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    Pacts worth over OMR 33 million signed to establish agricultural, fisheries projects

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    Egypt’s food industries contribute 24.5% of GDP

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    Local, Italian companies partner up to establish food retail chain in Egypt

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      What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

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          Food Africa and pacprocess MEA attract over 25,000 trade visitors to the trade fair duo in Egypt

          Pacts worth over OMR 33 million signed to establish agricultural, fisheries projects

          Pacts worth over OMR 33 million signed to establish agricultural, fisheries projects

          Egypt’s food industries contribute 24.5% of GDP

          Egypt’s food industries contribute 24.5% of GDP

          $36mln contract for construction of Duqm fisheries complex

          $36mln contract for construction of Duqm fisheries complex

          Ministry signs agreement to support Oman’s honey industry

          Ministry signs agreement to support Oman’s honey industry

          Local, Italian companies partner up to establish food retail chain in Egypt

          Local, Italian companies partner up to establish food retail chain in Egypt

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            Food Africa and pacprocess MEA attract over 25,000 trade visitors to the trade fair duo in Egypt

            Profits at top Saudi banks jump 17.6% in Q1

            Profits at top Saudi banks jump 17.6% in Q1

            GCC can create 600,000 tech jobs and add US$255 billion to GDP by 2030

            GCC can create 600,000 tech jobs and add US$255 billion to GDP by 2030

            What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

            What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

            New study reveals that UAE is most competitive economy in the Arab world

            New study reveals that UAE is most competitive economy in the Arab world

            Top 10 listed companies in the Middle East

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            Oman Construction Equipment Industry to 2028

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            $36mln contract for construction of Duqm fisheries complex

            $36mln contract for construction of Duqm fisheries complex

            What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

            What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

            Madayn working on major Oman industrial city projects

            Madayn working on major Oman industrial city projects

            Foundation stone laid for new 700-bed hospital is Salalah, Oman

            Foundation stone laid for new 700-bed hospital is Salalah, Oman

            Iraq set to award new Faw Port deals

            Iraq set to award new Faw Port deals

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              Suez Canal expects US$3.5 billion in revenues in H1

              Suez Canal expects US$3.5 billion in revenues in H1

              UAE and Egypt’s consortium to buy African renewables firm Lekela Power

              UAE and Egypt’s consortium to buy African renewables firm Lekela Power

              Fitch revises Saudi Aramco’s outlook to positive from stable

              Fitch revises Saudi Aramco’s outlook to positive from stable

              Investments in renewables in Egypt reach LE6 bn: Official

              Investments in renewables in Egypt reach LE6 bn: Official

              Egypt signs 8 gas exploration contracts worth $934mn over 15 months

              Egypt signs 8 gas exploration contracts worth $934mn over 15 months

              JGC lands $3.7bn Iraq refinery upgradation project deal

              JGC lands $3.7bn Iraq refinery upgradation project deal

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                Coronavirus: UAE conducting human trials for Covid-19 vaccine

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                GSK to develop plant-based COVID-19 vaccine with Canada’s Medicago

                Egyptian COVID-19 drug to be on market in two weeks: Health Ministry

                Egyptian COVID-19 drug to be on market in two weeks: Health Ministry

                UAE sends medical aid to Iraq to fight COVID-19

                UAE sends medical aid to Iraq to fight COVID-19

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                UAE launches phase III trial of inactivated Covid vaccine

                COVID-19 vaccine could be available by autumn: Oxford University

                COVID-19 vaccine could be available by autumn: Oxford University

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                Food Africa and pacprocess MEA attract over 25,000 trade visitors to the trade fair duo in Egypt

                Qatar has ‘solid’ line-up of infrastructure, hospitality projects to prepare for large influx of visitors in 2022: OBG

                Qatar has ‘solid’ line-up of infrastructure, hospitality projects to prepare for large influx of visitors in 2022: OBG

                Saudi to be among world’s big leisure tourism hubs by 2030

                Saudi to be among world’s big leisure tourism hubs by 2030

                Qatar’s hospitality sector peaks despite turbulent 2020

                Qatar’s hospitality sector peaks despite turbulent 2020

                Accor inks deal to manage first Swissôtel-branded hotel and residential project in Qatar

                Accor inks deal to manage first Swissôtel-branded hotel and residential project in Qatar

                Staycations to stimulate Qatar’s hospitality sector

                Staycations to stimulate Qatar’s hospitality sector

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              Why change matters for GCC economies?

