Jobs for locals, diversification, global positioning and stability are key areas for governments and businesses in the region to consider for the future of GCC growth, international management consultancy EY says in a report circulated today.
“In a global economy, where so many developed and emerging markets are struggling to maintain solid growth, businesses see strong and growing demand in the GCC,” says Gerard Gallagher, MENA Advisory Managing Partner at EY. “Governments in the region are using oil and gas revenues to develop new industries and set up the foundations of a knowledge economy. However, companies operating in the GCC are also facing challenges with regulations and hiring and retaining local talent. These barriers to realizing the potential they see mean that global companies have concerns about their sustainability in the GCC.”
EY says GCC citizens account for a low of 1 per cent of the private sector workforce in Qatar and the UAE and a high of 18 per cent in Saudi Arabia. There is a strong dominance of expatriates in the business and youth unemployment has been on the rise. Unemployment rates vary widely across the region, but everywhere, female unemployment rates are five to seven times higher than those of men.
EY says GCC governments are increasingly viewing entrepreneurship and SME development as a solution to youth unemployment and sustainable economic growth.
Managing the risks of oil dependence is one of the region’s biggest challenges, EY says. However, progress to reduce GCC dependence on oil has been mixed.
“Each of the Gulf states has developed long-term strategies, using different combinations of vertical and horizontal diversification,´ says Michael Hasbani, Partner in Advisory at EY. “But the region has yet to take advantage of coordinated diversification to leverage each other’s strengths and maximize the power and attractiveness of the economic bloc. Better coordination would lead to greater efficiencies and reduce the duplication of economic activities,”
High potential industries in the region such as metals production, aviation, sea trade, tourism and financial services are paving the way for more diversified revenue sources, EY says. GCC Governments need to commit to supporting new sectors and creating innovative and competitive industries to help diversify their economies, it adds
GCCV states also face a difficult balancing act of maintaining stability, in particular the social challenge of ensuring that nationals receive acceptable levels of education, healthcare and housing, EY says.
“To realize the promise of diversification and nationalisation policies while maintaining social stability,” says Stephen Farrell, Partner in Advisory at EY. “Gulf governments must continue to reform both their schools and universities, modernising their skill base while retaining their cultural identity. The private sector is also expected to play a major role in tackling the housing shortage, providing improved healthcare services whilst also creating a more heterogeneous job market for nationals and the expatriate workforce.”
The long-term success of the GCC will lie in welcoming the world into the region, with a focus on attracting global talent with a stake in the long-term economic future of Gulf markets and the desire and ability to motivate and nurture the region’s young people.
“The Gulf opportunity is large, but it is time-bound. Now is the time to take advantage of the region’s short-term attractiveness to become a long-term global magnet,” says Gallagher. “Fine-tuning the Gulf states’ global positioning, through country branding, improving regulatory environments while maintaining a sense of security and contentment for their citizenry during a period of economic growth and social change, will carry their existing successes into the future.”