Why Gulf Rentier Economies Must Pursue Economic Diversification

Abstract

Within the mandate of their national visions, GCC countries have announced several strategies to expand their manufacturing, tourism and financial activities (economic diversification). However, the path towards the ultimate goal is still unsettled. Evidence of the Dutch disease (deterioration in the economic performance during decreasing oil prices) is provided in the current chapter. The different economies, although looking similar, have varied competitive advantages when it comes to identifying areas with potential, which are partly influenced by past investment allocation and infrastructure availability. Integration among the GCC countries in an atmosphere of stability will support trade creation, sustainable growth, and consequently a better performance towards economic diversification. We provide analysis of the consequences of counting on one commodity (oil or natural gas) in the economic activities of GCC countries and the importance of pursuing economic diversification to achieve sustainable development.