Life after oil
Gulf countries are struggling with how to gird their economies for the day when their fossil fuels run out.
January 27, 2010 10:41 by Emily Meredith
What Abu Dhabi has been trying to do more recently is to transform its oil wealth beyond just financial assets and instead into real assets by developing the non-oil sectors of the economy, Khor said.
Abu Dhabi has made very public forays into a variety of industries. Through its business development and investment company Masdar, Abu Dhabi has built up the tourist sector by paying for local sites of the Guggenheim and Louvre museums and building a permanent Formula One race track. Its recent purchase of Singaporean chipmaker Chartered Semiconductor Manufacturing is the latest from the Advanced Technology Investment Company’s efforts to bolster the emirate’s investment in manufacturing.
Abu Dhabi is not alone in this endeavor. With more than 27 million people, Saudi Arabia is by far the largest country in the GCC and had to diversify its economy early on.
“You have this big story of enhancing the value chain by investing in petrochemicals,” the program manager for economics at the Gulf Research Council, Eckart Woertz, said.
With a market capitalization of more than $240 billion, the petrochemical manufacturer Saudi Basic Industries Corporation is the strongest example of this sort of diversification. Founded in 1976, the company uses the byproducts of oil to manufacture industrial chemicals, plastics, and fertilizers.
Qatar has recently moved in the same direction, offering scholarships through the Qatar Science and Technology Park to nationals who want to study petrochemicals. As a gas-rich state, it has the opportunity to expand into areas not yet touched by Saudi Arabia, and recently launched the first natural gas powered airplane as part of a diversification program.
But as these countries look at diversification, they are limited by the small size of their workforces, unable to compete with the cheap and plentiful labor in China and Africa.