Manama: The Gulf Cooperation Council (GCC) countries are in a “very enviable position in comparison with most economies”, Bahrain’s transportation minister has said.
“Developed countries across the world are dealing with a number of acute challenges such as depressed demand, low inflation; household deleveraging, public deficits and secular stagnation,” Kamal Ahmad said. “At the same time, many emerging markets have had to worry about the possible impact of tightening monetary policy in the US or about domestic credit bubbles. In the GCC, by contrast, we have arguably the strongest fundamentals of any region in the world. We have strong, resilient economic growth, sustainable public finances and household balance sheets, current account surpluses, strong government revenues from hydrocarbons and bright prospects for future growth as those revenues are invested in projects aimed at spurring economic diversification,” he said.
The minister, who is also acting chief executive of the Bahrain Economic Development Board (EDB), was delivering the keynote address at the opening session of the Business Opportunity and Political Risk in the Gulf and Middle East conference in Bahrain.
He attributed the GCC’s privileged position to a strong oil price and to the hard work of reform.
“Everyone is aware of how hard these reforms can be to put in place and make effective. Acting in response to a crisis is one thing, but putting in place difficult policies that sacrifice some short-term advantages or upset some domestic constituencies in order to secure prosperity in 20 years’ time is a very different matter,” he said.
“Of course, the Gulf has long been blessed with resources — but the reforms that we have made have meant that we are now making better use of them than we did in the past. More and more revenues have been invested domestically in sectors that are characterised by increasing productivity and that have helped to create quality jobs for GCC citizens. We have also taken steps to invest in infrastructure that has made the region a key point on global trade routes and creates a strong foundation for regional integration.”
However, while hydrocarbons are still important to the GCC economy, other sectors such as logistics, petrochemicals, professional services, tourism and others are playing an increasingly central role in supporting economic growth, he added.
“We have moved from bringing in international firms to export our oil, to building a local role in the hydrocarbon industry and utilising our resources to develop downstream industries such as aluminium, plastics and petrochemicals. Likewise, the wealth that oil and gas generates is increasingly being invested in the local economy through institutions based here in the region, staffed more and more by highly skilled locals. Increasingly, we are transforming wealth below the ground into sustainable industries, such as manufacturing and financial services, and a highly skilled population.”
The minister said that while there was “good” reason to be positive about the current state of the GCC economy, the challenge is to ensure that “the current prosperity is not something that will be seen in 30 years as a short-lived golden age”.
“After all, oil will not last forever — we need to make sure that we develop economies that are able to thrive in the post-oil era. As the population continues to expand there will continue to be a growing, number of young people coming into the workforce,” he said.
Investing in young people who make up 50 per cent of the population and in education are a necessity, he added.
“As well as giving people an education, we also need to encourage the right attitude. If our children leave school thinking that all they need to do is to wait for the government to give them a job, then we have failed them. Our goal must be a productive, innovative economy that generates ideas, products, and services locally and sells them to other markets. The purpose of economic growth should be to create high quality jobs and opportunities for people in the region — to allow them to share in the nation’s prosperity and to ensure that that growth is sustainable in the long term,” he said.