GRM 2010 GRM 2011

Abstract Details

Family Name:
Al Balushi
First Name:
Yousuf Hamad
Title of Paper:
Examining the critical importance of the Private Sector role as an engine for sustainable development growth in the Gulf Region
Paper Proposal Text :
The private sector is an important part of any given economy; it generate more jobs and make a significant contribution to continuation in sustainable growth. In the Gulf region , there is very little research on the role of the private sector as an engine of growth to face sustainable development challenges. In general, the gulf region economy has performed well in the last 40 years, regional macroeconomic performance in 2011 continued to remain robust, characterized by strong GDP growth, significant creation of job opportunities, and large surpluses in the fiscal and balance of payments positions. The economies of the Gulf region have attracted increasing attention over recent years, especially with the increase of oil prices when the growth has taken a more vertical route. These economies have also become more important as global investors and trade partners play a crucial role in global energy markets. Furthermore, together with other major oil-exporting countries, they have become part of the international policy debate on global imbalances. However, the region faces some important challenges in the near future to create adequate employment opportunities for the citizens , sustaining a high rate of growth and funding future economic development projects. It is important to stress here that unleashing the Private Sector is the key to meet above challenges. On the global level, all GCC countries are actively trying to integrate in the world economy and making a move toward the market system. Nevertheless, the region faces numerous constraints, including the absence of a dynamic and vibrant private sector. Globalization had forced the Private sector to be the way forward. Integration of the private sector with the global economy needs a competent private sector to serve as the engine of growth and a driving force for the development process in this region. In order to manage integration with global economy and enable private sector to grow, the region needs to improve its institutional framework and identifying forward and backward linkages with world economy where they exist. Opening the economy is expected to have a direct impact on the local economy by creating demand for a broad range of industrial and consumer goods, resulting in job creation, economic growth, and opportunities for GCC entrepreneurs.

Indeed, the private sector is the main driver of the development process in advanced and a number of emerging economies, while in most oil-based economies such as the GCC countries, primary income accrue mainly to government as the owner of the natural resources (oil and gas), these helped the government ply a major economic role as investor, provider of social services and infrastructure and in some production activities. Statistics indicate not strong performance of the private sector during the last period. The government has sought to provide a favorable environment to enhance the role of the private sector in the development process. Although there is significant improvement in private sector performance, these countries have yet to reach the target level, even with the great support received from the government through the enactment of laws, infrastructure development, provision of various types of incentives and support to the private sector, commitment to market mechanisms in resource allocation, and encouraging free competition to stimulate innovation.
It is important to note, however, that the government of those countries has a number of policies to promote the private sector so it becomes the leading sector in the national economy, which would provide additional employment opportunities. The focus has been to develop Small and Medium Size Enterprises (SMEs). The private sector is characterized mainly by businesses that are personal or family-owned, offering low-wage and low-skill employment, resulting in the fragmentation of this sector to small enterprises that lack the financial means and skills needed for doing business on a large scale. In fact, private sector enterprises favor the hiring of expatriates who accept lower wages, require less training and are subject to more flexible labour market regulation.

Against this background, this paper aims to provide better understanding of the whole set of complex factors preventing private-led growth in the Gulf region. it attempts to analyze the challenges and opportunities associated with private sector development and the role of the private sector as an engine of sustainable growth, specifically on the Institutional requirement, the growing pressures emanating from increasing number of job seekers among nationals, the role of the financial sector to enhance this transformation. It will analyse also, the impact of economic transformation in the Gulf on the development of the private sector and why economic diversification and redistribution of rent revenues have so far produced a national bourgeoisie rather than local entrepreneurs. In addition it will address the gaps between key private sector objectives and existing government policies, including a small private sector whose performance is primarily linked to that of the hydrocarbons sector.

To do so, the paper will be divided into five themes; the first theme will focus on theories related to private sector led growth. The second will seek to provide opportunity to exchange views on a variety of issues considered to be important for continuation of growth in the Gulf region, with particular focus on how the private sector can act as the engine of growth, taking into consideration that this sector still plays a minimal role in the economy and for the most part continues to be dependent on the performance of the hydrocarbon sector and the kind of Institutional framework needed to support SMEs and Entrepreneurship. In addition it will discuss the labor market structure and national identity in the sector, noting the young and rapidly growing national labour force, the heavy reliance on expatriate labour in the private sector and a large skill gap between job seekers and the market requirements. It will discuss the financial Sector and the need to expand credits to the productive sector and promote saving behavior. Also it will look at the global environment. We can see that GCC countries are highly integrated into the world economy; however realizing the potential gains from such integration is difficult without involvement of vibrant and competitive and self-reliant private sector. Moreover, the work will try to shed light on the importance of private sector capability building, as knowledge, science and technology have become key components of contemporary economic and social systems. Also, issues of education, skill and capacity building cannot be taken in isolation, as they must be integrated within an overall strategy that accounts for market requirements. The third theme will emphasise on the factors that affect private sector firm growth, which include: Improving the business environment and the investment climate with special attention to SMEs, improving SMEs access to finance, enhancing management and business development capacity through training, linkages and networks and creating an institutional mechanism to support SMEs development. The fourth part will deal with the roles of public enterprises in opening the gate for SMEs to grow and the role of foreign direct investment (FDI) in private sector development. In addition to addressing the above-mentioned themes, this paper will provide actionable policy recommendations designed to address some of the constraints that prevents the private sector from growing.