              OBG

              April 4, 2017
              in Economy
              0

              For many years those of us who study the countries that form the Gulf Cooperation Council – Saudi Arabia, the UAE, Qatar, Kuwait, Oman and Bahrain – have grown accustomed to using and hearing one term more than any other: diversification. But what has also been just as common has been the frustration at the pace of the process.

              The simple fact is that due their bountiful natural resources the GCC countries have many of the symptoms of what is known as Dutch Disease, the theory that economies which have a dominant export experience significant development in that area, but underdevelopment in others.

              The IMF, World Bank and OBG have long been advocates of economic reform that will enable an environment where other economic sectors can grow and contribute to state revenues. This is, of course, easier said than done. Every state in the region has a diversification strategy, and they have been implemented with varying degrees of success. All of these require the private sector to play a greater role, too.

              However, when hydrocarbons prices were high enough for budgets to show surpluses, it was difficult to generate much urgency to drive through the sometimes painful reforms necessary. Furthermore, the social contract that exists between state and citizen in the Gulf makes change even harder. In many cases the states’ largesse in every sense has meant that the private sector remains relatively underdeveloped.

              But now that oil prices have entered what some have referred to as the “new normal”, i.e. a much lower band, diversification and economic reform have taken on a whole new urgency.

              How is this change manifesting itself?

              1 – Subsidy Reductions
              Generous government subsidies have long been hallmarks of the Gulf. However, they have never been sustainable in the long term. They also have the capacity to create dependency, too, which is always a concern. Over the past 18 months each and every state has set about reducing the scale of subsidies, both to households in the form of utilities and food, and also those to industry.

              This has inevitably had an impact on households and industry alike, squeezing expendable income and margins in equal measure. However, at the time changes were made, for example in the UAE with fuel prices, which are now set monthly, many of the fears expressed, for example, that it would lead to significant inflationary pressure, have not materialized.

              2 – VAT
              The decision to implement a value-added tax was taken at the regional level by the GCC. It will see the imposition of a 5% levy on most goods, consumables and services. It is the first time such as tax has been introduced in the GCC and is a significant development.

              Certain items will likely be exempt from the tax – basic food and health supplies, for example. Businesses that sell VAT-liable products or services add on the percentage and then, as a VAT-registered businesses, file a VAT return to the relevant authority.

              But what does this mean in practice? Well, as well as being a boon for the financial services and IT systems companies who will be well placed to advise on the implementation of VAT systems and reporting structures, the real beneficiary in the long term will be the governments’ coffers. Raising revenue via VAT is in many senses is a reflection of a maturing economy. It can be varied as a fiscal tool, too, so that in good times it can be raised and in periods of financial stress, lowered as a stimulus.

              A more subtle benefit that VAT brings, though, is another layer of transparency, as VAT registration and filing will enable greater scrutiny and analysis of how the markets work. In a region that has seen major steps forward in this regard, this is another welcome development.

              3 – Public vs Private
              One of the most frustrated elements of the GCC’s economic reform strategies has been the development of autonomous private sector growth. Now, as the governments of the region look to accelerate reform, the private sector is being looked to with renewed enthusiasm. The trouble is that in some places they have felt the squeeze to such a degree from austerity measures and the dramatic reduction in government spending, that sentiment is at low ebb and they are struggling to find growth opportunities.

              This is, of course, perhaps an inevitable side effect of the necessary changes being made – the subsidy reductions, for example. Either way it looks as though it will be some time before the impact has worked itself through. A businessman I spoke with in Saudi Arabia recently spoke plainly that if the government cuts too hard as the dominant engine of growth, the private sector, in many senses a fledgling in comparison, could find itself without the momentum to succeed.

              On the other hand, another businessman said that while current conditions were definitely difficult, they also form an environment where entrepreneurship will flare sooner or later, quite simply out of necessity. There’s no doubt truth in both.

              There is really no easy, straightforward path to the economic reforms the GCC countries require. However, the signs are positive in that these changes, which have been talked about for years, are finally happening. To be sure, they’re not comfortable, but we must take notice that the governments over the past 18 months have taken measures that even in the preceding year were unthinkable.

              Change is always difficult but economic reform taking place in the Gulf shows it is more likely to happen when necessary than suggested.
              OBG
              4 April

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