Oil and Development – a Case Study of Gcc
Oil and development – a case study of GCC (Gulf Cooperation Council)AbstractThe Gulf Cooperation Council (GCC) countries’ economies are oil and gas based economies. Though these six countries are trying to bring in non-oil sectors in their economies, 80-85% of their GDP on an average for past three years has been directly through oil and gas. After the oil boom ended in 1973 there was a strong need for economic diversification. Over the past decade there has been a strong growth in the non-oil economy of these six countries. A key priority for GCC countries’ is to create a non-oil tradable sector which can support the sustainable growth. Till now GCC countries were only majorly exporting oil to the rest of the world. They need to compete in international markets with the emphasis on quality and the strengthen non-oil sectors other than construction, such as services and telecommunication.Current plans for development point toward more and more diversification so as to create a sustainable economic environment and decrease the dependability on volatile sector – oil. We focus on the analysis of overall development of the GCC economy by creating more and more private sector jobs and incentivising them so that nationals start opting them.Table of contentsExecutive SummaryGCC countries have relied heavily on oil as their main source of revenue and export. Over the past years GCC countries have started expanding their avenues and exploring more options such as infrastructure, health, education etc. Diversification in non-oil sectors will decrease the volatility in GDP and economy these countries are facing.        It is going to create sustainable growth as well as productivity will increase by investing more and more in private sector.
By investing in the non-oil sectors these countries have achieved low-inflation and by liberalising foreign direct investment they have deepened their financial sector. Though this diversification has shown mixed results.The public sector jobs for nationals discourages them from taking risks and become entrepreneurial and private sector employments. The availability of cheap and easy low-skilled foreign labour who are ready to work at low wages is another reason why firms are not moving deviating from low-risk and profitable options. GCC countries need to incentivise their policies in order to push the private sector firms to start working and generating more and more good employment opportunities. They should implement labour market reforms so that more and more nationals start taking up private sector jobs and create sustainable growth in the non-oil sectors.IntroductionThe economies of GCC countries have evolved rapidly through diversification, but that is not enough.The oil is a perishable source of income as it is not ever-lasting otherwise diversification was needed in these countries. The governments are distributing the revenues generated by oil sector which is considerable (Table 2) in the citizens through investing in SMEs’, strengthening the business environment, by creating more and higher education opportunities for them. GCC countries need more diversification as that will help in creating an economy which can sustain low oil prices and will be less volatile.