In Doha on 25-26 May 2021, the Arab Center for Research and Policy Studies conducted a video-conferenced workshop on “Economic Diversification in the Arab Gulf States: Challenges and Opportunities”. Convened in partnership with the Konrad Adenauer Stiftung and the Doha Institute for Graduate Studies, the workshop provided an opportunity for national experts from Gulf countries and from Germany to share their knowledge, insights, and assessments.
The workshop opened with all participating researchers, associate researchers and the audience at large welcomed by each of the three partner organizations’ representatives: Haider Saeed, Head of the Arab Center Research Department; Fabian Blumberg, Regional Representative to the Gulf States at Konrad Adenauer Stiftung; and Hamid Ali, Dean of the School of Public Administration and Development Economics at the Doha Institute for Graduate Studies. Saeed underlined the importance of the workshop topic, noting that the Arab Center had devoted a conference track to it in the 2016 Gulf Studies Forum, giving rise to the publication in 2019 of an eponymously titled book. Blumberg spoke of the premium the Konrad Adenauer Foundation places on the exchange of expertise in this domain. Ali observed that the workshop sought to explore and find answers to some key questions, such as: what does economic diversification really entail for the Gulf states, given their context? Why is economic diversification important? Who should oversee it? What are policy options are on the table?
Frank Himpel, Professor at Anhalt University of Applied Sciences Anhalt University of Applied Sciences moderated the first session of the workshop, which saw the presentation of four papers, beginning with that of Hessah Alojayan, Assistant Professor of Finance at Kuwait University, who presented “Before It’s Too Late: A Vision to Reform the Kuwaiti Economy”. Alojayan emphasized the need to reform the Kuwaiti economy in view of the many changes the country has witnessed since the discovery of oil: demographic transformations; geopolitical tensions; a global trend towards alternative and renewable energy sources; the post-2008 global economic crisis; and now the coronavirus pandemic. Pleading for a Kuwaiti national dialogue on economic challenges to the sustainability of the welfare state in future generations, she presented the 2020 “Before It Is Too Late” vision that has been adopted by 29 Kuwaiti management and economics specialists, to then propose steps to root out economic distortions and fight corruption, towards economic diversification and a sustainable future.
Hatim al-Shanfari, Professor in the Department of Economics and Finance at the College of Economics & Political Science at Sultan Qaboos University presented “Oman Experience in Fiscal Sustainability,” brought the Omani 2020-2024 plan to the consideration of the workshop: expand revenue, contain expenditure, invest in economic growth, accelerate economic diversification, augment expenditure effectiveness, reinforce social welfare plans, and basically beef up financial management. al-Shanfari indicated that during this plan’s implementation a value-added tax was imposed and the government took concrete steps to reduce water and electricity spending, and, for the first time in GCC history, Oman will impose an income tax, starting in 2022.
Noura Allahow, Vice Chairwoman of the Economic Forum at the Kuwait Economic Society then presented her paper on “The Role of the Private Sector in Economic Diversification,” with private sector production in Kuwait contributing 27% of Gross Domestic Product (GDP). Examining the impact that increasing women's employment in the private sector makes on the GDP, Allahow noted that a recently conducted experiment found that shifting 70,000 female employees from government to the private sector employment, and increasing it annually by 5-10 thousand, most emphatically does lead to an increase in the nation’s domestic product.
Executive Director of the German-Emirati Joint Council for Trade and Industry Oliver Oehms closed the first session and day of the workshop. Presenting his paper on “Foreign Direct Investment (FDI) Attraction, Industrialization and Small and Medium Sized Enterprise (SME),” he noted that German companies present in the Gulf’s Arab countries have contributed to economic diversification. There are some 1,000 German companies operating in the UAE, and over two hundred in Saudi Arabia. Obstacles that impede German integration into Gulf region markets of the are principally the conditions imposed upon international investors, and an absence of standardized technical specifications.
The second session and day of the workshop (26 May) saw five papers presented, with Director of the Political Studies Unit at the Arab Center Marwan Kabalan moderating. Professor of Management at Kuwait University-College of Business Administration Nawaf Alabduljader’s “Before It’s Too Late: A Vision to Reform the Kuwaiti Economy” enumerated the key focal points of the initiative known as “Before It’s Too Late”: 1) long-term economic sustainability to prevent short-term solutions engendering problems for the future, such as such diminished reserves for future generations; 2) transparency and rooting out corruption, addressing the system and structure of corruption (as when public sector posts are awarded on the basis of seniority rather than productivity, thereby boosting the rate of disguised unemployment) as well as the more obvious embezzlement of public funds; 3) social justice, since a state’s reliance on equality and parity rather than social justice may well create new problems; 4) primacy of scientific evidence since policies may at times in Kuwait be an outcome of personal whim rather than assessed data and statistical analysis, so necessitating free, easy access to information for all citizens.
Next, Assistant Professor in the Department of Economics and Finance at the College of Economics & Political Science at Sultan Qaboos University Adham bin Turki al Said spoke on the Omani Experience of “SMEs as a Vehicle of Job Creation & Economic Diversification,” noting that some 300,000 small companies supported through government startup funds (earmarked for companies with 30 percent export production) still have a long way to go towards economic diversification, and underlining that some 30 percent of job opportunities provided by such companies typically go to expatriate workers, which is of course not ideal.
Also related to the Sultanate of Oman, Smart Investment Gateway Founder Yusuf bin Hamad Al Balushi, presented his “Determinants of the economic diversification in the Gulf States: Oman as a Case Study” to identify three reasons for the limited success of the Arab Gulf states in dealing with the issue of economic diversification: first, inadequate support of local domestic trading activities, as in these countries’ fragile economies - so vulnerable to external shocks - export revenues go entirely towards the overall public budget; second, a disrupted cycle of medium and long term economic activities with general fiscal policy dominating most commercial activities; and third, the problematic relationships between the three parties of government, society and companies. With governments invariably setting national priorities and undertaking investment and recruitment, the role played by individuals and companies is often diminished. This obstructs a shift from rentier to productive economy as such a shift necessitates a balanced relationship between these three parties.
Finally, Political Analyst on Arab Gulf States and Middle East and Researcher with the Center for Applied Research in Partnership with the Orient (CARPO) Sebastian Sons presented his view of “Chances for Closer European-Gulf Cooperation in Terms of Economic Transformation,” considering historical European Union and Arab Gulf states’ reciprocal institutional and bilateral relations. In 2020, for example, the European Union ranked second after China as a Gulf Cooperation Council partner with its 12.3 percent trade volume share of 97.1 billion euros. Sons also underlined the Gulf’s perspective of problems in the relationship with the European Union standing particularly opaque about failed cooperation projects (such as free trade agreements), in addition to the dearth of a mutually agreed upon business model and European diplomacy being viewed as innately biased against the Gulf states. The European Union recently opted to encourage states pursue bilateral relations rather than dealing through the Gulf Cooperation Council - especially after the2017 Gulf crisis.
At the workshop’s conclusion the joint organizers mooted the possibility of an expanded academic conference on the subject convening in Doha during the 2021/2022 academic year.
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