GRM 2010 GRM 2011

Abstract Details

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Title of Paper:
The slow retreat of GCC rentierism: a critical examination of GCC diversification policies
Paper Proposal Text :
When oil was first discovered in the region, most GCC countries were sparsely populated, poor countries sustained by basic agriculture and trade. Oil became the driver of rapid economic and social transformation. Nonetheless, after more than 80 years of modern economic development, the GCC economies continue to be characterized by a critical dependency on oil as a source of government revenue, wealth, and subsidized energy or industrial inputs.

The awareness of the need to diversify the local economies ultimately stems from the finite nature of the oil endowments. But the perceived urgency of the task has grown as a result of the long period of low oil prices in the late 1980s and 1990s as well as due to the challenges created by the demographic boom triggered in large part by oil. Their ability to appropriately train and effectively employ this population will be critical for the future economic well-being of these countries.

Both government rhetoric and policy implementation have come to increasingly reflect these evolving priorities. Many regional governments have set up dedicated funds for managing part of the oil wealth. Industrial policy has set up new sectors while a number of countries have sought to capitalize on their position as hubs for finance and services or regional and international travel and shipping. Economic policy is increasingly carried out in the context of medium and long-term planning, often guided by national vision documents.

Our paper seeks to take stock of these developments with a view to determining the extent to which the GCC can be deemed to have moved beyond its oil-fueled model of development. Our view is that this economic remodeling is very partial in most cases and cannot be deemed to have significantly affected the basic modus operandi of these economies. In some cases, the dependency on oil has in fact increased. We find that much of the apparent diversification is in fact derivative and not sustainable in the absence of oil. Nor do we feel that much progress has materialized in terms of establishing sustainable sources of growth that are independent of oil. We will examine in detail the case of Bahrain which offers some examples of an alternative paradigm emerging.