SHARM EL-SHEIKH: The booming economies of Gulf nations will continue to grow in spite of increasing inflation, labor unrest and instability in global financial markets.
At least that’s what experts predicted Tuesday in a debate entitled “Is the Gulf Crash Coming? at the World Economic Forum on the Middle East in Sharm El-Sheikh.
Apparently, it is not.
As the never-ending surge in oil prices threatens to unhinge many economies, GCC countries are actually benefiting from the price hikes.
GCC countries own 50 percent of the world’s oil reserves and 30 percent of global gas reserves.
“There is no expectation that price or demand for oil will decrease, so the future of Gulf countries in terms of revenues from oil is secure, said Fouad Alaeddin, managing partner of Middle East Ernst and Young, Jordan.
Shafik Gabr, chairman and managing director of Artoc Group for Investment and Development, Egypt, concurred, saying that Gulf economies will not crash, at least not within the next two to three years. However, he did admit that there will be challenges that must be faced, especially unresolved political issues that can ignite the situation in the region.
“We cannot grow economically without developing politically, said Saad Barrak, deputy chairman, group CEO and managing director of Zain, Kuwait.
He warned of a “black swan effect, meaning unpredictable events that affect the performance of nations. Government policies, including transparency and balance of power, are elements that GCC countries lack and that could affect economic performance, he explained.
Addressing another challenge, Nasser Al Shaikh, chairman of Amlak Finance, United Arab Emirates, worries that GCC countries will not be able to attract enough human capital “with the talent to execute the projects we have in mind.
Still, he agreed that there will be no economic crash since liquidity in the GCC is secured, amounting to $9 trillion up to the year 2020.
Gabr highlighted concerns that a weakening US dollar – to which GCC currencies peg their currency – will deter foreign laborers from coming to the GCC because of higher commodity prices.
On the other hand, Alaeddin said the US’s wavering economy will result in the flow of human capital away from the West and towards the GCC. He was also confident that GCC governments will be able to deal with imported inflation, citing political instability as the only challenge facing the region.
“Everything is a short fuse and [political] crisis effects are immediate. There is no time to talk or preach of what should happen; we must do the right thing, Gabr said.
To that, Barrak boldly replied that if it was up to governments to solve political turmoil, then nothing would be solved. “I don’t trust governments; they are the lousiest people in the world to make political or economic decisions, he said.
He also called on the shift of power of public wealth in GCC countries from the government to the private sector to ensure more efficient management.
The issue of public wealth has been addressed in some GCC countries.
Saudi Arabia has been initiating public-private partnerships. Six economic zones are currently being built there, none of which are developed by the government.
“How governments manage wealth is not an issue that will be solved overnight, Al Shaikh added, “the GCC is very attractive; it’s not perfect, it’s still a work in progress, but those not in the GCC are losing big time.
