Some GCC countries have achieved further progress in diversification of sources of income and reducing dependence on oil revenues, both in financing of annual budgets or development programmes.
Dubai’s experience in this regard forms an example of how to utilise oil revenues in developing non-oil sectors to find alternative sources for funding for annual budgets.
In the 1980s and 1990s, Dubai’s oil production was estimated at 450,000 barrels per day, but the proven reserves were limited. Therefore, the decision makers’ thinking was focused on the need to speed up the process of using oil revenues effectively in the development of non-oil economic sectors. Dubai has succeeded in this regard, gaining a worldwide recognition, and has become a model for oil-producing developing countries.
In the 1990s, oil contributed significantly to Dubai’s budget — constituting a significant proportion ranging 70-80 per cent. Oil also constituted the greatest percentage of the emirate’s gross domestic product (GDP).
Since 2000, the picture has completely changed as funding the annual budget is becoming more dependant on non-oil resources through income generated from the emirate’s major economic sectors, such as trade, financial services, tourism and transport, most notably Emirates airline.
The tourism and transport sector contributes about 30 per cent of GDP, while Jebel Ali and its free zone contribute 20 per cent. Oil’s contribution fell to no more that 5 per cent of Dubai’s GDP at a time when the living standards of citizens and expatriate residents have increased, in parallel with a significant rise in salaries and wages, improvement of infrastructure and services in line with international standards.
This is in addition to the economic diversification achieved by other emirates, especially Abu Dhabi and Sharjah, thus contributing to bringing about substantial changes in the UAE’s overall economy, and has also led to increasing the value of the non-oil sectors.
Recently, Qatar announced a similar strategic approach for its economic future. Qatar has abundant natural gas production, where the state has set a target of issuing an annual budget without relying on oil in Qatar by 2022 — the year in which Doha will host the FIFA World Cup.
Qatar has allocated considerable investments exceeding $80 billion (Dh294.2 billion), a move that would contribute to the bold Qatari approach — which means economic and political stability and maintaining high standards of living without relying on depleting oil resources.
Through a careful study of Qatar’s current development approach, it can be said that the country has the capacity and potential to reach this target within the set deadline or at least achieve a considerable part of it.
More important is that Qatar is now adopting a serious approach towards achieving its targets, where it can make the most of the UAE’s experience.
A sign of optimism is the Qatar’s high annual economic growth rate, which is spurred from the rapid growth of non-oil sectors, particularly manufacturing industries, financial services, transport and tourism.
Apart from the UAE’s experience and Qatar’s efforts, the remaining GCC countries have a similar approach, but they have not yet developed a comprehensive vision of how to achieve this. In fact, there are very important and supporting factors that allow all GCC states to diversify their economies over the coming years, the most important of which are GCC’s economic integration and common market.
If this achieved during the current decade, expectations that indicate the Gulf common economy will turn to be one of the world’s top six economies in 2025 is justified, especially that the six Gulf nations have all the potential for the success of this strategic approach with its influential economic, political and social dimensions.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.