Sudden volatility in oil prices and natural depletion in the oil resources have lead oil dependent economies to diversify economy into non-oil sectors so as to grow and develop. Oil exporting countries are and have looked for tremendously different alternatives to diversify and grow. In this scenario entrepreneurship is a major headway to go for. Small and medium enterprises are a viable source of employment so this suggests that greater diversification in small and medium enterprises must be followed.
A report by the International Monetary Fund (IMF) suggests that, small and medium enterprises (SME) are the primary sources of job creation in oil exporting countries. Volatility in oil prices in many oil exporting countries has directly affected the performance of the oil sector. The drop in oil prices also affects public spending and employment in general. Job seekers have fewer job opportunities, which means less income and lesser prospects for increasing household wealth. Fostering economic diversification helps a lot to stabilise the economy in the long run. Even the countries that have a good number of oil reserves need to ensure intergenerational equity for the future. Considering the current scenario, oil dependent economies urgently need to diversify in order to achieve macroeconomic stability.
Global value chains also must be integrated ensuring competiveness and technology innovation. A very conducive environment for entrepreneurship and non-oil sector will definitely yield positive results. Improvements in export and import policies will give headway results in diversifying economies. A very competitive and flourishing non-oil sector will definitely provide a strong source of job creation and employment. SMEs need to be promoted and supported by government in a tremendous way. They are excellent sources of employment generation. More the economy is diversified, lesser are the volatility associated risks. The price fluctuation and volatility in oil market is key trigger of macroeconomic volatility and to avoid the injuries resultant of this volatility to the economy, greater economic diversification is a remedy and we need to go for it.
- The reader is a doctoral researcher and currently working in the financial service sector based in Dubai.
