Economic Diversification in the Gulf Region, Volume I

This chapter provides an analytical review of the current economic diversification strategies of the Gulf Cooperation Council (GCC) countries. It argues that diversification has been successful in the energy sector through investment in upstream and downstream industries, as well as energy-intensive industries such as petrochemical, aluminium and fertilisers, where GCC has comparative advantage. However, these countries have yet to expand in non-hydrocarbon industries to build vibrant, diversified economies that can withstand the effects of oil price shocks. Analysis of the six national diversification strategies reveals that those with less proven oil and gas reserves are more enthusiastic than others in diversifying their economies. The continuity of the allocation state model and dominance of the public sector are major challenges of diversification, and if GCC countries are to implement successful diversification, they must support and increase the role of private sector in economic development.

This chapter attempts to analyse the complex attitude of Kuwaiti business towards the government’s economic restructuring and rationalisation measures. We argue that the private sector, in its current state, that is, in its monopolistic, elitist form with reserved preferential treatment from authorities, forms its attitudes towards reform policies in accordance with its rent-seeking interests. Therefore, it is supportive of the initiatives that are aimed at the expansion of the scope of the private sector’s activity. However, policies that are intending to shift the employment burden on the private sector or broaden the scope of actual private sector players through encouraging new and foreign businesses do not fall in line with the interests of the established business actors and are strongly opposed.

This chapter focuses on the integration between state-owned enterprises (SOEs) and small and medium enterprises (SMEs) through national strategic projects (NSPs). It offers a holistic model for designing a new SOE in order to play a greater role in governmental initiatives towards economic diversification and create a platform for a value co-creation and experience-sharing. It also supports other governmental initiatives towards economic diversification like generating jobs, employing local workforce and building national knowledge. By performing systemic analysis of the organisation and its environment, suggestions are made to (a) enhance collaboration and promote alliances particularly with SMEs, (b) unfold the complexity resulting from the environment, (c) identify the SOEs’ core operational activities and (d) connect with numerous potential private companies.

This chapter reveals the implications of public-private partnerships (PPPs) in infrastructure development for economic diversification of Gulf Cooperation Council (GCC) countries. This is achieved by assessing the performances of infrastructure, economy and governments of GCC countries. In doing so, it explains the process in which PPPs achieve economic diversification as well as the relevance of regulation for the successful implementation of PPPs. From a long-term perspective, PPPs in infrastructure development strengthen governments in performing regulation as well as increase voice and accountability since the preparation and implementation of PPPs is for governments to design and implement regulation so that it responds to the interests of both domestic and international business community and society.

The commitment and determination to human capital development is evident in the details of recent Saudi national development plans. The Ninth Development Plan (2010–2015) has had a clear mandate to develop a “knowledge based economy and consolidate the basis of an information society” (Ninth National Development Plan 2009). Half of the expenditure of the Plan’s US$385 billion was devoted to human resources development, including education and training. What impact has this kind of investment made on the efficiency of Saudi labour force?

This particular study aims to tackle the growing significance of Outward Foreign Direct Investment (OFDI) and its relationship with Foreign Direct Investment (FDI) and fill the gap in the literature by focusing on the dynamics and procedural frameworks of the OFDI from Saudi Arabia and revealing its motivations and the impact of this business activity upon the economy. Foreign investment law was the establishment of an administrative authority in Saudi Arabia which has the function of regulating, managing and controlling foreign investment. This administrative authority is called the Saudi Arabian General Investment Authority (SAGIA) (Foreign Investment Law of 2000). SAGIA has the exclusive remit to regulate only Inward Foreign Direct Investment (IFDI). OFDI, once a phenomenon connected with the developed countries, is now a growing trend in the developing countries. The Kingdom of Saudi Arabia is one of those countries where increasing OFDI is being undertaken. The diversification helps countries in attracting FDI through allowing private sector investors to invest in non-oil sectors or industries. However, the regulatory instruments of privatization are one of the important elements in Saudi Arabia. A qualitative approach is followed where case studies of regulators, policymakers and firms, with international involvement from Saudi Arabia, have been employed.

In the context of Gulf countries, it becomes important that business must redefine its boundaries and play its role effectively as the Gulf countries are undergoing an extraordinary economic and social transformation—a transformation that has an impact on the entire global economy. The development strategies of GCC governments, to an extent, rely on the local private sector for diversification, job creation and the building of a more productive and less oil-dependent ‘knowledge economy’. This chapter attempts to review the importance of the diversification and the role which private sector plays in the development of economy. The chapter is based on the conceptual model that incorporates McKinsey’s 7S Framework to assess the extent to which specific management practices contribute to the effectiveness and productivity of the organisations and provide competitive advantage.

Due to arid climate and shortage of fresh water, GCC states do not have a comparative advantage in field crop production. They rely heavily on imports for their basic commodities and other foods. GCC import 80–90% of food for their consumption. Therefore, with demand in the GCC expected to rise significantly, food imports to the region will increase by as much as 100%. Hence, to meet the food demand will depend upon successful economic diversification. It has been seen that Gulf Cooperation Council countries’ economic diversification has affected diversification strategies and programmes, especially in the agriculture sector. The agriculture sector in GCC needs to boost agricultural output through productivity increases. GCC government should promote economic diversification that leads sustainable aquaculture, horticulture and poultry. Also, the need for agricultural investments for food security is top priority. Thus, food security and sustainable agriculture is a high priority for GCC governments on their economic diversification policy.

This study compares tourism models of five Gulf Cooperation Council countries (Bahrain, Kuwait, Qatar, Oman, UAE). It assesses to what degree each of these countries has managed to create a distinctive place identity and whether these identities are competitive enough to secure a flow of international tourists in the future. Creation of place identity takes place through the use of text combined with signs and images to add meaning to destinations, explain the destinations or the experience tourists can expect there. Using the method of content analysis and critical discourse analysis, this research brings new evidence to the study of semiotics in tourism in general. Furthermore, by pointing out tourism strategy gaps, this research provides recommendations on improvement of such strategies adopted by each of the GCC countries analyzed and for the region overall.

This chapter aims to examine the role of economic integration arrangements such as the customs union and common markets on economic diversification in the GCC countries. This study seeks to evaluate the efforts made by GCC governments to enhance their regional integration and economic diversification strategies and the levels of support given to the private sector and SMEs in particular, which form the basis of their national visions and economic diversification strategies. This chapter argues that economic integration has played an essential role in facilitating economic diversification in the GCC, while providing incentives and motivations to SMEs to internationalise their activities in the GCC regional market. While most of private sector activities are in trading, retails and services, the chapter stresses the importance of diversifying the manufacturing sector, if they are to compete internationally.