Posted in Finance Articles, Total Reads: 1058
, Published on 12 May 2013
The world is a global playground where the powers keep shifting from one pocket to another. As witnessed in the past one decade, the global economic domination has shifted from the west to east. The new nomenclature coined by Goldman Sachs called BRICS, has become a force to reckon with.Keeping U.S Financial Crisis and the Euro-zone crisis in the backdrop, if we put on our thinking caps a clear vision can emerge out of Arab countries which for long have been mired by the thoughts of political instability, terrorism and of course economic instability. Instead, if we take a closer view we can sense the shift in the underlying tectonics which may drive their economy in future and mind you it would not just be oil anymore, but beyond it.
A decade preceding the financial meltdown of 2008-2009, the region (Arab World) was growing economically at a healthy rate of 5.5% before the burst of Arab spring which engulfed the region, notably in Tunisia and Egypt. The spring was the cause to bring to fore the political unrest among the youth , which spurred their angst in such a manner that the political behemoths had to give in to the masses’ appeal. This led to the economic debacle in the form of reducing employment avenues in the region which has high dependence on public sector that averages out to be 25% of unemployment across the region. This has acted as a catalyst to further raise the dissent among the people resulting in challenging the long standing dictatorial regimes in the region.
But the question which is larger than reality is on how to move in the direction which leads to economic prosperity, stable political structure and enhanced quality of life. No doubt the dependency on the black gold for employment and revenue has been extremely high for quite some time now. According to IMF estimates, 70% of the dependency of the revenue generation falls on oil exports. Such an export concentration for these economies may be troublesome in the near future where the world is moving towards the clean energy sources, energy efficient equipment coupled with new technology driven exploration which reduces their dependency on the oil imports from the region.
Thus the time has come to shift the focus to other sources of survival that can provide the impetus to the already paralyzed economy. A change could be exploring other sources of growth and thus would enhance the economic sustainability of thfiguree region. The probable survival strategy could be to focus on technological developments and policy development, enabling the private sector to establish Greenfield projects, creating a conducive policy environment which supports innovation and entrepreneurship.
To exemplify, UAE is the country which has reaped a positive benefit by markedly reducing the dependence on oil exports and stimulating the growth from transportation, tourism and hospitality and services sector. To elaborate in terms of hydrocarbon dependency, as per IMF Country report on UAE, the country’s hydrocarbon export as percentage of total export of goods and services has declined considerably from 70% to 56% (approx).
Also, in the MENA region 11 of the 18 countries have enabled business friendly policies to facilitate trade and to align itself with the international policy framework. UAE, Egypt and Bahrain have already initiated steps in this direction. Further, to motivate the thought among the masses, an Innovation Tournament was organized by, University of Pennsylvania's Wharton School along with the United Arab Emirates' Higher Colleges of Technology in Abu Dhabi. As the event unfolded it focused on the bringing the culture of entrepreneurship by promoting sustainable ideas and making it work to solve the global issues, to mention few like new building technologies to water-saving systems.
But such initiatives would not work with the status-quo policy framework and thus should be supported by policy enhancement for promoting entrepreneurship sentiments as access to financing, restrictive labour regulations and inefficient government bureaucracy to an extent has marred the business environment. Also, the cultural shift towards gender equality is need of the hour which would create more cohesive society, diversify household incomes and promote women's involvement in the general affairs of the country. One such step towards this direction has already been initiated by Saudi Arabia king Abdullah who appointed 30 women to the previously all-male Shura Council, (a political office), first time ever in the history of Saudi Arabia’s politics. On the similar lines the UAE’s leadership quoted “If we lose our female population, we lose half our economy” stressing the importance of women’s participation in the economic affair of the country.
Taking cue from the above mentioned pragmatic initiatives taken up in select countries of the region, it would be radically important for others to follow suit. Since the world’s largest consumers of oil and the biggest trade partners of the region is also moving towards self-reliance for energy by finding new technology and alternative sources of energy so only revolutionary enterprisingness could reap long term competitive advantage for the economically ailing block.
Though many unprecedented events have fractionally boosted the confidence of political fraternity in the region, but still precarious situation of the block cannot be denied. Where on one hand America is reeling with its debt ceiling crisis, the comeback of the Euro zone to normalcy is still debatable and the meltdown repercussion can still be felt in Asia, the stability of Arab block is the precursor for the global economy to make a comeback.
Internationally and domestically the stability of this region is of great importance as the reliance on each other in this globally integrated world is more significant than ever so in the history. Though political turmoil is here to stay for few more years, but we are optimistic about the steps taken up by governments to eliminate the threat of dwindling down of economic stability completely. But ray of hope enveloped in the actions of certain countries of the region will definitely set an example for others to stabilise their political as well as economic structure which will boost positive sentiments for the block across the globe.
It is thus certain that the revolutionary, Tahrir Square, protest would open up new challenges for the region and provide better opportunities for its youth bulge to leverage it in a sustainable manner. Introduction of transparent and accountable policies that would support the competitiveness and higher standard of living is the objective today which can only be possible when the region’s governments and international community work in tandem to promote inclusive and sustainable growth that provides employment to fulfill the aspirations of the Arab world’s citizens.
We do not think that the day is far enough to see a new nomenclature evolve out of this part of the world. Now, to anticipate it, it could be out of oil focused countries or non-oil focused economies depending on how they progress on the new found areas of growth. Arab’s STYLE* could be one of the ideal block formation!!