Since the 1960’s, oil has been the Omani economy’s driving force. Today, although Oman is not a member of OPEC (the Organization of the Petroleum Exporting Countries) it is a major producer of crude oil in the Middle East - due to major enhancements in our oil recovery methods, amongst a few other things. Though oil prices have dropped and Oman has showed its support very recently by decreasing oil production through cutting 45,000 barrels from total daily oil production, prices have already begun to stabilise.
Unfortunately the GCC is heavily dependent on oil production. For example, in the Kingdom of Saudi Arabia alone, over 70 percent of the country’s revenue comes from oil, which leads to a direct hit on the economy when prices and demand are both unstable.
There has also been a slow-but-steady rise in economic growth in emerging markets, which has driven demand for oil, although a slowdown in growth in bigger and more powerful countries has also affected prices.
In recent years, these extremes have added to the overall instability in oil prices, as did the lifting of sanctions on Iran in 2016.
Yet the uncertainty around oil means it’s time to consider finding other sources of revenue to support not only the GCC economies, but the Middle East as a whole. So far, only Dubai has succeeded in becoming independent of oil by establishing itself as a global hub for travel and tourism, with over 20 percent of its GDP coming from tourism revenue. Real estate is also a powerful player in Dubai, but tourism takes the cake.
It is well-known that a few years ago both Oman and the UAE were the ones who had made the greatest progress in decreasing the oil and gas component of our exports, thus reducing some potentially dangerous vulnerabilities from both our economies.
But what about other sectors that can support and stabilise economies heavily dependent on oil? There should be more focus on technology, innovation and even manufacturing. Why import something if you can localise it and produce it? You not only cut costs but you increase jobs as well. Once you have perfected your manufacturing and logistics and are able to manage demand and increase output, you export and have a steady stream of revenue, decreasing the risk of external competition that some countries have become dependent on.
My business, Genesis Projects and Investments is a niche oil and gas service provider handling the analysis of upstream and downstream oil flows. In my line of business, a decrease in the price of oil is an advantage, because everyone decides to increase their production when prices are low.
But we cannot ignore the fact that lower oil prices are seriously affecting economies where oil production is the main, or single, source of income. Substitute sources of income are required to stabilise the economy, control inflation, and keep jobs safe through proper strategic planning, partnerships and projects. This could be customised, depending on the country, its strengths, resources and its manufacturing capacities.
Some serious insight is required to determine what each country needs and how to sustain itself without dependence on oil, then set targets and put the plan in motion to reach these goals, with complete focus. For example, could relying on technology mean learning from the Chinese government’s example of blocking Facebook and then releasing its own specialised social networking site, Renren?
Advertising on Facebook alone results in millions of dollars pouring into the company daily. Now imagine if there was a Facebook alternative in the Middle East with its own advertising platform? How would it affect all our countries? Or should an Industrial approach be taken? Japan, for example, is a major economic power in the world with the main power behind its economy lying in its manufacturing industry. We can even say the same about Germany’s high technology manufacturing methods. And even for the Netherlands, the largest cheese producer in the world despite not having the highest number of dairy farms worldwide! I think these examples are enough to draw light on the management weaknesses that are visible.
One question is, should we as the rest of the Middle East invest heavily in tourism the same way Dubai has done to become a successful worldwide tourism hub? Or should we put our focus elsewhere? We all know that a change needs to take place, and this change, albeit hard, will be a good one for the Middle East, but would require serious actions to be taken with a devoted mindset.
Any opinions expressed here are the author’s own
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