The world has been always dreaming about electric cars for a very long time, contemplated due to the over – using of exhuasting resources in recent times. Even though the first electric car was invented in 1832, it has been propagated in recent decades, since one day petrol will be out of fashion and Covid – 19 has definitely shortened the duration. The economic slowdown in the Gulf countries, backed with Covid -19 has aroused significant concerns of bending down of Brent Crude prices. From $64 per barrel at the initial stage of 2020, to $23 in April 2020. Though, It has been projected that the Brent Prices will rise up to $59.74 and $56.23 per barrel in 2021 and 2022, respectively but that doesn’t make the diversification of the economy evitable. The dip in the price has caused budget deficits averaging to 9.2% in 2020 and 5.2% in 2021.
The GCC ( Gulf Cooperation Countries ) has been planning to diversify their trading world due to incoming fear of exhaustion of Oil and gas reserves. Sustainability of these resources are expected to be short lived since Bahrain and Oman, both are in a precarious state whose resources are expected to run out within 10 and 25 years, respectively. The transportation sector is in a stagnant state in several countries due to the severe quarantine policies and propagation of work from home culture, even though the general public prefers to travel less. Therefore there is an under demand for oil at the given point of time, the pandemic has slashed fuel consumption. Moreover the Global demand for it will wash out ultimately by 2040. There will be more want for renewable and inexhaustible sources of energy requiring less effort ,benefitting with storage and efficiency factors.
GCC has already knocked on the door of $2 trillion of wealth which was accumulated with a purpose of securing the future generation. The IMF ( The International Monetary Fund ) has projected if any economic reforms aren’t formulated for the incoming crises, the GCC nations will face depletion of wealth by 2034. GCC has been an epitome of changing the status of the country by utilizing the potential resources. They have changed lives with their blessed fuel resources. Now, they are preparing a Non-oil based trade development.
They believe that establishing manufacturing hubs, that is harnessing the export import of non-fuel goods, ultimately making it a resilient economy. The Gulf does produce its indegeneous goods and services primarily for their own domestic consumption. Though a chunk of production can’t compensate for the requirement of population. In 2018, 90% of the exports in Kuwait and Qatar were Hydrocarbon products and its derivatives, so was in Saudi Arabia with a slight deduction of 10% and over 50% in Bahrain and UAE. This reflects how stubborn the dependency on hydrocarbons is and this needs to be altered by replacing a major chunk of government revenues derived from oil and petroleum. These countries are way more expensive than South asian countries to set up manufacturing hubs since the labour and infrastructural expenses are incurred in high volume.
FOREIGN DIRECT INVESTMENT
FDI ( Foreign Direct Investment ) is also added in the list where GCC is lagging in. The crippling business atmosphere is something why they are behind in the parameter of foriegn investment. From 2015 to 2019 , Oman and UAE were the only emirates to surpass the world standardized average of 2.5 in terms of FDI Inflow. The net FDI inflow of GCC as a whole was 1.1 which is almost 3 times less than the high income economies. Moreover they have tightened the international policies at certain times such as limiting the work permits and transfer of funds with neighbours. Such policies harboured the risk of losing International and local business investment. When they were enjoying overflow of wealth, implementing arbitrary policies was a costly mistake. Saudi Arabia has been thriving to accelerate the FDI inflow despite of covid. The authorities seek to increase FDI over there. They aim to increase the participation of SMEs ( Small and Medium Enterprises ) to attract foreign investments.The targeted sectors are petrochemicals, tourism, entertainment, healthcare and renewables.
They have also been in one of the lead positions to force the field of global higher education provision. They have lured a lot of reputed International Institutions to set up their gulf bases. Qatar, UAE and Kingdom of Saudi Arabia have been notably on the forefront of this prosperous academic success. In 1940, there were only 10 universities in the Middle East and North Africa. The number ultimately proliferated to 140 by 2000. The number further doubled in 2007. The ingress of private universities in 1993 was a success, and most of the providers of this success were US, UK and Australia, since the rubric was standardized in the form of western education.
The higher covid cases led to lower volumes of global oil trade, which has been tantalizing the Gulf authorities to diversify its economy. The pandemic has been strong enough to prove that the weaning economy with hydrocarbons isn’t sustainable for a long time. Alternatives and financial amendments are bound to be made to feed the workforce of new 400000 labour market entrants each year.