Experts brainstorm ways to reduce dependency on oil

Sep 26, 2001 02:00 AM

As oil ministers from OPEC prepare to assess the drop in the price of oil, economists and financial experts met in Beirut to brainstorm ways to reduce their dependency on oil as a main source of revenue. The economists held a three-day meeting at the Economic and Social Commission for Western Asia (ESCWA) entitled Economic Diversification in the Arab World.
Welcoming the speakers, the Under-Secretary of ESCWA Mervat Tallawy said that the meeting was devoted to one of the most challenging issues facing the economies in the region, "namely, how to change dependency on (oil) as a primary source of revenue." Oil prices have plummeted in recent days following concerns of a global economic slowdown. Participants agreed on the need to diversify the economies of the Arab states that heavily depend on oil.
Tallawy added that the primary aims of diversification are to expand investment opportunities, increase inter-linkage between the varying facets of the economy, and reduce reliance on international markets and trading partners. The Arab Gulf states, which are sitting on one-third of the oil reserves in the world, have built a huge infrastructure as a result of petro$.

However, fluctuations in the price of oil on international markets have prompted these countries to seek other sources of income to maintain growth. Countries like Saudi Arabia and Kuwait have invested heavily in non-oil sectors such as industry, tourism, and agriculture in the face of depleting oil reserves. Saudi Arabia has made over $ 25 bn of investments in the industrial and agricultural sectors over the past 10 years.
Some of the Arab Gulf states have begun to look into the possibility of privatising their petrochemical industries in a bid to increase efficiency and reduce government control. However, according to Simon Neaime, the economic affairs officer at ESCWA, Gulf Cooperation Council countries must move toward enhancing gender diversification in the workplace.
The GCC groups six oil producing countries: Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain, Qatar and Oman. Neaime said that there is a need to raise the number of female students at universities in GCC countries in order to give them the opportunity to be employed in a variety of economic sectors. The bulk of the students at GCC universities are male.

On the other hand, Elias Baroudi, another economist from ESCWA, looked at new options for the GCC states to diversify their economies. He suggested that Gulf states accelerate the privatisation of large state-owned public utilities such as petrochemical industries. "The main objective of privatisation is to reduce the role of the public sector and promote the growth of the private sector," Baroudi said.
He added that the improved economic outlook in the region should help make financial markets in GCC countries more receptive to an increase in foreign investment. At present, most GCC states are reluctant to allow foreign firms and individuals to buy local stocks. But this is expected to change after some of the GCC states passed laws permitting foreigners to buy local stocks. "Financial markets need to be reformed and their role and efficiency improved," Baroudi said.

Source: The Daily Star
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