EXPERT OPINION
Drilling for new sources of growth
How members of the Gulf Cooperation Council can diversify their economies .
Economic diversification is high on the agenda of all the countries in the Gulf Cooperation Council ( GCC ): Bahrain , Kuwait , Oman , Qatar , Saudi Arabia , and the United Arab Emirates ( UAE ). Even before oil prices dropped in mid- 2014 , their leaders recognized that their economies relied too heavily on the oil and gas industry . Nonetheless , although the share of non-oil GDP has steadily increased in each of these countries , their exports and government revenues remain concentrated on oil and gas . These sources have long funded infrastructure and social services and paid public-sector wages . Lower oil prices have thus resulted in a fiscal crunch , adding urgency to the need to transform .
GCC leaders already know that economic transformation is not a simple undertaking . It requires a holistic approach incorporating a variety of measures . For example , in April 2016 , Saudi Arabia released Vision 2030 , a sweeping diversification blueprint sponsored by Deputy Crown Prince Mohammed bin Salman . To rebalance the Saudi economy away from oil , it sets ambitious goals : increasing the share of non-oil exports from 16 percent to 50 percent , and raising the private sector ’ s contribution to GDP from 40 to 65 percent . Such plans are critically important not just for economic growth , but also for the ambitions of millions of young people in the region .
As they implement diversification measures , GCC countries should keep in mind three key principles . First , upgrade the strategic management of local enterprises so these organisations become world-class . Second , use digitization to leapfrog over the early stages of economic development . Third , build a skilled labor force that is capable of continuous learning .
World-Class Organisations
As John Jullens , a leading PwC commentator on emerging economies , points out , one of the best ways to improve any economy is to develop the effectiveness of local company management . By promoting disciplined strategic management , GCC governments could help develop world-class companies within their borders . This would foster more vibrant industries , promote local content creation , spawn advanced technologies and innovation , and provide new highpaying job opportunities .
Until now , many GCC companies have benefited from expanding local markets and country-specific competitive advantages , such as access to cheap natural resources and expatriate labor . This has often allowed them to avoid laying the foundations for global competitiveness or developing their capacity for innovation . But those past advantages are already eroding , and the GCC must rapidly develop the ability of its companies to compete .
As an initial step , GCC companies need to build the kind of distinctive capabilities that set them apart
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