A C A S E S T U DY O N G C C C O U N T I R E S

OIL & DEVELOPMENT

HISTORY OF GCC COUNTRIES

• A poor region before the discovery of Oil

• Rapid Development in the 2nd half of 20th Century

• Large Revenues from Oil Exports

• Steady source of income

• Government spending to develop economy

• Increased spending in public sector like

infrastructure, health, education and employment

• Developed housing and Tourism

DEVELOPMENTS IN GCC COUNTRIES

• A strong growth rate of 7.5% by 2011

• Changes in Fiscal policies & increase in spending

by 20%

• Expenditures dedicated to Current expenditure

and employment of people

DEVELOPMENTS IN GCC COUNTRIES

• Low Interest rates and anchored exchange rates

• Subsidies for food and inflation below 5%

• Fiscal surplus of about 1/4th of the GDP

• Decline in non-oil revenue growth rate

GDP Growth Rates of GCC Countries

Non-Oil GDP of GCC Countries

Expenditure Growth Rates of GCC Countries

Inflation in GCC Countries

Economic Problems

• Large surplus and large government spending lead to

high breakeven prices for oil

• Too much reliability on oil income

• Depletion of Oil resources will lead to reduction in Oil

Revenues

• Existing Fiscal Policy will face deficit unless modified

• Lack of taxation and other fiscal instruments

• No other sources of income

• Untapped human capital

Oil & Gas Revenues

Diversification & Development

• Diversifying into different sectors of revenue

generation

• Modification of Fiscal Policy and implement

instruments like taxes, surcharge, fees, etc.

• Providing opportunities for industrial development

• Service Industry/Sector Development

• Development of Tourist and financial hubs

CONCLUSIONS

• Oil revenues effect lasted less than a century

• Earliest Oil discovering countries progressed and

are performing better than a few Western Cities

• Lack long-term economic development

opportunities

• High reliability on Oil Productivity

• Lack industrial development

CONCLUSIONS

An effective decline in infant mortality from 25 to 7.

CONCLUSIONS

Increase in overall Life expectancy from 65 to 78 years.

CONCLUSIONS

Major share of the Labour Markets is flooded with Expats rather than native nationals.

CONCLUSIONS

Export composition shows that Oil revenues were covering around 80% of the entire revenue

CONCLUSIONS

Effective growth in the Human Development Index (HDI) of the GCC countries is clearly seen.