GCC may match the size of Canada, Russia economies
The GCC could become the sixth largest economy in the world by 2030 if it is able to keep growing at an annual average of 3.2 per cent for the next 15 years, EY's latest Growth Drivers report said on Monday.
If GCC countries were to become one single market instead of six separate ones today, it would be the ninth largest economy in the world today - similar in size to Canada and Russia and not far from India, EY said in its report 'Strength in unity.' "GCC governments are facing a decisive moment. With oil price falling, they have to accelerate the creation of growth drivers that do not rely on oil revenues," said Gerard Gallagher, Mena Advisory Leader, EY.
The GCC countries are now exploring options and taking decisions such as opening up to foreign investors, ending subsidies, introducing taxation, optimising costs and cutting jobs in the public sector, Gallagher pointed out.
"There are signs that serious change has begun. However, these reforms could be less disruptive and more effective as part of a wider push towards rekindling and modernising the drive towards a single GCC market. That would bring the benefits of scale and efficiency to the diversification drive, and strengthen the most productive parts of the private sector by introducing more competition and more jobs."
The analysis illustrated that removing obstacles to trade and investment would boost the GCC GDP by 3.4 per cent, or $36 billion, with 96 per cent of the gain coming from the removal of bureaucratic barriers to efficiency. The benefits would be spread across all six economies, with the strongest gains in the UAE, Saudi Arabia, Bahrain and Oman, with increases in GDP between 3.5 per cent and 4.1 per cent in the four countries. The report argued that the next phase of the GCC integration needs to address and facilitate change in three key areas including trade, foreign investment and institutions. More efforts should be taken to transform the customs union into a modern, technology-enabled single market that addresses the bottlenecks to cross-border business and optimise costs in the long run.
"There is a need to streamline and align approaches to foreign investment and company ownership regulations to increase the size and competitiveness of the entire private sector while building GCC institutions that have the capacity to sustain momentum and push against vested interests," he said. A fully functioning single market would reduce overall trade costs in the GCC, boost productivity and encourage higher levels of intra-regional trade.
"The far greater effect, however, would be to boost long-term productivity levels by increasing competition in the private sector, attracting significantly higher levels of foreign investment and creating more streamlined and effective institutions to enable world-class business. "There are immediate steps that the GCC could take that would optimise the existing levels of cooperation, bringing significant economic gains to each of the member countries.