In May 1981, the Gulf Cooperation Council (GCC) was formed, creating an economic and political alliance between Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman. The primary purpose of the union was to foster stronger ties between the member states in order to enhance their respective economies. The union was helped by the fact that all six countries already possessed strikingly similar political and cultural identities, which are heavily based on the teachings of Islam.
Together, the GCC is home to more than half of the world’s oil, with Saudi Arabia controlling the largest share out of the six member states. Possessing such a large proportion of total reserves provides GCC countries with a strong economic foundation, but in recent years the alliance has recognised that its dependence on the commodity is dangerous, and that greater diversification is needed to ensure long-term prosperity.
By working collectively, GCC member states managed to help one another weather the storm created by the economic crisis in 2008. During this period, the GCC’s common market was created, and in 2010, the alliance has even considered adopting a single currency similar to the euro, but it is yet to materialise. Since then, through increased cooperation, all member states have helped each other expand their economic activity by investing in infrastructure and other development projects, often through joint ventures, all of which have helped establish the GCC become a major player in the global market.
Saudi Arabia
Like other GCC member states, Saudi Arabia has been in the process of diversifying its economy for some time, with the aim being to reduce its reliance on oil. For this economic plan to be a success, it has required large levels of investment in education, infrastructure, technology, science and healthcare in particular. The country’s budget reflects the government’s commitment to economic diversification. In 2015, it is projected that total revenues will reach $190bn, with total government spending estimated at $229.3bn, resulting in a $38bn deficit.
But despite the kingdom’s willingness to invest in non-oil related projects, the country has not slowed oil production. In fact, as the price of oil has declined as a consequence of lower global demand, brought about by alternative sources of energy, like shale gas, the country has been reluctant to decrease output.
Nevertheless, the country has seen non-oil GDP grow considerably in 2014, with many private sector industries benefitting from the greater investment. According to the US-Saudi Arabian Business Council, growth rates for various industry sectors, including construction (6.7 percent), transportation, storage, and communications (6.13 percent), wholesale, retail, restaurants, and hotels (5.97 percent), and finance, insurance, and real estate (4.46 percent), have been impressive.
Kuwait
Over the years, Kuwait has introduced a number of reforms to corporate legislation in an attempt to increase the amount foreign direct investment the country receives. In a similar fashion, legislators have pushed ahead with regulatory changes that have made it easier for new businesses, domestic and foreign, to enter its various markets.
The Direct Investment Promotion Law was finally finalised by the government near the end of last year. It represents a massive leap forward for the country. So far, this has helped the country to reduce is dependence on oil, fuelling the national economy and offering investors more confidence, which in turn will ensure that investment continues to flow into Kuwait.
The new legislation is one part of a wider set of reform that is comprised in the Kuwait Development Plan. The plan lays out the country’s economic future and the direction that the government wishes to take to provide its citizens with increased prosperity. Over the next three decades, the government is hoping that it can transform Kuwait into a commercial and financial hub, reducing its dependence on oil in the process.
According to a recent economic update by the Oxford Business Group, the government has allocated more than $115bn for a wide array of projects, “including 45,000 new housing units, a metro and railway system, and a new refinery”. Once completed such developments in infrastructure developments will help its burgeoning private sector to grab a larger share of its economy.
UAE
Last year, the UAE Government proudly declared 2015 as the “year of innovation” and unveiled a new strategy that seeks to make the country one of the most innovative nations in the world.
“Announcing 2015 as the year of innovation comes to support federal government efforts, attract national skills, increase distinguished research, as well as boost efforts to build a national cadre who are able to lead our future in this field towards more progress, prosperity and innovation”, said His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE during a special meeting in Fujairah. “We live today in a world witnessing rapid changes and continuous developments, full of opportunities, discoveries and inventions.
“This innovation strategy is a national priority for our programme of development and progress”, he added. “It is a primary tool to achieve Vision 2021 and an engine for the growth of distinctive skills and capabilities across the nation.”
The National Innovation Strategy (NIS) seeks to cultivate a culture of innovation in some of the country’s key economic sectors, such as renewables, transport, education, health and technology. In order to make the dream a reality, the government plans to introduce new legislation, invest in its workforce, and provide industry with the right financial incentives that will drive innovation within the country.
Qatar
Qatar is one of the most successful GCC countries and boasts one of the fastest growing economies in the world right now, with GDP growth coming in at 6.3 percent in 2014 and expected to exceed expectations in 2015.
The country is a massive exporter of LNG, but the government has been keen to use the huge revenues from the sector to diversify its economy and stop it becoming a one trick pony. Its government plans to invest large amounts of capital into infrastructure projects that are essential if it is to develop a sustainable economy.
Qatar is eager to transform itself into a more modern society, with the hope that it will attract more investment. And it is particularly interested in developing its financial sector in a bid to bring more FDI. All eyes will be on the country when it hosts the FIFA World Cup in 2022 and the government will be hoping that the event will showcase the accomplishments the country has achieved so far, as well as helping to make the country a more prominent figure on the world stage.
Bahrain
Bahrain made a name for itself during the 1970s as the Middle East’s biggest financial hub. In recent years, the country has had to fend off attempts to dethrone it as the financial epicentre of the region, with economic diversification high on the agenda for many of its neighbours. But Bahrain has not rested on its laurels and invested heavily into its financial sector in a bid to stay ahead of the pack, with the country now boasting the greatest concentration of Islamic financial institutions in the world.
Its economic fortunes have been bolstered by strong population growth, which provides the impetus to invest in the development of new housing and infrastructure projects. Over the coming decade, the country plans to expand its rail and air links, which will help to make the country more appealing to tourists, and will help make the country more attractive to businesses looking to set up shop.
Like its GCC partners, Bahrain has felt the impact of falling oil prices. But it too has managed to weather the dip with relative ease, which exemplifies the success the country has had at reducing its dependence on the commodity. And while its financial sector has flourished, growing to become the country’s second largest contributor to GDP, the government has increased spending in other areas of the economy to help those grow with similar fervour.
Oman
Oman has ploughed a lot of money into developing its infrastructure, and is hoping that by doing so; it can entice businesses from around the world to lay down roots, assisting the economic growth of the country in the process.
One of the most ambitious, and potentially fruitful development projects is the long-awaited 256km Oman-Saudi highway, which cuts through the sand of Rub al Khali, or Empty Quarter. As it stands, the project is around 85 percent complete, but once finished, the trade link will help boost their respective economies.
Oman is also near to completing two state-of-the-art airports in Salalah and Musact that will help bolster its tourism sector. But arguably the most important infrastructure project the country has planned is the Public Transport Master Plan for the nation’s capital, which is designed to reduce the strain on existing infrastructure and lower congestion on major road networks throughout the sultanate.
