How will economic visions increase competition among GCC Countries?

The economic vision statement, which was released by the GCC governments recently, is expected to bring a healthy competition among countries in the region. It will also diversify the economies and lower oil dependency in these countries.

The following economic visions were announced by the GCC countries with the aim to make the economic conditions stronger and reduce the dependency on oil.

• UAE – vision 2021
• Iman – vision 2020
• Saudi Arabia – vision 2030
• Bahrain – vision 2030

The number shows the year by which a country is expected to achieve the vision.

Saudi Arabia is one of the GCC countries that is going to liberalize the free zones, and other services like entertainment, tourism and trade sectors as a part of its vision 2030. Experts believe that these steps will surely decrease the region’s dependency on petroleum products for revenue and increase competition.

Impacts of Economic Visions

At present, there is minimal trade between GCC countries, most of which is re-export to countries such as Iran, Africa, and others. “If the countries get their plan implemented under their respective visions, there will be more competitive in attracting investments,” said Dr. Fahad Alturki of Jadwa Investment Company.

The oil sectors of almost every GCC country saw a decline in the past couple of years, especially in the first half of 2017, however, the non-oil sector reported a growth. The non-oil industry of Saudi Arabia recorded marginal growth of 0.5 percent in the first half of the year. It is not much but points toward a positive increment by the next year.

According to Dr. Alturki, the oil prices are expected to drop to around $53 this year and even more in 2018. The current price is $60 per barrel. “It is hard to predict oil price as shale production is expected to increase which might push prices lower while inventories are expected to drop and could push oil higher. Then there is geopolitical situation also to watch for,” he said.

The experts at DMCC believe that the vision of the regional governments is clear and for good. The governments want to shift their focus from the traditional oil-based revenue sources to other revenue options, including tourism, infrastructure, trading, and factories. “It’s about expanding market rather than eating into each other. We have seen synergies in the regional leadership. There is $22-billion trade between the UAE and Saudi and it’s going to multiply if economies are going to open up.”

These are uncertain times for the economies of GCC countries and so, they are forced to look for other revenue opportunities. “It is not about what is happening outside, but how firms and individuals respond to that. It is all about how you position yourself and plan a strategy to deal with the situation.”

VAT and Economic Visions for GCC

VAT, which is being introduced in the GCC countries from the next year, is also going to have significant impacts on the economy of these regions. VAT is being launched as an alternative source of revenue for these countries. The authorities have alerted businesses to be ready for VAT as its impacts may go beyond the accounting and financial departments of organizations.

While some GCC businesses have already started preparing for the VAT, many other businesses are still hoping that the tax may not be implemented. As per the latest data, only about 11 percent of companies are fully prepared for the new tax regime. The thing is that it is going to be difficult for the companies that are not prepared or not even preparing for VAT.