GCC must join hands for economic diversification
A general view of the Saudi Aramco oil facility in Dammam. The continuous fall in oil prices in the last two years is a sign of great concern for oil-exporting countries in the GCC.
Global oil prices have slumped 70 per cent since mid-2014. In such a situation, it is not hard to understand that there are growing calls for economic diversification for sustainable growth and development in the region.
The Continuous fall in oil prices in the last two years is a sign of great concern for oil-exporting countries, including the UAE. Economies of Gulf Cooperation Council (GCC) countries mostly rely on oil as the main source of export and fiscal revenues.
Global oil prices have slumped 70 per cent since mid-2014. In such a situation, it is not hard to understand that there are growing calls for economic diversification for sustainable growth and development in the region. It is also a fact that in comparison with the GCC nations, the UAE stands tall for a diversified economy.
But more efforts are required and I strongly believe that GCC countries need collective and coordinated efforts for economic diversification in the region. In my opinion to find a common strategy for economic diversification in the region, GCC countries may establish a 'GCC Economic Diversification Organisation' which will be mutually beneficial for all sides.
The International Monetary Fund (IMF) in its staff discussion report 'Economic Diversification in the GCC: The Past, the Present and the Future' published in December 2014, said: "Greater diversification would reduce exposure to volatility and uncertainty in the global oil market, help create private sector jobs, increase productivity and sustainable growth, and establish the non-oil economy that will be needed in the future when oil revenues start to dwindle."
The goal to achieve economic diversification is not easy and takes a long time, so it is extremely important to establish a multi-staged plan. We have witnessed in the past that international and regional cooperation have led to some significant achievements in many fields in the world.
Some of the benefits of setting up a regional economic diversification organisation are illustrated below:
It will help create unified and coordinated efforts for promotion of economic transformation in the region.
This will provide an expanded base of financial resources, expertise with flow of ideas, new knowledge from many countries in order to pursue economic diversification.
The regional organisation will develop structural and institutional capacity to create sustainable development plans that benefit the entire region.
The proposed organisation would have much more depth than the approach of one single country which will present a better chance of developing economic transformation plans for the region.
This will create a more focused approach on particular sectors for economic diversification.
This will also provide large-scale data for analysis and that would set the direction for future course of action.
This will help identify target areas for innovation and economic diversification that are most relevant for the region.
This will also enable GCC countries to have an effective level of communication to identify shared aims and objectives for economic diversification.
Lack of economic diversification is harmful for economies. As the issue is commonly related to all GCC nations, it would be extremely appropriate to join hands and find ways for economic transformation/diversification in the entire region.
The writer is currently working as senior assistant director (finance), Nepra, Pakistan's official regulatory authority for electricity. Views expressed are his own and do not reflect the newspaper's policy.