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Middle Eastern economies are struggling to diversify. This is due to the fact that they have been over reliant on oil exports in the past decades, which has netted middle eastern countries huge revenues. Countries like Qatar and the United Arab Emirates are one of the most successful countries on the list. However, the diversification has to happen in Middle Eastern and North African countries as the oil supply is limited and the world is slowly moving away from the expensive to mine product to more eco-friendly and renewable energy sources. This means that these economies need new sources of revenue other than the ones dependent on oil. The economies proved to be fragile in terms of the novel coronavirus pandemic as well. This is due to the global lockdown and the restriction of movement through all means of travel whether it be by air, water, or ground. This means that the oil demand in the UAE, for example, has fallen to the minimum with lots of oil companies losing huge revenues and almost going bankrupt. This can easily be seen here as it describes the most recent oil market crash. Most of the oil mining operations have been halted and the doors shut down for the due period.
This is the time where private investors and market traders have cut down on their trades as well. It is due to the fact that the market is extremely volatile at the moment making it risky to make investments without appropriate professional opinions. Lots of brokers are also struggling to maintain their services although some like Axiory broker continue working with their customer base to maintain a good reputation as well as a source of income for a lot of families who have lost their primary income due to the aforementioned lockdown. Although a risky endeavor it seems to work well under proper supervision and care.
The United Arab Emirates (UAE) has been a leading country in terms of diversifying the economy as early as 2015. Back 5 years ago, the country boasted it’s huge success with 70 percent of GDP coming from non-oil sectors like media, telecommunications, tourism, and commercial aviation. Although, the latter has been hit hard in these times of crisis. All of this has put UAE on the map again through the government efforts of diversifying their economy and being quite successful at it. UAE has emerged as a business hub in the region even going as far as the ability for the Global Entrepreneurship and Development Institute (GEDI) naming UAE as the top country for entrepreneurs in the whole MENA region. The infographic shows that the UAE has had a GDP increase of 3.5% in 2015, which for the country with the huge size of the economy is a great showcase of the government's efforts. The numbers have been improving since then as well with UAE becoming the 4th largest international port operation center, having 4 civilian nuclear reactors boosting its renewable energy efforts, and a healthcare system of 30+ medical and surgical specialties. The country is also the 5th largest aluminum producer as well as a global aviation hub DXB being the world’s busiest airport with connecting more than 100 million passengers and 240+ destinations.
Diversification of the economy is extremely important to promote correct economic development. This is done via the creation of job opportunities for a very fast-growing local workforce and reduction of risks associated with the concentration of the economy. It is very apparent that countries with focused economies suffer the most during the times of crisis and/or when the shift happens in the market commodities, which comes with the technological advancements as well as efforts of other countries, which are outside of the power of local governments to control. This is why there are annual meetings between Arab Ministers of Finance to discuss further economic steps everyone can take to make sure the stability and prosperity do not slip away from the region.
The UAE government has a vision set for 2021. This means that they are looking at innovation and knowledge as the drivers of the economy. The federal government has implemented policies in its vision of 2021 to create an appropriate business environment and integrate the set of soft and hard institutions. UAE, unfortunately, lacks in the field of contract enforcement and investor protection thus the government is trying to fix this issue by implementing correct policies and setting specific goals to achieve them. Although, the international interest in the region has grown with different universities making quite comprehensive papers working on the strategies of advancement in the region.
MENA countries cannot be discussed in the same discourse as each other due to the simple fact that they are way too different on every possible level. The problem with lots of Arab countries is that most of them did not inherit strong and diversified economies after their independence. To this day, most of the regional forces have their economic power-driven by oil. Apart from this, the middle eastern region is extremely unstable due to the fact that there have been on-going conflicts all over the place in the recent history creating a hard time for any political coalition to become a regional driving force. The regional problem comes from the instability of countries all across the borders. This means that there are huge problems when it comes to trade agreements with the countries bordering each other as the region may seem extremely safe and stable but a couple of years down the line, due to international or domestic political involvement it may shift to a dangerous hot zone putting any agreements under huge risks.
There are three main aspects that are required for proper economic diversification:
- Stable Political Settlement which would allow elites to give breathing space to the private sector;
- Unified regional vision, which fosters complementation between the Arabic economies and aids the creation of shared economic space with relaxed taxes and laws on the businesses and trading;
- A vision of long-term development rather than short-term geostrategic stability. This means that the sustained economic change in the Middle East and North African countries can happen only if there will be more involvement from regional political elites and domestic political and economic leaders between each other on the international scale. A geopolitical discourse is extremely important for such ordeals.
Conclusion
In conclusion, MENA countries are desperately trying to diversify their economies as the world is slowly switching away from the oil either willingly or unwillingly due to the coronavirus pandemic and conflicts plaguing the whole region making it very expensive to deal with the local companies as well as securing the invested assets. UAE has been a leading country into the sector, which sets a precedent for others in the region thus giving an example that diversification is indeed possible if the political stability and economic driven policies are taken together.
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