(MENAFN- Khaleej Times) Transport and finance carry massive potential
Dubai - Dependence on oil is the biggest challenge for Gulf nations and the regional countries can get an additional $17.7 billion benefits by further diversifying their economies concluded a latest study by professional services firm EY.
The report identifies transport financial services tourism telecoms and research and development as the key sectors with the biggest economic potential for the GCC nations.
“The best drivers of diversification are those that have the strongest linkages with the rest of the economy. These sectors are said to have a high economic multiplier: in other words a dollar of investment translates into far more than a dollar of GDP due to the stimulation of other sectors” said Gerard Gallagher Mena advisory leader at EY. The EY Diversification Tracker assesses the degree to which economies have moved away from dependence on oil. It focuses on three aspects — export production and volume the share of the non-oil sector and private versus public spending — which demonstrate economic diversification.
“Dependence on oil and issues around youth employment are the GCC’s biggest economic challenges. With recent oil price volatility diversification has returned to the top of the GCC agenda; it’s an opportunity worth $17.7 billion. To put that into context it is more than three-quarters of the entire flow of foreign direct investment to the GCC region for 2013.”
EY unveiled the findings of its study at The Economist’s Future of Work Middle East conference in Dubai on Wednesday. The study pointed out a “sweet spot” where regional strengths economic impact and nationals’ employment preferences meet allowing all these three aspects to be achieved. The analysis of multiplier sectors in hydrocarbon economies shows that additional investment in oil and gas brings the least additional return to GDP at $1.30 billion and affects just seven other sectors. Construction is at the opposite extreme. It has the highest economic multiplier averaging an impact of $1.80 billion in GDP for every dollar invested in construction activity. This trickle down feeds into almost every other sector.
“The key is not for governments to pump more public money into these sectors. The public sector needs to shift from being the main investor to being the enabler and driver of business resetting the incentives removing regulatory obstacles encouraging collaboration and providing world-class infrastructure and services” said Michael Hasbani New Markets Leader Mena Advisory Services EY.
“The goal for diversification is not what is achievable in each individual country it is how Gulf companies and governments can find innovative proactive and profitable solutions to challenges such as resource scarcity demographics and digitalisation that are having a profound impact on how business is done and on where jobs are created” he added.—
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