Reinventing the wheel
Qais Al Khonji, CEO of Genesis Projects and Investments, sheds light on the crucial realities of investment and economic diversification in this region.
Since the 1960’s, oil has been the Omani economy’s driving force. Today, although Oman is not a member of OPEC (the Organisation of the Petroleum Exporting Countries) it is the largest producer of crude oil in the Middle East due to major enhancements in its oil recovery methods amongst a few other things. Though oil prices have dropped and Oman has showed its support very recently by decreasing oil production through cutting out 45,000 barrels a day from total daily oil production, prices have already begun to stabilise.
Unfortunately the GCC is heavily dependent on oil production, for example in the Kingdom of Saudi Arabia alone, over 70 per cent of the country’s revenue comes from the oil industry which is a direct hit at the economy when prices and demand are both unstable.
There has also been a slow though steady rise economic growth in emerging markets which has driven demand for oil, while a slowdown in economic growth in bigger and more powerful countries has affected prices too. These different extremes have also added to this instability, in addition to sanctions being lifted from Iran which also affects production and price. This, coupled with other factors have led to a serious decline in international oil prices which have affected the GCC greatly.
It’s time to consider finding other sources of revenue to save not only the GCC economies, but the whole Middle East as well. So far only Dubai has succeeded in becoming independent of any oil dependency by establishing itself as a global hub for travel and tourism, with over 20 per cent of its GDP coming from tourism revenue. Real estate is also a powerful player in Dubai, but tourism takes the cake.
It is a well-known fact that a few years ago both Oman and the UAE were the ones who had the greatest progress in decreasing the oil and gas component of our exports, thus decreasing some potentially dangerous vulnerabilities from both our economies. But what about other sectors that can support and stabilise economies heavily dependent on oil?
There should be more focus on technology, innovation and even manufacturing. Why import if you can localise it and produce it? You not only cut costs but you increase jobs as well which is always great, and once you have perfected your manufacturing and logistics and are able to manage demand and increase output, you export and have a steady stream of revenue and decrease risk of external competition that some countries have become dependent on. Something I do not agree with.
Some serious insight is required to determine what each country needs and how to sustain itself without dependence on oil, then set targets and put the plan in motion to reach these goals, with complete focus.
For example, could not relying on technology mean learning from the Chinese government’s example in blocking Facebook then releasing their own specialised social networking site Renren? Advertising alone on Facebook results in millions of dollars pouring in daily, now imagine how it would affect all our countries in the Middle East if there was a Facebook alternative and it even had its own advertising platform? Or should an industrial approach be taken, let’s take Japan for example, a major economic power in the world with the main power behind its economy lying in its manufacturing industry. We can even say the same about Germany’s high technology manufacturing methods. And even for the Netherlands, the largest cheese producer in the world despite not having the highest number of cow farms worldwide! I think these examples are enough to draw light on the management weaknesses that are visible.
One question is, should we as the rest of the Middle East invest heavily in tourism the same way Dubai has done to become a successful worldwide tourism hub? Or should we put our focus elsewhere? We all know that a change needs to take place, and this change, albeit hard will be a good one for the Middle East, but would require serious actions to be taken with a devoted mindset.