The panel discussion "Economic and Political Developments in the GCC" took place at the 62nd Annual Conference in November, 2008.
Susan Bastress; Nabil Ali Alyousuf; Amr Awadh al Rawass; Aamir Rehman
UAE Minister Nabil Ali Alyousuf, Amer Awadh Al Rawas, and Aamir Rehman discussed the enormous changes the the Gulf Cooperation Council (GCC)has undergone in the past two decades. They also reviewed the policies that led to GCC growth and the challenges that still lay ahead, including economic diversification, government regulation, budget sures and demographic changes
Nabil Ali Alyousuf cites the UAE as an example of major regional trends toward development and openness in the Gulf. In the past, he says, Gulf countries spent their vast oil revenues outside of the region. In recent years, they have learned to invest internally, improve local government structures, and open markets to outside investors. Alyousuf advises developing countries to encourage inward investment to take advantage of a larger share of the world's economic growth.
The UAE Minister explains that market driven reform has allowed businesses to prosper. Government has played a transparent and objective role as regulator. He suggests economic regulations, which establish a rule of law, will trickle down to the general public. If the private sector sees that the government is serious about regulations and openness, companies will be more likely to make large investments in the country. He cites a recent survey that ranked the UAE in first place for its desirability as a place to live and for the perception that hard work will be duly rewarded.
Alyousuf considers the UAE a model for other countries when it comes to diversifying economies. In the UAE, only five percent of the GDP comes from oil revenues. Other sectors play a larger role. Saudi economic cities, tourism throughout the GCC, and the real estate markets of UAE, Qatar and Bahrain are other examples of regional economic diversification. Dubai has created new sectors like tourism out of virtually nothing. Now tourism contributes to over 20 percent of the GDP. Dubai took in over eight million visitors this past year; more than India or Egypt, two widely recognized tourist attractions.
Amer Awadh Al Rawas describes changes in the GCC's development strategies. In the past, he says, investments were made outside the region or in the oil and gas sector. Gulf countries were susceptible to declines in oil prices, as witnessed in 1986 and 1997. GCC countries learned from these downturns. They began increasing their sovereign wealth funds, selling more oil when prices were high, investing in oil exploration and production, and using prudent fiscal balancing. Today, small countries like Qatar are enjoying huge sures. The recent spike in growth has allowed for large investments in infrastructure to take place, which supports the many immigrants and tourists coming to GCC countries. However, Al Rawas also mentions a downside of rapid growth: a spike in inflation rates, difficulties for the GCC's low income population, and lower immigrant worker remittances.
Al Rawas says the global financial crisis will cause companies to fire some workers and rehire them at lower prices. Competition will increase, and the government must play an increased role in the economy. Al Rawas reiterates the point that Gulf countries must move toward more diversification. Oman has done so by branding itself as a tourist destination, building several airports throughout the country, and investing in indigenous resources.
Aamir Rehman identifies three factors that will continue to make the GCC attractive for international business. The first is sustainable prosperity and growth, which the GCC economy has achieved with wealthy emerging markets.
Second is the GCC's attractive demographic, which includes a young population and two generations of an educated public.
Third is the regulatory reform by GCC governments, where Dubai is a clear front-runner. Rehman assures that sures in GCC economies will allow for a quick bounce back from the global financial crisis. And the attractive regional demographics are long term trends. The biggest challenges will be providing employment to the young population, and avoiding a policy of protectionism. Another development to watch closely in the region is the opening of Saudi Arabia's free economic cities.
Rehman advises economic stakeholders in the GCC to expand prudently, as sures are not what they used to be. Stakeholders should buy through private equity and other sophisticated investment tools. Finally, Rehman counsels GCC governments to keep capital within the region, to diversify revenue sources – possibly through taxation. He explains that taxation will positively alter how the public and government interact. Although the GCC is facing many challenges, all three panelists identified ways for the GCC to grow and become more competitive in the long run.
About this Event
The panel discussion took place during the Middle East Institute's 62nd Annual Conference November 21, 2008 at the National Press Club in Washington, DC.
The event summary was written by Shabnam Mojtahedi, a Research Intern at the Middle East Institute. She recently graduated from Western Washington University. The summary was peer edited by Han Chen, a Programs Department Intern at the Middle East Institute. She is majoring in International Relations in the School of International Service at American University.
Disclaimer: Assertions and opinions in this Summary are solely those of the above-mentioned author(s) and do not reflect necessarily the views of the Middle East Institute, which expressly does not take positions on Middle East policy.