Dubai – “ASWAQ”
The Gulf Cooperation Council (GCC) economies, when combined as a single market, could become the world’s sixth largest by 2030, from its current ninth position, according to EY’s latest Growth Drivers report.
The size of GCC as one single market is similar to the size of Canada and Russia, and assuming it is able to keep growing at an annual average rate of 3.2 percent for the next 15 years, it could become the sixth largest economy, after Japan.
A study by EY revealed that removing obstacles to trade and investment would boost the GCC GDP by 3.4 percent or US$36 billion, with 96 percent of the gain coming from the removal of bureaucratic barriers to efficiency. This move would benefit all six economies, with the strongest gains in the UAE, Saudi Arabia, Bahrain and Oman, with increases in GDP expected to be between 3.5 and 4.1 percent.
EY’s report further highlighted that the next phase of GCC integration should be towards addressing and facilitating change in three main areas i.e. trade, foreign investment and institutions. A fully functioning single market could reduce overall trade costs in the GCC, increase productivity and encourage higher levels of intra-regional trade.
EY added, “The far greater effect, however, would be to boost long-term productivity levels by increasing competition in the private sector, attracting significantly higher levels of foreign investment and creating more streamlined and effective institutions to enable world-class business.”
Gerard Gallagher, MENA advisory leader, EY, said: “GCC governments are now facing a decisive moment. With oil price falling, they have to accelerate the creation of growth drivers that do not rely on oil revenues. They are now exploring other options such as opening up to foreign investors, ending subsidies, introducing taxation, optimizing costs and cutting jobs in the public sector”.
Gallagher further said, “However, these reforms could be less disruptive and more effective as part of a wider push towards rekindling and modernizing the drive towards a single GCC market. That would bring the benefits of scale and efficiency to the diversification drive, and strengthen the most productive parts of the private sector by introducing more competition and more jobs.”
EY’s MENA transactions leader, Phil Gandier, opined that: “There are immediate steps that the GCC could take that would optimize the existing levels of cooperation, bringing significant economic gains to each of the member countries, while allowing them to focus separately on creating the incentives that will make them most attractive as investment locations.
He suggested that pinpointing and resolving these barriers might not sound like integration but it would be a major step forward to leveraging the GCC’s common strengths to benefit each of the country. A first step would be to work with the private sector to identify the top ten barriers to doing business across the GCC.