In their bid to develop the non-oil sector, the GCC countries are entering multilateral and bilateral agreements with different countries.
Gulf countries built their economies by capitalising on their oil resources. However, as the world grapples with the rising dangers of climate change, these countries are left with no choice but to diversify their economies. With investments pouring in to develop the technology, infrastructure, financial, and other key sectors, these petroeconomies are a hub of newly emerging potential, particularly for service industries.
In their bid to develop the non-oil sector, the GCC countries are entering multilateral and bilateral agreements with different countries, and much progress has been made through this cooperation and collaborative efforts. One common accusation against the GCC countries is that economic data is manipulated. More often than not, when the GDP of these countries declines, the emphasis is laid on the drop in oil prices. However, given the economic diversification that has occurred in recent years, the non-oil sector cannot be ignored.
Yet another reason why the growth rate of the oil and non-oil sectors must be studied separately is that the oil sector is subject to much fluctuation due to factors beyond the control of oil-producing countries. On the other hand, the non-oil sector is impacted by internal factors despite reacting sensitively to the oil sector to a certain degree.
In the past, it was a common feature that the decline in oil prices would often send the non-oil sector into a downward spiral as well. However, this interconnectedness is no longer true. According to recent data released by the GCC, the recent drop in oil prices did not reflect on the non-oil sector. Instead, the sector recorded a growth rate of more than 4% in its GDP. However, the GDP of these nations is still being assessed by integrating both sectors. Therefore, economic analysts are calling for the evaluation of this sector while making an economic case study of the GCC.
With the non-oil sector being viewed as a lucrative space for investment, the UAE alone has witnessed vast investments in manufacturing and technology, particularly in artificial intelligence (AI) and smart cities. The Emirates has made special provisions to create an environment to ensure that foreign companies investing in the country thrive and enable rapid digital transformation. There are also public and private sector partnerships in sectors like management consulting, e-commerce, general trading, and information technology, which can help rise to global challenges. This shows that economic growth through digitisation has been one of the top priorities of the GCC countries, thus making the IT industry all the more invaluable for these governments. The Middle East Institute had noted in a 2021 study that the region is home to more than 400 million people under the age of 25, and therefore it was a top priority to increase digital-first solutions across sectors like payments, banking, and lending.
New policies that focus on increasing non-oil revenues such as wholesale, retail trade, construction, utilities (e.g. water purification and renewable energy) are being implemented by the GCC countries. With these countries being blamed for the acceleration of the climate crisis, responsible development is also a key focus for the GCC. Even OPEC’s largest oil exporter, Saudi Arabia is shifting its reliance on exports of hydrocarbons to coffee. This shows the commitment of these petroeconomies to move away from oil in the long run.
Their vision to develop the non-oil sector goes hand in hand with their aim for long-term growth in order to protect the region from global economic uncertainties. The political climate across the globe has also been shaking the oil sector, the GCC has been able to remain relatively shielded amidst this upheaval. However, this may not be the case for much longer, so multi-alignment in the political sphere and diversification in the economic sphere is necessary.
