The CEO of EY on the GCC's response to oil price volatility

Abdulaziz Al Sowailim, chairman and chief executive officer of EY in the Middle East and North Africa, discusses how GCC countries are responding to oil price volatility, why their future could lie in greater union and how the region is being hit by digit

The changes being brought about by oil price volatility are becoming increasingly in-depth and long-lasting, and according to EY Middle East and North Africa chairman and chief executive officer Abdulaziz Al Sowailim a major benefit of that has been a greater focus on efficiency across the GCC. “It has made policymakers conscious about scale,” says the professional services boss.

“In today’s challenging market conditions, both governments and businesses know they have to change the way they run their operations – looking for opportunities to prioritise costs and enhance revenues.

“The real difficulty is finding the optimal balance that positions them not just to survive but to compete for growth now and in the longer term.”

The primary areas of this growth have been identified by Gulf governments as education, healthcare and housing – more specifically, ensuring nationals receive acceptable levels of each of them, says Al Sowailim.

“Let’s look at the healthcare sector,” he begins. “The GCC has fewer than two hospital beds per 1,000 people. In the past, the vast majority of healthcare was delivered by the public sector. However, the old model has been strained by two factors; the cost of treatment for nationals and rising and rapid growth in the expatriate population. Both have put pressure on medical facilities.

“Gulf countries are responding to this by moving to a market-based model. In line with this model the private sector delivers many healthcare services and pays for them through mandatory insurance schemes, which have been introduced in most GCC states.

“Simultaneously, Gulf governments are developing primary care systems to ensure that chronic diseases can be prevented and treated outside of hospitals.” He adds that demand for housing has also increased, as a result of the high birth rate in the region leading to a youth bulge.

“The population has urbanised as economic activity in the region became focused on a few major cities.

“All GCC states have varied legal commitments to provide housing. This has usually been done through land grants and concessional loans or housing projects developed directly by the state.

“Increasingly, the private sector is seen as the solution by rapidly boosting the housing stock for nationals, as well as financing opportunities.”

There are also opportunities in energy, according to the chairman– specifically in solar and nuclear power. But “changing consumption behaviour will be vital too,” he adds.

“The idea of conservation is at least on the table in the region. There is an incentive for companies and government agencies to show leadership by implementing initiatives to reduce their consumption levels.”

With so many opportunities being afforded governments and businesses across the region, as a result of dwindling reliance on oil, various avenues have been explored to capitalise on what is being viewed as a new era for the GCC.

For Al Sowailim, there is a lot to be gained by forging a greater union among GCC countries, especially if they become a single market.

“One of the key opportunities that the GCC has is to attract new revenue sources and to optimise costs through integration,” he says.

“To do this, the GCC would need operate as a single economic union or market. This is what we are proposing in our latest Growth Drivers report.”

The report, published earlier this year, emphasised the need for GCC countries to accelerate the creation of growth drivers that do not rely on oil revenues. Chief among the company’s advice to member states is the formation of a single market.

“On the surface, I agree, it can be seen as being a bit unrealistic and probably irrelevant as governments rush to tackle the deficit from low oil price,” continues Al Sowailim.

“But we are not talking about coordi-