GCC may match the size of Canada, Rus­sia economies

The Pak Banker - - 6BUSINESS -

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.

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