GCC differs in will to improve infrastructure developments

GCC differs in will to improve infrastructure developments
The Jebel Ali port. The UAE accounts for about 60 per cent of the Mena region's freight.

Airports in the UAE and Qatar also capture 37 per cent and 10 per cent, respectively, of the Mena's passenger traffic.



By Jordi Rof/GCC Focus

Published: Tue 4 Aug 2015, 12:00 AM

Last updated: Tue 4 Aug 2015, 9:11 AM

In many aspects, such as income levels or oil dependency, Gulf countries are very similar. In some other aspects, differences are striking. This is the case with infrastructures and equipment, ports, airports and railways. For instance, the quality of port infrastructure in the UAE is amongst the highest in the world, only behind the Netherlands and Singapore, but far below OECD standards in Kuwait. The port quality index is a gauge of users' satisfaction with the infrastructure, obtained through a survey including several industries. In air transport infrastructure dissimilarities are also sizeable.
The UAE and Qatar are important trade hubs, concentrating about 60 per cent and 23 per cent, respectively, of the Mena region's freight, versus one per cent in Kuwait, Bahrain and Oman. Airports in the UAE and Qatar also capture 37 per cent and 10 per cent, respectively, of the Mena's passenger traffic. Telecommunications are not an exception either, with Saudi Arabia, Kuwait and Oman significantly below GCC average, with 75 per cent or less of Internet users.
There is a clear link between income levels and the quality of infrastructure. Some countries have pursued an investment-led development, updating their capital stock in order to attract foreign direct investment or fuel their nascent industry. This is the case of the UAE and Dubai in the GCC or China and Singapore in the Asia-Pacific. There are also countries, typically first-comers in economic development, which developed their infrastructure gradually as needs arose. In all cases, infrastructure is linked to higher productivity and growth.
However, infrastructure is necessary but not sufficient. Macroeconomic stability - sustainable debt and price stability - institutional quality and a stable geopolitical environment also play a major role.
Emphasis on infrastructure is a common denominator in most GCC countries development plans. Kuwait's Vision 2020 laid emphasis on the upgrade of port and airport infrastructure to become a trade and logistics hub. Kuwait's ambitions to become a regional financial reference will also require an update of telecommunications infrastructure and related skills of its labor force. Investment on infrastructure is a key aspect to diversify the economy and stimulate the targeted sectors in the development plans of all other GCC countries. Improvement of the quality of institutions and legislative changes are also given a great importance. While the ultimate goal of diversification is the same, plans on how to reach these goals differ, from Bahrain's laissez faire to the active promotion of specific sectors of the UAE and Dubai.
The key difference across GCC countries lies in the degree of implementation in their development plans. The UAE, Qatar and, to a lesser extent, Bahrain, have been able to translate plans into reality efficiently. Even Oman and Saudi Arabia, at the bottom of the GCC ranks, have reached levels of infrastructure quality comparable to the euro area. In Kuwait however, the situation is radically different. New development projects are not materialising and the quality of existing infrastructure is suffering. Without assertive action in the years to come, the objective of becoming a trade and logistics hub is highly unlikely to materialize. Determined action means taking risk, but perhaps the biggest risk is not taking any risk at all.
The writer is an economist at Asiya Investments Company. Views expressed are his own and do not reflect the newspaper's policy.


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