gulf states on expatriate labour is their weakest pillar of economic growth, which has a direct impact on economic diversification. He argues that the countries' motives and justifications for receiving expatriate workers were based on increasing oil revenues to build the infrastructure of these countries, distribute wealth and raise welfare among citizens. In the seventh chapter, “The Impact of Expatriate Remittances on Inflation in the GCC,” Diab Ali Muhammad Al-Bari investigates the remittances of expatriate workers in the GCC countries from 2000-2014, especially during oil price fluctuations, and their impact on economic diversification. It concludes that these transfers do not affect local inflation rates, and that stimulating local investments for expatriates contributes to maintaining the increase in government revenues, even in the event of continued fluctuations in oil prices.

The third section, “The future of economic diversification in the countries of the Cooperation Council for the Arab States of the Gulf,” consists of two chapters. In the eighth chapter, “The Post-Oil Energy Era Already Started: How Will the Gulf Cope?” Naji Abi Aad argues that lower oil prices are an opportunity to usher in a new era of economic diversification. Despite the complexity of the issue, this does not negate the need for the GCC countries to search for a long-term strategy to diversify their economies, with the introduction of educational systems based on knowledge, marine resources and desalination technologies, especially in renewable energy sources.

In the ninth and final chapter, “Development Policies in the Gulf States: the Missing Link,” Ali Al-Zamia poses important questions about the development model required for the success of the comprehensive and sustainable development process in the GCC, invoking the economic imbalance resulting from the dominance of the rentier pattern and the control of a class of investors linked to the ruling class, impeding the production of a serious and real development model. It also examines the impact of the absence of a participatory societal and political vision for the success of development plans, and discusses the impact of community participation in formulating these plans, the availability of economic information and indicators, and the existence of a public administration independent of the state political authority.

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