Most of the major economies in the Middle East such as Saudi Arabia, Iraq, and United Arab Emirates are heavily reliant on oil production to drive economic growth. Although oil has been the mainstay for the region for nearly a century, as oil reserves begin to dwindle, there is a dire need to diversify economies to attain sustainability. However, with infrastructure, public and private sectors accustomed to depending on business from the oil industry, as well as government policies focused on the oil and gas sector, a massive reform of economic policy is the need of the hour. With political tensions in countries such as Egypt and economic crisis in emirates such as Dubai, investing in economic diversification has become a major challenge .
A 2008 study by Booz & Co. revealed that Saudi Arabia, Bahrain, and UAE showed the highest concentration of diversification when compared to other economies in the Middle East. Within the UAE itself, among the seven emirates that form the nation, Abu Dhabi and Dubai were unique cases with a highly diversified economy that included a strong real estate, tourism and trade sector. However, when compared to G7 economies such as US, UK, Canada and Japan, these economies were still considerably low in terms of diversification .
The countries most challenged in terms of economic diversification are Qatar, Oman, Kuwait, Egypt, Tunisia, Morocco, Syria, Lebanon and Yemen . While Qatar, Oman and Kuwait have fairly stable, if not diversified, economies, the other countries mentioned have been in the midst of great political turmoil that has dealt a severe blow to their diversification efforts. With Foreign Direct Investments or FDIs faltering, the scope for these economies to focus on the development of multiple sectors has become increasingly difficult.
Works Cited
Hvidt, Martin. Economic diversification in GCC countries: Past record and future trends - research paper, Kuwait Programme on development, Governance and Globalisation in the Gulf States. Research paper, The London School of Economics and Political Science, 2013.
Saif, Ibrahim, and Farah Choucair. Arab countries stumble in the face of growing economic crisis. Web Commentary, Carnegie Endowment for International Peace, 2009.
Shediac, Richard, Rabih Abouchakra, Chadi Moujes, and Najjar Mazen R. Economic Diversification - The road to sustainable development. Research Study, Abu Dhabi: Booz & Company, 2008.
