August 14, 2022

Can the Gulf region achieve oil diversification?

Since the beginning of oil extraction from underground, economic diversification has been the goal of all Gulf economies. Although “black gold” provides huge wealth, successive Gulf Cooperation Council (GCC) governments have long known that oil wealth cannot last forever.

The Covid19 pandemic allowed them to see the future for the first time. With the impact of the global blockade, prices fell to unimaginably low levels. For the first time, the development of national knowledge-based industries may become an urgent economic need rather than a welcome supplement.

The long-term unofficial social contract between the Gulf government and its people is that oil revenues will maintain a high standard of living. Compared to some neighboring countries, this is undoubtedly the main factor of stability in these countries. Therefore, it is foolish to predict a short-term future in which oil will no longer dominate the economy, especially if the world opens up after the pandemic.

“For Europe, which is looking for new export markets and may be tired of long-term trade negotiations with economic giants like the United States, the economically diversified Gulf offers an attractive option.” However, the pandemic has fundamentally shaken the Middle East Economy Images from various parts of. Despite rising infection levels, the Gulf region is particularly well suited for a rapid economic recovery. Recent economic forecasts have been revised upwards. The CCG’s growth rate this year is expected to be 23%, and the growth rate will be even higher in 2022, outpacing most of the rest of the world. This is the bonus of a fast and extensive vaccination program, which enables travel and businesses to open faster.

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For example, Dubai has adopted an open city policy since January. The world of other countries is blocked. Today, its current economic performance is approaching pre-pandemic levels. Although the vaccination program has proven to be the key to improving economic performance in the short term, it also provides a vision of what a diversified Gulf economy might look like.

CCG established a medical research and production industry, which was previously rare in the region. The UAE has established the region’s first vaccine production facility and conducted the first medical trial of Chinese medicine vaccines in the Middle East. The global focus on vaccines may also explain Saudi Arabia’s announcement of plans to cooperate with Argentina’s Biogensis Bago to build a $ 60 million animal vaccine production plant, which is also a first in the region.

These companies not only helped the Gulf weather the current pandemic storm, but also laid the groundwork for a new social contract. Young people with higher education are in increasing demand for highly skilled and knowledge-based jobs.

According to the Arab Youth Survey, 87% of Arab youth said they are concerned about unemployment. This means that they hope that the government not only provides a basic standard of living, but also provides high-quality employment. By developing gorgeous high-tech industries such as the space program and epidemic-related life sciences, the UAE seems to be ahead of its CCG counterparts. In fact, the non-oil sector now accounts for more than 50% of total GDP.

The key to the GCC countries is that some of these industries have matured, not just existed. For example, in Bahrain, the financial services industry accounts for nearly 20% of GDP and has quickly become a recognized regional financial center. For Europe, this also offers opportunities for other forms of participation in the region. Previously, at least in terms of public discourse, this relationship was primarily defined by security concerns.
“This pandemic has undoubtedly accelerated the urgency to make the economic diversity of the Gulf region more than just an impressive vision and a well-designed PowerPoint.”

However, for Europe in search of new export markets, it may be possible Tired of long -term trade negotiations with economic giants like the United States, the economically diversified Gulf offers an attractive option. The UAE crown prince recently visited Austria, and the statement highlighted cooperation in innovation, artificial intelligence and green energy, highlighting the subtle shift in focus of the EU Gulf Alliance.

These emerging Gulf industries now provide dozens of examples and templates for other oil-based economies in the region. The future economic model of the Gulf will not be one that can extract oil from the ground more efficiently and transport it quickly to all parts of the world. Rather, it will be the companies that develop the world’s leading knowledge-based industries that can provide the highly skilled and innovative jobs that young people need.

The pandemic has undoubtedly accelerated the urgency to make the economic diversity of the Gulf region more than just breathtaking visions and well-designed PowerPoint. Partly out of necessity, he has also accelerated his vision to make it a reality in places like Abu Dhabi, Manama and Jeddah. For the Gulf countries, Covid19 has taken the race for economic diversification to a new stage.

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