Oil is only a catalyst in GCC’s economic advance

Commodity has been a major factor, but that alone would not have made the enormous changes witnessed in the Gulf societies

By Mohammad Al Asoomi, Special to Gulf News
January 29, 2014

The Gulf nations are rated at the top of the table in the Middle East when it comes to their standard of economic and social development. Over the past four decades, they have achieved high growth rates and almost managed to eradicate illiteracy and raise the living standards of their nationals as well as expatriate.

We are well aware of the reason why such remarkable gains were made. It is oil, but the answer is not that simple. Oil has been a major factor, but that alone would not have made the enormous changes witnessed in the Gulf societies. Otherwise, it could have had the same effect in other regional countries with abundant oil and gas resources such as Libya, Iraq, Iran and Algeria.

The other reasons are many. We will mention some of them and how these relate to the experiences of Libya, Iraq, Iran and Algeria.

First, at the time when the economic systems collapsed in Libya, Iraq, Iran and Algeria, the new regimes that emerged failed to present development alternatives because they simply did not have one. This resulted in the destruction of the old economical structures based on historical experiences and replaced with confusion and failures.

In contrast, the GCC evolved gradually within a stable economic and social system that allowed for the creation of a healthy environment for the business sector and provision of facilities for the development of various non-oil sectors. This was coupled with government support and flexible economic policies. This approach still prevails as it helped transform the GCC from “developing” to emerging markets with high living standards and good rate of growth for their non-oil sectors.

Qualitative shift

It is no exaggeration to say that Libya, Iraq, Iran and Algeria could have achieved similar developments if they had maintained their former economic regimes. For instance, Ayatollah Khomeini of Iran abolished contracts worth $50 billion (Dh183.5 billion) for projects that were agreed upon by the Shah’s regime.

If this value is calculated at today’s prices it is equivalent to $500 billion, which would have meant a qualitative shift for the Iranian economy. It is no different from the economic situation in the other three countries.

The GCC took up open economic policies and allowed for capital to move smoothly and actively into the financial and trade sectors. This was accompanied by the transfer of state-of-the-art technologies that contributed to the development of various non-oil sectors. As a result, the GCC has become a global trading and financial hub.

Ironically, they were also able to attract investments from the other four oil-producing countries in the region, with Iranian investments alone estimated at $250 billion in the GCC.

The GCC has enjoyed enviable political stability and security despite the volatile security situation in the region and the attempts by some groups to undermine this stability or drag the Gulf states into hopeless conflicts.

These and other factors are the real reasons behind the economic and social progress achieved by the GCC, with oil playing a crucial role in financing sound policies that served the development needs.

Therefore, it is important for the GCC to maintain their natural course and to work on developing their economies in keeping with rapid international changes. They also need to boost their economic co-operation within the Gulf Common Market, which will open up new horizons and the competitive capabilities required in the next phase of growth and competitiveness.

Source http://gulfnews.com/business/oil-is-only-a-catalyst-in-gcc-s-economic-advance-1.1283659