Middle East must ‘invest in education’
Shortage of skills a key problem, reveals ICAEW report
December 9, 2013 11:10 by kippreport
Countries in the GCC and Middle East regions need to invest in education and raising skill levels to remain internationally competitive as oil prices continue to fall, according to a new report by ICAEW.
Falling oil prices mean that skill shortages, coupled with population growth, could damage these regions’ economies if the issue is not addressed, the finance body said in its latest quarterly Economic Insight report.
The report warns that while GDP growth in the Middle East region is above the global average and expected to remain steady in the short term, oil prices will drop as global supplies rise. The loosening of international sanctions on Iran and rapid expansion of US shale production means that oil prices will continue to fall, as demand from emerging markets slacken.
While GCC governments have recognised the need to diversify away from oil, they still face a challenge in terms of skill shortages. The report argues that strong population growth means countries can benefit from a ‘demographic windfall’ if they invest in education. On the other hand, a lower-skilled population would lead to rising unemployment and a drain on national resources.
Peter Beynon, regional director of ICAEW Middle East, says that because the GCC region is lagging behind other developed economies in terms of education, many companies are forced into “buying in” expertise from abroad. He adds, however, that in certain circumstances, firms are fined for not employing enough nationals.
“Investing in education to raise skill levels would be a long-term sustainable strategy that would help the GCC region to diversify, while also helping nationals into the workforce,” he says.
The region’s role as an energy exporter means that its output closely tracks the mood of the global economy, so GDP growth in the Middle East region is expected to rise this year.
The report notes that the GCC region is also becoming increasingly reliant on exports to developing economies.
Douglas McWilliams, chief economist and executive chairman, Centre for Economics and Business Research (CEBR), says: “20 years ago, advanced economies accounted for nearly three quarters of all goods sold overseas by the GCC region. Now fewer than half of all exported goods go to advanced economies and nearly the same again to emerging markets. The trend to increase trade with emerging markets is likely to continue. The centre of economic gravity is shifting to the East and the Middle East region is at the crossroads of global trade. As well as a finance centre, this means the region should have the opportunity to develop as a logistics hub, with a bigger role for ports and shipping.”