GCC Focus: GCC as key business partner

Last week I presented a paper at Malaysia-Arab Business Forum in Kuala Lumpur arguing for the case of clinching economic accords with the Gulf Cooperation Council (GCC).

In late 2008, Singapore became the first country in the world to sign a free trade agreement (FTA) with the GCC countries as a group. The accord will most likely enter into force in 2010 once ratified by all GCC countries.

And earlier this year the GCC signed an accord with the European Free Trade Association (EFTA). The group comprises Switzerland, Norway, Iceland and Liechtenstein. Also, negotiations are underway for separate agreements with China, Japan, Australia, New Zealand, South Korea and Turkey.

In my paper in Malaysia I argued that certain qualities make GCC economies uniquely attractive. For instance, the latest statistics put the monetary value of the gross domestic product (GDP) of the six GCC members combined at $1 trillion (Dh3.67 trillion).

Another such exceptional quality is the per capita income of some GCC members like Qatar. The 2009 Human Development Index puts Qatar's GDP per capita at $72,882 per annum on purchasing power parity (PPP) . Only Liechtenstein and Luxembourg enjoy a higher per capita income.

Yet, a vote of confidence in GCC economies is rising steadily. This is exemplified by Saudi Arabia emerging as a global recipient of foreign direct investments (FDI).

According to the World Investment Report 2009, issued by the United Nations Conference on Trade and Development (Unctad), FDI into Saudi Arabia amounted to $38.2 billion in 2008. The figure represents 42 per cent of total FDI in West Asian countries, which include Turkey and Iran.

To be sure, the amount of FDI in Saudi Arabia has increased substantially over the last few years, amounting to $24.3 billion in 2007 and $18.3 billion in 2006 and still $12 billion in 2005. The extraordinary progress partly reflects sustained economic reforms including granting foreign firms the right to own majority stakes in companies in the kingdom.

These practices partly explain the outstanding result that Saudi Arabia has achieved in the World Bank's Doing Business 2010. The report ranks Saudi Arabia 13th among 183 economies.

In the same context, transparency is rising steadily in most GCC countries. The 2009 version of the Corruption Perceptions Index (CPI) ranks Qatar among the top transparent countries in the world. Qatar was number 22d by scoring 7 out of a maximum 10 points on the CPI scale.

Still, there are other promising prospects for GCC economies and for good reasons. A recently released study developed by the Economist Intelligence Unit and sponsored by The Qatar Financial Centre entitled The GCC in 2020: The Gulf and its People predicts a sharp growth in population.

The study expects the collective populations of the six-nation grouping will increase by one-third or from nearly 40 million in 2008 to 53 million in 2020. The majority of the populations of Saudi Arabia, the UAE, Qatar, Kuwait, Oman and Bahrain are projected to be below 25 years old.

Undoubtedly, when speaking of the GCC, one cannot overlook the region's petroleum resources.

Interestingly, a recently released report by the Dubai International Financial Centre Authority (DIFCA) put the present value of the GCC's oil reserves at $18.3 trillion, in effect larger than the gross domestic product (GDP) of the US.

The value of the US GDP was estimated at $14.2 trillion in 2008. The DIFCA study assumes averages of $50 per barrel and $9 per million British thermal units (BTU). The same report puts the present value of the wealth at $37.7 trillion with an oil price of $100 per barrel and $15 per million BTU.

In short, it is sensible to do business with and in the GCC economies.

The writer is a Member of Parliament in Bahrain