Economic reforms in GCC promise big payoffs
All the six GCC states, Saudi Arabia in particular, have embarked on a post-oil journey with ambitious visions and well thought-out roadmaps.
Dr. Fahad. M. Alturki, Chief Economist and Head of Research, Jadwa Investment, a Saudi Closed Joint Stock Company with headquarters in Riyadh was one of the speakers at the second and final day of Top CEO Conference & Awards at King Abdullah Economic City, Saudi Arabia. He examined the prospects of a region that will now be reliant on a non-oil economy.
The conference tackled numerous topics, including New Technologies, Challenges of Slow Growth, The Broken Job Machine, Private-Public Partnerships, Leadership 2.0, Vision 2030, New Alliances, the Arab Image in the West, Antitrust Laws, Women and Leadership, and The Image War.
Sustainability is the key underlying theme that can be found common in the respective reform programmes announced by the countries in the region. We speak to Alturki to find out more.
Q: An era of abundance is slowly coming to an end in the region. The call is now for sustainable growth and pragmatic strategies. What is the way forward for a regional march towards sustainability?
A: The reform programmes announced in Bahrain, Saudi, and Kuwait are aimed at changing the structure of their respective economies. These programs emphasise the need to diversify both government revenue and exports as well as improve local products and reduce national unemployment, all which are essential to attain sustainable growth in the non-oil economy. The likely channel of such reforms will be through policies to ease doing business, deregulate, privatise and attract FDI and portfolio investment on the domestic front and from abroad. Skill-upgrades and employment opportunities would follow with an emphasis on emerging sectors such as IT, logistics, finance, and mining.
Q: What are the risks and adjustments that these countries would be facing during this period of slow growth?
A: Risks include lack of serious reform to the most growth-enhancing parts of the transformation programmes mainly the regulatory system, investment, credit growth, transparency and accountability. Other risks that may impact growth include the pace of fiscal consolidation, with a faster-than-necessary consolidation likely to dampen efforts.
Q: Gulf business sectors seem to be taking solid steps to prioritise sustainable development as in the case of 166 GCC companies signing up for the ‘Business Pledge’ in October 2016. How do you look at that?
A: This is very encouraging since it shows the resilience of the GCC private sector in confronting the new business environment which it finds itself in. The likely result would be an improvement in efficiency and productivity, all of which should result in higher employment of nationals as well. This drive is enabled by the new government policy of redirecting subsidies (energy and other forms) only to those who are in need, be it businesses or households.
Q: Would the 17 goals outlined by the UN in the ‘Sustainable Development Goal’ report be applicable in the region?
A: Most of the economic initiatives and aspirations in NTP 2020 and Vision 2030 touch on the same sustainable economic goals highlighted by the United Nations. Economic growth, industry innovation, and modern energy are some of the goals being emphasised repeatedly in plans by GCC nations.
Q: With changing socioeconomic scenarios, countries in the GCC are chalking out individual agendas for a sustainable future. Do you think this works out better for the region in the long run or to function as a single entity, as they are, in the case of tax reforms?
A: If each country successfully implements its plans to empower the private sector and break its link to government spending, then we should automatically see a model of a single entity with increase in cross-border trade and investment. GCC businesses will bring about significant value by specializing across supply chains in specific industries and trade with other complementing businesses within the region. Movement of labour and capital will also become more visible in the GCC and this will probably entail a larger scope for the region.