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
The Qatar Foundation, meanwhile, has been investing in growth in the energy sector. “Within the parallel lines, we will see differentiation,” Shaher said.
Competition and Transparency
Although Gulf economies are diversifying, their investments are largely top-down efforts undertaken by their sovereign wealth funds. To be sure, finding a suitable economic model for a successful, resource-rich economy is difficult, but Chatham House’s Stevens said they have one thing in common: The private sector is encouraged, significantly encouraged. Encouragement, though, frequently comes at the expense of competition. Stevens said the businesses that have succeeded in the past are the ones that did not protect their domestic businesses from international competition.
Protection or state support for just one company often means that company is not competitive when it enters international markets. “Governments are bad at picking winners; losers are good at picking governments,” Stevens said.
As the economies evolve, support for a competitive environment in which small and medium businesses can compete will be critical. Perhaps unsurprisingly, the most recent World Bank report, “Doing Business in the Arab World”, ranks the six countries of the GCC higher than any other Arab nation for ease of doing business.
But the same report shows that it takes an average of 537 days to enforce a contract in the United Arab Emirates – the shortest amount of time for any of the GCC countries.
Qatar recently established a ministry specifically dedicated to overseeing new businesses, but in order for these initiatives to make it easier for businesses, the kind of appropriation of private companies by the government that has historically occurred in Gulf countries is troublesome for economic development.
Many people at the Dubai School of Government conference discussed instances where governments or powerful families take over businesses once they have become successful.
“In many of the countries the private sector is stifled by the ruling elites,” Stevens said.
Along with ending unfair practices, increasing transparency could help the economies immensely in attracting business. “The International Monetary Fund has asked the U.A.E. central bank to publish more advanced statistics,” Woertz said. Countries like Saudi Arabia are more transparent with their economic data.