Diversification: The ‘copycat’ route
At the beginning of the century, there were few reputed airlines, tourist destinations, investment opportunities and educational institutions to choose from in the Gulf region. Those that existed were unique and faced little or no competition. However, an attempt to diversify the economies beyond non-oil resources — begun when oil prices dipped in the 1990s and pursued vigorously as oil prices threaten to shoot over the $100 per barrel milestone — has resulted in duplication of models and competition, raising questions about their long-term sustainability.
A recent Citigroup report estimates that the Gulf Cooperation Council (GCC) countries have produced oil worth about two trillion dollars at spot prices since 2004. And more than one trillion dollars have been invested in infrastructure and real estate projects in the six GCC countries, with more than half these projects already under way. The GCC, established in 1981 among Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE, form a regional common market that includes defence planning as well. Geographic proximity as well as free trade economic policies are factors that encouraged its establishment.
Dubai, the most famous of the seven-member UAE, is the best example of the post-oil age in the Gulf — oil contributes only four per cent of the emirate’s gross domestic product, down from 50 per cent in 1975. Though Bahrain started diversifying earlier, Dubai became a trendsetter by liberalising and expanding its economy faster than others.
Transforming the oil-rich capital of the UAE, ‘Plan Abu Dhabi 2030’ has declared projects and those under development worth about $400 billion, of which
about $175 billion have been earmarked for diversification. Apart from the manufacturing sector, large investments have been made in real estate and tourism projects, especially the 27-billion-dollar Saadiyat Island plan with the Guggenheim Museum.
Qatar has earmarked 130 billion dollars for investments in the next six years, with about 50 per cent of it going into the non-oil sectors. And, the Saudi government has charted plans to privatise 20 state-owned corporations and institutions. The new economic cities in Rabigh, Hail, Madinah and Jizan, as well as the new industrial city in Jubail, are expected attract investments worth hundreds of billions of dollars.
Explaining the Dubai case, Eckart Woertz of the Gulf Research Centre said: “It has successfully positioned itself as a trade and services hub in an oil-rich region. But as
the term hub already indicates, there needs to be countries and regions between which the hub intermediates — not everybody can be a hub. Bahrain, for example, has had a long experience in the banking sector, but it now faces stiff competition from Dubai.”
The aviation industry exemplifies the ‘copycat’ culture with new airlines, airport expansions, as well as buying of new aircraft. Currently, the Emirates of Dubai, Etihad of Abu Dhabi, Air Arabia of Sharjah (all UAE), Qatar Airways, Bahrain’s Gulf Air, Oman Air, Saudia, Kuwait Airways and Jazeera Airways (also of Kuwait) make up most of the GCC airlines industry. According to estimates, nearly a third of the airport development projects across the Middle East, Africa and South Asia by value $65 billion are being carried out in the UAE. — IPS